Expedia Group (EXPE) Q2 2026 earnings call transcript

Good afternoon, and welcome to Expedia Group Q2 2026 earnings call. I'm pleased to be joined on today's call by our CEO, Ariane Gorin, and our CFO, Derek Anderson. As a reminder, our commentary today will include references to certain non-GAT measures. Reconciliations of these non-GAT measures to the most comparable GAT measures are included in our earnings release. Unless otherwise stated, all growth rates are on a year over year basis, and any reference to expenses excludes stock-based compensation.

You'll also be making forward-looking statements during the call, which are predictions, projections, and other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict. Active results can materially differ due to factors discussed during this call, and in our most recent forms, 10Q, 10K, and other filings with the SEC.

Except as required by law, we do not undertake any responsibility to update these forward-looking statements. This call is being webcast on the investor-related section of our website at ir. expediagroup. com. Our replay will be archived on our site. A fly presentation containing financial highlights has also been posted to our website. Starting this quarter, we expanded the presentation to provide additional context on our performance.

For today's call, Ariane will begin with a review of our second quarter results. Derek will then provide additional detail on our financial performance, as well as our third quarter and full-year guidance. After our prepared remarks, we will turn the call over to the operator to begin the Q&A portion of our call. And with that, let me turn the call over to Ariane.

Thanks, Rob, and good afternoon, everyone. We had a solid second quarter, delivering strong financial results while making tangible progress on our strategic priorities.

We exceeded the high end of both our top and bottom line expectations for the fifth quarter in a row, growing bookings 12%, revenue 14%, and adjusted EVADOT 23%.

We delivered new product experiences, expanded supply across our marketplace, and took an important step in building our one-stop B2B travel shop.

Based on our first-half results and the ongoing trends we're seeing were raising our full-year guidance, and Derek will cover that shortly.

Turning back to the second quarter, consumer spending was healthy in particular in the US. Consumers continued to prioritize travel with longer lengths of stay and longer booking windows, even as air ticket and hotel prices rose.

The World Cup generated modest incremental demand late in the quarter. A lot of bookings happened after the tournament began, a pattern we anticipated, and were well-positioned to capture.

Total book-to-room nights were up 6% with mid-single digits in the US, low-single digits in a Mia, and low-double digits in the rest of the world. Europe remained pressured, particularly outbound travel, as macro headwinds and reduced air capacity weighed on demand, while APAC rebounded from the disruption related to the Middle East.

Our market-leading B2B team delivered its 20th consecutive quarter of double-digit growth, underscoring the durability and the momentum of this business.

Consumer bookings were up 8%, driven by our fastest US growth in 15 quarters. Active loyalty members increased low-single digits with faster growth in our higher tiers.

Over the last two years, we've executed on our three strategic priorities, one, delivering more value to travelers, two, investing in our biggest growth opportunities, and three, driving operating efficiency and margin expansion.

As a result, we've accelerated our consumer business, expanded margins by four points, and more than doubled our trailing 12-month free cash flow over that same period.

We continue to progress these priorities in the second quarter. First, delivering more value to travelers. It starts with product experiences that make it easy for travelers to plan and book their perfect trip. And AI is unlocking new ways to make these experiences simpler and more personalized.

Last quarter, we launched new and updated conversational experiences, introducing natural language search on the verbal homepage and updating property expert and AI compare in the hotel shopping flow.

Our AI-powered personalization and recommendations keep getting smarter across all three of our consumer brands. On Expedia, our fastest growing brand, this translated into another quarter of record attach rates. So travelers are getting even more value from booking their trips with us.

Traveler value also comes from having the best assortment in price, and we recently achieved a few big milestones. In July, we became the first OTA to distribute allegiance flights and achieve full coverage of U. S. commercial airlines.

This partnership further reinforces our position as the most complete travel marketplace in the U. S. On lodging, we expanded our supplier funded promotions.

More than 40% of Bobo Booking's last quarter included partner funded offers. And our May sale was the first campaign to exceed $1 billion in bookings for participating properties.

These are clear proof points of the strength of our two-sided marketplace where travelers get better value and our supply partners capture incremental demand across rooms, seats, and cars.

Turning to our second pillar, investing where we see the greatest opportunity to drive growth. In our consumer business, our sharper measurement and targeting capabilities are allowing us to invest in the highest return opportunities and leverage our marketing spend.

