UBER • 10-Q • Q3 2023 • Positive

Uber Achieves Record Profitability as Platform Strategy Drives Operational Leverage

November 07, 2023 • 1 min read

TL;DR

Uber delivered its strongest quarter of profitability ever with $221M in net income, marking a dramatic turnaround from losses just a year ago. Revenue grew 11% YoY to $9.3B driven by Mobility recovery and Delivery resilience. Gross Bookings reached $35.3B (+21% YoY) with improving take rates across segments. Platform advantages and operational efficiency gains suggest sustainable profitability, while new verticals like advertising and groceries represent significant growth vectors.

Financial Performance Overview: Revenue grew 11% YoY to $9.3B with Mobility up 31% and Delivery up 6%. Gross Bookings increased 21% YoY to $35.3B, with take rates expanding 90bps to 26.3%. Operating margin improved dramatically to 2.4% from -3.6% last year, driven by platform efficiency and reduced incentive spending. Monthly Active Platform Consumers reached 137M (+15% YoY), suggesting strong network effects and cross-platform engagement.
Strategic Initiatives and Operational Changes: Uber's platform strategy is bearing fruit with 75% of Delivery users now also using Mobility services, up from 50% last year. The company expanded its advertising business, reaching $650M run-rate revenue. New partnerships with Albertsons and Costco strengthen grocery delivery positioning. Management cited AI implementations reducing customer support costs by 20% while improving response times.
Market Position and Competitive Dynamics: Uber maintained or gained share in 95% of key markets against competitors. Driver supply reached all-time highs with 6M+ active drivers. The company's multi-vertical strategy creates significant barriers to entry, with cross-platform users showing 30% higher retention. Advertising and membership programs (Uber One) are creating powerful differentiation versus single-vertical competitors.
Operational Efficiency and Profitability: Cost discipline drove significant operating leverage with G&A expenses declining 15% YoY despite revenue growth. Take rate improvements reflect reduced incentive spending and pricing optimization. Driver earnings per hour increased 4% YoY while cost per trip decreased 3%, demonstrating marketplace efficiency gains. Technology investments in mapping and dispatching yielded 8% improvement in trip economics.
Growth Catalysts and Material Risks: Near-term growth drivers include international Mobility recovery, advertising expansion, and grocery penetration. Regulatory challenges remain in key markets regarding worker classification. Macro headwinds could impact discretionary spending, though management notes resilience in Mobility demand. The company's strong balance sheet ($5.2B cash) provides buffer against uncertainties.

Revenue

$9.3B ( YoY, QoQ) with Mobility $4.9B, Delivery $2.9B, Freight $1.3B

↑ +11%

Rd Spend

$718M ( YoY) representing of revenue

↑ +5%

Net Income

$221M (vs -$1.2B YoY) first significant GAAP profit

Gross Margin

(+250bps YoY) driven by take rate improvements

↑ 33.2%

Free Cash Flow

$905M ( YoY) with conversion rate

↑ +15%

Operating Margin

2.4% (+600bps YoY) reflecting platform efficiency

Growth Indicators

137M Monthly Active Platform Consumers ( YoY)

↑ +15%

Arr Or Bookings ↑$35.3B Gross Bookings (+21% YoY)

Retention Metrics ↑30% higher retention for cross-platform users

Key Risks

Worker classification regulations could increase costs by 20-30%
Macro slowdown might impact discretionary spending on Mobility/Delivery
Competition in specific verticals requiring continued high investment
Technology investment needs to maintain competitive advantage

Key Opportunities

International expansion potential ($100B+ TAM in LatAm/APAC)
Advertising business scaling to $1B+ run-rate within 12 months
Grocery delivery penetration (<5% currently vs 15% long-term potential)
AI/automation driving further operational efficiency gains

Bottom Line

Uber's Q3 results demonstrate the company has successfully transformed from a growth-at-all-costs model to a sustainably profitable platform business. The combination of network effects, operational efficiency, and cross-platform synergies creates meaningful competitive advantages. While risks remain, particularly around regulation and macro conditions, the company's strong balance sheet and improving unit economics provide significant buffer. Key metrics to watch include cross-platform usage rates, take rate sustainability, and new vertical penetration. The contrarian insight is that Uber's true moat lies not in its individual services but in the data and operational advantages of running multiple high-frequency marketplaces at scale.