(Bloomberg) -- Uber Technologies Inc. issued a first-quarter bookings outlook that disappointed analysts, cautioning that currency headwinds and severe winter weather would have an impact on trips and deliveries in the current period.
Gross bookings, which includes ride hails, delivery orders and driver and merchant earnings but not tips, will be $42 billion to $43.5 billion for the first quarter, Uber said in a statement on Wednesday. Fourth-quarter bookings grew 18% to $44.2 billion.
In prepared remarks about the forecast, Chief Financial Officer Prashanth Mahendra-Rajah cited continued currency headwinds, as well as impact from the recent Los Angeles fires and “extreme weather in January.”
The muted outlook may suggest Uber is not completely out of the woods after it began warning of softening rideshare demand in the US late last year.
Shares of Uber fell as much as 6.2% after markets opened in New York.
Vital Knowledge researchers said the first-quarter outlook was “a touch underwhelming,” and expressed concern about the “huge currency headwind.”
Bloomberg Intelligence analyst Mandeep Singh attributed the softer bookings outlook to a possible “deceleration in monthly user growth, while frequency may be limited by higher prices for rides and food delivery.”
“It raises the question of, ‘Is this just trying to lower the bar and beat it or is there an issue with productivity/competition that will eat into forecasted sales?’” said Brian Mulberry, client portfolio manager at Zacks Investment Management, whose Zacks Focus Growth ETF fund holds less than a 1% stake in Uber. “We will be watching closely before adding to any positions in the near term.”
Rising Legal Expenses
Legal and regulatory fees are a growing cost of business for Uber that risk eating into the company’s profits. The firm set aside $462 million for legal, tax and regulatory matters in the fourth quarter, according to its presentation slides. That’s the most it has earmarked since the first quarter of 2024, based on past company statements.
Adjusted earnings before interest, taxes, depreciation and amortization were $1.84 billion, shy of the $1.85 billion that Wall Street was projecting. Income from operations for the fourth-quarter was $770 million, well below the average estimate of $1.2 billion. “Discrete legal and regulatory related matters” partially offset income gains, Chief Executive Officer Dara Khosrowshahi said in a prepared statement.
Uber’s US flagship rideshare business, which accounts for more than half of its profitability, has lately been weighed down by rising insurance prices. Executives have blamed these expenses for slowing demand ride demand, saying it’s had to pass higher costs on to consumers in certain markets such as New Jersey, Southern California and parts of Florida.
Khosrowshahi has since publicly vowed to push for insurance and tort reform to address the issue. The company has gone on the offensive in New York, filing a racketeering lawsuit against a group of law firms, doctors and clinics it claims staged fake car accidents to take advantage of insurance policies.
In his prepared statement, Khosrowshahi said the company has made “significant progress in slowing insurance price increases through a combination of tech innovation and strong policy work.” Yet the company will continue to pass on those rising costs to consumers and expects UberX prices in the US to be “up marginally” in 2025.
The company is also facing an antitrust probe by the US Federal Trade Commission on whether it illegally coordinated with Lyft Inc. to limit driver pay in New York City, Bloomberg reported last month.
Most recently, a federal judge denied Uber’s request to block a Colorado law that requires the company to disclose how much of each fare it keeps to drivers and riders, Bloomberg Law reported earlier this week.
Diversifying Revenue
Meanwhile, Uber has been pushing into new growth areas across its global mobility and delivery businesses. It has launched more affordable options such as shuttle rides in New York and pooled rides at airports.
The company is also working on a $2.99-a-month pass feature to let commuters secure prices for frequent rides ahead of time, Bloomberg reported last month. This subscription offering would represent a potential new revenue source if Uber decides to move forward with the plan. Additionally, the firm has begun selling data labeling services to other businesses by leaning on its gig-worker platform, Bloomberg reported last year.
Uber continues to partner with other brands to boost user growth. Last month, it announced an exclusive, multiyear deal with Delta Air Lines Inc., ending rival Lyft’s prior deal with the air carrier that allowed riders to earn miles on ground trips. Separately, the Uber Eats unit recently struck a partnership with Home Depot Inc., allowing customers to arrange deliveries for things beyond just restaurant orders.
Autonomous vehicles have also been an increasing area of focus for Uber, which inked more than a dozen manufacturer partnerships and has invested in multiple self-driving technology companies. Earlier Wednesday, the rideshare giant announced it has opened a waitlist for customers in Austin to indicate interest in Waymo rides ahead of an expected launch in March. The company will also be the sole app offering Waymo rides in Atlanta this summer. The tie-up is part of a longer-term vision to become the go-to platform for automakers to monetize their self-driving vehicles.
“Even as we see AV technology advancing, we expect AV commercialization will take significantly longer,” Khosrowshahi said in the prepared statement, citing the need for an operator to balance a consistent safety record, on-the-ground logistics and managing a high-utilization marketplace. “Given the scale of the Uber platform, and human drivers’ ability to dynamically fulfill demand spikes—and take a break during demand troughs—partnering with Uber allows AV players to move much faster than they could on their own.”
(Updates with analyst commentary starting in the sixth paragraph.)