We're investing in newer surfaces, like AI and social platforms, where more consumers are starting their trip planning. AEL and social are two of our fastest growing channels. And while agentic traffic remains small, it's a promising channel with high purchase consideration.

We're deepening our partnerships with leading AI platforms. And during the quarter, we're an early adopter of CHAC QPT's latest ad product and expanded our work across Google's newer AI services.

And last week, we announced the acquisition of Leila, an AI conversational planning act, allowing us to capture new types of travelers while bringing learnings into our core business.

Finally, in B2B, alongside investing in our existing partnerships, we continue building toward our vision of a one-stop travel shop for partners. And in May, announced our intent to acquire car crawler, the leading B2B car rental and insurance platform.

Moving to our third pillar, driving operating efficiencies in margin expansion. We expanded margins by nearly two points in the quarter, driven by tight expense management and the consumer marketing leverage I just mentioned.

Importantly, we're continuing to deploy AI to innovate faster and operate more effectively. On Verbo, we launched an Agentic voice solution to support partner inquiries previously handled by human agents.

Early results are promising with faster resolution and lower contact propensity. More broadly, our Agentic Technology Stack is allowing us to design and ship products faster, ultimately unlocking new capabilities for both travelers and partners.

As we scale these capabilities, we're managing token costs thoughtfully while giving broad access to our team. In closing, we delivered strong second quarter results and are raising our full year outlooks. I wanna thank our teams for their hard work and our partners and travelers for their continued trust in us.

With that, I'll turn it over to Derek.

Thank you, Ariane, and good afternoon, everyone. I've had an exciting first quarter as part of the Expedia Group team and look forward to engaging with you all in the quarters ahead.

Before I walk to our financials, you'll see that we've expanded the earnings presentation this quarter to provide additional details in an easier to access format. I'll focus my remarks here on the headline financials and guidance so we can get to your questions a little faster.

Our second quarter performance exceeded the high end of our guidance, reflecting a healthy macro environment, continued momentum in our B2B segment, improved consumer marketing returns, and ongoing cost discipline.

Growth bookings increased 12% year over year, and this was driven primarily by 6% room night growth, as well as 5% ADR growth on an FX neutral basis.

Revenue increased 14%, which exceeded our expectations entering the quarter. Foreign exchange was a tailwind for the business, contributing nearly half a point to booking's growth and four points to revenue growth.

Adjusted EBITDA was 1.1 billion in Q2, representing a margin of 25.9%, which is an improvement of nearly two points compared to the prior year. The margin expansion was driven by a combination of cost efficiencies, consumer marketing leverage, and the flow through of higher volume. Adjusted EPS grew 36% year over year, which reflects strong earnings growth, as well as the accretive impact of share repurchases over the past year.

We continue to generate strong free cash flow, which reached 4.5 billion on a trailing 12 month basis, and this has fueled the return of capital to shareholders. During the quarter, we repurchased roughly 880,000 shares for $200 million at an average price of 226 a share. This brought our year to date share repurchases to 900 million, which is roughly in line with the first half of last year.

Our capital allocation priorities remain unchanged, including investing organically in the business, pursuing disciplined M&A in support of our strategic priorities, and returning cash to shareholders in the form of dividends and opportunistic share repurchases.

For our third quarter outlook, we expect growth bookings of 32.2 to 32.8 billion, representing growth of approximately 5% to 7% year over year. This assumes that growth in bookings and room nights moderates relative to Q2, reflecting tougher comparisons as we lap faster growth in the second half of last year, and an estimated one-point FX headwind at current rates.

We expect revenue of 4.65 to 4.75 billion, representing growth of approximately 5 to 8% year over year, including an estimated one-point FX benefit at current rates.

We expect adjusted EBITDA at 1.51 to 1.56 billion, implying a margin of 32.5 to 32.8%. Margin expansion is expected to moderate in Q3. Due to the lapping of prior year cost actions, ongoing investment in B2B growth, and unfavorable net FX impacts. We expect a pace of margin expansion to improve in Q4. At some of these pressures ease, and as we continue to drive operating efficiency across the business.

Based on the strength of the first 10th and our assumptions for the third quarter, we are raising our full year guidance. We now expect growth bookings of 129.5 to 130.8 billion, representing growth of 8 to 9%. And revenue of 16.05 to 16.22 billion, representing growth of 9 to 10%. Our guidance continues to assume foreign exchange tailwinds of approximately a point for growth bookings and two points for revenue.

