Why Uber Stock Declined Today

Uber's shares fell 5.2% after concerns about slowing growth overshadowed the company's first-ever quarterly operating profit.

Shares of Uber Technologies (UBER) experienced a decline today following concerns about slowing growth, despite the company's first-ever quarterly operating profit. As a result, the stock was down 5.2% as of 12:18 p.m. ET.

In its second-quarter report, Uber surpassed estimates with gross bookings rising 16% to $33.6 billion and revenue increasing 14% to $9.23 billion (or 17% on a constant-currency basis). However, these figures fell slightly short of the estimated $9.3 billion.

Both the mobility and delivery sectors performed well, with mobility gross bookings rising 25% to $16.7 billion and delivery gross bookings increasing by 12% to $15.6 billion.

Uber's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also saw a significant jump, with profitability improving by 152% to $916 million, and free cash flow tripling to $1.14 billion.

On a generally accepted accounting principles (GAAP) basis, the company reported an operating profit of $326 million, a significant improvement from the operating loss of $713 million. Additionally, Uber benefited from gains in investments and reported GAAP earnings per share of $0.18, surpassing the consensus of a $0.01 loss per share.

CFO Nelson Chai expressed pride in the company's progress, stating, "The unique power of the Uber platform and the team's relentless focus on profitable growth was on full display in Q2, with record profitability and over $1 billion of quarterly free cash flow. I'm incredibly proud of the progress we've made, and Uber is well positioned to drive tremendous value for shareholders in the coming years."

For the third quarter, Uber expects gross bookings of $34 billion to $35 billion and adjusted EBITDA of $975 million to $1.025 billion. While the gross bookings guidance represents an 18.5% increase from the year-ago quarter, it only reflects a 3% sequential increase, leading to doubts about its growth potential.

The stock's decline may also be attributed to the fact that it has already experienced significant gains this year, nearly doubling prior to today's report. Investors may believe that the improved performance is already priced into the stock.

Moving forward, Uber will need to deliver increased profitability if it wants to sustain revenue growth in the teens.