By Jo Constantz

Uber Technologies Inc. recorded a $3.2 billion loss on its stake in Didi Chuxing Technology Co., China’s largest ridesharing company, underscoring the risks inherent in its international investments and expansion. 

Didi’s stock has plummeted since its IPO in July under increased regulatory pressure from the Chinese government. Uber registered a total net loss of $2.4 billion in the third quarter, largely driven by its Didi investment. 

In 2016, after an intense fight for market share, Uber China sold its business to Didi for a 20% shareholder stake in the new company. Uber’s stake in Didi, now worth about $4 billion at the end of the third quarter, is still its most valuable investment.

In an interview with CNBC, Uber CEO Dara Khosrowshahi said that the company will monetize its Didi stake over time.

While Uber’s leadership emphasized the recovery of its core businesses––it achieved an $8 million profit on an adjusted EBITDA basis for the first time, up $517 million quarter-on-quarter, and gross bookings hit a record-setting $23.1 billion, up 57% year-over-year––numbers in markets outside the U.S. are decidedly mixed.

Driver supply in other countries hasn’t kept up with demand. “In some non-U.S. markets like the U.K. and Brazil, the driver base is back to roughly the same size as it was pre-COVID, but it still hasn’t kept up with very strong demand which has grown past 2019 levels,” Khosrowshahi said on the third-quarter earnings call. 

While Khosrowshahi said Uber expects to see margins improve as they taper incentives in the U.S., the same may not be said for international markets. “Outside the U.S. on the mobility side, international take rates are seasonally lower in Q4 due to weather,” said Khosrowshahi. “We actually are leaning in a little bit more in driver supply, particularly in some places like India and Australia recover.”

Wells Fargo analysts Brian Fitzgerald and Robert Coolbrith noted both the Didi writedown and lower international take rates––the amount the company makes on each ride––as two key areas of concern.

Other analysts are less concerned. “I think there’s been way too much emphasis on the mark to market of the Didi investment,” said Steven Fox, founder and CEO of Fox Advisors. “You should drill back out and look at all of their investments in aggregate––from that standpoint, that’s a significantly undervalued portfolio as far as the stock price goes.”

Other investments in Uber’s portfolio saw third-quarter gains. Zomato Limited, which acquired Uber’s food delivery operations in India last year in exchange for a nearly 10% stake, added $994 million in value. In 2018, Uber sold its Southeast Asia businesses to Grab Holdings Inc for a 27% stake, though the deal incurred a nearly $7 million fine for antitrust violations.

Uber’s sale of its operations in China, India, and Southeast Asia has allowed it to save the money it would have spent competing and invest it in other, more strategically advantageous ways, while still retaining a presence in the region.

Aside from these concessions, Uber still operates its ridesharing and delivery services in dozens of countries around the world.

Additionally, Uber faces greater regulatory pressure in international markets, particularly in Europe. In September, a Dutch court ruled that drivers should be considered employees, not contractors. The recent reclassification of drivers in the U.K. and food delivery commission caps in the U.S. cost the company $150 million to $200 million in adjusted earnings.