We are also raising our margin guidance for the full year, and now expect adjusted EBITDA margin expansion of 150 to 175 basis points versus last year. With that, let's open the line to take your questions.

As a reminder, if you would like to ask a question, please press star followed by the number one on your keypad. If you would like to retract your question, please press star followed by one again.

Sure, I'll take that. So I'll start with what we're doing in our product. And I really think about it sort of in two categories. There's what are we doing with AI in our product right now that is delivering results in our core business? And then the second is what are we doing in our product that's not necessarily delivering conversion right now, but we know it's helping us better understand travellers and is going to have compounding benefits over time.

So in that first bucket, it's using AI for better recommendations, for better ranking, for personalizing the UX and the content. And there we are seeing immediate impacts, and it's not only just improving conversion, but you can imagine as we're getting traffic, whether it's direct traffic or paid traffic, that is improving. In addition, I would say just as an aside, is all the work we're doing in using AI in our technology teams in order to increase our cycle time is allowing us to innovate a lot faster.

So that's what we're doing in the product to increase conversion now. Also in the product, we're introducing these natural language experiences, like Burbo Natural Language Search on the homepage or these agents like Property Expert or AI Compare. Those are not driving conversion right now, but what we're finding is that you get over 60% more information about traveller intent, and that allows us to deepen the relationships with a traveller and over time, I believe that that's gonna drive sort of deeper conversion. So that's what we're doing in our product.

I also believe there's a big growth opportunity in getting access to travellers who are starting outside of our brands in these AI experiences. As a reminder, two thirds of our bookings in our consumer brands come direct, but of the third that is coming through paid channels, obviously AI experiences, whether they are with CHAT-TPT or CLOD, or Google's new experiences, are new opportunities for our brands to show up there.

It is early days, I would say that's an area that's fast moving, the algorithms, the search UXs, all of that is moving really quickly, and so we're staying close to it and vigilant. We are testing and participating everywhere that things are evolving, and I see that over time as opportunities to bring more travellers into our business. There's a lot of complexity of how do you understand what the prompts are so that you can land them well in our product, but again, I see that as a big opportunity.

Thanks so much.

Sure, well, I'll take the first one and then I'll hand you over to Derek for the second one. You know, the thing about the B2B space is it's always been competitive. I've been in it for over a decade, and it's always been a competitive space. The good news is there's a very large addressable market for B2B partners.

When I think about what we bring to the table, obviously we have great supply and content, strong technology, really great servicing, great partner accompaniment sort of as we think about the integrations. So obviously I'm not going to talk about individual partners, but some relationships are exclusive, some are not exclusive. My view is we have to be proving day in and day out to our partners that they contrast us to build their business on top of us. I think it's been important for us for many years that it's a standalone business, a standalone P&L that has resources that it can invest on its own.

And I'm excited about the investments we're making to build out the one-stop-shop value proposition so that we can offer all components that a partner might need to build their travel program. And that was the announcement of car trawler, discordor, acquisition we did of tickets. It's really so that we can have that complete one-stop travel shop from supply to technology to servicing and beyond.

And, Justin, as it pertains to the contribution of marketing to the operating leverage and margins overall, you're right, we did make substantial progress over the last year in terms of driving margins. And we are gonna begin laughing that in the second half of the year. We had the substantial reductions in marketing spend and driving out inefficient spend, but also redirecting spend to more productive channels. And that's been a big contribution over the last year and you can see that in the margins.

We also made progress on overhead as well so it's a broader picture than just marketing. As we go into the third quarter and the quarter ahead in the second half of the year, we will begin laughing those things. However, the structural improvements that we've made on the marketing program are going to endure and give us a base to drive further efficiencies off going forward.

We've also continued to make incremental progress on the rest of the cost structure. And I just point to the fact that overheads were flat year over year in the most recent quarter, even as revenue rose 14%. So we're committed to continuing to drive our strategic pillar of operating efficiency and scaling out margins as we go forward. And I think you'll see that reflected in the update that we made to the full year guide where we took the EBITDA margin expansion range up to 150 to 175 basis points for the full year.

So I'll take the first part and then Derek can take the second one. Just in terms of the GEO trends, and the good news is we have a, we have a geographically balanced business. Certainly our consumer business is two thirds in the US, a third outside of the US, and our B2B business is really the inverse.

