Why is Lyft tanking?

Lyft shares tanked after hours on Thursday after the company shared weak outlook for the next quarter. Lyft expects to make $975 million in revenue in the fiscal first quarter of 2023, lower than the $1.09 billion analysts anticipated, according to StreetAccount.



In 2026, Lyft's financial struggles are primarily attributed to its lack of diversification compared to its main rival, Uber. While Uber successfully pivoted into a "super-app" encompassing food delivery (Uber Eats), freight, and global expansion, Lyft remained almost exclusively focused on ride-sharing in North America. This made Lyft more vulnerable to the rising costs of insurance and the shortage of drivers that plagued the industry. Additionally, Lyft has struggled to reach "true" profitability because it lacks the massive scale and data-monetization capabilities of its larger competitor. Investor confidence has also been shaken by the ongoing legal battles regarding driver classification (contractors vs. employees), which threaten to significantly increase labor costs. While Lyft’s 2026 strategy has shifted toward "value-priced" rides and a revamped loyalty program to win back commuters, the company continues to play a difficult game of catch-up. Without a secondary revenue stream like delivery or a significant move into autonomous vehicle partnerships, Lyft remains in a precarious position as it tries to prove it can be a sustainable standalone business in a crowded mobility market.

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Shares of Lyft plunged nearly 15% in after-hours trading Thursday following the earnings results. The latest earnings report comes on the heels of Lyft shaking up its the C-suite and announcing plans to cut 26% of its employees as it fights for market share and profitability.

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Earnings are decreasing because Uber and Lyft keep changing the rates - keeping prices the same for passengers, lowering pay for drivers and pocketing the difference. As Uber and Lyft continue to make more, drivers continue to make less.

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On average, Uber paid its drivers more per hour than Lyft in 2022, according to Gridwise. Uber drivers had gross earnings of $21.14 per hour in 2022, while Lyft drivers were grossing $19.90.

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For Uber and Lyft, the reason is simple: their business plans were based on eventually using driverless vehicles to eliminate their main cost, the labour cost of the driver.

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Uber dominates U.S. market share By April 2022, Uber sales exceeded their pre-pandemic levels and remained elevated throughout most months of 2022 and into 2023. Meanwhile, sales at Lyft are yet to reach their pre-pandemic levels as of July 2023.

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Lyft reported a net loss of $187.6 million, or 50 cents a share, including stock-based compensation costs and related payroll expenses of $186.6 million. In the year-ago period, the company lost $196.9 million, or 57 cents a share.

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Uber and Lyft have comparable gross margins, but Lyft's operating costs-to-sales are far higher due to immense stock-based compensation. Given Lyft's liquidity position and cash burn rate, I do not believe it will survive through 2024.

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The slow pace suggests Lyft is still struggling to bounce back from the pandemic. Lyft and Uber saw demand for their services ravaged by Covid-19, a blow exacerbated by a driver shortage that pushed up fares and wait times for customers.

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As of 2022, Uber has a 71% share of sales in the U.S. rideshare market, whereas Lyft only has 29%. However, both have seen significant sales increases since 2021. As of January 2022, Uber's sales are up 84%, and Lyft sales are up 62% year-over-year.

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When many passengers in your area request a ride at the same time, ride prices will likely be higher than normal. You can expect higher demand during commute hours, big events in town, and when bad weather hits.

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John Zimmer is the co-founder and former president of Lyft, an on-demand transportation company, which he founded with Logan Green in 2012.

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Lyft began the year mired in the same ditch it ended in last year, with its ride-hailing service struggling to recover from a pandemic-driven downturn that triggered a change in leadership and layoffs that wiped out a quarter of its workforce.

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For example, Lyft's average incomes are around $18 per hour, while Uber's average income can sometimes average as low as $15 per hour. With this thought in mind, at the outset, you may be able to earn slightly more with Lyft; this may be because Lyft riders are generally more likely to pay a tip than Uber riders.

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He and other ride-hail app drivers say they struggle to pay their rent and other bills, have maxed out their credit cards, and are stuck making payments on cars they no longer want. “You work and you make no money,” said Mr. Jatta, now 43, who is quitting Uber to become a truck driver. “This is not sustainable.”

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The unscientific sampling showed that, of 10 rides, drivers with Uber received an average of 56 percent of what I paid; of 10 with Lyft, drivers received an average of 47 percent of what I paid. Of all 20, drivers took home an average of 52 percent of what I got charged.

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With lawsuits piling up against both popular rideshare companies, it's unclear whether passengers are safer riding with Uber versus Lyft, or vice versa. Lyft was long seen as the safer alternative to the “frat culture” of Uber, but that characterization may have since been proven wrong, USA Today reports.

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Arab, the company spokesperson, added that “Uber's median take rate has remained the same” — that is, around 25 percent.

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Rider Demographics Age: 49% of Lyft's users are between the ages of 18 and 34. Income: The median household income for Lyft riders is $55,000. Education: 20% of Lyft's active riders are currently students.

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