Fearless in the headwind, "overseas Didi" Uber's execution remains strong

On the evening of May 7th, Beijing time, "International Didi" $Uber Tech(UBER.US) released its Q1 2025 financial report. Overall, the performance for the quarter showed some flaws, but the guidance for the next quarter exceeded expectations, offsetting the negative impact of the poor performance in the current quarter. The key points are as follows:

1. The significant slowdown in ride-hailing growth is the biggest "red flag": This quarter, the order amount grew only 13.5% year-on-year, a decline of 4.7 percentage points quarter-on-quarter, which is clearly lower than the not-so-high market expectation of 15%. Even after excluding the impact of exchange rates, the growth rate also dropped from 24% to 20%, indicating that the slowdown cannot be entirely attributed to adverse exchange rate effects; the business is indeed experiencing substantial deceleration.

2. The growth of the other pillar, the food delivery business, was unexpectedly robust (yesterday's DoorDash performance indicated weak growth in food delivery). This quarter, the order amount grew approximately 15% year-on-year, although it did slow down by 3 percentage points quarter-on-quarter, it was still above the market expectation of 14.3%. Moreover, after excluding the drag from exchange rates, the growth rate remained unchanged at 18% quarter-on-quarter.

According to the company's disclosure, the annualized order amount for non-food deliveries such as fresh produce and daily necessities has reached $10 billion, accounting for 12% of the current overall food delivery order amount, which should be one of the main contributors to growth.

3. In terms of price and volume driving factors, the year-on-year growth rate of core business order volume actually remained at 18%, which did not slow down compared to the previous quarter and was also higher than the market expectation of 16%. The volume growth this quarter is not bad.

The main issue is that the average order value significantly dropped by 3.2% year-on-year, which dragged down the growth of the order amount. However, the adverse impact of exchange rates on the order amount this quarter was 4 percentage points, which was only 1 percentage point higher than the previous quarter, indicating that exchange rate headwinds are not the main reason for the significant drop in average order value.

Dolphin Research speculates that this may be due to an increased proportion of low-priced products and emerging markets in the product structure and market share structure, or recent declines in oil prices leading to lower pricing in the ride-hailing business. The actual reasons will depend on the management's explanation.

4. In addition to the slowdown in order amount growth, the revenue growth of the ride-hailing business this quarter saw a sharp decline, with a year-on-year growth rate of only 15%, compared to 25% in the previous quarter.

The underlying reason is that the take rate for the ride-hailing business this quarter grew by only 50 basis points year-on-year, significantly narrowing compared to the more than 160 basis points increase in the past two quarters. The trend of improving monetization rate has been "stalled," with both order amount and monetization rate growth slowing down, amplifying the impact, ultimately leading to the sharp decline in revenue growth. In comparison, the monetization rate of the takeaway business has only increased by 38bps year-on-year, but it has remained consistent over the past three quarters and will not marginally drag down the year-on-year revenue growth rate. Under variable exchange rates, the year-on-year revenue growth rate of the takeaway business this season is 18%, with a quarter-on-quarter slowdown of only 3 percentage points. However, after excluding the adverse impact of exchange rates, the revenue growth rate of the takeaway business reaches 22%, which actually accelerated by 2 percentage points quarter-on-quarter. This also shows that the growth of the takeaway business is more resilient.

5. In terms of profitability, the gross profit this season increased by 16% year-on-year, which is generally in line with market expectations and slightly lower, but still outperformed the revenue growth rate. Despite the slowdown in growth and the narrowing increase in take rate, the gross profit margin still increased by 73bps year-on-year, the largest increase in the past six quarters. This indicates the company's ability to release operational leverage through efficiency improvements.

From the expense perspective, this quarter, only marketing expenses showed significant growth, increasing by 15% year-on-year, while other expenses generally grew in single digits or even declined year-on-year. Even the growth rate of marketing expenses is roughly comparable to the revenue and gross profit growth rates, which will not significantly drag down the profit margin.

Even in the case of a noticeable slowdown in business growth, the company continues to drive profit margins higher through excellent cost control and efficiency improvements. This season, adjusted EBITDA was $1.87 billion, slightly higher than the expected $0.2 billion, with a year-on-year growth of 33%. The adjusted EBITDA margin increased by 0.7 percentage points and 0.3 percentage points quarter-on-quarter, respectively.

