Is Uber Technologies Stock Halal to Invest in? Facts You Should Know

Report Published as on 31st May 2024

We have conducted an in-depth assessment of Uber Technologies from a Shariah compliance perspective, aiming to analyze its revenue streams and determine adherence to Shariah principles.

Uber Technologies Inc. is a prominent technology platform that serves as a conduit for connecting individuals with various services, including ridesharing, food delivery, and other on-demand offerings. Through its expansive network, Uber engages with numerous drivers, restaurants, and businesses to facilitate seamless transactions. Utilizing the Uber mobile application, individuals can conveniently access rides from drivers, order food from restaurants, and procure groceries from stores, enhancing overall convenience and accessibility.

Moreover, Uber extends its services to cater to the transportation needs of businesses seeking to transport goods, providing access to trucks and drivers through its platform. Operating across more than 70 countries and serving over 10,500 cities globally, Uber boasts a vast network of over 150 million monthly active users, establishing itself as the largest ridesharing company worldwide. Facilitating millions of trips daily, Uber prioritizes technological innovation and product development to enhance its offerings continually, addressing everyday transportation and logistics challenges.

The company generates revenue primarily from three key segments:

1. Mobility Revenue: This segment encompasses various sources of income related to ride-hailing services. It includes driver service fees, where drivers pay a fee to utilize the app for finding riders and completing trips. Additionally, revenue is generated from fees paid by riders directly or through commissions on rides in certain markets. The company typically receives its fee soon after the trip concludes, although payments from cash transactions are recorded once collected from the driver.
2. Delivery Revenue: This segment involves income generated from delivery services provided by the company. Revenue sources include fees paid by couriers and businesses (merchants) for using the app to find delivery jobs or connect with customers. Additionally, delivery fees may be charged to customers, and in some markets, platform usage fees are levied separately.
3. Freight Revenue: The freight segment involves connecting shippers with independent carriers to facilitate freight transportation. Revenue is earned through brokerage fees charged to shippers for this service. The company typically receives payment from shippers within a specified period after issuing the invoice. Additionally, the company offers integrated services, managing all aspects of shipments from planning to payment, with revenue primarily derived from upfront fees charged to shippers upon service completion.

Applying Shariah screens to these operating segments involves assessing the nature of the revenue generated and ensuring compliance with Shariah principles. This entails evaluating whether income sources align with Shariah-compliant activities and adhering to ethical and moral standards outlined by Islamic finance principles.

Operating Revenue: (In USD Millions) for the  year ended 31^std December 2023

Tricky Areas from a Shariah perspective

Potentially Non-Permissible Areas:

Uber Technologies Inc. made a strategic decision to shut down Drizly, their alcohol delivery app, in March 2024, following an announcement made in January 2024. This move reflects Uber’s strategic shift towards consolidating all their delivery services, including food and groceries, under the umbrella of one app, namely Uber Eats. By focusing on a unified platform, Uber aims to streamline operations and enhance the user experience for its customers.

However, there are uncertain areas regarding Uber’s financial partnerships within the Mobility and Delivery segments, as specific details about these partnerships are not provided. While these partnerships may contribute a small or immaterial amount of revenue to Uber, the nature of their financial arrangements remains unclear.

On the other hand, certain areas of Uber’s business operations are deemed permissible from a Shariah perspective. Mobility services, which include ridesharing and rentals, facilitate transportation for people and goods, aligning with Shariah-compliant activities. Similarly, the delivery of food and groceries through Uber’s platform is considered permissible, as it involves providing essential services to customers.

Furthermore, Uber’s freight services, which involve connecting shippers with carriers for freight transportation, also appear to be Shariah-compliant. These services contribute to the efficient movement of goods, supporting economic activities without engaging in non-permissible transactions.

Based on the evaluation of its business operations, it is reasonable to conclude that Uber Technologies Inc. operates in compliance with Shariah principles. However, further analysis of the company’s non-operating income is necessary to provide a comprehensive assessment of its Shariah compliance status.

Non-operating revenue of the company: (In USD Millions) for the  year ended 31^std December 2023

It is clear from the table above that the non-operating income of the company includes interest income and Unrealized gain (loss) on debt and equity securities which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen: (All figures in USD Millions for the Quarter ended 31^st December 2023)

Source: All the above information is based on the website of the company, Annual and the latest Quarterly Report for the period ended 31^st December 2023.

Conclusion: 

Given the above information, we at Ratings Intelligence believe that Uber Technologies Inc. is a Shariah-compliant company as per the Shariah screening criteria.