Uber: Still in the Fast Lane
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Investors in South Korea were thoroughly spooked
By the end of April, the South Korean stock market had fully recovered from the decline caused by the escalating conflict in Iran, and the index subsequently hit a series of new highs. However, the Kospi’s rise temporarily stalled after a local politician suggested that South Korea could return the additional tax revenue generated by the artificial intelligence industry to the public in the form of dividends. The suggestion was quickly clarified to state that there was no question of a windfall tax on corporate profits. The Kospi then surged to a new high, approaching the 8,000-point level. Although the index has been setting new highs in recent times, trading volume has also been gradually declining, which may indicate a weakening trend. Valuations are not stretched, but among the potential risks, in addition to the effects of the war in Iran, concentration risk is also worth mentioning, as Samsung and chipmaker SK Hynix have played a prominent role in the index’s rising market capitalization recently.
Impressive results from US companies
Although more corporate earnings reports are due in the coming days, in the US, earnings season is nearing its end. U.S. companies have had a strong quarter in terms of profits; according to FactSet, the S&P 500 index could see a 27.7% increase in first-quarter earnings growth. Earnings growth is expected in ten of the index’s eleven subsectors this quarter: the technology sector likely saw the strongest profit growth, and within that sector, companies in the semiconductor industry may see the highest earnings growth.
Uber’s quarterly results reinforced the view that the company’s growth and profitability story remains firmly intact. Investors focused primarily on stronger-than-expected gross bookings, robust trip growth, continued adjusted EBITDA expansion, and favorable guidance for the second quarter. The key message from the report is that Uber is no longer merely a mobility platform: the delivery business is increasingly emerging as a second meaningful profit pillar, while autonomous vehicles may represent a longer-term growth opportunity.
Uber shares remain on our Equity Top pick List.
Earnings Report
Uber’s Q1 report carried an overall positive message for equity investors. Although revenue came in slightly below consensus, gross bookings exceeded forecasts, trips increased by 20%, and adjusted EBITDA rose by 33%. Management also raised its gross bookings guidance for the current quarter. The share price reacted positively to the news.
In the Mobility segment, gross bookings increased by 25% to USD 26.4 billion. Revenue, however, rose by only 5% to USD 6.8 billion, falling short of the USD 7.1 billion consensus. That said, the company indicated that much of the divergence between gross bookings and revenue was attributable to a business model changes and possible adjustments in the take-rate structure. This interpretation is supported by the fact that segment operating profit increased by 28% to USD 2 billion, indicating that profitability remains very strong. If the company were facing genuine pricing pressure or a demand issue, operating profit would likely have been materially weaker as well.
In the Delivery segment, gross bookings increased by 28% to USD 26 billion, while revenue grew even faster, rising 34% to USD 5.07 billion. Operating profit expanded by 43% to USD 961 million. This is strategically important, as the Uber investment case was previously predominantly centered on Mobility, whereas Delivery now represents a demand pillar of almost comparable scale. Margins are admittedly lower in this business, but at the group level there is no evidence of profitability deterioration — quite the opposite. Delivery growth was particularly strong in Australia, Japan, and the United Kingdom, suggesting that the growth story is not solely dependent on the U.S. consumer, but is increasingly geographically diversified.
Another important driver has been Uber One. The membership program reached 50 million members, and members now account for roughly half of gross bookings and orders. This is especially important for Delivery, as the subscription model increases order frequency, improves customer retention, and may reduce customer acquisition costs over the longer term. There was limited new information regarding autonomous driving. The company had previously confirmed that it aims to launch in 15 new cities with various partners by the end of this year. Target markets include London, Zurich, Madrid, Munich, Los Angeles, and Hong Kong.
Investment story
- Uber is the world’s largest mobility platform, with 200 million monthly active users, and has already demonstrated that it can generate sustainable free cash flow while continuing to grow. Both Mobility and Delivery operate in structurally growing markets, where Uber holds a leading global position.
- The Uber One program increases user engagement and helps stabilize revenue. Advertising revenue is already at a multi-billion-dollar run-rate, generates high margins, and still offers meaningful additional growth potential.
- Uber is not developing autonomous-driving technology in-house; rather, it provides the demand layer and the platform. As a result, it assumes less capital intensity and technological risk than many competitors. If robotaxis become economically viable, Uber could be one of the most scalable beneficiaries.
- Main risks: The core business could be affected by weaker demand in the event of a slowing economy and softer consumer spending. The adoption of autonomous taxis may take longer than expected, while intense competition could also pressure profitability. Regulatory or safety-related issues could hinder the broader rollout of autonomous vehicles.
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