Uber will slash costs and focus on creating a leaner company in response to a “seismic shift” in investor attitude, according to the CEO Dara Khosrowshahi’s email to staff.
In an email to staff, Dara Khosrowshahi said: “After earnings, I spent several days meeting investors in New York and Boston.
“It’s clear that the market is experiencing a seismic shift and we need to react accordingly.”
As investors worry about the possibility of an end to the era of cheap money that defined a historic bull market, tech stocks have plummeted from their highs during the coronavirus pandemic.
Last week, the Nasdaq Composite fell for the fifth week in a row, the longest losing trend since 2012.
Khosrowshahi said: “To address the shift in economic sentiment” the ride-hailing firm will slash spending on marketing and incentives and treat hiring as a “privilege,”.
“We have to make sure our unit economics work before we go big.
“The least efficient marketing and incentive spend will be pulled back.”
“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.”
Uber is the latest company to warn of a hiring slowdown.
Meta, the parent company of Facebook, announced last week that it would cease or slow the addition of mid-level or senior positions, while Robinhood is laying off around 9 percent of its personnel.
On Monday, May 9, Uber’s stock dropped by more than 11%.
The stock has dropped more than 45 percent year to date after hitting a new 52-week low earlier in the session.
Khosrowshahi said: “Uber will now focus on achieving profitability on a free cash flow basis rather than adjusted earnings before interest, taxes, depreciation, and amortization”
In the first quarter, Uber’s revenue more than quadrupled to $6.9 billion, as demand for its trips business recovered because to a relaxation of Covid regulations. During the pandemic, the firm has depended primarily on its Eats meal delivery unit to bolster sales.
Still, Uber also posted a $5.9 billion loss in the period, citing a slump in its equity investments.
“We are serving multi-trillion-dollar markets, but market size is irrelevant if it doesn’t translate into profit,” he said.
Though investors are “happy” with the growth of Uber Eats coming out of the pandemic, the segment “should be growing even faster,” Khosrowshahi said.
He added the company’s freight business is a growth opportunity that “needs to get even bigger.”
He ended the note with a rallying call to staff: “Let’s make it legendary. GO GET IT!”
Uber’s cost-cutting strategy highlights a divergence from Lyft, its main competitor in the U.S. and Canada. Lyft said Wednesday, May 4 it would raise spending to entice more drivers due to surging gas prices.
Both firms have faced a lack of drivers as demand for taxis has bounced back. But Uber says its driver base is at a post-pandemic high, meaning the business won’t need to invest a great deal into luring more drivers to the platform.