Uber Technologies, Inc. (UBER) Earnings Call Transcript & Summary

I think we're going to go ahead and get started. I'm Stephen Ju with the UBS U.S. Internet team. Sitting to my left is, of course, the CFO of Uber, Prashanth Mahendra-Rajah. So welcome back to the conference.

Thank you. Great to be here.

Yes.

I have a different role. I have the privilege of having one of the collectors' items, which was the last vest they gave out at this conference, which was before Credit Suisse imploded. So I have that saved. I don't know how many of you saved yours, but if you remember the one from the -- I think it was the 35th anniversary. So...

Yes. I think it was the 25th anniversary, and it's somewhere deep in the closet in my office. I don't care bring it out. So great to see you. Yes.

And so just kind of get started with the core business. The overall delivery and mobility gross bookings growth has been stronger than Uber had projected. I'm happy you were wrong there at the 2024 Analyst Day. So what have been the biggest sort of upside drivers versus what you had thought at the time?

Sure, sure. So maybe start with a reminder that back in February, we set a 3-year CAGR framework where we said the -- our view was that the top line or gross bookings would grow in the mid- to high teens, and then we would drive leverage off of that for EBITDA to grow in the high 30s to 40%. So you look back at this last quarter, third quarter, we grew 21% at gross bookings level. We're at a $50 billion run rate now. So the business really is humming along. And when we look at sort of what's behind that strong growth, it's really the -- what's sort of reassuring to me is that it is very broad-based. It is across multiple products, it's across multiple geographies. Probably, the most challenging question I get from investors is what's driving the growth. And it's an unsatisfying answer when you say everything, but it really is a reflection of just how diversified and strong we are experiencing right now. If we look at sort of particularly where have we been making some investments that are really helping to support that and why we feel good about sort of the position we're in, I think we like the investments that we continue to make on quality. So the consumer experience is really driven by things like liquidity, selection, defect rates, et cetera. We've had I think growth in couriers and earners -- in general, couriers and drivers, 21% growth in the number that have come on the platform. Number of merchants that have come on the platform is up 12% year-over-year for Q3. So that continues to make the supply and choices available to consumers better, which improves sort of the quality of the experience they get. Another area that has been very relevant for us in 2025 certainly has been focusing on use cases. So we've got some really good use cases such as the New York shuttle, the investments we're making in grocery and delivery, and those are continuing to feed the growth. What else can I say? The focus on the dense markets, I think, has also been one that we're very happy with that instead of focusing purely on the metro cities, we've been expanding to look at suburbs and sparser markets. And those are growing 1.5 to 3x as fast as cities. So overall, I think we're feeling this has just been a great -- it's been a great year for us, and we feel the momentum is going to continue.

Got it. So there's a lot of underlying pieces here that's driving the growth. But are any of these durable secular changes from your perception that should support higher growth for a longer period of time? So at least high teens in delivery and maybe high teens, hopefully low 20s in mobility over the next 3 years?

Sure, sure. The -- I think maybe 2 -- I'll tell you if I zoom back, how do I think about it. The first is what is the -- what's sort of our view on penetration. And if we look at our top 10 countries in terms of gross booking size, the number of adults in those countries who use either Uber or rides or delivery is around 15%. So -- and then you have the other 60 countries where that penetration is even lower, right? So on average, for the top 10, we're at 15%. And then if you look within a given country, the number of folks who are using Uber and Uber Eats together is only at 20%, right? So when we think about over the next several years, why do we remain confident that there is years of growth in front of us. We know from looking at some of our stronger or more penetrated countries, there's room to grow that 15%. So that's going to continue to tick up and that we've seen that trend very steady across our largest markets. You look at the long tail of countries that are not in the 10 largest markets, and those still have to get to the 15%. So still plenty of room to grow there. And then you look at the opportunity to get more folks using both products and grow that 20%. Again, plenty of opportunity there as well. So -- which is really why when we -- over this year, we've been talking more about investing some of our profit dollars for longer duration growth ideas because we have many ideas that we view as -- given the opportunity set in front of us that there's a long runway for growth, and we didn't want to just focus on -- we're coming to the end of our -- of that 3-year framework and then what happens at the end of that. There's plenty to go beyond.

