Uber’s first-quarter bookings increased despite falling demand for its core ride-hailing business. The Covid-19 related slump that devastated its core business also brought a silver lining in the shape of a massive increase in its food delivery business.
Overall Uber’s bookings grew 24% to $19.5 billion when compared to the same quarter from last year. $12.5 billion of this figure came from its food delivery business, more than double that of last year’s corresponding quarter. Over the same period, Uber’s ride business saw bookings slump by 38%.
Bookings are used to assess consumer demand as they represent the total value of food or trips booked through the platform. Uber’s revenues are earned by taking a slice of each of these bookings.
New U.K. legislation dents revenue figures
Despite the growth in bookings that beat analysts’ forecasts, Uber’s overall earnings dropped. This is mainly due to an adjustment that is tied to new U.K. legislation that affects the employment status of Uber drivers.
Last month, Uber lost a long legal battle in the British courts, with the company now being forced to grant its drivers employment status. Under the new legislation, Uber drivers in the U.K. will be entitled to benefits such as vacation pay and pension contributions.
As a result of these amendments, Uber set aside $600 million from its revenue to cover the cost of the legislative changes. The company recorded U.K. revenue at $2.9 billion, down from $3.2 billion in the same period last year.
A sign of things to come?
Uber is embroiled in similar cases in the U.S. It recently won a court battle in its home state of California, however, there may be more regulatory changes just around the corner.
The Biden administration recently blocked a proposal from the previous administration that was designed to make it easier for companies such as Uber to classify workers as independent contractors. Whilst the move maintains the status quo for the moment, it does mean that the current administration is open to adding regulatory inhibitions further down the road.
How does the future look?
Whilst the figures were better than analyst forecasts, Uber admits to facing a bumpy ride in the short-term future. In a conference call with analysts, the company said it expected its ride-hailing business to improve over the coming months as vaccination programs continue. However, Uber acknowledged that it faces a looming challenge, a lack of drivers.
Uber’s Chief Executive Dara Khosrowshahi said that many of its drivers are hesitant to carry passengers. Uber is offering drivers incentives to return to passenger ferrying, including distributing free personal protective equipment.
The company also acknowledged that it had “limited visibility” as to how its delivery business would fare over the coming months. Chief Financial Officer Nelson Chai said during the call that – “Year-over-year comparisons become tougher as the company faces forecasting uncertainty in predicting post-reopening consumer behavior.”
Mr. Khosrowshahi is confident that the two core arms of the business will continue to flourish despite the concerns. He said – “Looking ahead, I’m confident that Uber will benefit from the complementary nature of our two large core opportunities.”