What happened

Shares of African e-commerce company Jumia Technologies (JMIA 0.49%) popped on Wednesday after a very promising financial report for the second quarter of 2022. In relative terms, the company showed improvement in most every performance metric. And that's why Jumia stock was up 13% as of 10:15 a.m. ET.

So what

In Q2, Jumia's revenue was up 42.5% year over year to $57.3 million. And its operating loss only increased 31.3% from the prior-year period, reaching $67.7 million. Operating losses aren't ideal. But in relative terms, it's good to see revenue growth outpace growth in operating expenses.

Key performance indicators were also positive. Active customers, orders, merchandise volume, and payment volume were all up, not just year over year, but also up from the previous quarter. Moreover, its fulfillment expenses dropped from the first quarter, suggesting it's gaining a little operating leverage in its logistics network with growth. 

Now what

Jumia is still a small platform with only 3.4 million active customers in Q2. Therefore, adoption is one of the most important things for investors to watch. And in Q2, Jumia's adoption increased, which is a good sign. But it's still coming at a steep loss for the company.

Through the first half of 2022, Jumia has an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $112.5 million. In the back half of the year, it plans to cut spending to reduce its adjusted EBITDA loss to between $87 million and $107 million. And it expects its adjusted EBITDA loss in 2023 to be lower than it was this year. But there's still a lot of cash flying out the door in absolute terms.

With total liquidity of about $350 million as of the end of Q2, Jumia is in a crucial stage of its business. It's growing. But can it scale fast enough to fund its business with cash from operations before needing more capital from financing arrangements? Investors will have to wait and see.