Looking at the business segments: 1) The adjusted EBITDA for the ride-hailing business was $1.75 billion, in line with expectations. This is mainly due to the profit margin of the ride-hailing business accounting for 8.3% of the order amount, which is 0.2 percentage points higher than market expectations, offsetting the impact of lower-than-expected growth.

Meanwhile, the takeaway business, while showing resilient growth, also saw a slight quarter-on-quarter increase in adjusted EBITDA margin of 0.1 percentage points to 3.7%, higher than the expected 3.6%. The final profit was $760 million, exceeding expectations by 3.6%.

6. Although there are some flaws in the quarterly performance, the company's guidance for the next quarter is better than expected, offsetting the negative impact of the not-so-good quarterly performance. The company guidesthe median total order amount to be $45.75 billion to $47.25 billion, with the lower limit close to the market expectation of $45.84 billion.****The median guidance corresponds to a year-on-year growth rate of 16.4%, indicating that the next quarter will not only maintain but accelerate by 2.7 percentage points compared to this quarter.However, it is worth noting thatthe adverse impact of exchange rates in the next quarter is 1.5 percentage points, while this quarter's impact was 4 percentage points,therefore2.5 percentage points of the acceleration in total order amount growth comes from the improvement in exchange rate impact.**Nevertheless,due to the more pronounced impact of tariffs in Q2, even if the guidance actually implies that the growth in the next quarter is roughly flat or slightly improved compared to this quarter, it is still good news. From a profit perspective, the adjusted EBITDA guidance median is between 2.07 billion, slightly higher than the expected 2.05 billion. However, the implied profit margin of 4.5% is basically in line with expectations, with the positive surprise mainly due to order amounts being higher than expected.

Dolphin Research's Viewpoint:

As mentioned earlier, Uber's performance this time has some flaws in the current quarter's results, but the guidance for the next quarter being above expectations partially offsets the negative impact of the not-so-good performance in the current quarter, hence the company's decline in performance is not significant.

Specifically, the main issues reflected in this performance are twofold:

The growth of order amounts in the ride-hailing business has significantly slowed down, and it is not entirely influenced by non-operational factors like exchange rates. Considering price and volume factors, it is highly likely that there is a downward shift in product structure or the impact of falling oil prices.

Additionally, the performance improvement in both the ride-hailing and food delivery businesses has been quite limited. If this trend continues, it means that the subsequent revenue growth center will gradually approach around 15% growth in order amounts, which will reduce the future revenue and profit expectations.

However, on the positive side of the current quarter's performance: 1) Firstly, the food delivery business has maintained resilient growth in both order amounts and revenue growth rates. Despite high-frequency data indicating poor dining consumption, and yesterday's DoorDash performance confirming this observation, Uber has delivered impressive results against the trend.

Although the growth performance is not good, thanks to cost reduction and efficiency improvement, Uber's profit performance is still slightly better than expected, validating the company's ability to achieve profit margin improvement even in adverse conditions.

Although the main reason for the company's guidance of accelerated order amount growth in the next quarter is attributed to the easing of exchange rate headwinds, the fact that it remains flat compared to this quarter without deterioration can be considered a good performance.

Overall, before the performance, the market's view on Uber is mixed with both bullish and bearish sentiments. Bears believe that optional "light luxury" consumption like food delivery will have a larger reduction in elasticity in the context of a weakening macro economy. While the demand for ride-hailing is relatively inelastic, a significant portion of the demand is related to long-distance travel such as airport returns, which will also be impacted by the reduction in cross-border business travel.

On the other hand, bulls believe that the company can offset the weakening growth in the U.S. domestic market through the development of overseas business. Relatively speaking, the elasticity of ride-hailing demand is low, and during economic downturns, more driver supply will also benefit the platform. Therefore, Uber can be seen as a defensive stock.

Although the future trajectory of the U.S. macro economy remains difficult to predict, from this performance, it seems that Uber is more likely to serve as a defensive stock during economic downturns, with a lower probability of being significantly impacted.

