PHOTO: Uber's growth has allowed for quite the astounding losses. (photo via Flickr/Automobile Italia)
It takes money to make money.
That’s the sentiment behind a BuzzFeed report stating the popular ride-hailing app has seen a historic set of losses in the last few years. However, losing money isn’t as much of a worry when you continue to grow at remarkable bounds.
The news comes by way of a Bloomberg Technology report that spotlights Uber and its decision to become financially transparent. As it explains, Uber isn’t publicly traded, which means it doesn’t have to provide items like profits and losses to just anyone.
But it’s now showing its cards, as it were, and the hand is a real loser.
As the reports explain, the mammoth brand endured losses of $991 million during the final months of 2015. And then it continued to outspend its profits to the tune of $2.8 billion in 2016.
Of course, we aren’t about to call Uber itself a loser, because it’s losses come in tandem with great gains according to its recent financial unveiling.
Bloomberg Technology explains: “The ride-hailing giant more than doubled gross bookings in 2016 to $20 billion, according to financial information Uber shared with Bloomberg. Net revenue was $6.5 billion, while adjusted net losses were $2.8 billion, excluding the China business, which it sold last summer.”
Last August, Uber decided to ditch the great China experiment and sold its holding in the market to national giant Didi Chuxing. At the time, the specifics of the deal were not disclosed but it was believed Uber would become a major shareholder of Didi, enjoying what some valued as an asset worth $7 billion.
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Rachel Holt, Uber Regional General Manager, explained in email to Bloomberg: “We’re fortunate to have a healthy and growing business, giving us the room to make the changes we know are needed on management and accountability, our culture and organization, and our relationship with drivers.”
While Uber’s losses are noteworthy, its growth is far more impressive—and, thankfully for investors, more lucrative.
Bloomberg explains that, while losses went up 6.1 percent, the company enjoyed a boon in growth: “In the last three months of 2016, gross bookings increased 28 percent from the previous quarter to $6.9 billion. The company generated $2.9 billion in revenue, a 74 percent increase from the third quarter.”
BuzzFeed explains that there is normally a reason behind dramatic losses. As it noted, IBM lost over $5 billion in the early nineties but was transitioning its business model. Microsoft also had some billion-dollar damage done in 2015 when it wrote off its Nokia mobile phone business.
In the case of Uber, it’s sinking a great deal of money into growing its brand, its service and its reach globally.
Despite a series of missteps this year, Uber is likely going to be just fine as it’s worth $69 billion and contends to have about $7 billion in cash, via Bloomberg.
Back in February, TravelPulse’s Patrick Clarke noted that, despite a polarizing reaction to Donald Trump’s travel ban, “Uber's favorability among Americans hasn't taken too big a hit.”
Uber is an established ground transportation solution for millions. That it is losing this much money should come as no surprise when you consider it continues to grow globally, has looked towards new patents and even has sights set on self-driving and flying-car technology.
Whether any of this is sustainable in the long term remains to be seen. One thing is for sure, however, Uber has no qualms about making it rain throughout the industry.