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Market Round-Up: Uber Q2 2020 earnings reaffirm importance of food delivery

The coronavirus pandemic might have left Uber in financial distress, but its food delivery business has come to its rescue.

Gross Bookings declined to $10.2 billion, down 35% year-over-year, or 32% on a constant currency basis Delivery Gross Bookings (Uber Eats, for example) grew 113% year-over-year each on a constant currency basis, essentially doubling Uber's freight services also saw an uptick in demand

In a world where an unsuspecting cab could carry the highly contagious virus that has killed hundreds of thousands and ravaged endless economies, who will consider pinging Uber for their next ride? That’s the question the ride hailing giant has had to constantly ask itself during this pandemic. 

With Uber’s Q2 earnings report having been released last week, let’s take a look at how the company is progressing through this crisis.

Ride hailing on the decline, but other sectors play savior

As the numbers of coronavirus cases continue to soar across the world, Uber’s numbers equally met them with a decline, at least with its core business.

Gross Bookings declined to $10.2 billion, down 35% year-over-year, or 32% on a constant currency basis, with Mobility Gross Bookings declining 73% and Delivery Gross Bookings (Uber Eats, for example) growing 113% year-over-year, each on a constant currency basis.

Revenue declined 29% year-over-year, or 27% on a constant currency basis. Mobility Revenue declined 67% year-over-year and Delivery Revenue grew 103% year-over-year.

Image: Uber

While Uber’s ride-hailing business was naturally on the decline, its food delivery business doubled in bookings. Its Freight business also saw an uptick, bumping up 27%. 

Here’s how the ride-hailing and food delivery company did versus what Wall Street expected, as per CNBC

  • Losses: $1.02 per share vs. 86 cents per share (adj.) expected, according to a consensus of analysts surveyed by Refinitiv.
  • Revenue: $2.24 billon vs. $2.18 billion, as per Refinitiv.

Here’s how the business units performed versus what analysts expected for the quarter:

  • Rides (gross bookings): $3.05 billion vs. $3.47 billion expected, according to estimates compiled by StreetAccount
  • Eats (gross bookings): $6.96 billion vs. $6.57 billion expected, as per StreetAccount.

CEO Dara Khosrowshahi said during the earnings call: “The Covid crisis has moved delivery from a luxury to a utility.” According to CNBC, he believes Uber users will continue to order food and other items through Uber delivery services even after the pandemic subsides, and stay-at-home orders are lifted. 

Additionally, he said that rides recovery depended on the ability of different countries to contain the virus, with the recovery so far led by Asia, excluding India, as per Reuters.

In an effort to keep its ride service relevant during the pandemic, Uber launched new options and tech such as in-app product innovations like mask detection for drivers, video education and go-online checklists for all users, and new “no mask” feedback tags that promote shared accountability.

Food delivery leads the chargeImage: Uber
Like Careem in the MENA region, Uber has naturally fallen back on its food delivery business to buffer some of the losses from the COVID-19 pandemic. The numbers clearly show that while in-house dining might be banned in some countries like Kuwait, or restaurant seating limited by capacity, the F&B industry never slumbers. 

Additionally, grocery delivery plays a major role in Uber’s positive numbers. As more and more people fret to visit their local supermarket, Uber plays both a convenience role for customers and a safety role for overall society as less people feel inclined to step out and risk exposure to or transmission of the virus. 

Khosrowshahi told analysts that Uber’s food-delivery business would be profitable in the vast majority of countries in which it operates within a couple years. 

Overall, adjusted EBITDA loss for its delivery business was reduced to $232 million, improving $81 million quarter-over-quarter and $54 million year-over-year or by 59 percentage points as a percent of Adjusted Net Revenue (ANR).

In an attempt to cut the fat (no pun intended), Uber had shut down its food delivery operations in several markets, including the Middle East, after fierce competition from existing rivals such as Talabat, Zomato and even its subsidiary Careem NOW.