How Does Uber Make Money? Business Model Explained!

Transporting people and goods from place to place is made possible with Uber Technologies Inc. (UBER), a digital platform that leverages the company’s massive network and technology. With its mobility business, the company offers ride-hailing services, food and grocery delivery services, and freight shipping services. People and businesses in need of these services can connect with individuals and businesses that provide them through Uber’s platform.

As well as competing in the highly competitive mobility and delivery industries globally, Uber operates in the U.S. and Canadian logistics industry. The company faces competition from Lyft Inc. (LYFT) as well as Didi Global Inc. (DIDI) of China. Also competing with Uber are DoorDash Inc. (DASH) and Inc. (AMZN). The company competes with freight brokers such as CH Robinson Worldwide Inc. (CHRW) and XPO Logistics Inc. (XPO).

Overview of Uber’s Financials

Early February, Uber released financial results for the fourth quarter of its fiscal year (FY), which ended Dec. 31, 2021. This was a significant improvement over the $968 million net loss reported in the year-ago quarter. Revenue increased 82.6% to $5.8 billion (YOY). In the most recent quarter, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $86 million versus -$454 million a year ago.

With the onset of the COVID-19 pandemic in early 2020, Uber’s ride-hailing business suffered. People sheltering at home increased their demand for food delivery, however, resulting in its delivery business growing. Due to the rollout of vaccines and the reopening of the economy, that success helped to offset some of the losses in the rides business.

According to Uber’s earnings press release for Q4 FY 2021, its platform attracted more consumers than ever before and its delivery business achieved adjusted EBITDA profitability. Additionally, the ride-hailing company said its gross bookings had almost recovered to pre-pandemic levels.

How Uber Makes Money

There are three segments that Uber operates and reports on: Mobility, its ride-hailing business, formerly known as Rides; Delivery, its food, grocery and other small items delivery service, formerly known as Eats; and Freight, its freight shipping business.

Uber provides revenue breakdowns and adjusted EBITDA for each of these segments.

In addition to reporting results for the “All Other” category, Uber now primarily provides rides through dockless e-bikes and e-scooters, in addition to its traditional mobility offerings. Neither revenue nor adjusted EBITDA were generated in Q4 FY 2021. The company also reports corporate G&A and platform R&D costs under the “Corporate G&A and Platform R&D” category, which reported a $489 million loss in adjusted EBITDA.

All negative amounts in the reportable segments as well as results from these two other categories were excluded from the percentage calculations.

1. Mobility (formerly Rides)

Uber’s Mobility segment is the company’s flagship ride-hailing business. The app connects consumers with drivers of a wide range of vehicles, including cars, auto rickshaws, motorbikes, minibuses, and taxis. Additionally, Uber’s financial partnerships and transit offerings are included in the segment.

In Q4 FY 2021, Mobility segment revenue was $2.3 billion, up 54.9% from Q4 FY 2021. Uber’s revenue from rides accounted for more than 39% of its total revenue for the quarter. The segment posted adjusted EBITDA of $575 million, a 96.2% year-over-year increase. Across all reportable segments, adjusted EBITDA comprised nearly 96% of it.

2. Delivery (formerly Eats)

Uber’s Delivery segment enables consumers to search for restaurants near them, order meals, and either pick up or have food delivered. A few regions also offer grocery delivery, alcohol delivery, convenience store delivery, and delivery of other goods.

The Delivery segment generated revenues of $2.4 billion in Q4 FY 2021, up 78.5% YoY. In the quarter, the segment generated nearly 42 percent of total revenue. During the quarter, the company posted adjusted EBITDA of $25 million, compared with a loss of $145 million in the year-ago quarter. Within Uber’s reportable segments, the segment accounted for more than 4% of adjusted EBITDA.

3. Freight

The Freight segment of Uber connects carriers with shippers. In addition, it allows carriers to book shipments upfront and with transparency. Other logistics services are also included in this segment.

Q4 FY 2021 revenue for the Freight segment was $1.1 billion, up 245.0% from the same quarter last year. Nearly 19% of companywide revenue came from this segment. Segment adjusted EBITDA for Q4 FY 2021 was $25 million, down from $41 million in Q4 FY 2021.

Recent Developments

Starting on March 16, 2022, Uber will begin imposing a temporary fuel surcharge as a way to compensate its drivers and couriers for rising fuel prices. According to location, the surcharge for an Uber trip is either $0.45 or $0.55, and the surcharge for an Uber Eats order is either $0.35 or $0.45. The entire surcharge will be paid directly to the company’s workers. In the company’s statement, the surcharge would only last for 60 days, after which a reassessment would be conducted.

Uber announced an agreement with the United Food and Commercial Workers Canada (UFCW) union on Jan. 27, 2022. Ride-hail and food delivery contractors hired by Uber will receive employee-like benefits, such as pensions and sick leave.

The Uber and GMB unions reached a similar agreement in 2021, which allowed GMB to represent as many as 70,000 drivers. Since 2010, Uber has been in a legal battle with labour unions worldwide over reclassifying its drivers from contract workers to regular employees.

Leave a Comment