Uber plans about $10 billion for autonomous vehicle ambitions
Uber’s second-quarter gross bookings jumped 24% to $58.02 billion, and adjusted earnings of 81 cents a share surpassed the consensus analyst forecast, according to FactSet. Revenue of $14.19 billion came in slightly below the $14.24 billion analysts expected, and shares fell 4% in early trading.
Earnings and guidance
Chief Executive Dara Khosrowshahi said on CNBC that the revenue miss was driven by a change in how Uber accounts for revenue in the United Kingdom. “I wouldn’t call that a fundamental issue in any way,” Khosrowshahi said. “The business continues to execute incredibly well.”
The company plans to invest about $10 billion in the coming years to support its autonomous vehicle ambitions. “AVs represent a very important future for mobility,” Khosrowshahi said, noting that Uber has partnerships with more than 30 autonomous vehicle companies spanning software, technology and vehicles. Uber expects to operate autonomous vehicles in 15 markets around the world by the end of the year.
Operating commentary
Khosrowshahi said riders showed no signs of pulling back. “We’re not seeing any signs of trade down, we’re not seeing smaller basket sizes,” he said. “Consumers remain generous in their tipping, for example. Sometimes if someone is feeling pinched at the pocket they might pull back on tipping, but none of that is happening.” He added that driver earnings increased in the latest quarter.
The company is also passing lower insurance costs on to customers, reducing prices across its mobility business in several markets, including California. “One of the most significant causes of price increases in mobility in the U.S. had been insurance,” Khosrowshahi said. With insurance costs declining, the lower prices are driving more business. “We’ve seen an acceleration in those markets in terms of bookings,” he said, adding that both the mobility and delivery businesses grew in the U.S. during the quarter.
Market update
Oil prices edged higher in European trading after settling more than 5% lower in the previous session, as investors waited to see whether the U.S. and Iran could reach an agreement to reopen the Strait of Hormuz. Brent crude rose 1% to $80.15 a barrel, while West Texas Intermediate added 0.3% to $76.05 a barrel. Analysts at ING said there is still a wide gap between the two countries over management of the waterway and the nuclear issue, and said “there is the very real risk that any deal unravels fairly quickly, as we saw with the memorandum of understanding.” Tanker movements through the strait remained curtailed, and the global oil market continued to tighten.
European stock indexes notched fresh record highs. The pan-European Stoxx 600 gained 0.5% to 659.75 points, a new peak. London’s FTSE 100 rose 0.6%, helped by gains for metals miners including Fresnillo, which added 5.3%. Germany’s DAX climbed 0.7%, with Siemens Energy jumping 4.4% after its earnings report. France’s CAC 40 edged up 0.2%, while Novo Nordisk shares in Copenhagen fell 4.4% after the company released its quarterly figures.
Auto update
Auto shoppers are becoming more selective, with SUVs and hybrid vehicles increasingly favored, according to the Kelley Blue Book Brand Watch from Cox Automotive. During the first half of the year, Kia and Subaru were the only non-luxury brands to gain shopper consideration, while Audi was the only Top 10 luxury brand to improve year over year. Vanessa Ton, senior manager of market and customer research at Cox Automotive, said affordability is challenging many households, but noted that value-oriented SUVs are popular. “We recognize that value-oriented SUVs are the heart of the market right now, providing shoppers with the right mix of attributes and usability,” Ton said.