Yes. I mean if you're that underpenetrated and if we have that much white space in front of us, you shouldn't be over earning, right?

Correct. Yes, exactly.

So I guess for the U.S. market, how penetrated are we in terms of potential TAM we just talked about? And then strategically, there's user growth versus frequency, usage across platforms as well. So which is going to be the lever or the vector that you're going to be pressing on for the next year?

Yes. So maybe the way that we think about growth and the healthy way that we would encourage investors to think about growth is how many users are on the platform per month and then how frequently are they using the platform. And then you multiply that by changing price and you get to your gross bookings growth rate. So our user growth -- and so let's start with the top level number. Globally, in the third quarter, we grew trips 22%. And if you break that 22% down, 17% growth in monthly active users and 4% growth in the frequency at which those users are reaching the platform. So the U.S. is continuing to grow, and we see -- we continue to see double-digit growth in the U.S. for the last several quarters and continue to be optimistic that, that's what the future will look like. Interestingly, the penetration of adults in the U.S. is right in line with that 15% average that I told you. So still plenty of opportunity there to continue driving growth here in the U.S. Again, it's interesting being in my chair with a group like this is investors tends to be extraordinarily high users. So from your mindset, it's often a view of there is no way I could use Uber any more than I am, and there's no way my children can order Uber Eats more than they already do. But you are a really unique case compared to the U.S. average. And I think just appreciating your mindset or sort of your operating world is not really what we see across the U.S. and that's why we remain very optimistic about the U.S.

I mean at 15% penetration, it's still an open-ended growth story?

Very much. Yes.

All right. So on the mobility side, let's zoom in there a little bit. I think insurance costs and what you have to incur here has been a headwind over the last several years. And I think in the coming year, I think that headwind is set to dissipate. So help us think through what kind of an impact that will have on gross bookings growth for next year for mobility?

Sure. Yes, yes. So let's see, I've been -- I just cleared 2 years with Uber. And when I started, the -- I guess, it was probably the second most popular question I would get from the owners would be to talk about insurance because it was creating significant pricing pressure for us in the U.S. Over that time. And really prior to my arrival, we had created a cross-functional effort that we had sort of named bending the insurance cost curve. And we looked at it across sort of 3 different areas. The first is what can we do with technology that can continue to bring down our insurance costs? What can we do from a policy standpoint to improve the environment that we operate in? And then what can we do on the commercial side? So against those 3, we've made really, really strong progress. On the technology side, and there's many examples here, but I'll use one more recent is we have made available to all of our drivers in the U.S. something called Driving Insight. And it is us collecting information about their driving patterns and their driving behaviors that gives them a safety score. It takes into consideration, are you doing fast accelerations? Are you hard breaking? Are you making your turns very sharp? Are there things that you're doing that we can see that say you could be driving safer? And that was purely just for awareness. We then moved, and we're piloting this in several cities. So early days now to say, if you can improve your score, we want to reward you. We will give you a better selection of rides that you can -- or trips that are more in line with your interest. We will give you better economics on some of your trips if you can get to a certain score. What we've seen is that for the number of miles that are being driven by those who are in the highest rated safety category has -- is growing significantly over time. So the behavior nudges are working, and we are seeing the driver patterns and behavior respond accordingly. So that's an example on the tech side. On the policy side, we have been working with a number of state situations to improve the equality of -- and the fairness really of the circumstances in various states on how Uber has to -- what levels of insurance Uber has to provide. California is probably one that many of you have heard about more recently. We used to have to carry $1 million of liability for uninsured and underinsured, whereas the car next to us would only have to carry a liability of $300,000. That delta ended up building a cottage industry of folks who were looking for Uber as a source of torque and legal claims. I mean, it really -- we became their TAM. And by readjusting that down, we know that the amount of fraudulent use of the legal system in a number of states, California, we've done some reforms in Georgia, Nevada, et cetera, are also starting to give us benefit. And the last is, overall, the cost of insurance industry-wide in the U.S. has also started to moderate. So that's now down to sort of mid-single digits from when I started at Uber, it was -- I think it was in the low 20s. So very good progress there. And then the commercial relationships we have are stable. So the result of all of that is we've got a fairly substantial amount of savings that we're putting back into the U.S. market for 2026 at lower pricing. And you should think of that in sort of hundreds of millions of dollars. And we believe that by putting that back into the U.S. market and knowing the experience we have on elasticity of demand, we feel good that trips were actually going to inflect.

