Uber’s shares are rising on positive trends despite a big loss in the second quarter

Uber’s efforts to merge its pioneering ride-hailing service with food delivery and freight showed progress in the latest quarter, even as the company suffered a big loss as a result of a sharp drop in outside investment.

Looking past Uber’s $2.6 billion second-quarter loss announced Tuesday, Wall Street celebrated a significant milestone that raised hopes that Uber is on the verge of becoming a self-sustaining business.

The good news came on Tuesday in the form of a key metric known as free cash flow. Uber generated $382 million in cash during the April-June period, the first quarter in the company’s 13-year history that it didn’t bleed cash.

Uber has now been profitable for four consecutive quarters under a financial measure called EBIDTA, or “adjusted earnings before interest, taxes, depreciation and amortization.”

By that measure, Uber earned $364 million during the second quarter, beating industry analysts’ estimates of $277 million, according to FactSet Research.

Uber still incurred a massive loss that translated to $1.33 per share, mainly caused by declines in Uber’s stake in Aurora, a self-driving car company, and a Singapore ride-hailing service called Grab.

Chief Executive Officer Dara Khosrowshahi said Tuesday that he is confident the company will build on its momentum and possibly exceed a previously set goal of generating $1 billion in free cash flow annually.

Khosrowshahi said he now believes Uber is in its strongest position since he was hired as the company’s chief executive nearly five years ago. Khosrowshahi took over after co-founder Travis Kalanick was pushed out amid a series of scandals, from allegations of sexual harassment and cover-ups to allegations of stealing self-driving car technology.

Shares of Uber Technologies Inc., based in San Francisco, rose nearly 19% to close Tuesday at $29.25. The stock is still down 30% this year, well below the peak of around $64 reached early last year.

The downturn largely reflects ongoing skepticism about whether Uber will be able to continue charging high enough prices for rides and food delivery to make money over the long term. For most of its history, Uber had been able to lure customers to its services with low prices subsidized by the billions of dollars it raised from venture capitalists and other investors before going public in 2019.

Less than a year later, the pandemic hit and demand disappeared as government lockdowns put millions at home and people stopped driving.

Uber’s ride-hailing service has now surpassed its pre-pandemic levels, although Khosrowshahi told analysts on Tuesday that demand remains subdued in several major US cities such as San Francisco, Los Angeles and Seattle, where large numbers of people continue to work remotely.

Elsewhere, passengers are returning to Uber in droves and seem willing to pay the higher fares the service charges even in the face of skyrocketing inflation.

Passengers took a total of 1.87 billion rides on Uber during the spring and early summer, a 24% increase compared to the same time last year. That’s about 21 million trips per day, on average. The volume also surpassed the 1.68 billion passenger trips that Uber provided during the second quarter of 2019 before the pandemic turned everything upside down.

Wedbush Securities analyst Daniel Ives said the second quarter suggests Uber can “produce profits as they navigate inflationary pressures and pockets of driver shortages that still linger in some cities.”

The increase in ridership helped Uber more than double its revenue from the same time last year to nearly $8.1 billion.

Uber’s higher prices and other incentives also make driving for the service a more attractive option. Drivers who work exclusively for the ride-hailing service now earn about $37 per hour, while those who do also spend some of their time on the food delivery side.

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