The $69 billion ride hailing giant Uber gives a terrible performance for the first half year of 2016. A net loss of $1.2 billion loss for this company really put the concerns on the profitability of the company. In order to expand its business, Uber has to put huge amount of capital into the subsidies for Uber drivers. Besides, promoting business globally also required the company to spend a lot. The company is still in its growing period but the speed of spending the capital to take the market from local taxi service is too quick to be concerned. Raising money round after round then became necessary. What’s more, competition from Didi and Lyft makes Uber suffer more from lowering the ride cost for customers and attracting more drivers. However, Uberpool service will be closely measured in the future development since this part will contribute more to its revenue.
The ride-hailing giant Uber Technologies Inc. is not a public company, but every three months, dozens of shareholders get on a conference call to hear the latest details on its business performance from its head of finance, Gautam Gupta. On Friday, Gupta told investors that Uber's losses mounted in the second quarter. Even in the U.S., where Uber had turned a profit during its first quarter, the company was once again losing money.
In the first quarter of this year, Uber lost about $520 million before interest, taxes, depreciation and amortization, according to people familiar with the matter. In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said. That means Uber's losses in the first half of 2016 totaled at least $1.27 billion. Subsidies for Uber's drivers are responsible for the majority of the company's losses globally, Gupta told investors, according to people familiar with the matter.
Uber's losses and revenue have generally grown in lockstep as the company's global ambitions have expanded. Uber has lost money quarter after quarter. In 2015, Uber lost at least $2 billion before interest, taxes, depreciation and amortization. Uber, which is seven years old, has lost at least $4 billion in the history of the company.
The second quarter of 2016, which ended in June, could represent a nadir for Uber. The company's losses will likely fall. In July, it cut a deal with its largest global competitor, Chinese ride-hailing behemoth Didi Chuxing, washing its hands of its massive losses in that country. Didi gave Uber a 17.5 percent stake in its business and a $1 billion investment in exchange for Uber's retreat. Uber lost at least $2 billion in two years in China, people familiar with the matter told Bloomberg in July. Uber won't see any losses from China on its balance sheet after August, the company said on Friday's investor call.
It’s still too eraly to judge the Uber business model based on this financial result. This technology company is expanding and spending quickly. It will take the market from taxi and other car service. But the problem remains whether it can main the business profitable and sustainable.