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Uber’s sales are dramatically slowing even as the ride-hailing company is spending more to fuel global growth, particularly in its food delivery business. Reven

Uber’s sales are dramatically slowing even as the ride-hailing company is spending more to fuel global growth, particularly in its food delivery business. Revenue growth of 38 percent in the third quarter was almost half of what the growth rate was six months earlier, when the company was negotiating a $9.3 billion investment led by SoftBank Group Corp. Brutal opening paragraph

asteli 8y ago
It's a strange world we live in when people speak poorly of 38% revenue growth. To me, that seems like a staggeringly huge growth rate. I looked up the numbers independently to double check, and yep. 63% revenue growth between Q2'17/Q2'18, 38% between Q3'17/Q3'18. If my own 9 year old company was growing 38% YOY I think I'd be very very happy.
- deleted 8y ago
  [deleted]
- Latty 8y ago
  I mean, yes, but they are also throwing $1B at it each quarter, so is it really surprising that the expectations are high?
- marinman 8y ago
  "Highly valued companies typically grow quickly or generate big profits -- and great ones do both. In the fourth quarter of 2005, Amazon.com Inc. had about the same revenue as Uber’s today -- just under $3 billion, not adjusted for inflation. Yet, Amazon earned $199 million in profit and was worth about a fourth of Uber’s $76 billion valuation." I think this graph neatly summarizes the concern at this point. There are few signs that the business can live up to its existing hefty valuation, not-to-mention the even-loftier IPO expectations. Amazon was also famously unprofitable as a public company for a long, long time. But they still had revenue growth rates worth investing in and potentially more defensible businesses. I do wonder if the ride-sharing business will wind up like the airlines business: valuable, booming but very, very tough to consistently make large profits.
  - adventured 8y ago
    > I do wonder if the ride-sharing business will wind up like the airlines business: valuable, booming but very, very tough to consistently make large profits. Rather, how the airline business used to be, before it consolidated down enough (in the US). Now it's a goldmine of consistent profit compared to what it used to be. Delta - the world's most profitable airline - generated $24 billion in operating income over the prior four fiscal years; $3.3b in the last two quarters. Not impressive compared to certain tech giants, however still excellent operating profitability given the history of airlines. The major US airlines are of course domestic focused, so the corporate tax cut took them all from ~35-40% rates down to closer to 20%, further bolstering their bonanza. It's why Warren Buffett bought ~10% of all of them (Berkshire owns 9.2% of Delta, 9.7% of American, 9.8% of Southwest, 9.8% of United). He perceived that the market had permanently shifted due to consolidation. The airlines have become more like the modern railroads, going from brutal competition to stable oligopoly and consistent profit machines. Last four years operating income: Delta: $24b, American: $23b, United: $17b, Southwest: $14b
- jonlucc 8y ago
  I may be totally wrong, but I think the point is that just about any company can grow 38% for a long time if you throw enough money at it. So far, lots of people have thrown lots of money at Uber, and some days it looks like they're not going to get profitable before they burn their runway.
- rightbyte 8y ago
  Exactly. If 38% is bad then I would like to know what Uber would need. On the other hand, they are operating at a loss so increasing revenue just means they spend more money paying costumers to ride with them or eat with them. Only founding would limit the revenue growth when you are giving away stuff.
  - dragonwriter 8y ago
    > If 38% is bad then I would like to know what Uber would need. Enough that their losses get smaller, rather than bigger.
- friday99 8y ago
  Well to be fair, the 9 year old company is losing $1.1B a quarter with no plans to make any money which would make me very very sad. Also, that revenue growth is half of what it was 6 months ago, which is the dramatic slowing referenced.
- SilasX 8y ago
  >It's a strange world we live in when people speak poorly of 38% revenue growth. It's also a strange world where you need significantly more than 38% growth just to stop losing money while still valued at $50 billion.
- AlexandrB 8y ago
  It's easy to grow a company that's giving away $2 of goods/services for every $1 it charges. Until the money runs out that is. Uber just has very deep pockets compared to other companies that used this model (e.g. Movie Pass).
- dragonwriter 8y ago
  > It's a strange world we live in when people speak poorly of 38% revenue growth. Their losses are growing. Growing revenue is important as a route to profitability, but if you are heading the other way despite growing revenue...
- TheCoelacanth 8y ago
  When you're selling dollar bills for $0.75, 38% revenue growth is not that impressive.
- crunchlibrarian 8y ago
  In finance the actual growth rate is rarely looked at that much, but the rate of change of the growth rate is scrutinized to the nth degree.

