Uber reported second-quarter results before the open this morning - and there is one number worth stripping out before looking at the headline.
What was reported
| Quarter | Year ago | Change | |
|---|---|---|---|
| Gross bookings | 58,022 | 46,756 | +24% |
| Revenue | 14,191 | 12,651 | +12% |
| GAAP income from operations | 1,890 | 1,450 | +30% |
| GAAP net income | 2,394 | 1,355 | +77% |
| GAAP diluted EPS | $1.17 | $0.63 | +85% |
| Adjusted EBITDA | 2,819 | 2,119 | +33% |
| Non-GAAP operating income | 2,143 | 1,534 | +40% |
| Non-GAAP EPS | $0.81 | $0.60 | +35% |
In millions of dollars
The number worth stripping out
85% against 35% - the difference is one line
GAAP EPS jumped 85%. Non-GAAP EPS rose 35%.
The whole difference comes from one line, and the company states it explicitly in a footnote: net income for the quarter includes a $1.6 billion pre-tax benefit from revaluations of Uber's equity investments.
For comparison, in the year-ago quarter the same line was negative - minus $17 million.
This is a paper gain on holdings in other companies, not cash coming in from operating the platform. It is real in accounting terms, but it does not recur and management does not control it.
The number that describes the business is $0.81 per share, up 35% - and that is still excellent.
And the second gap: bookings +24%, revenue +12%
It looks like a contradiction. It is not.
Gross bookings - the total money flowing through the platform - rose 24%. The revenue Uber books for itself rose only 12%.
The explanation is in the report: "Business model changes negatively impacted total revenue YoY growth by 8 percentage points."
In plain terms: in some markets Uber changed how it records the transaction - whether it is the principal in the transaction or the intermediary. That changes the size of recorded revenue without changing a single dollar of what actually happens.
Excluding that change, revenue grew at roughly 20% - far closer to the bookings rate.
What actually happened
Volume grew, and so did users:
| Quarter | Year ago | Change | |
|---|---|---|---|
| Trips | 3,867 million | 3,268 | +18% |
| Monthly active platform consumers | 208 million | 180 | +16% |
And in the company's words, from Dara Khosrowshahi: "We've added more first-time users over the past twelve months than in any period over the past five years."
And that is the meaningful detail: it is not only that existing users ride more - the user base itself is expanding at its fastest rate in five years.
The cash flow - and this is the real milestone
$10 billion of free cash flow a year
Trailing twelve-month free cash flow crossed the $10 billion mark for the first time in the company's history.
In the quarter itself: operating cash flow of $2.862 billion and free cash flow of $2.792 billion.
And that changes what Uber is. A company asked for years when it would generate cash now generates it at a rate that lets it invest, acquire, and reduce its share count at the same time - as the CFO notes in the release.
Cash and short-term investments: $5.4 billion.
The autonomous vehicle bet
Khosrowshahi frames the goal sharply: "build the world's largest platform for autonomous vehicles."
That is a strategic statement rather than a number, and there is no figure in the report quantifying it. But it marks the logic: if the driver is the main cost component of a ride, whoever controls demand - the app the rider opens - stays relevant even when the driver disappears.
That is precisely the difference between owning the fleet and owning the demand.
The guidance
For the third quarter Uber guides to:
- Gross bookings of $58.25 to $60.25 billion - growth of 18% to 22% in constant currency
- Non-GAAP EPS of $0.84 to $0.88 - growth of 28% to 35%
- Adjusted EBITDA of $2.86 to $2.96 billion
The company notes the outlook assumes roughly a one percentage point currency headwind.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
This is a strong quarter, and I want its strength measured in the right place.
The headline of 85% EPS growth is misleading, and not through any fault of the company - it states the reason in a footnote. $1.6 billion from revaluing equity investments is a paper gain on holdings in other companies, and it says nothing about how many people ordered a ride.
The number I look at is $0.81, up 35%. And that too is excellent.
What genuinely interests me is the cash flow. Uber crossed $10 billion of free cash flow a year. That is the stage where a company stops being a growth story that has to fund itself and starts being a business that produces a surplus. To me that is a bigger milestone than any single quarter's profit line.
And what I note as a risk: the gap between bookings and revenue. This year the explanation is accounting and legitimate. But when a company changes how it recognises revenue, comparability with prior years breaks - and it is worth watching that this does not become a habit.
As for autonomous vehicles - that is a statement without a number. I take it as a declaration of intent, not as data, and I will test it when there is something to measure.
