Lyft (LYFT 0.27%) has spent much of its public life as the smaller player in ride-hailing -- overshadowed by Uber, questioned about its path to profitability, and often dismissed by investors seeking a safer bet.
Fast-forward to 2025, and the narrative is shifting. Lyft just delivered one of its strongest quarters ever, with record bookings, positive generally accepted accounting principles (GAAP) earnings, and almost a billion dollars in trailing free cash flow. The underdog is starting to punch above its weight -- and investors are paying more attention.
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How Lyft makes money
Lyft runs a two-sided marketplace that connects riders and drivers through its app. It earns the bulk of its revenue by taking a commission on each ride. Other sources include:
- Micromobility: scooters and bikes in select cities.
- Partnerships: deals with airlines, credit card issuers, and delivery companies.
- Advertising: sponsored listings, in-app promos, and brand partnerships.
The company's asset-light model means it doesn't own vehicles, which keeps capital needs low. However, it also means constant competition for riders and drivers -- and the pressure to keep prices competitive without eroding margins.
Compared to its larger peer, Uber, Lyft has a narrower focus, both in the type of services offered (mainly mobility) and the regions it covers (the U.S., Canada, and, lately, Europe). This differentiated strategy means that Lyft may not have the scale that Uber has, but its focus and specialization provide some edge against its peers.
For instance, Lyft can direct resources toward refining ride-hailing economics -- like lowering driver incentives, optimizing pricing algorithms, and reducing wait times -- without cross-subsidizing other segments. Additionally, in North America, Lyft is synonymous with ride-hailing, making marketing more straightforward. There's no confusion about whether you're booking a car, ordering dinner, or shipping a package.
So, despite having a smaller market share than Uber in the U.S., Lyft demonstrates that its focus strategy is the right one, both operationally and financially (more on this in the next section).
From cash burner to cash generator
If you followed Lyft's IPO years ago, you know the most significant criticism: The company could grow, but it couldn't make money. That's changing fast.
Here are some highlights from the second quarter of 2025:
- Gross bookings: $4.5 billion, up 12% year over year.
- Revenue: $1.6 billion, up 11% year over year.
- Net income: $40.3 million, up from $5 million a year ago.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA): $129.4 million, a 26% increase, with a 2.9% margin.
- Free cash flow: $329.4 million for the quarter; nearly $1 billion over the last 12 months.
The ride-hailing company is growing, profitable, and generating a substantial cash flow. Beyond these financial metrics, one operational metric tells the story best: incentive cost per ride fell from $1.82 in Q2 2023 to $1.03 this quarter. That means Lyft is spending less to keep both riders and drivers engaged -- and those savings are reflected directly in the bottom line.
Lyft's successful transition into a profitable business model matters in today's higher-interest-rate environment, which differs from the earlier years, when capital was cheap. With its solid cash flow, it can now fund its future growth using internal funds, rather than relying on debt or equity markets, which provides more flexibility and stability when making long-term strategic investments.
The road ahead for Lyft
After years of operating under a growth-at-all-costs model, Lyft is now on a more sustainable growth trajectory, making measured investments to achieve profitable growth.
One potential area of growth will be its expansion into the European market through the acquisition of Freenow, which will give Lyft access to 180 cities across Europe and significantly expand its addressable market. It's still early days, but if this acquisition delivers the intended benefits, it can set the stage as a springboard for Lyft's global expansion in the years to come.
While entering new markets looks exciting, finding better ways to grow customer wallet share and improve monetization in existing markets can be equally profitable. To this end, Lyft can increase the number of rides per month for existing users, expand its advertising business, and establish new partnerships to attract high-value customers.
And let's not forget the opportunity in autonomous vehicles, via partnerships with companies like Baidu and Benteler Mobility, among others. These partnerships enable Lyft to capitalize on the potential growth of robotaxis without incurring the significant investment required to develop its infrastructure.
What does it mean for investors?
Lyft is still the smaller player in a fiercely competitive industry. However, by sharpening its focus, improving operational efficiency, and transforming the business into a cash generator, it has transitioned from survival mode to sustainable growth mode.
It won't overtake Uber anytime soon (and probably won't in the foreseeable future). The good news is that it doesn't have to be that way. By owning its niche, expanding selectively, and keeping a tight grip on costs, Lyft can deliver solid returns for patient investors who believe in its disciplined approach.
Investors seeking an alternative to Uber in the ride-hailing industry should keep this underdog on their radar.