Yes. So there's reasons to believe that some of the stuff is maybe a little bit more onetime in nature, stuff like California. But you do have products in the pipeline that should drive that long-term secular product-driven improvements that we were talking about.

Correct. But that -- those California savings are -- they're recurring savings.

Yes. Got it. All right. Switching gears a little bit to delivery side. Your business grew gross bookings at its fastest rate in nearly 4 years in the fourth -- in the third quarter. So talk about what's driving that strength and the initiatives that you're most excited about to drive continued growth in the business.

Sure, sure. So I think maybe underappreciated is that our delivery business growth has been accelerating on a quarter-over-quarter growth has been accelerating sequentially now for -- I think we're on our -- either our seventh or eighth quarter. So it's been a long run of this business growing in scale, but also growing faster than it was the quarter before. So we're really enjoying the momentum. And you see that acceleration, whether you look at it with the recent acquisition we did or without. So organically or inorganically, we're seeing that. And that growth really is being driven, I think, by a number of areas, but I guess, I would focus on improving the product, right, that the consumer experience and the tech that we're putting in to improve the product through both adding more merchants to increase our selection, adding the -- improving our tech to improve the defect rate so that you're getting a really magical experience when you're ordering from us. There's still plenty of work for us to do there, and that is continuing to give dividends on driving retention. In addition, there is a great focus on affordability, particularly given some of the pressure that consumers are facing with some of the tariff and economic headwinds that are coming at us. And that focus on affordability, we've been quite fortunate is being partly contributed to by restaurants and merchants who are funding offers to make their products more affordable. So merchant-funded offers are up over 50% year-on-year. And that is where a merchant says, "Buy one sandwich, get one free. Buy this, get a free French fries." Whatever it might be, but offers that they're driving to attract you to their store, also competing with other merchants who are doing the same, but helping to keep the affordability levels for folks quite good. I think an interesting metric on that, by the way, is we look at our users on an income cohort basis. So I mean, I may not get these buckets exactly right, but I believe it is under 70,000, 70,000 to 90,000 and then over 90,000. So based on your ZIP code, we sort of know what income you are in. The growth in all 3 of those income buckets has remained very steady, even in more recent quarters where I think folks are saying, "Hey, what -- how is delivery growing at a time when it feels like the economy is not as strong as it used to be. But the growth that we're seeing in all of those cohort groups continues to be very strong, which I think just speaks to the sort of the habit of and the convenience and the value that delivery is bringing.

As an overall catalyze the change in behavior.

Yes, very much so, right? I mean no different than we did with Rides many years ago, right? And then lastly is -- that's been really a big boom behind the delivery growth has been our grocery and retail, which has been a big focus for us, adding a number of key groceries that have come on and a number of key merchants. I think it's been a parade. If you look back at our earnings over the last several quarters, you'll see that every quarter, we are announcing key merchants, key large grocery stores coming on to the platform, and we expect that to continue for several quarters. There's still a whole great set of negotiations that are ongoing. And it sort of feeds on itself. As you become more relevant, then more merchants and grocers want to be on your platform.

