In the wake of tepid earnings reports from the travel industry and a weak jobs report, Uber Technologies Inc. (NASDAQ: UBER) is set to face increased scrutiny as it prepares to unveil its Q2 earnings tomorrow morning.
The company's stock, which has dropped nearly 20% since mid-August, is under pressure due to concerns about softening ride demand and broader economic worries.
Analysts expect Uber to report earnings per share (EPS) of $0.31 and revenue of $10.57 billion for the quarter. However, it is adjusted EBITDA, rather than EPS, that is likely to be the primary focus.
The company has guided for Q2 2022 adjusted EBITDA of $1.45-$1.53 billion, which represents a slight underperformance compared to its previous guidance.
Despite the Q1 miss, Uber showcased some positive signs. The rideshare segment's gross bookings grew by 26% year-over-year to $18.7 billion, with a 130 basis points improvement in Mobility revenue margin to 30.2%. Tight expense management, with non-GAAP sales and marketing expenses at 2.4% of gross bookings, contributed to better-than-expected margin expansion.
The Delivery segment, which has seen substantial growth during the pandemic, also performed well, with gross bookings increasing 17% to $17.7 billion. Uber's partnership with Instacart and the addition of Costco delivery options are expected to fuel future growth in this division.
As investors await the earnings report, the key metrics to watch will be adjusted EBITDA, which surged 82% year-over-year in Q1, and Q2 gross bookings guidance, which was set at $38.75-$40.25 billion, indicating an 18% to 23% year-over-year growth on a constant currency basis.
However, the weak economic backdrop and competition from Lyft (LYFT) could weigh on expectations, with both companies grappling with similar challenges in the travel and delivery markets.
The bulls, who had previously pointed to Uber's driver supply advantage, will be looking for signs of resilience in the face of adversity.
Conversely, bears may argue that the company's growth prospects are limited without clear catalysts to boost demand and maintain margins in an increasingly competitive landscape.
Uber's Q2 earnings will be a critical juncture for investors to gauge the company's ability to navigate through a challenging environment. While the fundamentals show some strength, the earnings report will likely be influenced by the broader economic climate and the ongoing battle for market share in the ridesharing and delivery sectors.
Investors should pay close attention to management's commentary on strategic initiatives and cost management to better understand Uber's path forward in these volatile times.