Uber achieves its first annual profit, driving its market value close to $150bn

Uber has announced its first ever annual operating profit, registering a significant milestone in the ride-sharing company’s history. This announcement propelled Uber’s stock to unprecedented highs and exceeded analysts’ expectations, fueled by strong demand for ride-hailing and delivery services, alongside its expanding advertising business.

The company reported an operating profit of $1.1bn in 2023, a stark contrast to the $1.8bn loss it suffered in 2022. The fourth quarter operating income amounted to $652mn, surpassing forecasts, while the net profit reached $1.9bn for 2023, again contrasting with a $9.1bn loss in 2022.

Dara Khosrowshahi, Uber’s CEO, hailed the results as a significant milestone, adding that they demonstrate the firm’s capability to consistently generate strong, profitable growth. In New York, Uber’s stock rose roughly 1% by midday trading, with the firm’s market value approaching $150bn after doubling in the past year.

Nearly five years since Uber’s initial public offering (IPO) had a shaky start, the company has reported its first annual operating profit. After initially not meeting the expected $120bn value at its IPO and subsequently recording the largest ever first-day dollar loss for a US debut company, Uber has faced significant losses and persistent questions about its business model.

The company has expended billions in its battles with ride-hailing competitors like Lyft, food delivery rivals such as DoorDash, and global regulatory challenges. However, as the Covid-19 pandemic subsided, Uber saw improved margins as competitors diminished and it managed to reduce costs.

Consequently, the company has hinted that it will reveal plans for a stock buyback at an investor day next week. Citi analysts have speculated that Uber may announce such a program and possibly even its first-ever dividend. This news follows Uber’s accumulated operating losses of over $30bn since 2014, the year it first provided financial detail disclosures.

During the tenure of co-founder Travis Kalanick, Uber pursued an aggressive strategy of global expansion in the ride-sharing market, funded by substantial capital injections. However, under the leadership of Kalanick’s successor, former Expedia CEO Dara Khosrowshahi, who took over in 2017, the company shifted its focus towards conflict resolution with regulators, cost reduction, and profitability.

For the last quarter of the year, which is usually the strongest for ride-share companies, Khosrowshahi referred to it as a “standout quarter” in a “standout year”, with revenues rising 15% to $9.9bn. Forecasts for Q1 of 2024 align with analysts’ predictions, expecting gross bookings, which amount to fares paid, to increase to between $37bn and $38.5bn.

Khosrowshahi also lauded Uber’s expanding and more engaged consumer base, with a record high of 150 million monthly active users.

Uber’s quarterly gross bookings grew 22% to $37.6bn, slightly exceeding analysts’ forecasts and marking an increase from the previous quarter’s 21% growth. Uber trips also saw a 24% surge in Q4 to 2.6 billion, and both the ride-hailing and delivery segments saw improved profit margins year-on-year.

The grocery and retail delivery sector, which Uber has been keen to expand, contributed to a fifth of the annual growth in the delivery segment. However, a significant portion of the earnings boost, amounting to $1bn, resulted from an increase in the carrying value of the company’s equity investments, primarily the rise in value of its stakes in self-driving car firm Aurora and Chinese ride-hail company DiDi.