Maybe Uber is, after all, a tech company. The US-based online taxi business on Tuesday reported its first quarter of positive free cash. It collected $382mn on gross bookings of nearly $30bn. The result came three months after chief executive Dara Khosrowshahi declared the days of free spending were intolerable.
Cash generation was modest. Repeat performances are needed. But Uber’s result is be a tiny beacon of hope for the tech sector.
Uber has long been the symbol of Silicon Valley lossmaking. The business model’s promised technology and scale efficiencies, needed for profitability, are still hazy. The company admits it benefited from paying lower subsidies to drivers as the labour pool has expanded. Some people need to take on gig work to keep up with inflation.
However, Uber claims that tweaks in its pricing and driver-routing algorithms were upending the traditional trade-off between revenue growth and profitability.
The company has built adjacent businesses around ride-sharing. These include food and grocery delivery as well as freight shipping. Additionally, it has built products around these — subscription services, for instance. Uber said this portfolio effect creates its own benefits.
For example, drivers can join the Uber Eats segment and then transition to rideshare drivers. That would be a more lucrative posting for them thanks to a more efficient hiring process for the company.
The message from the company is upbeat for the rest of the year. Consumer spending and travel trends remain positive. In the US, its largest market, households have migrated from buying goods to stumping up for experiences.
Uber shares rallied nearly a fifth on Tuesday. They are still a third less than their listing price of three years ago. The company has $5bn in cash, though it carries $11bn in debt. Now it must show positive free cash flow is here to stay. If the decade of heavy spending has come to an end then its shareholders — and investors in other profligate upstarts — can feel heartened.