But we have supply that is able to respond to whatever the traveler demand is. Obviously we're gonna lean in more where we see the most demand and so where we see the greatest returns. But you know, my view is what we've always seen is over time demand rebounds sort of across the world. So we'll take advantage when, you know, there's strength in one GEO versus another, but we have a long-term North Star with, you know, continuing to grow our business in the areas we're strongest, and then, you know, identifying some geographies where our consumer grants have relevance, but haven't yet in our mind gotten to our fair share.

And then it pertains to the go-forward margin side of things. Number one, I would reiterate, we remain committed to our strategic pillar of driving operating efficiency and expanding margins over time. In Q3 specifically, there are a few factors that will weigh on the margins in the very near term. One, as you mentioned, that we're gonna lapse some very substantial reductions in the cost structure from a year ago, that'll weigh a little bit on the margins in the near term.

The other is, we'd also made progress, not just on marketing, but overheads there. And then, we have some FX net headwinds that'll impact the CQ3 that are really a factor on the margin as well. That said, if you look at what I shared earlier about the update to the full-year margin expansion, guidance of 150 to 175 basis points, that implies that in Q4 at the midpoint, we'd be expanding by about 50 basis points there. So that we'll see some of the pressures that are specific to Q3 ease there, but we'll also see the ongoing benefits of our efficiency initiatives continue to build over time. So the margin expansion won't always be perfectly linear, but it is a very important part of the strategy and something that we're committed to continuing to drive out.

Sure, I'll talk about competition. Like I said, it's a big target addressable market. If you think about the travel business, it's over $3 trillion. If you exclude sort of hotel airline direct and the three big OTAs, there's still a lot of space there. So for us, we just look at whether it's in offline retail, other online travel agents, loyalty programs, corporate travel agencies, where are all of the places that people are looking for when they look to travel beyond our core consumer brands? And how do we make sure that we're showing up, well, I think competition forces you to be better, whether it's be better with having more service offerings, having better service levels and the like.

So our focus is just making sure that we've got a great value proposition.

And in fact, Derek can talk about it, but I think some of the expense you're seeing is related to the build out of our additional lines of business. Because that business today is very lodging focused. We do sell other lines of business, but over time, we want to become that one stop travel shop.

Yes, Jen, I mean, in terms of the margin point, Ariane's exactly correct. There's investments going into the B2B segment to drag that one stop shop and build out our lines of business. And one aspect of that is that we had the digestion of tickets and that acquisition in Q2. And so that would have weighed a little bit on the cost that you're seeing.

The other is a little bit of the geography of the FX hedging and where that shows up in the P&L. And so you're seeing a little bit of that show up on that line item and impacting the margin as you pointed out. So hopefully that context helps.

Sure. I'll take the first one, and then Derek can take the second one. And I think about organic traffic, and I'm going to buck it together, SEO and AEO. For us, organic search traffic is stable to slightly up. Now, as I mentioned in my prepared remarks, AEO is one of our fastest growing channels. And SEO has remained a bit soft, but it stabilized over the last few quarters.

And I think it's due to the great work that our team has done. You know, a number of quarters ago, we organized a small team to look at organic across the board, AEO and SEO. And they've increased testing velocity, both sort of technical and content. They've been doing, as I said, they've been doing more tests. They've been using AI across the board in order to improve our performance in that channel.

Now, that being said, as I said earlier, it's a fast-changing space. We're seeing algorithms and search page changes more prevalent and happening faster than they have in the past, which is why we're staying vigilant or monitoring, we're reacting to them. Today, we think we're getting at least our fair share, but organic is an important thing to us, so we're making sure that we're staying on top of it.

And then in terms of the second half guidance on bookings and so on, we're assuming that the healthy demand trends that we have seen through Q2 and to begin Q3 here persist. And that's led by a particularly strong U. S. and domestic market. We do, of course, see an environment where the conflict in the Middle East is having some impacts.

The sort of direct impacts in that region are business there is relatively small and so the impact is lighter. However, there are secondary impacts impacting jet fuel prices, which have an impact on airline prices and ticket prices. So there are some secondary impacts, but the strength overall and the resiliency in the travel market and consumers continuing to prioritize travel has led to a relatively resilient environment. And so we have that informs our guide for Q3 and the updates we made to our full year guidance.

