Uber Beats Wall Street, but Its Earnings Come With a Catch

What happened

Uber reported third-quarter revenue of $14.77 billion, up 9.4% from a year earlier and nearly $100 million above Wall Street projections. Non-GAAP earnings were $0.88 per share, $0.01 above analyst expectations. Uber said strategy changes reduced its stated year-over-year sales growth rate by about eight percentage points.

Confirmed

Global impact / market context

The strategy-related reduction means reported revenue growth may understate changes in transactions handled on Uber’s platform. For investors, that complicates comparisons with earlier periods, while the small earnings beat leaves future profit growth dependent on operating performance and the company’s ability to expand its services.

Analyst inference

Uber also said revenue rose about 10% at constant currency, meaning the comparison removes exchange-rate effects. That points to stronger underlying growth than the reported rate alone suggests, but the article gives no breakdown of how strategy changes affected sales or transaction volumes.

Confirmed

What to watch

1. Management’s fourth-quarter outlook is the next stated trigger; check its gross-bookings estimate, which measures the value of rides and deliveries placed through Uber’s platform. Confirmed
2. Watch the forecast for adjusted EBITDA, a measure of operating earnings before certain costs, to see whether business growth is translating into stronger profitability. Confirmed
3. The free-cash-flow estimate, which tracks cash left after operating needs and investment, may show whether Uber can fund its operations while sustaining growth. Confirmed

Evidence

• gurufocus.com