Uber will slow down hiring and cut down on marketing and incentive spending to address a "seismic shift" in investor sentiment, CEO Dara Khosrowshahi told employees in an email.
"We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board," Khosrowshahi said in the email to employees, a copy of which was seen by Moneycontrol. The development was first reported by CNBC.
"We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back and some initiatives that require substantial capital will be slowed," he said.
Khosrowshahi mentioned that they have made a "ton of progress" in terms of profitability, setting a target for $5 billion in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2024. However, the goalposts have changed and they would now focus on achieving profitability on a free cash flow basis.
This development comes at a time when several tech stocks have seen a major dip from the highs of pandemic-led growth in the past couple of years. Many tech companies which boomed in the past couple of years are taking various measures including laying off employees to reduce costs and conserve capital amid an anticipated slowdown in the sector.
"In times of uncertainty, investors look for safety. They recognize that we are the scaled leader in our categories, but they don’t know how much that's worth," Khosrowshahi said. "The average employee at Uber is barely over 30, which means you’ve spent your career in a long and unprecedented bull run. This next period will be different, and it will require a different approach."
The mobility sector was one of the worst impacted sectors during the pandemic as the demand for rides saw a sharp decline amid lockdown restrictions across the world to tackle the virus outbreak. Uber however benefited from the growth of its delivery business that became bigger than its core ride-hailing business in the second quarter of 2020 and boosted the company's revenues over the past two years.
In the recently concluded quarter ended March 31, 2022, revenue from its ride-hailing business finally surpassed its delivery business again, driven by rebound in demand for rides, although it still trails the delivery business in gross bookings. Khosrowshahi had recently mentioned that its mobility gross bookings in April 2022 exceeded 2019 levels across all regions and use cases.
Uber's revenues more than doubled to $6.9 billion for the quarter, with mobility business contributing $2.518 billion and delivery business accounting for $2.512 billion. The remaining came from its freight business.
In the email to employees, Khosrowshahi said that investors are happy with the growth of its delivery business, having "performed better than many other pandemic winners", although he firmly believes that "it should be growing even faster". He also mentioned that their freight needs to get even bigger "so that investors recognize its value".
"We have started to demonstrate the Power of the Platform, which is a structural advantage that sets us apart. As you know, our strategy here is simple: bring in consumers on either Mobility or Delivery, encourage them to try the other, and tie everything together with a compelling membership program. The advantage here is obvious, but we have to show the value of the platform in real dollar terms. We are serving multi-trillion dollar markets, but market size is irrelevant if it doesn’t translate into profit," he said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
