It’s not because the company actually makes any money.
Here’s a deeply strange thing about Uber, which publicly filed for its IPO today: The company has lost $10 billion from operations, just since 2016, and while riders have paid $79.4 billion for rides, many drivers attest that they can barely scrape together a living. So no part of the operation is a high-margin business, and yet, Uber keeps growing and growing and growing.
The numbers in the company’s SEC filing are truly eye-popping. Uber has delivered 1.5 billion trips. People paid $41.5 billion for Uber rides in 2018 alone, up 45 percent from the previous year. Uber took $9.2 billion of that as revenue. The company had 3.9 million drivers in the last quarter of 2018.
And, of course, Uber will raise something like $10 billion from its IPO.
Uber almost doesn’t feel like a business, but rather some essential service that investors believe should exist, so they’ve kept injecting money into it. Something so useful would have to make money at some point, right?
For past and prospective Uber investors, there is some good news. Uber is obviously losing less money per passenger mile than it has in the past. The company is careening dangerously toward profitability, though it’s not there yet. Instead, Uber’s financial team created a different metric that they’re calling “Core Platform Contribution Margin.” This is basically how much money Uber makes on the rides themselves after direct expenses.
And by this metric, Uber began to make money in 2018, for the first time: about $900 million on $10 billion of topline revenue for a 9 percent margin.
Of course, the company has a lot more expenses than the direct ones of providing service.
