Uber Got a Bit Too Revved Up

The ride-hailing company’s second-quarter results Tuesday included its first-ever operating profit, based on generally accepted accounting principles. This comes just a little over four years after Uber listed its shares on the New York Stock Exchange, though the company has been on this trip for quite some time, having reported its first profit on the far more generous standard of adjusted earnings before interest, taxes, depreciation and amortization in late 2021. Earnings on that basis came in at $916 million for the most recent quarter—exceeding Wall Street’s consensus forecasts by 10%.

But Uber’s top line growth didn’t impress to the same degree. Revenue rose 14% year over year to $9.2 billion, which represented the company’s slowest growth in more than two years and fell a bit short of the $9.4 billion projected by analysts. That was due to weakness in Uber’s food-delivery and freight businesses—the latter of which saw revenue slide 30% year over year. The much larger food-delivery segment saw revenue grow nearly 11% to almost $3.1 billion, but that still fell about 5% short of prior estimates.

Uber’s stock price, which had doubled for the year to date ahead of the results, fell around 5% in midday trading Tuesday.

Ride-sharing still accounts for nearly half of Uber’s total revenue, and that business is doing well. Gross bookings in Uber’s mobility segment rose 25% from a year earlier to $16.7 billion, beating the $16.5 billion expected by analysts. Revenue rose even further, jumping nearly 38% to $4.9 billion. Missteps by Lyft have helped, as the much smaller ride-sharing rival was keeping its prices high, which ended up driving riders away.

But Lyft is under new management now, and Uber Chief Executive Dara Khosrowshahi noted in Tuesday’s earnings call that Lyft “now is competing effectively" in the ride-share market. It still isn’t a close contest; analysts expect Lyft to report 3% revenue growth for the second quarter when the company posts its results next week, and to stay at low-single-digit growth for the remainder of the year.

A more rational marketplace has been key to Uber finally being able to cross the profitability threshold, and is a welcome change from the bruising, venture-capital-backed competition to build market share at all costs that marked the company’s early years. More milestones are ahead still, as Uber works toward landing an investment-grade debt rating and building up its balance sheet. Notably, the company’s free cash flow for the quarter crossed the $1 billion mark for the first time ever in the recent quarter.

Nikhil Devnani of Bernstein said steady GAAP profitability is the final hurdle for Uber to be included in the S&P 500. In a report last month, he projected that this could come sometime in the later half of next year. That could become another driver of the stock this year, as companies added to the key index from 2010 to 2023 averaged a strong outperformance in the year prior to their inclusion, according to Bernstein’s research. Uber’s stock may only be taking a rest stop.

Write to Dan Gallagher at dan.gallagher@wsj.com