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Uber Eats was doing under a billion dollars in gross bookings when its current CEO joined and is now over 100 billion, which took an enormous amount of organic investment. Coming from banking, he is comfortable with the power of compounding: get the core metrics right, from user metrics to financial ones, and keep expenses growing slower than revenue unless there is a long-term benefit.
Excess capital goes first to the services already being built, then to algorithms and more engineers, and then to the new reality of autonomous vehicles. That includes investments in partners and commitments to tens of thousands of AVs, which get financed, as in the billion dollar line announced with Santander for EV and AV fleets. The company has to be the one developing that market, and it still has plenty of cash left over for buybacks.
How does compounding work in business?
Compounding means that returns on reinvested earnings earn returns of their own. A business that grows 10 percent a year doubles in about seven years, a shortcut known as the rule of 72. The rule appears in Luca Pacioli's 1494 book Summa de arithmetica.
Why do companies buy back shares?
A buyback reduces the number of shares outstanding, so each remaining share claims a larger slice of earnings. In 1982 the SEC adopted Rule 10b-18, a safe harbor protecting companies from manipulation charges if they met conditions on timing and volume. Buybacks have since become a major way American companies return cash to shareholders, alongside dividends.