Uber debuts $7bn share buyback as tech groups step up capital returns

Uber unveiled an inaugural $7bn share buyback programme on Wednesday, days after reporting its first full year of operating profit, making it the latest Silicon Valley company to step up its returns to shareholders.

The move by the San Francisco-based group comes after Facebook parent Meta announced its debut dividend earlier this month, triggering a record leap in its stock price, while home rental site Airbnb expanded its buyback programme by $6bn on Tuesday.

Uber revealed its plans to repurchase up to $7bn shares as part of a closely watched investor update that also outlined important details about its growth strategy and financial goals over the next three years. 

The news sent Uber’s shares up 14.4 per cent in New York on Wednesday to a new high of $79.15. The stock has more than doubled over the past year, pushing the company’s market capitalisation to more than $160bn.

The buyback represented a “vote of confidence in the company’s strong financial momentum”, said Prashanth Mahendra-Rajah, Uber’s chief financial officer.

The capital return announcement coincided with a wave of planned strikes by delivery workers in North America and the UK on Wednesday, as couriers for services including Uber, Just Eat Takeaway, Deliveroo and DoorDash push for higher pay and more transparency.

Tech companies such as Uber, which had been notorious for profligate spending to grab market share during the 2010s, have been forced to refocus on profitability over the past two years as interest rates rose and it became harder to raise capital. Many cut thousands of jobs in order to streamline their businesses.

As well as returning a portion of those newfound profits to investors, buybacks allow tech companies to counterbalance the issue of new shares to employees as stock awards vest. Equity incentives remain a vital component of staff remuneration and talent retention in Silicon Valley.

“We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation, and working towards a consistent reduction in share count,” said Mahendra-Rajah.

Uber last week hailed 2023 as an “inflection point” in its history and signalled that it could return capital to shareholders. It had come under growing pressure from investors about whether it could deliver sustainable profits after racking up more than $30bn in losses since it was founded in 2009.    

Over the next three years, Uber said it expected gross bookings growth — which accelerated to 22 per cent in the final quarter of 2023 — to be in the mid to high teens, while growth in adjusted earnings before interest, tax, depreciation and amortisation would range from the “high 30s to 40 per cent”. 

“A majority of our top markets are profitable, and have increased profitability in the last two years,” said Uber.

The deployment of generative artificial intelligence would help boost margins, by making some areas such as customer support more efficient, added the company. 

Uber, like rival Lyft, has worked to cut costs, drive efficiencies and bolster margins as investor patience with chronically lossmaking tech companies has waned in the context of higher inflation.

Under chief executive Dara Khosrowshahi, Uber has pushed into businesses beyond its core ride-sharing and restaurant delivery segments, including grocery delivery and advertising, which has boosted margins. 

The company said last week that user numbers had risen to 150mn from 45mn seven years ago. It added on Wednesday that even in its “most mature markets”, such as the UK, US and Australia, it was “growing consumers at a strong pace — with lots of runway left”. 

Uber said it was also targeting growth in its mobility business in “huge new countries” including Argentina and Japan, and noted that it had a “high proportion of low frequency customers” that it aimed to lure to its growing suite of services, such as bike and car rentals.