Uber Technologies Inc. reported a wider loss for the third quarter, offering a stark reminder of the challenges facing its business even after winning a political victory in California this week.
The euphoria investors felt after Uber successfully avoided an assault on its business model in California, driving a surge in the stock, was partly deflated Thursday. Shares of Uber were down 1 percent to $41.50 in after-hours trading Thursday and had been down as much as 5.9 percent.
The third-quarter loss, excluding interest, taxes and other expenses, deepened to $625 million, though it was roughly in line with an average of analysts’ estimates compiled by Bloomberg. The loss narrowed from the previous quarter.
The coronavirus pandemic continues to limit travel spending. Sales for the ride-hailing company declined 18 percent to $3.1 billion, better than analysts expected. Uber reaffirmed in the report Thursday that it remains on track to turn a quarterly adjusted profit by the end of next year as projected.
The prospects for the business would be much worse if Uber hadn’t won a reprieve Tuesday from voters in California. The winning ballot measure, Proposition 22, will exempt Uber and other gig economy companies from a state law that sought to reclassify their drivers as employees. Uber contributed more than $57 million to the ballot initiative, helping make it the most expensive in state history. Policymakers in Illinois, New York and elsewhere have been considering stronger labor protections.
The California measure sets minimum pay restrictions and gives drivers select perks, such as a health insurance stipend. Those will have an $18 million impact on adjusted earnings for Uber in 2022 compared with $91 million if the company were required to reclassify workers, according to a report by Morgan Stanley.
The adjusted loss in the third quarter, an increase of $40 million from last year, doesn’t account for an array of one-off expenses. Those include COVID-19 response and efforts to promote the California ballot measure. The net loss was $1.1 billion. Uber ended the quarter with $6.15 billion in cash, down from $10.9 billion at the end of last year.
Delivery continues to benefit from the pandemic. Sales for that division increased 125 percent in the third quarter, exceeding estimates of 113 percent. The category is mostly meal delivery, although newer products including groceries, prescriptions and packages are also included.
Uber’s performance in each region mirrored the spread of the virus and government response there. Revenue surged in Asia but declined in Latin America. Sales from Uber’s largest market, the U.S. and Canada, decreased 30 percent.