How Uber Makes Money: food delivery, ride-hailing, and freight

Uber Technologies Inc. (UBER) makes money by running a ride-hailing service, and takes a cut of the fares. The company also has a food order and delivery business, Uber Eats, and a freight shipping business, Uber Freight. These work similarly to ride-hailing, except that they match people with delivery drivers and freight shippers, respectively.

Uber’s Financials

Uber’s market cap is about $81 billion. Total revenue fell 17.9% year-over-year (YOY) in Q3 2020, which ended September 30, 2020. The company, which has consistently struggled to make a profit, posted a net loss of $1.1 billion for the quarter. However, it was an improvement from the $1.2 billion net loss posted in Q3 2019. Uber’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) across all of its businesses is slightly better, but still registered a loss of $625 million in Q3 2020.

Uber’s Business Segments

Uber has made some changes to the way it classifies its reportable business segments as of Q2 2020. The Rides segment has been renamed to Mobility and the Eats segment has been renamed to Delivery. Additionally, Uber sold its JUMP electric bike rental service, which had been categorized under its Other Bets segment. Certain immaterial offerings previously organized under Other Bets have now been moved to the Mobility segment. Uber now has just four operating and reportable segments: 1) Mobility; 2) Delivery; 3) Freight; and 4) ATG and Other Technology Programs. Uber also includes an “All Other” category, but its contributions to the company’s overall business are immaterial. It is not included below nor in the pie charts above.

Mobility (formerly Rides)

Uber’s Mobility segment is its flagship ride-hailing business. This segment, once Uber’s largest, made up just 44% of Uber’s revenue in Q3 2020, having fallen 52.8% YOY. Uber reports adjusted EBITDA for its reportable segments. Even using this more generous measure of profitability, only Uber’s Mobility segment is profitable. The segment posted adjusted EBITDA of $245 million in Q3 2020, down 61.2% compared to the same quarter a year ago.

Delivery (formerly Eats)

Uber’s Delivery segment offers an app that lets people order meals from restaurants remotely for either pickup or delivery. For delivery, customers are matched with drivers similarly to how they are for Uber’s ride-hailing business. The segment was first launched in 2014 as UberFRESH, before becoming UberEATS in 2015.  The segment, which is now officially reported under the name Delivery, generated 46% of Uber’s revenue as of Q3 2020, seeing revenue grow 125.0% YOY.

Freight

Launched in 2017, Uber Freight connects truck drivers to shippers looking to move freight in the same way that its ride-hailing business connects drivers with people looking for a ride. Uber Freight only makes up a small portion of Uber’s total revenue, or about 9% as of Q3 2020. But it is growing, up 32.1% YOY.

Advanced Technologies Group (ATG) and Other Technology Programs

Uber’s ATG is its program to develop self-driving vehicles and ride-sharing technology. The other major part of this segment is Uber Elevate, a program to develop vertical takeoff and landing (VTOL) aircraft ride-hailing. This segment is composed of very early-stage projects, and registered revenue of just $25 million in Q3 2020, up 47.1% from the year-ago quarter.

Recent Developments

On August 13, 2020, San Francisco Superior Court Judge Ethan Schulman refused to grant Uber more time to appeal an earlier decision requiring the company to classify drivers in the state as employees. California’s new state law — Assembly Bill 5 — makes it more difficult to classify “gig” workers as independent contractors. Currently, Uber classifies its drivers as independent contractors rather than employees, a distinction that allows Uber to avoid paying minimum wages, paid sick and family leave, unemployment insurance, and workers’ compensation insurance.

On August 20, 2020, a California appeals court granted Uber and Lyft an extension to comply with the order to reclassify their drivers as employees. They were required to submit plans on how they will comply with the order if their appeal fails and ballot Proposition 22 (Prop 22), which would exempt their drivers from AB5, fails to pass. Oral arguments for the appeal begin on Oct. 13, 2020.

On November 3, 2020, California voters approved Prop 22, ensuring that AB5 will not apply to Uber, Lyft, or Doordash.

On Sept. 28, 2020, Uber’s transportation license in London was restored after it had been revoked in November of 2019, the second time it has been revoked in the last three years. London’s transportation regulators cited Uber’s failure to prevent unauthorized drivers from using their app, potentially endangering riders. The current license lasts 18-months and is conditional on Uber provided periodic safety reports.

On Feb. 19, 2021, the U.K.’s supreme court ruled that 25 drivers who brought a case against Uber are employees, not contractors, and should be entitled to the rights employees have, such a minimum wage and vacation pay. While the ruling only applies to the drivers involved in the case, it sets a precedent that could make it easier for other workers to gain the status of employees in the future.

How Uber Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Uber and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Uber releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Uber discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Uber breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.