Uber Got Its Mojo Back While Lyft Faces an Existential Crisis

Lyft Inc LYFT shared plunged 15% during extended trading due to disappointing second-quarter guidance while Uber Technologies Inc UBER delivered strong quarter results earlier on Tuesday, showing growth and improved profitability. 

Lyft’s First Quarter Was A Bumpy Ride

Revenue rose 14%to $1 billion, topping $981 million that Refinitiv expected, but Lyft’s operations still resulted in anet loss of $187.6 million, or 50 cents a share. With the first reported quarter since getting behind the CEO wheel, David Risher is more than pleased with the results that show improvement in rideshare services with riders taking more rides and drivers gaining the power to increase their earnings. 

Lyft Is Having An Existential Crisis

Over the past year, Lyft lost 50% of its value.  When Risher who is a former retail executive at Amazon.com Inc AMZN took charge last month as co-founders Logan Green and John Zimmer decided to step back from daily roles, Lyft embarked on a journey of serious job and cost cuts in an effort to compete with Uber. Back in April, Risher announced that 1,072 employees will be let go, which represent about 26% of Lyft’s workforce. Second-quarter earnings are expected in the range $1.0 billion to $1.02 billion, disappointing analysts who were expecting$1.08 billion, according to Refinitiv.

The Corporate Strategy Gap Disables Comparison

Unlike Lyft, Uber is all into diversification as besides ride-hailing, its business spans across food delivery, transportation, logistics and product delivery business. Besides its business being solely ridesharing, Lyft is also only present in North America, while Uber is in 70 countries around the globe. Given Uber’s global scale, it is pretty much impossible for Lyft to win the ride-sharing game, especially given the financially tight macroeconomic environment. 

Q1 Results Show Uber Got Its Mojo Back

Uber began the year strong by showing growth while improving its profitability. 

Revenue for the quarter rose 29% YoY to $8.82 billion, topping $8.72 billion that Refinitiv expected. Mobility segment generated $4.33 billion in revenue while delivery brought in $3.09 billion.  What was down from 2022’s quarter was the freight business that generated $1.4 billion, down from $1.8 billion as consumers have been spending more on services and less on retail that is shipped by freight.

Gross bookings rose 19% YoY to $31.4 billion, with mobility rising 40% YoY to $14.98 billion and deliveries rising 8% YoY to $15.02 billion.

Adjusted EBITDA amounted to $761 million, topping StreetAccount’s consensus estimate of $687 million. 

Uber made a net loss of $157 million, or 8 cents per share, improving from $5.9 billion, or $3.03 per share it lost during last year’s comparable quarter.

Operating loss was $262 million, representing a margin of negative 3% which is an improvement compared to negative 6% over the last 12 months.

Only A Glimpse Of Efficiencies Brought On By AI Solutions

Uber is already using AI achieve accurate predictions of arrival times for rides and deliveries as well as to handle driver recruitment more “reliably and cost-efficiently.” CEO Dara Khosrowshahi remarked that the tech company is only the early stages of using large data models to improve user experiences and efficiencies across its business, announcing significant developments are on the horizon.

The Food Delivery Business Is Still Going Strong

This segment was Uber’s brightest spot during the COVID-19 lockdowns, and one in which it competes with DoorDash DASH that also reported a strong quarter as consumers continued using online deliveries despite higher prices. DoorDash reported its revenue grew almost 40% to $2.4 billion as orders increased 27% YoY. Along with record revenue and orders, DoorDash also raised its guidance on the back of strong demand. But despite Adjusted EBITDA of $204 million, rising from 2022 quarter’s $54 million, DoorDash still made a GAAP loss of 41 cents per share, improving from 2022’s quarter loss of 48 cents per share.

There’s No Contest, But Not All That Shines Is Gold 

It's safe to say that there is no competition between Uber and Lyft as the latter looking for way to stay above water, while the former is defying the tech slump by getting its house, one that hosts a diversified business model, in order.

But despite winning big in ride-hailing and improving on the profitability front, Uber still has a negative operating margin meaning its costs over the past 12 months exceeded the gross profit of $12 billion it made over that timeframe. Moreover, food delivery remains a notoriously low-margin business. Even with $15 billion in bookings just this quarter, Uber's food delivery segment only brought in $288 million in adjusted EBITDA which excludes corporate expenses and non-cash charges. Therefore, defeating Lyft or any other competitor is not all it takes to win in business.