Uber (UBER -1.45%) just hit a major milestone. The leading ridesharing and delivery business generated operating income and free cash flow of $326 million and $1.1 billion, respectively, in the latest quarter (second-quarter 2023 ended June 30). For Uber bulls, this was a vote of confidence that the company can indeed make a positive turn financially.

The growth tech stock, which is up 89% in 2023 (as of Sept. 29), might already be pricing in this optimism. But despite the favorable development, investors need to keep their eyes on any downside risks. Over the long term, I think Uber faces one existential threat above all else. 

Here's what shareholders need to know. 

The promise of autonomous vehicles 

One of the big technological trends in the past decade has been the rise of electric vehicles (EVs), thanks in large part to the monster growth of Tesla. This has spurred every other automaker, including legacy manufacturers like Ford and GM, to invest in EVs as well. The hope is that greater adoption can have a positive effect in the world's battle against climate change.

Taking the advancements in the auto industry even further, autonomous vehicles (AVs) -- cars that can drive without human intervention -- are a promising technology that could take the industry to the next level. It is estimated that 94% of car accidents are caused by human error. If vehicles are programmed to operate well within safety guidelines, following all the rules, perhaps roads can be a safer place.

How can this game-changing technology affect a company like Uber? Well, think about the typical Uber ride or delivery transaction. When a customer gets to their destination or receives their food and a payment occurs automatically in the app, most of that money goes to the driver, which is the biggest expense item for the business. In fact, drivers keep about 75% of the fare, plus any promotions that Uber might offer to attract and retain them. 

In a world where there are fully self-driving (FSD) vehicles, Uber's largest cost can essentially be eliminated. It doesn't matter what industry a company is in. If its single biggest expense can be taken out of the picture, that can be a huge boon financially. Just imagine what Uber's profits would look like in this scenario. 

Leading the wave 

Of course, I alluded to a prominent risk facing Uber earlier. I think understanding the potential of AVs gives investors an idea of how it can benefit the business. However, it could also end up making Uber obsolete.

If FSD cars become a reality, there might not even be a need for Uber's ride-hailing service anymore, as the software providers working on this tech could simply create their own robotaxi services. This is like controlling the operating system to a new computing platform. In this scenario, the cars will just become a commodity.

In the AV race, there are clear leaders. GM subsidiary Cruise is in an advantageous position. It's developing and testing robotaxis in different cities across the U.S. and internationally. Plus, with a major automaker involved, there's also the ability to supply the vehicles.

As a major disruptor in the industry, Tesla is a contender as well. CEO Elon Musk's grand vision is for Tesla to operate a global fleet of robotaxis that essentially runs nonstop, generating high-margin revenue for Tesla. The company just announced a $1 billion investment in Dojo, its artificial intelligence-powered supercomputer, with the goal of getting it to better analyze driving and traffic data.

Alphabet's Waymo is also in the race. In January of this year, Waymo Driver, its driverless ride-hailing app, hit 1 million miles on the road. This is huge progress. Moreover, Alphabet's financial resources and adeptness at software development can only help propel Waymo.

With the sales of its AV research unit in 2020, Uber completely exited the AV wars in a direct capacity. But what's interesting is the company's recently announced partnership with Waymo, allowing Uber riders to book using Waymo Driver in the Phoenix, Arizona area.

This is a clear sign that Uber understands that it will need to rely on a provider of AV software to stay ahead of any changes in the industry. But to Uber's benefit, it can also be interpreted that Waymo is trying to go where consumer behavior is, and that's on the leading ride-hailing platform.

Ultimately, time will tell how this all plays out. Nonetheless, shareholders need to understand the long-term threat to Uber's competitive positioning.