Rideshare rivals Lyft and Uber shared some unwelcome news for riders and investors this week. During an earnings call on Thursday, Uber disclosed that it lost $5.2 billion in the second quarter, a record-breaking loss, and grew just 14 percent year over year, the slowest growth rate ever reported for the company. Lyft reported better-than-expected growth and losses during an earnings call on Wednesday, but nevertheless said that it was raising prices for rides.
The two companies, which both had initial public offerings in the spring, have been consistently unprofitable. This is in part because the companies heavily subsidize their fares in order to expand their consumer bases—and beat each other and other rivals. Price wars between Uber and Lyft have incentivized them to offer lower and lower fees, though the companies both claimed during their earnings calls that this sort of jousting is no longer an issue.
Uber’s massive loss partly stems from its rocky IPO in May, when its shares dropped below the $45 offering price. The company claimed that a majority of the $5.2 billion loss consisted of about $3.9 billion in equity compensation for its employees following the stock listing. Even if this was just a one-time cost, though, Uber still bled $1.3 billion through its regular course of business, almost twice what it lost in the same quarter last year. “We think that 2019 will be our peak investment year,” CEO Dara Khosrowshahi said during the earnings call. “In 2020, 2021, you’ll see losses come down.” The company did report some positive developments, however. Bookings, a feature that allows users to schedule rides in advance, grew 31 percent year over year. And the number of monthly customers for Uber Eats nearly doubled.
Lyft painted a rosier picture of its financial situation during its earning call, though the results were underwhelming all the same. The company reported a loss of $644.2 million, which was less than expected, but still up from $178.9 million a year ago. Lyft also posted a 72 percent growth rate, which again beat analysts’ expectations, but is far less than the doubling revenue it saw last year. What’s important for Lyft riders, though, is that the company announced that it started “price adjustments” in June, slightly raising fees in its quest to become profitable. “We’re focused on trying to win on brand preference and experience—not coupons,” chief financial officer Brian Roberts said during the earnings call. The company did not disclose the size of the price increases or the cities in which they were set to take place. Consider it a preview of fare jumps to come: Wall Street will only tolerate your cheap Uber and Lyft rides for so long.