Uber’s food delivery helps cushion the blow of COVID-19 on rides business

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Uber has laid off thousands of employees and lost billions of dollars because of the coronavirus pandemic. But the company’s shares got a lift on Thursday after it reported weak quarterly results that were not quite as bad as analysts had expected.

First-quarter revenue rose 14% year over year to $3.54 billion, slightly beating already lowered analyst estimates of $3.51 billion. Its losses ballooned to $2.95 billion, $2.1 billion of which was from write-downs in the value of investments—compared to a $1 billion loss in the same quarter in 2019.

While rides bookings were down 80% in April, Uber’s overall bookings for April fell 40% due to a rise in demand for its food delivery service, Uber Eats. In recent weeks, CEO Dara Khosrowshahi had said the rides business was on the “comeback trail,” led by states that are beginning to ease their stay-at-home restrictions like in Georgia, where demand jumped 43%, and in Texas, where it increased 50%.

In after-hours trading, Uber’s stock initially dropped 2%, but it later popped 6%, to $32.82 per share, following Khosrowshahi’s suggestion during a call with investors that the business was recovering. It’s shares had already risen 11% during regular trading on Thursday.

The earnings come just a day after Uber said that it would cut 3,700 jobs, or 14% of its global workforce, and shuttered 180 support centers for drivers. Khosrowshahi had previously warned investors that Uber would survive the slowdown given its “strong” balance sheet. One month after those comments, he withdrew the company’s full-year financial guidance for 2020, a year in which he had said the company to become profitable, excluding certain expenses. 

But Khosrowshahi, on Thursday, said the difficulties created by the pandemic had only delayed Uber’s profitability, not squashed them. The company now expects to become profitable, minus certain expenses, in 2021.

“We believe the disruption caused by COVID-19 will impact our timeline by a matter of quarters and not years,” Khosrowshahi said. 

Tom White, an analyst at investment bank D.A. Davidson, described Uber’s results as being “fine,” not “great.” And while the company sounded upbeat, its future performance is unclear.

“Uber for whatever reason was not willing to draw the line in the sand around the magnitude of losses” ahead, he said.

But Uber Eats may have helped cushion the blow the pandemic had on the company. Khosrowshahi said he expects the unit to continue to benefit from the explosive growth of food delivery as people avoid going into restaurants.

The food-delivery service generated $819 million in quarterly revenue, up 53% from the same period last year. And though the segment continues to add revenue, it still loses money. Excluding certain expenses, that amounted to $313 million during the first quarter, slightly more than during the same quarter last year.

But Khosrowshahi has big hopes for the service as well as the company’s foray into grocery deliveries. Uber acquired Latin American grocery delivery company Cornershop last year and expects to close the sale in the next few months. And during the pandemic, Uber has partnered with supermarket chains and convenience stores in various countries to deliver a limited number of items through its Uber Eats service. 

The “big opportunity” the company assumed the food delivery service had just got “bigger,” Khosrowshahi said.

He also talked up a recent cost-cutting plan that he expects to save more than $1 billion annually. That includes an announcement by Uber earlier in the day that it had moved its bike-sharing brand JUMP into Lime, a rival in which it had just led a $170 million investment. Additionally, the company said that Uber Eats would exit eight regions to better focus on areas where it could be one of the top two providers—part of a strategy Khosrowshahi had announced last year

More must-read tech coverage from Fortune:

—Remote work, online grocery shopping, cord cutting: What coronavirus trends will stick
—No buses, no problem. Some cities provide subsidized Uber rides amid pandemic
How to choose a video chat app? Grade it on privacy
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Zoom’s ups and downs since the coronavirus crisis

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