Story Stocks^®

The resiliency of Uber's (UBER) business was on display this morning when the rideshare and delivery company reported better-than-expected Q2 results as it swung back to profitability while revenue growth also accelerated a bit to 16% from 15% last quarter.

• Rewinding to UBER's Q1 earnings report, the company posted a surprise loss of $0.32/share, driven by unrealized losses on equity investments and litigation costs, but the slight miss on Mobility Gross Bookings was more concerning since it related to the demand environment for the company's largest business. In the wake of a disappointing Q2 earnings season for the airline industry, which is experiencing a slowdown in domestic leisure travel activity, those demand and macro-related concerns from Q1 grew stronger ahead of UBER's earnings report.
• However, UBER's business remained quite strong in Q2 despite softening consumer spending trends, supported by a higher-income customer base that is still in great shape, according to CEO Dara Khosrowshahi. This characterization is supported by a variety of metrics, including total Gross Bookings growth of 21% on a constant currency basis, matching Q1's growth.
• The Mobility segment was especially impressive, achieving Gross Bookings of $20.6 bln, up 27% yr/yr on a constant currency basis, compared to 26% growth in Q1. Additionally, for the sixth consecutive quarter, trip growth remained north of 20%, coming in at 21% for the quarter. Mr. Khosrowshahi stated that growth was steady across use cases and that the international business was strong, particularly in Latin America, Brazil, Australia, and India.
• Turning to Delivery, Gross Bookings growth was solid at +17% (constant currency) to $18.1 bln, reflecting the stickiness of that business amid tough macroeconomic conditions. Ordering meals from restaurants for delivery has clearly become habitual for many, while UBER's expansion into the grocery vertical has augmented the business' growth. UBER disclosed that about 15% of its Uber Eats customers are now using grocery, up 200 bps yr/yr, and that customer retention for grocery is also improving.
• Advertising, a high margin business, is also becoming a more meaningful contributor for Delivery. In fact, ad spend on grocery and retail more than tripled yr/yr, helping adjusted EBITDA surge by 79% yr/yr to $588 mln for that segment.
• Overall, UBER's adjusted EBITDA jumped by 71% to $1.570 bln -- a quarterly record -- exceeding its guidance of $1.45-$1.53 bln. Looking ahead, the company expects its profitability to continue to improve, forecasting Q3 adjusted EBITDA of $1.58-$1.68 bln, slightly beating expectations at the midpoint of the range.

The main takeaway is that UBER's diversified business model and more affluent customer base is helping to insulate the company from mounting macroeconomic headwinds. A more severe economic downturn would undoubtedly hurt its business, but at this point, UBER's "growth engine is continuing to hum," as Khosrowshahi put it.