One of the most significant innovations of the tech industry has been planting the idea in investors’ minds that a company can lose buckets of cash and still be deemed a success.
Ride-share giant Uber is the latest Silicon Valley wunderkind to prove that correct.
The company lost $1.2 billion over the last three months, in large part because of poorly performing investments in other businesses.
Yet Uber’s stock was up 12% Tuesday on data showing people are spending more on rides and food delivery.
Third-quarter revenue surged by 72% from a year ago. CEO Dara Khosrowshahi told analysts he’s “confident in our ability to deliver healthy top and bottom line growth” despite “the uncertain global economic environment.”
That’s impressive.
Except for the part about losing $1.2 billion over three months.
Maybe investors are scoring that huge loss as a win because a year ago, Uber lost $2.4 billion in the third quarter.
In Tech World, losing less money is often viewed as a sign of doing something right.
I’m old-school when it comes to investing. Either a company makes money or it doesn’t. Either it has a business model that works or it doesn’t.
If those sorts of things are important to you, then Uber, at least right now, is a sucker’s bet.
If, on the other hand, you buy into the tech industry’s mantra that it’s all about growth, not profit, then Uber is delivering the goods.
Uber’s gross bookings grew 26% to $29.12 billion. For the current quarter, it says gross bookings will rise by as much as 27% from a year before.
“With continued rigor around costs, discipline on headcount, and a balanced capital allocation approach, all supported by our leading technical and operating capabilities, we are well positioned to deliver expanding profitability over the coming quarters,” Khosrowshahi said.
By “expanding profitability,” he presumably means losing less money.
Or not. Either way, Wall Street doesn’t seem to care.
