Lyft’s stock is currently performing well, increasing by over 7% in after-hours trading following the release of the company’s Q3 financial results.

The American rideshare company, a competitor to Uber, announced revenues of $499.7 million for the third quarter. This represents a 48% decrease compared to the $955.6 million reported during the same period last year. However, this outcome still demonstrates a 47% increase when contrasted with the $339.3 million in revenue reported in the previous quarter.

Investors reacted positively to this improvement and the fact that Lyft surpassed analysts’ revenue predictions of $486.45 million. Although the company’s net loss of $1.46 per share was higher than anticipated, investors generally exhibited optimism, leading to increased purchasing of Lyft stock and a subsequent rise in its value after the earnings announcement.

Lyft’s recent performance is characterized by declines on a year-over-year basis, alongside gains compared to the previous quarter. Specifically, the number of active riders decreased by 44% compared to the year-ago quarter, but increased by 44% when compared to Q2 2020. Revenue generated per active rider fell by 7% compared to Q3 2019, but rose by 2% from the immediately preceding quarter.

Similar to Uber, Lyft is benefiting from investor patience as it works to recover from the impact of COVID-19 on the ride-hailing market. Uber has been aided by its delivery service and international operations, which have helped offset declines in ride revenue. Lyft, which primarily focuses on the U.S. market and does not have a delivery service comparable to Uber’s, has been more significantly affected by conditions within the domestic market.

A resurgence of COVID-19 cases and the implementation of stricter lockdowns could potentially hinder Lyft’s ongoing recovery. Nevertheless, the company’s fundamental financial health remains stable despite the pandemic. In Q3 2020, Lyft’s contribution margin – a measure similar to an adjusted gross margin – stood at 49.8%, compared to 50.1% in the same quarter of the previous year.

Lyft’s future success is dependent on a recovery in ride volume. The company remains on track to achieve adjusted EBITDA profitability by the fourth quarter of 2021, even with a slower-than-expected recovery, according to Logan Green, who stated during the earnings call on Tuesday that Lyft is adopting a very careful strategy to improve its operating leverage. Green also noted that Lyft is now projected to reach this profitability goal with approximately 30% fewer rides than initially required when the target was first established last fall.

Lyft concluded Q3 with $2.5 billion in cash and equivalents. The company’s operations have utilized $1.1 billion in cash so far this year, with an increase of around $156 million in the third quarter. With monthly cash consumption at $50 million, Lyft has considerable capacity to return to more moderate loss levels and resume year-over-year growth.