Uber Technologies (UBER -0.41%) entered the limelight when billionaire investor Bill Ackman disclosed his ownership of 30.3 million shares (worth more than $2 billion) in the ride-hailing company.

The tech company delivered solid returns to shareholders in the last three years after its stock price more than tripled from its 2022 bottom (in the low $20s), thanks to its improving financial prospects.

Here are some key factors investors should pay attention to when getting up to speed on this tech giant.

Image source: Getty Images.

A leader in the mobility sector

Founded as a ride-hailing app, Uber evolved its business model to become a major player in the mobility sector. While ride-hailing remains a massive business within the company, Uber also ventured into food and grocery delivery (via Uber Eats), freight logistics, and, more recently, autonomous ride-hailing.

Uber operates a relatively simple business model: taking a commission out of each ride it connects or every food delivery it enables. The take rate for ride-hailing is around 30% of gross bookings, while the commission rate for delivery is around 18% to 19%. In the quarter ended Dec. 31, 2024, 52% of Uber's revenue was from ride-hailing, 46% was from delivery, and the remaining was from its freight management segment.

Uber went from a troubled child to a solid cash-generation machine

Uber has also been at the forefront of the smartphone revolution, one of the earliest to leverage smartphones to build world-class consumer apps. While the company has been bold in investing heavily in technology and marketing to grow its business, it has also been in the red for most of its existence.

Uber lost $6.8 billion, $0.5 billion, and $9.1 billion from 2020 to 2022. Uber's aggressive global expansion into new territories and new businesses and the intense competition within the mobility segment caused huge concerns about the viability of Uber's business model.

Fortunately, thanks to its various cost-cutting and efficiency improvement initiatives, the tech giant reported its first profitable year (after going public) in 2023, delivering an operating income of $1.1 billion on the back of its $37 billion in revenue. This strong performance continued in 2024 as revenue and operating profit came in at $44 billion and $2.8 billion, respectively.

The turnaround in financials alleviates investors' concerns about the sustainability of Uber's business model. Moreover, the tech giant reported a solid free cash flow of $3.4 billion and $6.9 billion in 2023 and 2024, giving it plenty of firepower to invest in its future.

Uber is positioned to win in the coming years

As Uber just delivered its second profitable year, investors wonder if the tech company can sustain its growth and profitability momentum.

The good news is that Uber has guided bookings to grow in the mid to high teens between 2024 and 2026. Similarly, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) would grow at 30% to 40% compounded during that period. The company already met this guidance in 2024 and is on its way to keep delivering in the coming years. It expects bookings to grow between 17% and 21% in the first quarter of 2025.

Uber's huge confidence is not without reason. On the one hand, the ongoing increase in ride-hailing and delivery penetration will keep its top-line growth intact. Meanwhile, adjusted EBITDA would grow faster as the company benefits from operating leverage.

In the long term, Uber also positioned itself to win, especially with its partnership with autonomous driving platforms like Waymo. This partnership allows Uber to participate early in the transition toward autonomous vehicles in the ride-hailing industry, giving it a front seat in the development of this industry. Uber has also collaborated with overseas players such as WeRide and Pony.ai to benefit from the overseas markets on autonomous driving.

In short, Uber's prospects look bright.

What it means for investors

After years of operating in the red, Uber has finally proven that it has a viable business model and that its growth is sustainable, riding the ongoing increase in penetration of its services.

Besides, the partnership with Waymo has vastly removed the existential risk caused by autonomous cars.

Savvy investors like Ackman have begun noticing these positives; individual investors should also pay attention.