Expedia Group, Inc. (EXPE) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session indicate strong financial performance, optimistic guidance, and strategic growth plans, particularly in B2B and advertising. The raised guidance, AI integration, and international growth are positive indicators. Some concerns in B2B competition and unclear responses slightly temper the sentiment, but overall, the outlook is positive.
Key Financial Performance
Bookings Increased by 12% year-over-year, driven by strong demand and higher lodging and air prices. B2B bookings grew 26%, marking the 17th consecutive quarter of double-digit growth. Consumer Brands bookings grew 7%, with double-digit growth outside the U.S. and particular strength in Europe.
Revenue Grew by 9% year-over-year to $4.4 billion, with a 2.5 point benefit from foreign exchange. Growth was primarily driven by improved market demand, advertising, and insurance.
EBITDA Margin Expanded by over 2 points year-over-year to 33%, driven by revenue and expense leverage, particularly within direct sales and marketing in the B2C segment.
Booked Room Nights Increased by 11% year-over-year, with high single-digit growth in the U.S., low double-digit growth in EMEA, and high teens growth in the rest of the world, including over 20% in Asia.
Advertising Revenue Grew by 16% year-over-year, supported by a record number of active partners and increased penetration outside North America.
B2C Gross Bookings Increased by 7% year-over-year to $21.3 billion, driven by performance both domestically and internationally.
B2B Gross Bookings Increased by 26% year-over-year to $9.4 billion, with broad-based growth across all regions. Rapid API was the fastest-growing product and the largest contributor to growth.
Adjusted EBITDA Increased to $1.4 billion, with a 23% year-over-year growth in adjusted EPS to $7.57, driven by share repurchases.
Cost of Revenue Decreased by 3% year-over-year to $373 million, leveraging 1 point as a percentage of revenue due to efficiencies in payments and customer service.
Direct Sales and Marketing Expenses Increased by 7% year-over-year to $2 billion, driven by B2B. However, B2C direct sales and marketing expenses decreased by 4%, leveraging over 0.5 point as a percentage of gross bookings.
Overhead Expenses Increased by 3% year-over-year to $620 million, while leveraging almost 1 point on revenue due to cost structure reductions earlier in the year.
Free Cash Flow On a trailing 12-month basis, reached $3 billion, reflecting the strength of the operating model and disciplined execution of strategic priorities.
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Operating Highlights
AI Integration: Integrated AI into products such as AI filters, property Q&A, guest review summaries, and service agents, driving engagement and effectiveness.
Vrbo Enhancements: Introduced new recommendation experiences and improved property comparison tools for better traveler experiences.
Expedia Enhancements: Launched new design flows in lodging search and post-booking paths, leading to double-digit growth in vacation rentals and record attach rates.
Global Room Night Growth: Booked room nights grew 11% globally, with high single-digit growth in the U.S., low double digits in EMEA, and over 20% growth in Asia.
B2B Growth: B2B bookings increased 26%, marking the 17th consecutive quarter of double-digit growth.
Advertising Revenue: Advertising revenue grew 16%, with a record number of active partners.
Margin Expansion: Expanded EBITDA margins by over 2 points in Q3 due to operational discipline and volume leverage.
Marketing Productivity: Achieved the fourth consecutive quarter of improved marketing productivity in the consumer business.
Cost Efficiencies: Reduced cost of revenue by 3% and leveraged overhead expenses by almost 1 point on revenue.
AI-Driven Search: Invested in AI-driven search and partnerships with Google, OpenAI, and Perplexity to transform trip discovery and planning.
Loyalty Programs: Launched new loyalty capabilities like member deals on Vrbo and Save Your Way on Hotels.com, driving repeat and direct bookings.
B2B Investments: Expanded tools and features for B2B partners, including AI-powered trip planners and new payment options.
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Risk or Challenges
Economic Uncertainty: The company is monitoring economic indicators amidst a dynamic macro environment, which could impact demand and financial performance.
