Uber Technolgoies Inc. chief executive Dara Khosrowshahi told staff in an email that the company plans to cut marketing and incentive costs and will treat hiring as a “privilege.”
The email, which was sent to staff on Sunday, according to CNBC, tells Khosrowshahi that the company is dealing with a “seismic shift” in investor sentiment.
“After the earnings, I spent several days meeting with investors in New York and Boston,” Khosrowshahi said in the email. “Clearly the market is experiencing a seismic shift and we need to respond accordingly.”
This shift boils down to a shift not just in tech stocks, but in the broader market, amid growing concerns about the long-term prospects of the U.S. economy, amid 40 years of inflation and rising interest rates.
The decision came after Uber announced its quarterly results last week and reported a loss of $5.6 billion. To be fair to Uber, the loss is the result of adjusted valuations of its investments in Aurora Innovation Inc., Grab Holdings Inc. and Didi Chuxing Technology Co. as well as $359 million in stock-based compensation expense. . But that’s still not a headline.
Excluding the additional costs, Uber made adjusted profit of $168 million, an improvement of $527 million from a year ago.
Khosrowshahi’s decision for Uber to cut costs, especially on driver promotion, contrasts with its main rival in the US market – Lyft Inc. second quarter.
During an earnings call, Lyft CEO Logan Green said that despite having 40% more active drivers in the first quarter year over year, “we want to continue to improve service levels for future growth. Rides are only about 70% recovered from the fourth quarter of 2019, so Lyft expects to need more drivers as the post-COVID recovery continues.
Uber would likely face similar issues, although the two companies differ on one major aspect: food delivery. Uber Eats has quickly become a popular service where it operates and generally represents more revenue and business for Uber than its ride-sharing business, but it is not as profitable.
Uber investors didn’t really care about the news. The company’s stock price fell nearly 12% in regular trading to $23.05.