Uber Eats has overtaken Uber ride-hailing service as Uber Technologies Inc (NYSE:UBER)’s leading source of revenue. According to the company’s 2Q 2020 results, Uber rides registered a whopping 75% drop in gross bookings compared to the same quarter last year. The ride-sharing unit reported $3 billion in revenue.
On the other hand, Uber’s delivery unit registered almost double the number of bookings, with revenues amounting to $6.96 billion. Uber’s delivery business, commonly known as Uber Eats, is now bigger that the ride-sharing unit. Over the last two years, the company has shifted its strategy with more focus on delivery business.
COVID-19 fueling delivery business
The COVID-19 pandemic has created a health crisis that has led to lockdowns around the world. With people confined in their homes, there has been a growing demand for delivery business. With limited movements due to lockdowns, there has been a corresponding drop in demand for ride-sharing services. Then ride business is shrinking even further in area that still have high levels of infections like California. On the other hand, regions that have registered some sort of recovery from the pandemic like Hong Kong and New Zealand have reported a steady recovery in rides business.
Overall, Uber reported $2.24 billion in revenue, representing a 29% drop. The company reduced its net loss to $1.8 billion compared to $5.2 billion reported in 2Q of 2019. Despite the rise in delivery business, profit margins from then unit have been thin. This is largely due to the stiff competition in the sector, with Uber occupying only a small section of the market.
Uber’s ride business reported $50 million in earnings before taxes, interest, depreciation, and amortization. This is a big drop from the $457 million reported in the second quarter of 2019.
“It’s become clear that we have a hugely valuable hedge across our two core businesses that are a critical advantage in any recovery scenario,” Uber CEO Dara Khosrowshahi said.
Cashing in on growing online orders
With many people staying in their homes, Uber is seeking to capitalize on stay-at-home consumer growth online shopping. Uber’s delivery unit has been making inroads from delivering drinks to meals. The company is delivering for major restaurants like Mcdonald’s Corp 9NYSE: MCD) and Starbucks Corporation (NASDAQ: SBUX).