Ongoing travel recovery boosts Q1 earnings for Uber and Lyft

A post-pandemic hunger for travel — whether it be across oceans or just across town — is driving an optimistic outlook for both Uber and Lyft as they reported first quarter earnings this week.

For Uber, that means big revenue boosts that could soon lead to profitability, while Lyft hopes a leadership change and cost savings from recent layoffs fuel a drive toward more competitive pricing that keeps it sharing the road with its larger competitor.

Following the market’s close on Thursday, Lyft reported revenue of $1 billion in the first quarter, a 14% increase over the same period last year. The number of active riders during the first three months was nearly 10% higher than the first quarter of last year. Net losses for the quarter were $187.6 million, an improvement over the $196.9 million in losses last year and $588.1 million in losses during the fourth quarter of 2022.

New CEO David Risher hailed the progress.

“We’re improving our rideshare service and are thrilled with the early results. Riders are taking more rides and drivers have the power to earn more,” said Risher, who officially replaced co-founder Logan Green as CEO in April. “Our focus on riders and drivers will be our strength as we build a large-scale, healthy and profitable business.”

Uber showed even bigger increases in a Q1 report released two days earlier. Uber’s $8.8 billion in revenue for the quarter was up 29% from the same quarter last year. Its $31.4 billion in gross bookings represented a 19% increase from a year ago.

While the company lost $157 million over the three months, that represented an improvement from the first quarter of last year, when it reported a loss of nearly $6 billion. Company leaders said they are on track to start showing quarterly profits.

“We delivered record profitability and free cash flow in Q1, and we are poised to expand profitability again in Q2,” CFO Nelson Chai said.

During calls with investors this week, leaders at both companies spoke of the benefits of a competitive market. Lyft has had a bumpier path, as co-founders Green and John Zimmer stepped away from day-to-day responsibilities, though both remain on the company’s board of directors with Green serving as chairman. Following Risher’s ascension last month, the company announced layoffs of over a thousand employees, more than a quarter of its workforce.

“Lyft is at an inflection point,” Risher said Thursday evening during a call with investors. “People are getting back out to work and play, and we have a renewed focus on delivering a great rideshare experience.”

He believes a push for more competitive pricing helped drive an acceleration in year-over-year rideshare growth for the first time in nearly two years.

“This is key and really important to remember: Every year millions of riders choose Lyft over Uber. We don’t want to give them a reason to go the other direction,” Risher said. “It’s time to grow again. Riders and drivers both want a healthy competitive ride-share market, with Lyft as a strong player.”

Lyft’s adjusted EBITDA was $22.7 million for the quarter, down from the $54.8 million in the first quarter last year, but an increase over the $248.3 million in losses in the final quarter of 2022. Sales and marketing expenses for the quarter were $116 million, down from $126 million year over year.

Despite Lyft’s troubles, Uber’s Dara Khosrowshahi predicted a “constructive, competitive environment” between the two companies.

“Obviously, they’re going through a lot of changes. It’s a very, very strong brand. It’s not going anywhere,” he said. “What we’re seeing is, they’re looking to price competitively with us, and we think that sets up a competitive environment where we’re competing on brand and we’re competing on service and ETAs and accuracy, reliability, etc.”

Khosrowshahi likes Uber’s position. Adjusted EBITDA came in at $761 million, up from $593 million in the first quarter last year. Sales and marketing expenses came in at $1.262 billion, just below the $1.263 billion spent in Q1 last year. More revealingly, this year’s costs represented 3.9% of gross bookings, down from 4.7% last year, which the company attributed to a decrease in consumer discounts, credits and refunds.

During the pandemic, Uber’s delivery business helped carry the company, diversification that Lyft lacked. While ride-hailing was slow to recover, Uber invested in incentives for drivers to return to its platform. Now it’s paying off, as revenues from mobility soared 72% to $4.3 billion for the quarter. Delivery was up 23% to $3.1 billion, while freight was down 23% to $1.4 billion, which the company attributed to a difficult economy.

“[We] have demonstrated the ability to deliver in good markets and bad markets,” Khosrowshahi said. “Remember, this is not a fair-weather company. We’ve been through a lot of difficult things. We came out of COVID. … Early last year before everyone else was raising alarms about the reality of today’s capital markets and the discipline needed, we raised alarms internally and took action early so that we didn’t have to be reactive like a lot of other tech companies. We’re innovating, we’re building, while a bunch of people are restructuring. That’s a good position to be in.”