Bloomberg News reported Thursday that Uber lost $1.2 billion in the first six months of 2016, despite Uber Technologies Inc.’s claims that its U.S. business became profitable this year.
Bloomberg cited unnamed sources who said the San Francisco on-demand-ride-sharing company’s chief finance officer, Gautam Gupta, had disclosed the numbers on a conference call with Uber’s private investors last Friday.
Gupta acknowledged that Silicon Valley’s most valuable venture capital-backed “unicorn” had losses before interest, taxes, depreciation and amortization of roughly $520 million in the first quarter of 2016, despite U.S. operations being profitable.
But those losses accelerated in the second quarter to about $750 million, including a shocking $100 million loss in the United States. Uber claims that most of the losses were due to the company providing subsidies for its drivers. But nobody expected that the U.S., as a mature market, would still need driver subsidies.
Gupta told investors that the company’s bookings in the April-through-June period jumped to over $5 billion from about $3.8 billion in the prior three months.
But when pressed on the call, Gupta admitted that during the second quarter Uber had changed how it calculates the company’s “UberPool’s,” which had artificially inflated its revenues. With the accounting change, Uber’s portion of the ride-sharing revenue only grew from $900 million in the first quarter to $1.1 billion in the second quarter.
Despite losing $2 billion in 2015 and $4 billion since being founded as Uber Cab in 2009, venture capitalists — including Google Ventures, Benchmark, Menlo Ventures, T. Rowe Price and Fidelity — have poured $16 billion of cash into Uber. In its latest financing in December 2015, the company raised $2.1 billion at a valuation of $62.5 billion.
But skepticism of the company’s supposedly disruptive business model, which relies on all of its drivers operating as independent contractors, is growing due to litigation by drivers who claim they really are employees and should receive Obamacare, benefits and overtime.
The only way Uber can overcome being seen as “employing” drivers is to allow them to work for any of its growing number of ride-hailing competitors, such as U.S.-based Lyft and China-based Didi Chuxing.
At the June 2016 Re/Code Conference in New York, Didi Chuxing president Jean Liu demonstrated to CNBC that Uber’s smartphone app was specifically offering discounts to Didi Chuxing prices. Lui indicated that competitiveness may be why Apple invested $1 billion in Didi Chuxing. Lui added, “I find it quite cute because I’ve never seen a company put their competitor’s brand on their own homepage. … This is very strong proof to show that we have better service.”
A month after the Re/Code Conference, Uber agreed to stop doing business in China in exchange for $1 billion and a 17.5 percent stake in Didi Chuxing. Gupta told the private investor group that losses from China should end shortly.