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Think Uber Is Profitable? Think Again

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Think Uber Is Profitable? Think Again

Many individuals wrongly assume that Uber, the popular ride-hailing giant, is operating with a hefty profit. This is, however, incorrect. The company has lost at least $1.2 billion in the first half of 2016 alone.

According to Bloomberg, Uber's head of finance, Gautam Gupta, told dozens of investors during a conference call last week that the company was profitable in the first quarter of the year in the United States but was losing money worldwide. The company's losses then mounted in the following quarter.

Bloomberg, citing "people familiar with the matter," suggested that Uber lost around $520 million before interest, taxes, deprecation and amortization during the first quarter. During the second quarter, its losses exceeded $750 million, including a shortfall of $100 million in the United States.

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Bloomberg added that the majority of Uber's losses across the world came from subsidies it offers drivers.

Aswatch Damodaran, a business professor at New York University and critic of Uber's valuation, told Bloomberg that it is difficult to find "many technology companies that could lose this much money, this quickly." This is particularly poignant for a private company like Uber, which has the ability to raise substantial capital — more than $16 billion in cash and debt to be precise. It has reached the point where the situation has become "unprecedented."

Uber has lost at least $2 billion in 2015, and the company's total losses over its seven-year history is at least $4 billion.

"It's hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share," Joe Grundfest, professor of law and business at Stanford, also told Bloomberg. "The interesting challenge is for them to turn the corner to become profitable, cash-flow-positive entities."

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