Why Uber keeps posting losses

That’s the whole paradox. Between April and June, Uber recorded a net loss of 2.5 billion euros, but its turnover approached eight billion, greatly exceeding forecasts. Turnover – an exact reflection of the group’s activity – increased by 120% for the VTC activity (Transport cars with drivers) and by nearly 40% for the meal delivery branch.

Activity on the rise but, ultimately, the Californian group is losing money. This is explained by the difference between this famous turnover and profit. For a company, the turnover is the money it makes thanks to its activity, it is what is recorded before the payment of subcontractors, charges and other operating costs. The profit is the amount that actually remains in the coffers after payment of all charges, before tax. So, precisely in the case of Uber, the 120% increase in turnover reflects the increase in demand for transport and the delivery of meals, but the final loss is explained by excessive charges.

First, the American platform has made risky investments in several companies whose financial health is shaky, particularly in Singapore and India. Then, it must face legal proceedings in several countries for its refusal to grant employee status to its drivers. But basically, structurally, some administrative fixed costs, overheads, operating expenses (lobbying, marketing, legal advice, etc.) are heavier than in the case of traditional taxi companies. It is this equation that Uber has still not settled.

The problem also arises more or less for other digital platforms, such as Netflix in another sector. This does not prevent the financial markets from continuing to believe in the adventure despite the losses recorded in the second quarter, Uber shares gained 19% on Tuesday August 2 on the New York Stock Exchange. Investors believe that, despite the difficulties, the company’s future is not in jeopardy.

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