The following is a detailed interpretation of this quarter's financial report:

1. Ride-hailing slowdown & resilient food delivery, declining average order value is the "culprit behind" Core Indicator -- The main issue with the gross booking amount is the significant slowdown in the growth of the mobility business, which was much higher than expected. This quarter, the year-on-year growth rate was only 13.5%, a quarter-on-quarter decline of 4.7 percentage points, which is also significantly lower than the not-so-high market expectation of 15%. Even after excluding the impact of exchange rates, the growth rate also declined from 24% to 20%, indicating that it is not primarily affected by adverse exchange rates, but rather by a slowdown in actual business.

In contrast, the growth of Uber Eats' delivery business has been surprisingly resilient. (High-frequency data shows that the growth rate of dining expenditure among American residents has significantly declined, and DoorDash, which released its performance yesterday, indeed fell short of expectations.) This quarter, the order amount increased by about 15% year-on-year, although it seems to have slowed down by 3 percentage points quarter-on-quarter, it is still higher than the market expectation of 14.3%. Moreover, after excluding the drag from exchange rates, the growth rate remained unchanged at 18% quarter-on-quarter. In fact, over the past five quarters, the growth rate of the delivery business's order amount at constant exchange rates has consistently maintained between 17% and 18%, demonstrating considerable resilience.

According to the company's disclosure, the annualized order amount for non-food delivery, such as fresh produce and daily necessities, has reached $10 billion, accounting for 12% of the current overall delivery order amount, making it one of the main contributors to growth.

Due to the significant slowdown in the delivery business, partially offset by the resilient delivery business, the core order amount growth rate for delivery + ride-hailing was 14.3%, slightly underperforming the expectation of 14.7%.

From the perspective of price and volume drivers, in terms of volume, the year-on-year growth rate of core business order volume actually remained at 18%, which did not slow down compared to the previous quarter and was also higher than the market expectation of 16%. Thus, the growth in terms of volume this quarter is not bad.

The main issue is that the average order value significantly dropped by 3.2% year-on-year this quarter, which dragged down the growth of the order amount. However, the adverse impact of exchange rates on the gross booking amount this quarter was 4 percentage points, which is only 1 percentage point higher than the previous quarter, indicating that exchange rate headwinds are not the main reason for the significant drop in average order value.

Therefore, Dolphin Research speculates that it may be due to an increase in the proportion of low-priced products and emerging markets in the product structure and market share structure, or recent declines in oil prices leading to lower pricing in the ride-hailing business. The actual reasons will depend on the management's explanation

In terms of user data, the monthly active users this season are 170 million, with a year-on-year growth rate remaining stable at 14%, which is relatively steady. On average, each monthly active user places orders 17.9 times per season, an increase of 3.5% year-on-year. Both indicators are basically flat compared to the previous quarter.

2. The trend of increasing monetization rate has paused, and the revenue slowdown is more pronounced

From the revenue perspective, the ride-hailing business not only shows a significant slowdown in order amount growth but also a sharp decline in revenue growth. This season's year-on-year growth rate is only 15%, the lowest quarterly growth rate since the pandemic. The underlying reason is that the take rate of the ride-hailing business this season increased by only 50bps year-on-year, a significant narrowing compared to the more than 160bps increase in the past two quarters.

The trend of increasing monetization rate has been "blocked," further amplifying the impact of the decline in order amount growth, leading to a sharp drop in revenue growth.

Although the monetization rate of the takeaway business also increased by only 38bps year-on-year, it is not unexpected bad news compared to the consistent increase in the monetization rate over the past three quarters. The year-on-year revenue growth rate of the takeaway business this season is 18%, with a quarter-on-quarter slowdown of only 3 percentage points. Moreover, after excluding the impact of adverse exchange rates, the constant currency revenue growth rate is actually 22%, which has accelerated by 2 percentage points quarter-on-quarter.

Uber's freight business generated approximately 1.25 billion yuan in revenue this quarter, a slight decrease of 2% year-on-year, with growth still showing no signs of improvement.

Aggregating all business segments, Uber's total revenue this quarter was approximately 15.53 billion USD, with a year-on-year growth of only 13.8%, significantly down from the previous quarter's 20% growth rate, and also below the market expectation of 14.7%. If excluding the impact of exchange rates, the revenue growth rate would narrow to a slowdown of 4 percentage points.

Thirdly, despite the slowdown in growth, cost reduction and efficiency improvement can still drive an increase in profit margins.

