For much of its existence, Uber (NYSE: UBER) has been criticized for prioritizing maximizing its adjusted earnings (EBITDA) over its profitability. In a change to that longstanding tradition, Uber CEO Dara Khosrowshahi wrote in a May 4 email to staff that the company will begin focusing on achieving profitability and freeing up cash flow by drastically cutting its funding for marketing, incentives, and new hires.
Khosrowshahi said that recent meetings with investors have revealed a "seismic shift" that's happening in the market, a shift that Uber is hoping to respond to with this change in priorities.
"We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed," Khosrowshahi wrote. "Now it's about free cash flow. We can (and should) get there fast."
Along with investor sentiment, Uber and other ridesharing companies have also been facing a driver shortage due to rising gas prices and a resurgence in demand for taxis.
During the pandemic, tech stocks skyrocketed, but recent plunges in stock prices have investors worried that tech won't be seeing a rebound any time soon. In response to this change in sentiment, Uber isn't the only company expecting to cut hiring: Meta (NASDAQ: FB) announced in the last week of April that it would stop or slow hiring, and Robinhood (NASDAQ: HOOD) has plans to cut just under 9% of its staff.
"After earnings, I spent several days meeting investors in New York and Boston. It's clear that the market is experiencing a seismic shift and we need to react accordingly," Uber's CEO wrote. "While investors don't run the company, they do own the company-and they've entrusted us with running it well."
Uber may not be as profitable as it would like, but it has seen improvements in recent years. Throughout the pandemic, UberEats grew rapidly, and the end of pandemic restrictions has not led to the end of that growth. Uber's revenue has more than doubled to $6.9 billion during the first quarter of this year. However, the company also reported a $5.9 billion loss during the same period related to its equity investments.
"The hurdle rate for our investments has gotten higher, and that means that some initiatives that require substantial capital will be slowed," Khosrowshahi said. "We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back."
"We will be even more hardcore about costs across the board," he continued.
Unlike its competitor Uber, Lyft (NASDAQ: LYFT) isn't stepping off the gas when it comes to hiring. Instead, the company is boosting its spending in an effort to attract more drivers.