On Monday, Uber Technologies, Inc. announced that it would scale back hiring and cut expenditure on its marketing and incentive activities.
CEO Dara Khosrowshahi explained that the company needs to respond to a seismic shift in market sentiment. He further mentioned that the firm wanted to focus on unit economics.
In line with this, Uber will turn to free cash flow. Khosrowshahi mentioned that the firm initially made a ton of progress in terms of profitability.
In the first quarter, its revenues doubled to $6.90 billion as demand for its rides segment rebounded. Subsequently, the business has relied heavily on its Eat food delivery unit to boost sales in the pandemic.
However, he noted that the goalposts have changed from the previous target of $5.00 billion in Adjusted EBITDA in 2024.
Specifically, it posted a $5.90 billion loss in the period, citing a plunge in its equity investments.
The American ride-hailing firm is the latest to rein in costs in achieving a leaner investment model.
Uber’s move followed the decision of Facebook-owner Meta Platforms last week. The social media giant announced decelerating the pace of adding mid-level or senior roles.
In April, financial services company Robinhood cut back staffing levels. It cited duplicated roles and job functions after a rapid expansion last year. Correspondingly, the move will affect about 9.00% of full-time employees.
Accordingly, tech stocks have plunged sharply from their respective highs during the onset of the coronavirus pandemic. At present, traders fret over the prospect of an end to the era of cheap money that has defined a historic bull market.
Last Friday, the Nasdaq Composite recorded its fifth consecutive week of declines, its longest weekly losing streak since 2012.
Driver incentives weigh on Uber, Lyft
Ride-hailing companies have grappled with supply and demand as drivers edged off the road. In addition, the war in Ukraine caused significant hikes in fuel prices.
Correspondingly, Uber had to rely on incentives to bring its staff back, which ate into financials.
Likewise, its rival Lyft mentioned that it would offer more subsidies in the coming quarter. The firm believes that will help pay off in a healthier marketplace.
Analysts feared that firms would have to pour millions into keeping drivers, hurting their profitability.
Shares of Uber slashed 2.72% or 0.71 points to $25.36 per share on Monday’s post-trading. Similarly, Lyft stocks declined 2.54% or 0.52 points to $19.99 per share.