DoorDash said Wednesday it expects to spend more than $50 million in the second quarter providing gas price relief to delivery drivers, citing a sharp increase in fuel costs attributed to the Iran war. The San Francisco-based company disclosed the plan alongside its first-quarter earnings results, as it weighed higher costs against maintaining delivery demand.
The company said it began offering extra compensation to U.S. and Canadian drivers in March through a temporary program designed to offset what it described as a sharp increase in gas prices driven by the Iran war. On Wednesday, the national average price for a gallon of gas was $4.53, up 44% from a year ago, according to AAA.
DoorDash said delivery demand remained strong during the January-March period. The company reported total orders rose 27% to 933 million, even though that figure was below Wall Street’s forecast of 954 million, according to analysts polled by FactSet. DoorDash also pointed to winter storms that closed businesses and dampened demand in some locations.
DoorDash reported revenue rose 33% to $4.0 billion for the January-March period, short of the $4.15 billion analysts expected. In results presented with its quarterly update, the company said it is funding the gas price relief by adjusting investments in other areas.
DoorDash Chief Financial Officer Ravi Inukonda said on a conference call with investors that the company had to shift plans to create room for the driver program. “We did have to push out some investments … in order to make room for this,” Inukonda said, adding: “If we do decide to extend the program, our goal is to find offsets.”
DoorDash said its net income fell 5% to $184 million, or 42 cents per share, for the January-March period. The company said the decline was partly tied to a 30% increase in research and development costs compared with the same period last year, while also reporting that its profit beat FactSet’s forecast for a 36-cent-per-share gain.
After market close on Wednesday, DoorDash shares rose more than 11% in after-hours trading. The earnings release came about a week after rival Uber announced a deal with Expedia Group that would let users make hotel reservations through the Uber app.
When asked whether DoorDash plans to add a similar service, co-founder and CEO Tony Xu said the company still sees room to grow its core restaurant and retail delivery business. Xu said, “We are a tiny fraction of what’s actually available and addressable, which in some sense means that there’s a large runway and opportunity for us to become even better in breed in terms of what it is that we can offer,” according to the company’s prepared remarks on the investor call. He added: “And if we can keep doing that, I think we’re going to be just fine.”