Why Did Uber Post a Third-Quarter Loss?

21 Dec

Uber lost at least $800 million in this year’s third quarter, global media reported this week. The third-quarter loss occurred due in part to hefty spending on promotions. That spending comprises cash payments to recruit new drivers. It also includes investment in the company’s self-driving car unit and food delivery through UberEats, market insiders say.

Analysts say Uber would likely have to pare some of the losses before its eventual IPO in order not to scare off potential investors. The $800 million quarterly loss comes on top of at least $1.2 billion in this year’s first half, experts say. Meanwhile, gross revenue, the amount of sales Uber books before taking a commission, rose to $5.4 billion from about $5 billion in the second quarter.

In the most recent quarter, Uber sold its China operations to Didi Chuxing Technology after a costly battle for market share. Uber agreed to take a 17.7% stake in Didi, while Didi agreed to invest about $1 billion in Uber as part of the deal.

With that deal complete, Uber can concentrate on its other global markets, particularly the U.S. where it has a big lead over Lyft. Its U.S. rival, also based in San Francisco, was valued most recently at $5.5 billion. Earlier this year, it hired Qatalyst Partners LP, a boutique investment bank known for helping companies find a buyer.