Competitive Pressures: The company faces competition in the travel and advertising sectors, requiring continuous investment in AI and technology to maintain its edge.
Regulatory Risks: Potential regulatory changes or compliance requirements could impact operations, particularly in international markets.
Supply Chain and Partner Risks: Dependence on supply partners and promotional rates could pose risks if partners reduce participation or funding.
Foreign Exchange Volatility: Revenue and bookings growth are influenced by foreign exchange rates, which could negatively impact financial results.
Strategic Execution Risks: The company’s ability to execute on AI-driven initiatives and strategic priorities is critical to sustaining growth and operational efficiency.
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Guidance & Outlook
Full Year Guidance: The company is raising its full-year guidance based on results to date and ongoing trends. Gross bookings are expected to be up approximately 7%, revenue up approximately 6% to 7%, and EBITDA margins to be up approximately 2 points versus last year.
Q4 Guidance: For Q4, gross bookings and revenue growth are expected to be 6% to 8%. Adjusted EBITDA margins are expected to expand by approximately 2 points. Gross bookings include an estimated 1 point benefit, and revenue includes a 1.5 point benefit from foreign exchange at current rates.
2026 Outlook: The company expects further margin expansion in 2026, albeit at a more moderated pace compared to 2025, as it continues cost-out efforts and invests in growth initiatives.
Market Trends: The demand environment improved in Q3, with continued momentum in October. The company is monitoring economic indicators amidst a dynamic macro environment. Demand for premium travel has performed well, and resilient demand is observed at the lower end as well.
B2B Growth: The company sees further opportunities across its B2B business and will continue investing to drive growth. B2B gross bookings grew 26% in Q3, and B2B revenue grew 18%. Rapid API was the fastest-growing product and the largest contributor to growth.
Advertising Revenue: Advertising revenue grew 16% in Q3, and the company sees significant opportunities for continued growth, including increasing penetration outside of North America, B2B, and monetizing more areas of its sites.
AI and Technology Investments: The company is integrating AI into its products and operations, which is expected to drive engagement, improve efficiency, and enhance customer experiences. AI-driven search and partnerships with tech companies like Google and OpenAI are being prioritized.
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Shareholder Return Plan
Share Repurchase Program: At quarter end, we had $1.8 billion remaining in our share repurchase program after utilizing $451 million in the quarter to repurchase 2.3 million shares of our common stock. This brings our total shares repurchased in the last 3 years to 44 million, which reduces our share count by 22% net of dilution.
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Key Q&A
Q:How should we think about the building blocks for medium-term growth in B2B and the competitive environment?
A:The growth is driven by a combination of great supply, strong technology, and long-term partners. Future growth will come from signing new partners, growing existing ones, and expanding product offerings. Lodging is the core, but there is potential in car rentals, advertising, and insurance. The business is geographically diverse, with 65% outside the U.S., and works with various partners like travel agents, airlines, and banks.
Q:What are the biggest sources of margin expansion in the next couple of years?
A:Margin expansion will come from optimizing sales and marketing for B2C, tighter cost controls, better cloud cost dynamics, and overhead reduction. AI is being used to improve cost efficiency, and there is a mix dynamic between ads and insurtech that contributes to margin growth.
Q:How is the quality of leads from Gen AI search tools like ChatGPT and Perplexity?
A:The quality of leads is good, but it’s still early days with relatively small traffic volumes. The focus is on understanding traveler context to improve personalization and conversion. AI is already driving growth through better personalization in products, marketing, and partner experiences.
Q:How is the replatforming process helping you compete better, and how are Vrbo and Hotels.com performing?
A:The replatforming has enabled scale across brands with a common data platform, lodging path, and loyalty program. Hotels.com and Vrbo showed strong performance due to platform work and brand repositioning. Features like Save Your Way for Hotels.com and member rates for Vrbo have been introduced.
Q:Can you sustain direct marketing leverage in B2C into next year, and is the current performance sustainable?
