Bernstein: Uber's third-quarter Mobility business slows, while Delivery growth supports overall guidance

Why did Mobility fall short of expectations?

Third-quarter Mobility total Bookings grew 17% year over year at constant currency, below Bernstein's forecast of 20%; growth also slowed by 3 percentage points from the second quarter. Mobility trip volume grew 16% year over year during the same period.
Management attributed the weakness mainly to insufficient driver supply: high fuel costs and a tightening labor market affected India and Brazil, while Canada was also affected by tighter restrictions on immigration inflows. The Middle East conflict weighed on third-quarter growth by 0.75 percentage points, and the company expects the drag to widen to 1 percentage point in the fourth quarter.
Bernstein roughly estimates that international Mobility growth may slow by about 5–6 percentage points; the slowdown in the US was much smaller. This regional breakdown is the firm's estimate.

Third-quarter Delivery total Bookings grew 23% year over year at constant currency, and management said organic growth was also accelerating. Core restaurant Bookings benefited from improved merchant selection and increased merchant-funded promotions; grocery and retail Bookings growth remained at around 40% year over year.
Overall third-quarter Bookings were 59.819 billion US dollars, close to Bernstein's forecast. The company expects overall Bookings to grow 18%–22% year over year at constant currency in the fourth quarter, with a midpoint of 20%; Mobility growth is expected to be broadly stable, while Delivery growth is expected to slow slightly. The firm had previously forecast overall growth of 20.5%.
The company is awaiting approval of the DHER and ezCater deals; Bernstein would also like to learn more about how several small acquisitions made this year contributed to growth in the third and fourth quarters.

Uber plans to increase investment in driver supply, with some of the funding coming from a shift in rider subsidies. Along with seasonal factors, the company expects its take rate to face pressure in the fourth quarter, while indicating that other items on the income statement could cushion the impact on margins; Bernstein believes recent layoffs will also help balance the investment.
Third-quarter adjusted EBITDA was 2.963 billion dollars, up 31% year over year and slightly above the firm's forecast of 2.958 billion dollars. The company's fourth-quarter guidance is 3.13 billion–3.23 billion dollars, with a midpoint above the firm's prior forecast of 3.15 billion dollars.
Bernstein believes that Mobility's miss did not significantly affect overall profit, which may indicate that weakness was concentrated in lower-margin international markets. However, if the driver shortage becomes structural, both Mobility growth and profitability could be hurt.

The company plans to have about 700 autonomous vehicles on its platform by the end of 2026, more than 2000 by the end of 2027, and to begin larger-scale commercial expansion in 2028. Bernstein believes this implies capital expenditure could grow faster than the firm's model and market forecasts; the company is pursuing third-party financing, whose role will affect the intensity of Uber's own capital investment.
Uber says its network can enable autonomous vehicles to achieve utilization 30% higher than operator-owned fleets, potentially offsetting platform fees and improving partners' economics. Bernstein is also focused on the scale and duration of subsidies in mature autonomous driving markets.
Bernstein maintains its Outperform rating on Uber and its 95-dollar price target.