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At first glance, Uber's (UBER) Q3 earnings report looks quite solid as the rideshare and food delivery company drove past EPS and revenue expectations. However, the sizable GAAP EPS beat was partly due to a $1.70 bln benefit from net unrealized gains on equity investments, making the upside performance mostly irrelevant from an operational standpoint. Furthermore, while revenue of $11.19 bln came in slightly ahead of estimates, the key demand metric that most investors and analysts home in on -- Gross Bookings -- fell a bit short at $41.0 bln, putting demand and growth concerns back under the spotlight.

• For Q3, Gross Bookings grew by 20% on a constant currency (CC) basis, representing a modest downtick from last quarter's growth of 21%. The slight deceleration in growth seems trivial, and not worthy of sending the stock lower by 11%, but the issue is that the trend is pointing lower. UBER's Q4 Gross Bookings guidance of $42.75-$44.25 bln equates to yr/yr growth of 18% at the midpoint.
• The fact that it's the Mobility segment -- UBER's largest business at 51% of total Q3 Gross Bookings -- that's experiencing the slowdown is only adding to the concern. More specifically, Gross Bookings growth decelerated to 24% in CC from 27% last quarter, while Gross Bookings growth for Delivery remained steady at 17%. As such, it doesn't come as a surprise that rival Lyft (LYFT) is selling off in sympathy today ahead of its Q3 earnings report on November 6.
• By no means has business fallen off a cliff for UBER's rideshare business. In fact, trips per monthly active platform consumer (MAPC) were up 4% yr/yr, reaching an all-time high, and Gross Bookings grew across all use cases. Airport trips and weekday trips were particularly strong. What's hurting the stock, though, is the perception that conditions have softened as macroeconomic headwinds take a toll.
• Despite the nasty selloff, there are some notable positives, too. For instance, adjusted EBITDA margin expanded by one percentage point yr/yr to 4.1%, a new record for UBER, driven by strong growth in the high-margin advertising business (+80% yr/yr) and efficiency gains. For Q4, the mid-point of UBER's adjusted EBITDA and Gross Bookings guidance indicates that adjusted EBITDA margin will tick higher to 4.2%.
• UBER also believes it has plenty of runway for growth in Mobility. CEO Dara Khosrowshahi commented that about 45% of the U.S. population lives in places without reliable on-demand transportation service. Looking ahead, the company plans to expand into more suburban markets by focusing on better pricing strategies for longer distances.

The main takeaway is that growth expectations are getting reset a bit lower after UBER missed Gross Bookings expectations and guided for a further slowdown in Q4. Although UBER's rideshare business has displayed impressive resiliency, the Q3 earnings report showed that it's not completely immune to macroeconomic headwinds.