Uber's Q3 Growth Underscores Persistent Margin and Valuation Concerns

What happened

Uber posted strong Q3 2025 growth with rising gross bookings and revenue, driven by increased trip volumes in Mobility and improved efficiency in Delivery. However, operating income lagged behind EBITDA, casting doubt on the sustainability of margin expansion despite cost reductions in sales and marketing. The Delivery vertical showed a higher take rate, indicating better monetization, while Mobility benefited from lower incentive costs. Yet, the stock's valuation remains demanding, with a DCF anchor near $53 per share and an EV/EBITDA multiple around 22.7x, suggesting limited upside at current levels. Ongoing regulatory, legal, and labor risks, such as potential reclassification of drivers as employees, further threaten Uber's profitability and cash flow durability.

Implication

Uber's Q3 results confirm operational strength but highlight vulnerabilities in earnings quality and margin sustainability, warranting caution. The disparity between operating income and EBITDA suggests underlying profitability may be weaker than headline figures indicate, exacerbated by reliance on tax allowance releases. Persistent regulatory threats, including labor classification changes and legal actions, could structurally compress margins and erode cash flow. With the stock trading well above conservative valuation anchors, investors face limited margin of safety and should monitor take rates and regulatory developments closely. Patience is advised until clearer signs of durable margin expansion and risk mitigation emerge.

Thesis delta

The investment thesis shifts from acknowledging Uber's cash generation to heightened skepticism about margin durability and valuation. Q3's operating income shortfall and elevated multiples reinforce overvaluation concerns, while regulatory and legal risks remain unresolved, increasing the likelihood of sustained pressure on returns. This underscores the need for a more defensive stance, waiting for evidence of improved earnings quality and risk reduction.