A:Direct marketing leverage is expected to sustain, supported by agile marketing strategies and improved site performance. The current performance is sustainable, with opportunities for growth in brands like Vrbo and Hotels.com, and continued focus on marketing efficiency.
Q:What are the competitive dynamics in the alternative accommodation market, and how is integration with hotels progressing?
A:Vrbo is strengthening its position as a vacation rental pure play, while Brand Expedia is integrating vacation rentals into the lodging flow. Vacation rentals are also being distributed through B2B partners, providing additional demand for owners.
Q:How is the competition in B2B, and what are you seeing in terms of contracts and renewal cycles?
A:Competition is always present, but the company focuses on delivering value to partners and innovating to meet their demands. The team remains confident in its value proposition despite competitive pressures.
Q:What is the current state of the B2C business, and what is the medium-term target for direct bookings?
A:About 2/3 of B2C bookings are direct, supported by loyalty programs and returning travelers. Conversion in direct channels is improving, and traffic has increased, with a focus on balancing spend and channel productivity.
Q:What drove the acceleration in U.S. room nights, and are there any specific drivers?
A:Room nights grew 11%, the strongest in over 3 years, with high single-digit growth in the U.S. and low double digits outside the U.S. APAC and Europe showed strong performance, and growth was seen across all brands.
Q:How are you approaching partnerships with AI assistants like OpenAI to ensure branding and repeat traffic?
A:The focus is on Answer Engine Optimization to showcase brand value and seamless direct integrations to drive traffic back. The company is experimenting and learning in this fast-moving space to stay ahead.
Q:What are the primary investment areas for next year, and how do they align with the 2026 margin outlook?
A:Investments will focus on core strategic priorities, growth opportunities, and operational efficiencies, including marketing leverage, cost of sales, and overhead reduction. More details will be provided in the next quarter.
Q:How is Vrbo performing in the U.S. relative to the market, and what is the outlook for Q4?
A:Vrbo grew bookings and room nights, maintaining or possibly growing market share in the U.S. For Q4, the company expects 6%-8% GBV and revenue growth with 2 points of margin expansion, despite tougher year-over-year comparisons and potential risks like a government shutdown.
Q:What is the update on international and U.S. travel dynamics, particularly from Canada?
A:Inbound travel to the U.S. is nearly back to last year’s levels. Europe to U.S. travel has recovered, and APAC to U.S. travel has accelerated. Canada to U.S. travel remains pressured but improved as the quarter progressed.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the competitive dynamics in B2B contracts and renewal cycles, providing only general statements about competition and value delivery. Additionally, the response to the question about the evolving alternative accommodation market lacked specific details on how integration with hotels would become the norm.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI opportunity
AI partner
AI trip
Answer Engine
Asia momentum
BB advertising
BB share
Brands booking
Cash
Expedia Group
Investor Relations
QA
Scott
agency
booking digit
brand product
demand environment
efficiency
feature
journey
margin
measure
number
opportunity BB
partner rate
partner tool
productivity
progress priority
property
recommendation
record
reference
remark
review
statement
step
technology customer
value traveler
volume
website
EXPE Transcript
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The earnings call highlights robust financial performance with a 15% increase in revenue, 25% rise in net income, and 20% growth in adjusted EBITDA. Despite increased operating expenses, these results, coupled with strong gross bookings growth, indicate effective cost management and high demand. The absence of negative elements in the Q&A further supports a strong positive sentiment, suggesting a likely stock price increase over the next two weeks.
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The earnings call summary and Q&A reveal positive aspects: raised full-year guidance, strong financial metrics, and optimistic outlooks in B2B growth, AI investments, and advertising. Despite unclear responses on some specifics, the overall sentiment is positive, supported by a significant adjusted EPS growth and strong free cash flow. These factors suggest a likely positive stock price movement in the short term.
EXPE Slides
EXPE Report
Frequently Asked Questions
Where does this earnings call transcript come from?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
