Uber Technologies Inc. delivered a positive outlook for earnings in the current period, signaling the company plans to capitalize on robust ride demand without compromising profits by focusing on product changes, rather than incentives, to address the driver shortage.

The ride-sharing and delivery company projected gross bookings of US$28.5 billion to US$29.5 billion in the second quarter and adjusted earnings before interest, tax, depreciation and amortization of US$240 million to US$270 million. The top end of both ranges beat the average analyst estimate. 

Uber’s rosy results contrasted with rival Lyft Inc., which delivered a disappointing outlook on Tuesday and signaled the shortage of drivers that has plagued both ride-hailing companies for the past year would spill over into the second quarter. Shares plummeted as much as 27 per cent in extended trading after Lyft said it would ramp up spending on driver incentives to bring the number of drivers on its marketplace back into balance with resurgent rider demand. Uber shares were dragged lower by Lyft’s report, tumbling 3.8 per cent in premarket trading after the results.

Uber’s guidance comes after revenue rose 136 per cent to US$6.9 billion in the first quarter, the company said Wednesday in a statement. That beat the US$6.1 billion analysts had projected, according to data compiled by Bloomberg. Adjusted Ebitda earnings were US$168 million in the quarter, surpassing the US$135 million analysts expected. 

“After more than two years of persistent and sometimes unpredictable impacts to our business, our Q1 results make clear that we are emerging on a strong path out of the pandemic,” Chief Executive Officer Dara Khosrowshahi said in the statement.

Khosrowshahi said Uber’s driver base is at a “post-pandemic high” and that it expects engagement to continue “without significant incremental incentive investments.” 

The driver shortage underscores the challenge of grappling with pandemic-induced swings in demand and reveals the fragility of a labor model ill-equipped to address them. By hiring drivers as independent contractors, ride-hailing companies were historically able to offer lower prices than traditional taxis. But the pandemic destabilized this workforce after demand for ride-share cratered and many found other jobs, were better off collecting unemployment benefits, or were more concerned about the risk of infection from being in close quarters with passengers. 

Unlike the speed at which customer demand has rebounded, luring back drivers and onboarding new ones to meet demand is taking more time and money than investors expected. After spending hundreds of millions last year to entice drivers back to the platform, a spike in gas prices when the war in Ukraine broke out dealt a blow to efforts, just as companies were scaling back bonuses.

Uber and Lyft, which reached profitability for the first time as public companies last year, are faced with balancing a post-pandemic recovery and profits after years of losses. 

The intensifying competition for labor is also revealing the different ways in which ride-hailing giants are tackling the issue. Uber said it has been making tweaks to the driver app, like unlocking the ability to see upfront fares before accepting a ride, improving maps and removing bugs. Rather than increase incentives, Uber plans to instead focus on its “holistic product experience as a way to attract, engage and retain earners,” Khosrowshahi said. 

Unlike Lyft, Uber was able to rely on its food-delivery business Uber Eats, which boomed during the pandemic just as ride share demand plunged. The delivery segment, which includes orders across restaurant, grocery and alcohol, has continued to grow despite indoor dining resuming, with bookings up 12 per cent from a year ago to an all-time high of US$13.9 billion.

Growth at Uber Eats has also helped funnel more drivers into its ride-hailing business. The ability to toggle between ferrying meals and people to make money has enticed drivers, many of whom shifted to food-delivery during the pandemic. “The success there has been very very significant,” Khosrowshahi said on a call with analysts on Wednesday. Active drivers in the U.S. and Canada increased 70 per cent in April compared with last year, with new drivers jumping 121 per cent, Khosrowshahi added.

“Having a multi-product marketplace really does provide tangible benefits in terms of driver retention, engagement and overall better marketplace liquidity,” said D.A. Davidson analyst Tom White.

In the three months ended Mar. 31, Uber reported US$26.4 billion in gross bookings, which encompass ride-hailing, food delivery and freight, a 35 per cent increase from the same period last year. Monthly active platform users reached 115 million, just below the 116.6 million analysts expected. 

Uber recorded a net loss of US$5.9 billion due to unrealized losses from stakes in Didi Global Inc., Grab Holdings Ltd. and Aurora Innovation Inc.