SAN FRANCISCO — Technology firms not often generate profits earlier than they go public. Twitter was unprofitable when it listed on the inventory market. So had been Snap, Spotify and SurveyMonkey.
For Uber, the query because the ride-hailing big prepares for a public providing is even greater than whether or not it may well generate profits. That’s as a result of the corporate, essentially the most outstanding tech start-up of its era, will set the bar for different well-known tech firms like Slack and Lyft as additionally they stampede towards the inventory market this yr.
So far, Uber will not be doing itself any favors on income.
The firm reported on Friday that it had narrowed its web loss within the fourth quarter of 2018 from a yr earlier. But excluding sure one-time objects, together with the sale of a few of its companies, Uber’s losses for the quarter rose 88 % from the earlier yr, to $842 million.
The losses had been a results of Uber’s growing its spending because it tries to outmuscle rivals, a lot of which have intensified their efforts so as to add riders and drivers. Uber has responded by providing greater incentives and extra promotions to fend off rivals like DoorDash, Lyft and different ride-hailing and food-delivery companies.
Uber made its monetary disclosure because it hurtles towards what is about to be one of many biggest-ever public choices by a tech firm. A transportation colossus, Uber was privately valued at greater than $70 billion final yr, and proposals from funding bankers counsel that it might be value as a lot as $120 billion after going public. The share sale will create enormous windfalls for Uber’s many investors, and for its founders and early employees.
As a private company, Uber is not required to disclose financial results. But it has regularly done so over the past two years to inform investors about its business, and perhaps to keep the depth of its losses from coming as a surprise later.
The latest set of figures, probably Uber’s last as a private company, will be closely scrutinized. Many investors initially give young and fast-growing tech start-ups a pass for losing money, but questions about whether such companies can ultimately be profitable eventually catch up with them. Investors criticized Twitter for racking up losses before it finally began to make money last year, and they have pushed down Snap’s share price since its public offering, partly because the company is still deeply unprofitable.
In a statement, Uber’s chief financial officer, Nelson Chai, did not address the company’s losses. He said Uber had “maintained category leadership” in its ride-hailing business, and he noted other bright spots, including the company’s freight-management business and nascent e-bike and scooter program.
Uber has a long history of spending large sums of money. Ride-hailing is inherently an expensive business that requires companies to expand into new markets for growth, pay to recruit drivers and lower prices to grab business away from competitors.
Dara Khosrowshahi, Uber’s chief executive, has been under pressure to pare its losses, and the company has pulled out of money-losing markets like Russia and Southeast Asia.
Some of the company’s losses have been overshadowed by its explosive growth. In 2018, Uber increased its total bookings — what it charges customers for rides and food delivery — to $50 billion, up 45 percent from 2017. Net revenue was $11.3 billion, a 43 percent increase.
The company’s net revenue for last year’s fourth quarter was $3 billion, a 25 percent increase from a year earlier, and its gross bookings jumped 37 percent, to $14.2 billion. The company has $6.4 billion in cash, and its net loss was $865 million.
But Uber’s profit margins have declined as it cut prices to match competitors and spent money on expanding its food-delivery business, Uber Eats. The margins are also smaller on Uber Eats orders because the company pays commissions to restaurants as well as delivery drivers.
Uber’s self-driving car program, which will probably not yield revenue for years, continues to burn cash. The company returned its autonomous vehicles to public roads in December after a 10-month hiatus, which was prompted when one of its vehicles fatally struck a pedestrian in Arizona.