asteli 8y ago

It's a strange world we live in when people speak poorly of 38% revenue growth. To me, that seems like a staggeringly huge growth rate. I looked up the numbers independently to double check, and yep. 63% revenue growth between Q2'17/Q2'18, 38% between Q3'17/Q3'18. If my own 9 year old company was growing 38% YOY I think I'd be very very happy.

deleted 8y ago
[deleted]
Latty 8y ago
I mean, yes, but they are also throwing $1B at it each quarter, so is it really surprising that the expectations are high?
marinman 8y ago
"Highly valued companies typically grow quickly or generate big profits -- and great ones do both. In the fourth quarter of 2005, Amazon.com Inc. had about the same revenue as Uber’s today -- just under $3 billion, not adjusted for inflation. Yet, Amazon earned $199 million in profit and was worth about a fourth of Uber’s $76 billion valuation." I think this graph neatly summarizes the concern at this point. There are few signs that the business can live up to its existing hefty valuation, not-to-mention the even-loftier IPO expectations. Amazon was also famously unprofitable as a public company for a long, long time. But they still had revenue growth rates worth investing in and potentially more defensible businesses. I do wonder if the ride-sharing business will wind up like the airlines business: valuable, booming but very, very tough to consistently make large profits.
- adventured 8y ago
  > I do wonder if the ride-sharing business will wind up like the airlines business: valuable, booming but very, very tough to consistently make large profits. Rather, how the airline business used to be, before it consolidated down enough (in the US). Now it's a goldmine of consistent profit compared to what it used to be. Delta - the world's most profitable airline - generated $24 billion in operating income over the prior four fiscal years; $3.3b in the last two quarters. Not impressive compared to certain tech giants, however still excellent operating profitability given the history of airlines. The major US airlines are of course domestic focused, so the corporate tax cut took them all from ~35-40% rates down to closer to 20%, further bolstering their bonanza. It's why Warren Buffett bought ~10% of all of them (Berkshire owns 9.2% of Delta, 9.7% of American, 9.8% of Southwest, 9.8% of United). He perceived that the market had permanently shifted due to consolidation. The airlines have become more like the modern railroads, going from brutal competition to stable oligopoly and consistent profit machines. Last four years operating income: Delta: $24b, American: $23b, United: $17b, Southwest: $14b
jonlucc 8y ago
I may be totally wrong, but I think the point is that just about any company can grow 38% for a long time if you throw enough money at it. So far, lots of people have thrown lots of money at Uber, and some days it looks like they're not going to get profitable before they burn their runway.
rightbyte 8y ago
Exactly. If 38% is bad then I would like to know what Uber would need. On the other hand, they are operating at a loss so increasing revenue just means they spend more money paying costumers to ride with them or eat with them. Only founding would limit the revenue growth when you are giving away stuff.
- dragonwriter 8y ago
  > If 38% is bad then I would like to know what Uber would need. Enough that their losses get smaller, rather than bigger.
friday99 8y ago
Well to be fair, the 9 year old company is losing $1.1B a quarter with no plans to make any money which would make me very very sad. Also, that revenue growth is half of what it was 6 months ago, which is the dramatic slowing referenced.
SilasX 8y ago
>It's a strange world we live in when people speak poorly of 38% revenue growth. It's also a strange world where you need significantly more than 38% growth just to stop losing money while still valued at $50 billion.
AlexandrB 8y ago
It's easy to grow a company that's giving away $2 of goods/services for every $1 it charges. Until the money runs out that is. Uber just has very deep pockets compared to other companies that used this model (e.g. Movie Pass).
dragonwriter 8y ago
> It's a strange world we live in when people speak poorly of 38% revenue growth. Their losses are growing. Growing revenue is important as a route to profitability, but if you are heading the other way despite growing revenue...
TheCoelacanth 8y ago
When you're selling dollar bills for $0.75, 38% revenue growth is not that impressive.
crunchlibrarian 8y ago
In finance the actual growth rate is rarely looked at that much, but the rate of change of the growth rate is scrutinized to the nth degree.