Ride-sharing giant Uber Technologies (UBER) appears to be trading range-bound between the mid-$80s and low $100s since August. And following its September quarter results, the market reacted quite bearishly—even though Uber delivered higher-than-expected EPS, a solid operational beat, and strong free cash flow.
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The key point, however, is that Uber’s investment thesis is no longer about “earnings beats” in the traditional sense, but about structural margin expansion. In other words, at roughly 15.9x forward earnings, the market isn’t really pricing the EPS reported this quarter—it’s pricing the long-term margin ceiling of the business: essentially, how much profit Uber can sustainably extract per trip.
In this context, the market is now seeking evidence that the recent spike in General & Administrative expenses—largely driven by stock-based compensation—is temporary rather than structural. On the other hand, with free cash flow generation still very strong and buybacks effectively offsetting dilution from executive compensation, the long-term margin expansion story remains intact.
So for me, Uber isn’t lacking fundamentals—it’s lacking narrative momentum. As the margin narrative stabilizes and G&A normalizes over the next few quarters, I expect sentiment to improve and continue to view UBER as a Buy.
The Case for Uber Still Hinges on Operating Leverage
To begin with, I would argue that Uber’s investment thesis today is fundamentally grounded in operating leverage, given that the company operates under an asset-light model. Uber essentially acts as a coordinator between supply and demand, while the core assets belong to its partners rather than the company itself.
As a result, the primary metric driving Uber’s stock performance is Adjusted EBITDA, specifically Adjusted EBITDA margin in relation to Gross Bookings. In practical terms, this metric indicates the amount of recurring operating profit Uber can extract per ride, which ultimately determines the company’s long-term profitability profile.
Looking back at the previous four quarters leading into Q3, Uber had been consistently expanding this margin, moving from 4.1% in Q3 2024 to 4.5% in Q2 2025. Over the same period, Adjusted EBITDA increased from $1.69 billion to $2.1 billion, representing ~35% YoY growth in Q2 2025.
The issue is that in Q3 2025, this sequential momentum stalled. Adjusted EBITDA margin over Gross Bookings remained flat at 4.5%, and Adjusted EBITDA grew “only” 33% YoY, slightly below the pace investors had become accustomed to.
Why Uber’s Margin Expansion Paused This Quarter
Breaking down the reasons behind the stalled margin expansion, the key issue was an unfavorable rise in costs, specifically within General and Administrative (G&A) expenses. While Uber delivered solid top-line growth—trips up 22% YoY, gross bookings up 21% YoY, and revenue up 20% YoY—and even with COGS rising at roughly the same pace (+20% YoY), the real point of concern was that G&A nearly doubled: from $630 million in Q3 2024 to $1.2 billion in Q3 2025, an increase of roughly 88% YoY.
This jump distorts Uber’s operating leverage and directly pressures Adjusted EBITDA margin, which, as discussed earlier, is the metric that most directly influences the stock’s valuation today. What matters isn’t just that G&A increased—but why it increased. As Uber transitions into a mature-growth stage, stock-based compensation (SBC) is now being treated and recognized as a real operational cost, rather than something to be ignored or excluded. This dynamic naturally pushes G&A higher.
Additionally, Uber has been investing in senior talent, platform-wide corporate infrastructure, and global operational scalability, which also contributes to elevated general and administrative (G&A) expenses. As CFO Prashanth Mahendra-Rajah noted in a recent earnings call, “…talent decisions and location decisions…can impact costs such as SBC or depreciation… and those are real costs.”
Given that a crucial component of the bull case had been that Uber would continue to expand margins structurally as it scaled, Q3 effectively served as a reminder that this expansion may not be linear. And when the pace of margin expansion slows, the valuation tends to get repriced, even if the core business fundamentals remain strong.
Margins Set to Normalize Ahead
Looking ahead, the key question for investors to focus on is whether the concern that Uber’s structural margin ceiling may be lower than previously assumed will persist or prove temporary.
To reinforce confidence that Uber’s margin ceiling remains intact, the next few quarters should demonstrate continued operational discipline. Specifically, general and administrative expenses—8.8% of revenue in Q3—should begin trending back toward the 4–6% range over the medium term. Stock-based compensation, currently around 5% of revenue, should ideally decline year over year or at least hold steady. Most importantly, share repurchases need to keep offsetting stock-based compensation, minimizing dilution and preserving value on a per-share basis.
In Q3, Uber did in fact offset SBC through buybacks—repurchasing $1.46 billion in shares. The issue is that the market perceived this as defensive rather than accretive, meaning it prevented dilution but did not materially increase shareholder value in the near term.
However, I still view the situation as recoverable, not structurally damaging. The spike in G&A appears to be more closely related to SBC timing and accounting reclassification than to any permanent increase in operating costs. Uber’s CFO explicitly reinforced that management is prioritizing margin discipline and accountability at the business unit level.
Meanwhile, free cash flow remains strong, with $2.2 billion generated in Q3 (+6% YoY)—enough to cover SBC, continue repurchasing shares, and still invest strategically in autonomy, mapping, and platform infrastructure. In my view, this does not indicate that Uber’s cost structure has permanently risen or that its long-term margin ceiling has diminished. The most likely scenario is normalization, followed by a resumption of margin expansion.
Is UBER a Buy, Hold, or Sell?
Street sentiment on UBER remains overwhelmingly bullish. Of the 28 analyst ratings issued over the past three months, 25 are Buys and only three are Holds. The average stock price target is currently $115.96, implying about 26% upside from the current share price.
Uber Remains a Buy Based on Margin Normalization
Uber’s Q3 earnings were solid at first glance, but the devil is in the details. The recent spike in General & Administrative expenses raised valid questions about Uber’s long-term margin ceiling. However, this looks more like a test than a thesis break. If, over the next two to three quarters, G&A and stock-based compensation show signs of normalizing as a percentage of revenue—and buybacks continue to offset dilution—the margin expansion story should remain intact.
My base case is that Uber will reaffirm this margin trajectory because it is already an operationally scaled platform with strong free cash flow generation, along with a management team that has explicitly committed to prioritizing margin discipline and accountability at the operating income level. At ~15.9x forward earnings, roughly 23% below the industry median, I continue to view Uber shares as a Buy.