Due to the instability in the company's revenue recognition caused by changes in the duration of certain business 1P/3P models, the gross profit/revenue ratio is not entirely comparable. Therefore, when considering the growth of expenses, we use gross profit as the basis .

This quarter, gross profit grew by 16% year-on-year, slightly below market expectations but generally in line. However, it still outperformed revenue growth, with the gross profit margin increasing by 73 basis points year-on-year, marking the largest increase in nearly six quarters. The improvement in gross profit margin was not affected by the slowdown in revenue growth or the narrowing increase in take rate.

From an expense perspective, this quarter, only marketing expenses showed significant growth, increasing by 15% year-on-year, while other expenses generally saw low single-digit growth or even year-on-year declines. Moreover, even the growth rate of marketing expenses was roughly in line with the growth rates of revenue and gross profit, thus not significantly dragging down profit margins.

It is also worth noting that management expenses decreased significantly both year-on-year and quarter-on-quarter, primarily due to relatively high one-time legal and tax expenses in the same period last year, leading to a high base.

Therefore, even with clear signs of a slowdown in business growth, the company can still continue to drive profit margins higher through excellent cost control and efficiency improvements.

The key metric the company focuses on, adjusted EBITDA for this quarter was 1.87 billion, with order volume and revenue slightly below expectations, but profits were still about 20 million higher than expected, with a year-on-year growth of 33%. The adjusted EBITDA profit margin has increased by 0.7 percentage points and 0.3 percentage points quarter-on-quarter, respectively. This reflects the company's ability to continue improving its profit margin.

Looking at the business segments: 1) The adjusted EBITDA for the ride-hailing business is $1.75 billion, which is in line with expectations. The profit margin for the ride-hailing business accounts for 8.3% of the order amount, which is 0.2 percentage points higher than market expectations, offsetting the impact of lower-than-expected growth.

While the takeaway business continues to grow resiliently, the adjusted EBITDA profit margin has also slightly increased by 0.1 percentage points to 3.7%, exceeding the expected 3.6%. Therefore, the final profit is $760 million, which is 3.6% higher than expected.

The freight business saw a slight narrowing of losses this quarter to $7 million;

The group headquarters' losses amounted to $640 million, a slight increase of $10 million compared to the previous quarter.

Dolphin Research's past research on Uber:

February 6, 2025 earnings report commentary 《 Uber: FSD Concerns, Small Mistakes Lead to Big Punishments 》

February 6, 2025 conference call 《 Uber (Minutes): Autonomous Ride-Hailing Estimated to Have a Small Share in Five Years 》

November 1, 2024 earnings report commentary 《 Uber: Plummeting 10%, What Mistake Did the Honor Student Make? 》

November 1, 2024 conference call 《 Uber 3Q24 Conference Call Minutes 》

August 7, 2024 earnings report commentary 《 Uber: Unfazed by Recession, or Is the U.S. Version of Didi Strong? 》 August 7, 2024 Conference Call: Uber: How Much Impact Will Autonomous Driving Have

May 9, 2024 Conference Call: Uber: Confident in Subsequent Growth, Will Increase Investment Next Quarter

May 9, 2024 Earnings Report Commentary: “The American Version of Didi” Faces a Crisis, Is It a Jump Forward or Really Out of Steam?

February 8, 2024 Conference Call: Uber: Core Business Grows Steadily, Advertising & Groceries Provide Additional Increment

February 8, 2024 Earnings Report Commentary: Uber's Performance, “Ten Times That of Didi,” Is Fine, But Lacks Surprises

November 8, 2023 Conference Call: Uber: Optimistic About Sustained Strong Demand

November 8, 2023 Earnings Report Commentary: Uber: The American Version of Didi Has Flaws but Still Shines, Can It Reach New Heights?

August 2, 2023 Conference Call: Uber: Confident in Continuous Growth of Revenue and Profit

August 2, 2023 Earnings Report Commentary: “American Didi” Uber: No Issues Except for Being Expensive ？

In-depth:

November 21, 2022: After the Pandemic's “Suffering and Joy,” Where Is Uber's Future?

October 14, 2022: Navigating Through the Pandemic and Inflation, Uber's Secret Weapon Behind Its Luck Risk Disclosure and Disclaimer for this Article: Dolphin Research Disclaimer and General Disclosure