Uber Says Yes, Food Delivery Can Be Profitable

Uber's Eats segment more than doubled last quarter, but lost $232 million on an adjusted basis.
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The good news? Uber more than doubled its food delivery business last quarter. The bad: It lost staggering amounts of cash in the process. 

In its latest earnings release, Uber said that gross bookings for its Rides segment -- now renamed Mobility -- were down 73% year over year to $3 billion, while bookings for Eats (now called Delivery) increased 113% to $7 billion. It lost $1.8 billion in the quarter, however. 

Uber  (UBER) - Get Report shares were down 3.1% in after hours trading. 

On a shareholder call, Uber CEO Dara Khosrowshahi said that the company is making progress in turning its Eats division profitable. The delivery segment lost $232 million last quarter on an adjusted basis. 

"We stand firmly on the belief that pure-play delivery companies can and will be profitable and we think it's a pretty easy answer," said Khosrowshahi. "It's only a question of when."

Khosrowshahi said that its deliveries business is profitable on an adjusted basis in two of its top five international markets, and that it will be profitable in the "vast majority of countries in which we operate." He cited a combination of improving liquidity on the delivery side, a large existing baae of Eats customers and "healthy" revenue margins in helping the segment get profitable.

 The rest of Uber's business is a different story. 

Uber told investors that it will turn a profit on an adjusted basis by sometime in 2021, but the timing of that goal depends on the timeline of COVID-19 and an eventual recovery to its core rideshare segment, which accounts for the large majority of its revenue in a typical quarter. 

"At the end of the day, the single biggest driver of what quarter next year [we report profitability] is really going to be on the COVID recovery and its impact on our Mobility business," added Uber CFO Nelson Chai. He said the company is modeling different scenarios, based on an expected bounce back to its rideshare bookings.

"It seems like particularly here in the US, things have only gotten murkier and not clearer over the past few weeks here, but as [more visibility] comes, we'll have a better view in terms of which quarter we think we'll get profitability," he added. "We are going to continue to build out and improve economics of the Delivery business."