Yes. I think you brought up groceries. So I think it's go time for Amazon now. It sounds like they've been building the infrastructure for the last couple of years. They've done some things to lower the customers back. So it sounds like they're now going to step up their efforts in the category. So why should investors not worry about the competitive intensity here? And as a result, there's going to be impacts to your business, the consumer incentives go up. There's going to be other factors here. So help us think through that and how the environment might change.

Sure, sure. This is a massive TAM, massive. We are -- we, as an industry, are still in early innings of the behavioral changes that are underway where consumers will get their grocery activity -- grocery purchases delivered to them. Where Uber is fitting into that secular trend is we are the choice for top-up. We are the choice that folks go to when you are in the kitchen, preparing something and you're missing 1 or 2 ingredients. We are the choice that you go to when you're deciding to cook tonight and these are the things that I need to finish out what I need. So that is a -- it's a clear set for how folks use Uber, and we feel very good that, that is sort of what comes to mind as you think about it. The -- I think you will also see a growing trend as this becomes more pervasive to sort of break the -- it's a very U.S. mindset. For those of you who are not from the U.S., you'll appreciate this. It's a very U.S. mindset to go to the grocery store on a Saturday or Sunday and come back with 2 full cartloads of groceries to load into your SUV or your minivan. In the rest of the world, you're hitting the grocery store multiple times during the week. So it's just behavioral. And I'm confident we will continue to see that behavioral change come through here in the U.S. And as folks move to that more, what am I going to do tonight? Am I going to order food or am I going to get a restaurant food delivered and what's on Uber Eats? Or am I going to cook and therefore, what am I going to need from Uber Eats to be able to prepare that meal? So we feel very comfortable behaviorally. That business is now running at a $12 billion run rate. It's been growing meaningfully faster than delivery. And then if you look sort of across the globe because it's not just the U.S. market, it's a global market, we are #1 in, I think, 7 or 8 of the top 10 markets.

And of course, you have the customer already there. So that just in front of them.

Indeed.

Great. So I think you touched on this earlier. I think you guys have been fairly vocal about reinvesting a part of the margins in both businesses back into growth, and there's an opportunity for higher TAM capture here. I think on the deck, you've laid out, I think, what's going to be an increase in TAM of 6x, right, $2 billion to $12 billion. And eventually, what should be higher profit dollars over time. So can you help us understand a bit more like what are the largest areas of investments that you're going to be looking at over the next 12 months? And what might be some of the new investments that might be coming up?

Yes, sure. So let's first make certain that there's clarity on how we think about running sort of the company's P&L. We're very confident that we have an abundance of investment opportunities to continue to drive durable growth for Uber for many years to come. And as has always been the case with our business, that requires us to invest now to build the product out, to build the use and then sort of let it loose and watch that grow. I think an easy example would be think of Germany, which 4, 5 years ago, we entered the market, very limited presence. We're losing money. Now it's a great growing market for us and it's profitable. So we know how to do this repeatedly, whether it's at a geography level or a product level. So we have these list of ideas. We need to balance that with what is the right level of profitability to deliver to the owners versus investing in the business. So what we've talked about for the last couple of quarters, and again, more specifically at our third quarter earnings call here is that we see profitability growing faster than our top line for years to come. But we want to continue to invest in that -- in the ideas to grow that top line. So you probably won't see the same level of margin expansion that you've historically seen. But the leverage will be there, and we're committed to leverage for, again, as far out as I can see. Now where are those ideas? They're really across all of these areas that we've talked about. We believe that there are still geographic opportunities for us. For example, mobility is in 70-plus country, delivery is only in 30. We believe that there are -- continue to be use case areas that we can develop. We've just launched seniors, which is gaining traction, very similar to teens. It's a product that's a little more tuned for folks who may not be as tech savvy or need someone's assistance in ordering an Uber. We're going to continue to invest in the grocery and delivery space that I have already mentioned that, again, there's merchant selection there. There's product development. There's a lot of search that needs to be improved for us. I think we are early innings on how we help consumers find what they're looking for on the product. And then I think a big area that sort of was reflected in the organizational change Dara made earlier this year is we've historically looked at our businesses as discrete P&Ls. There's the mobility and then the delivery. And as a result of doing that, we missed opportunities to optimize across the platform. And so you will see us make significant investments in driving that cross-platform utilization. And that cross-platform utilization comes from things like discovering, when do we show you a product or an opportunity that's in a different P&L structure. For example, if you are on your morning ride to an office or to a meeting, that's an ideal time to offer you a Starbucks. When you are -- when we know what restaurants you have ordered from in the past, then what can we do to encourage you on the mobility side, take an Uber to that restaurant to eat in person. Membership benefits that go across both ways. So lots of investments in those areas that we think can continue to drive the cross-platform utilization. And we know that when you use more than one of our products, your retention is higher and your -- you spend more on the platform in general. I think it's -- you spend 3x more.

