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Home Lifestyle

Gig Economy Shows Resilience Despite Poor Tech Earnings Reports

The Global Economics by The Global Economics
August 8, 2024
in Lifestyle, Technology
Reading Time: 4 mins read
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Gig Economy Shows Resilience Despite Poor Tech Earnings Reports

Gig Economy Shows Resilience Despite Poor Tech Earnings Reports

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Gig economy businesses might profit from developments that other businesses see as obstacles.

This has been a difficult earnings season for the technology sector and markets in general. One bright light has emerged amid all the gloom – the gig economy. Wall Street was not persuaded by big tech corporations that their enormous investments in artificial intelligence are yielding returns. Their main enterprises did not grow at all. Their findings, together with more general worries about the state of the US economy, set off a financial collapse that at one time completely erased almost $6.4 trillion from stock markets throughout the world.

Uber Technologies Inc., DoorDash Inc., Instacart, and Grubhub parent Just Eat Takeaway.com NV have all exceeded projections in the last two weeks, recording double-digit growth rates in numerous critical indicators. Their findings have not only served to confirm that there is still a strong market for both rides and deliveries, but they have also provided a wider refutation of concerns that US consumer spending is generally declining.

Gig economy businesses might profit from developments that other businesses see as obstacles. Dara Khosrowshahi, the CEO of Uber, stated that the business has been efficient amid downturns. Consumer fares may be lowered when more people look for jobs as drivers and couriers during slow periods in the labour market.

During an analyst results call, Khosrowshahi stated, “While our consumers tend to be higher-income, we’re not seeing any softness or trading down across any income cohort.”

Gig economy companies were less likely to have been overhyped in the first place, according to Harvard Business School professor Malcolm Baker, in contrast to major AI players like Apple Inc., Alphabet Inc., and Microsoft Corp. that have suffered a reaction from the market.

According to Baker, Uber may be less vulnerable to the forces of reversal that we are currently witnessing because it has not gained the same kind of traction as some of the larger digital businesses.

Additionally, these businesses aren’t under as much pressure to invest in AI, which frees them up to take cheaper chances or make other investments.

According to Baker, the AI impetus has come from companies that create AI models and infrastructure rather than from AI users like Uber. The technology that rideshare companies now have on hand is already capable of meeting the demands of ride-hailing applications.

Regarding delivery, where Uber runs its Uber Eats platform in addition to its rideshare business, Khosrowshahi stated that customer behaviour is “much more habitual” than many had previously believed. During his company’s earnings call, DoorDash CEO Tony Xu made the same statement.

Analysts noted that DoorDash has delivered better-than-expected earnings by fending off any trepidation about customer spending. DoorDash leads rivals UberEats and Grubhub in the US market.

According to the companies’ findings, consumers have already incorporated food delivery and ride-sharing into their budgets. Particularly since the Covid epidemic, when most individuals were compelled to cook for themselves or order takeout, the demand for food delivery has remained strong.

If anything, the earnings season indicates that consumers view travel as an optional expense, as indicated by the lacklustre demand, especially in the US, signalled by companies like Booking Holdings Inc. and Airbnb Inc. Following the release of the company’s dismal projection for a third consecutive quarter, Airbnb shares saw their largest intraday decline.

Similar to this, Walt Disney Co. forecasts modest attendance pressure at its theme parks, with pressure projected to persist “for the next few years”. Disney Chief Financial Officer Hugh Johnston stated in a teleconference with investors that higher-income consumers are travelling abroad for holidays, while lower-income visitors are a little stressed and shaving a little bit off their time at the parks.

Particularly Instacart has endured a general industry downturn in advertising. Chief Financial Officer Emily Reuter stated on a teleconference with investors on Tuesday that while some of its brand partners have been cutting down on ad spend, which is an easy cut to make during economic downturns, the firm has “more than offset” it by acquiring new advertisers.

In contrast to its competitors in the gig economy, Lyft Inc. revealed unimpressive bookings and guidance that was below Wall Street’s projections. On the news, Lyft’s stock fell as much as 18.6%, the most in more than a year. Lyft’s market share is around three times smaller than Uber’s, even though the ride-hailing company is Uber’s largest US rival. Melius Research analysts claim that although the two companies have similar business concepts, their scale differences have led them down divergent paths.

Source: short URL
Tags: Gig EconomyGrubhubInstacarttechnologyUberEats
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The Global Economics

The Global Economics Limited is a UK based financial publication and a bi-annual business magazine giving thoughful insights into the financial sectors on various industries across the world. Our highlight is the prestigious country specific Annual Global Economics awards program where the best performers in various financial sectors are identified worldwide and honoured.

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