Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) have had a turbulent time since their respective IPOs just over a year ago. Amidst a global pandemic, burning cash, and "increasing" competition, the future is uncertain for these companies.

Coping with Covid-19

Lyft and Uber have been hammered by the pandemic, with the number of rides taken falling significantly due to lockdown measures. Uber just recently announced another round of layoffs taking the total number laid off to 6,700 employees -- roughly 25% of its workforce -- while Lyft terminated 982 employees, representing 17% of its workforce. 

Earnings

Uber lost a total of $2.9 billion in the last quarter with a total revenue of $3.5 billion -- up 14% year-on-year. Uber's main segment in ride sharing has been hit the hardest with ride bookings down 80% for April. However, despite this dismal report, Uber CEO Dara Khosrowshahi remained optimistic as UberEats saw gross bookings rise 54% on the year previous due to the surge in food delivery. Khosrowshahi was also "encouraged by the early signs" in markets that are re-opening. 

The strength of Uber Eats has helped to offset the impact of the decline in bookings for ride sharing. Uber has been trying to capitalize on this surge and has been partnering with chains such as Chipotle Mexican Grill (NYSE: CMG). A key question for investors is whether this trend will remain in a post COVID-19 world and would  it be viable with slim margins? Uber did not provide guidance. 

Lyft reported a loss of $398.1 million and revenue of $955.7 million, which was an increase of 23% on the year previous. Rides were down 75% year-over-year for the month of April, but for the quarter it registered a 3% rise. The nature of Lyft's costs, with the majority being variable, can help them weather the storm. In contrast to Uber, Lyft does not have exposure to food delivery and has stated that it has no interest in entering this space.

Both Uber and Lyft are facing lawsuits in California due to the classification of drivers as independent contractors instead of employees. This is not the first time their treatment of workers has come under scrutiny, and represents another headwind for them. A legal battle will ensue which will undoubtedly cost large amounts of money.

Were they right to go public when they did?

Uber and Lyft are relatively young companies, established in 2009 and 2012 respectively. The early investment allowed both firms to provide a service with low fares and to gain market share. They raised billions from venture capitalists and private investors and at some point that money must be repaid. By going public it allows the early investors to cash out. However, by waiting several years before going public, there is less scrutiny which companies like Uber and Lyft could have used to adapt and change, which is an easier task as a smaller company. 

Self driving

The future of this industry seems to be not in ride-sharing but in autonomous or self-driving vehicles. CEO of Lyft Logan Green has described the company's autonomous vehicle investments as "critical" to Lyft's future. Uber has also been investing in self-driving cars along with third parties. There are other competitors in this space such as Alphabet's (NASDAQ: GOOG) Waymo and Tesla (NASDAQ: TSLA). There are already a handful of Waymo's vehicles available on the Lyft app. Although fully autonomous vehicles may be some way off, this could potentially redefine the ride-sharing space and prove to be hugely profitable due to the decrease in costs.

There are a number of headwinds in the ride-sharing space and we will undoubtedly see significant change in the sector's future. Uber and Lyft should be able to weather the storm in the short-term but long-term there remains a significant question mark about whether they can make a profit and prosper.

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