UPDATE 1-Uber increases quarterly revenue, but food delivery costs eat profit

Feb 6 (Reuters) - Uber Technologies Inc drew more customers to its ride-hailing and food delivery business in a boost to its fourth-quarter revenue, but high costs at Uber Eats meant Uber continues to lose money as it tries to outspend competitors.

Total revenue rose 37% to $4.07 billion on a yearly basis, compared with analysts’ average estimate of $4.06 billion, according to IBES data from Refinitiv.

Three-quarters of that revenue came from Uber’s ride-hailing service, available in more than 700 cities worldwide. The core segment had its best quarter yet and on its own, Uber’s ride-hailing business would already be profitable, but the company is burning through cash pursuing an array of other initiatives.

Uber shares fell 1.3% in after-hours trading.

Uber’s total costs rose 25.2% to $5.04 billion in the quarter, as the company spent heavily on expanding its food delivery platform.

While revenue at Uber Eats grew nearly 14% on a quarterly basis, Uber also increased spending to attract drivers, with promotional incentives outpacing the segment’s revenue growth. Promotional costs as a share of revenue at Uber’s Eats business grew 4% from the third quarter.

Uber was the biggest of a group of Silicon Valley startups that went public last year against the backdrop of a global stock market sell-off sparked by trade tensions between the United States and China. Uber also faces increased regulation in several countries and fights with its drivers over wages and working conditions.

Uber in November promised to be profitable on an adjusted basis by the end of 2021, excluding stock-based compensation expenses and other items.

In reaching its profitability goal, Uber has vowed to exit markets where it could not become the dominant food delivery player.

The company in January sold its food-ordering business in India to local competitor Zomato, in exchange taking a stake in the startup. The Indian business contributed only 3% of gross bookings in the first nine months of last year, but accounted for a quarter of the company’s adjusted operating losses.

Investors welcomed the news as a sign of Uber prioritizing profit over growth, sending the company’s shares up on Jan. 21, the day after the announcement. (Reporting by Tina Bellon in New York and Munsif Vengattil in Bangalore Editing by Matthew Lewis)