Yes. Got you. We only have a couple of minutes left. So this is a topic that we have to touch on.

Sure.

Of course, the topic of robotaxis that everybody has been focused on over the last year plus. So walk us through where you are in terms of your strategy here. You've probably done speed dating a bunch of people over the last year plus. And so where are you between potentially buying and owning fleets longer term? Is there even a likelihood that you might own thousands if not...

We got a minute and 20 here. Let me do this. So one, we are highly -- we have very, very high conviction that the platform is the right way for this market. Why? Because you're solving 2 incredibly important problems. First, if you are a manufacturer and provider of AV vehicles, you need to maximize the revenue per vehicle and the way to maximize the revenue per vehicle is to make sure that it is never empty. It always has a paying passenger in it. We can do that better than anyone because we have the demand. The second problem you're solving that's critical is if you are a consumer, you want a seamless experience. I'm sure everyone in here has called an Uber at some point. You've had a very long delay in when that ride can get to you. You've canceled. You've tried again or maybe you've switched to a different app. That ability for you to get that ride in the time you want it is critical in terms of how consumers interact with the product. So having a hybrid network that allows you to serve folks through AV or through non-AV vehicles will be critical. What we -- the technology problem has been solved. Multiple vendors have solved that. It is now really how do you commercialize this and scale this for profits. We will have 10-plus cities by the end of 2026, where you can order an AV on Uber. I think we just announced this morning that Dallas is launching with one of our partners. And then last week, we announced, I think Abu Dhabi, the driver is now out of the car. So the wave is coming, and we think we're really extremely well positioned to help both the AV providers make money and the consumers have the right experience.

Sure. We're a little bit over, but any type of -- any thoughts or details that you can share in terms of what your partnership with Waymo has yielded because I think what that's yielded in Austin as well as Atlanta?

Sure. So for -- we're operating with Waymo in Phoenix, Austin and Atlanta. And I think that our -- kind of the key metric that both of us look at is that utilization metric. And that utilization metric has been extraordinarily high. Those vehicles are busier than 99.9% of Uber drivers in terms of the number of trips per day that they're doing. And for us, that's sort of the proof point that we need to know that it is the platform provides the right level of demand because we can aggregate that demand. And in the end, we know this from our 50 years of experience, consumers want to get from A to B. How they get there is a secondary consideration. The price they pay is really what's most important. And that is why we've seen -- you've seen so much effort from us not only on maintaining the affordability of Uber X, but investing in low-cost products because we know that, that is what -- that's what drives demand. What drives demand is how I get there at what cost versus the vehicle that takes me there.

Okay. We're going to have to leave it there, Prashanth. Thank you very much for joining us.

All right. Thank you so much.

And we'll see you back getting with UBS. Thank you, Uber.