Back in May, ride-sharing giant Uber Technologies Inc. (NYSE:UBER) delivered its first-quarter 2022 earnings report.
Back then, Uber CEO Dara Khosrowshahi declared that the business would reduce spending in order to concentrate on getting leaner in order to address the "seismic change" in investor attitude.
“After earnings, I spent several days meeting investors in New York and Boston,” Khosrowshahi said in an email on May 8. “It’s clear that the market is experiencing a seismic shift and we need to react accordingly.”
In May, when layoffs ravaged the tech sector, Uber decided to approach adding new team members as a privilege rather than a necessity in order to ensure that as the company expanded, people would be added in a meaningful way.
“In times of uncertainty, investors look for safety,” Khosrowshahi said at the time. “We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed, now it’s about free cash flow. We can (and should) get there fast.”
Khosrowshahi’s grit paid off in a big way, and it only took one quarter. Uber is now cash flow positive.
On Tuesday, Uber revealed second-quarter earnings that exceeded expectations on both the top and bottom lines. The company announced quarterly sales of $8.1 billion, exceeding the $7.39 billion analyst consensus estimate. Additionally, free cash flow was reported to be $382 million, an increase of $708 million from the previous year.
Also read: PayPal Earnings Preview: Will PayPal's Q2 Pay Off Despite Macroeconomic Uncertainty?
"We became a free cash flow generator in Q2, as we continued to scale our asset-light platform, and we will continue to build on that momentum…” said Uber CFO Nelson Chai. “This marks a new phase for Uber, self-funding future growth with disciplined capital allocation while maximizing long-term returns for shareholders."
Investor sentiment highlighted Uber's commitment to being a free cash flow producer in the post-pandemic era when consumers are using the ride-share service more regularly.
Investors interpreted Uber's encouraging earnings announcement as a sign that the e-hailing sector is expanding. This also boosted the share price of rival Lyft Inc. (NASDAQ:LYFT), which opened about 10% higher following Uber's earnings on Tuesday.
Lyft is expected to report earnings on Thursday, Aug. 4, after market close.
Price action: Shares of Uber are trading 15.16% higher to $28.36, while shares of Lyft are up 13.02% to $15.71, according to data from Benzinga Pro.
Image created by Anthony Noto, Benzinga editor
