Uber Technologies Incorporated, the parent company of the ride hailing giant-Uber, reported that it will deliver a first-ever quarterly profit by the end of the year, indicating that the cost-cutting measures are exceeding even the company’s own recent expectations.
“2019 was a revolutionary year for Uber and I’m gratified by our progress, steadily delivering against the commitments we’ve made to our shareholders on our path to profitability,” said Dara Khosrowshahi, CEO.
The company will become profitable, on an adjusted basis, by the fourth quarter of 2020. A previous plan set this goal for 2021. The stock was up about 5% in extended trading.
Uber has edged out even Wall Street’s projections, with bookings up 28% and a loss that was narrower than analysts’ estimates, for the fourth quarter. The demand for transportation and food delivery orders remain strong as indicated by the $18.1 billion gross bookings for the fourth quarter.
The gross bookings will decline slightly in the first quarter from the previous period, said Nelson Chai, the chief financial officer. Hence, the drive towards profitability is likely to take a toll on growth.
The San Francisco-based company reported an adjusted loss of $615 million, compared with a $713 million average of analysts’ estimates. A significant decrease from the loss of $817 million in the same quarter a year earlier proving that the efforts to rein in spending to be especially effective.
The termination of the food delivery unit in South Korea, the sale of the delivery operation in India last month, reduced marketing expenses and cutting off more than 1000 employees are some of the steps Uber has taken to keep a check on expenditure.
Abandoning delivery in other countries or acquiring businesses with the goal of only competing in markets where UberEats would be the biggest or second-biggest option is the primary motive of the company as of now. Following a similar strategy to what the company did in ride hailing, eventually, UberEats will reduce discounts for customers, which will drive a decline in spending by the second quarter.
The ride-hailing business was profitable on a standalone basis in the fourth quarter, Uber said. The company lost $130 million on its “other technology programs,” including the autonomous driving division, which is funded by Uber, SoftBank Group Corp., Toyota Motor Corp. and others.