As it pertains to bookings and rim nights specifically, we do have much tougher clumps in the second half of the year. And so we've incorporated that into the guide for Q3 and the update that we've made for the full year. So we do accept expected growth rates to decelerate as we see those cons, although probably more so on the booking side, a little less so on the rim night side, but we will face much tougher clumps on both of those numbers.

Sure, why don't I start with that one? And then I'll, Derek, can take your first question. Look, AEO is still a small channel. As I said, it's one of our fastest growing channels. I believe we were early in organizing ourselves around it and understanding not only what visibility were we getting in prompts and answer in AI search, but also how do we make sure we're getting the right visibility?

And it's a combination of work we're doing in our brands, the brand value propositions, obviously a lot of technical work. What I find exciting about it is it's changing really quickly. It's figuring out how do we make sure our brands show up either completely organically? Are there opportunities with these connectors or micro apps? For example, in Claude and chat GPT, it's fascinating to see there are some cases in which we can control a bit more what the interface is where our brand shows up and others where we can't. So I think it's sort of too early to declare anyone's getting a lot more versus less. I can just tell you that we have a team focused on it and that it's not just the technology of it.

It's also all the work we're doing on our brand value propositions on making sure that we have great full and complete content and making sure that travelers understand that when they come to Expedia or hotel. com or Verbo, they're going to get a complete shop, they're going to get a loyalty program, they're going to be able to have payments and all different currencies. Just it's really that full value proposition that we need to make sure it comes through.

I know I like it's great to be engaged with you and your team again as well. Before joining Expedia, I'd tell you that I was really excited about what I saw and the opportunity in the travel market. It's the scale of the industry as immense and so the total opportunity set is huge. But for this business specifically, I was excited about the leading consumer brands and some of the most important markets in the world.

And the opportunity for us to continue to grow beyond that and then the B2B business is the leading B2B platform in the world as well. It gives the business a lot to work with and then I spent a lot of time looking at how well the team has executed over the last couple of years and the results that they've been able to drive to build momentum in the business is really impressive.

That was exciting coming in. I think that what's more exciting is that after a couple of months in the building and working with the team, most of what I hoped would be true on the way in the door has proven to be true. I'm particularly pleased with the quality of the team here and the consistent focus on operational execution. And I think probably the last thing I mentioned is just that it's exciting how much of what lies ahead of us in terms of opportunity is something we can capture through our own execution and scaling this business efficiently. And so I'm excited to dig in with the team and capitalize on that.

So as you rightly say, we had nice margin expansion. We grew our bookings 8% while leveraging marketing spend, which was only up 1%. And that came from our fastest US growth in 15 quarters and a healthy environment. I would say it came from really pulling on all of the levers of the marketplace, improvements in the product, whether that's recommendations, ranking, improvements all along the funnel. For example, optimizing the checkout in Verbo. It came from growth in our supply footprint.

As I said, the May sale was a record-breaking sale for us, making sure that travelers know that when they come, they're gonna be able to find what they're looking for, driving attached in supply. The performance of our top tier loyalty members, so silver and above, did really well, both in bookings and then also in retention.

And then in marketing, as you saw, yes, we've had good marketing leverage, and it's not just that measurement that allows us to better understand incrementality and returns. The team is also doing some really fantastic work around using technology to be more effective. They're developing these agentic systems to create personalized ads at scale, both using our technology and using third party technology.

And I look at it, and of course, I see all of the areas that we can do better, but I also see so much good work that the team is doing, and I'm just really pleased to see that margin expansion.

Hi, Mark. On the advertising business, growth with stable, growth of the Q1 and Q2, as we look at the future growth opportunities for the business, we see a lot of opportunity to sustain healthy growth there. Some of the drivers you pointed out more geographical reach, extending our existing ad solutions into our B2B and Verbo business lines, and then also monetizing on more areas of our sites. On Verbo specifically, it's very early there, but we are excited about the opportunity to build on that over time, but it's early.

And we've got a new leader there also, and this is a business that I'm personally and familiar with, so I'm excited to dig in with them and help build this out over time. To your question on the World Cup, as Ariana mentioned in prepared remarks, we did see bookings related to that come in late, and the impact of that on the quarter was relatively modest overall. We saw it show up more in ADRs than we did in RIMNITES, and the impact of the quarter overall from a booking's perspective was modest.

Yeah, I would say we've seen a normalization. I think we've seen a normalization.

Sure. On B2B margins, first, we're really pleased with what we're seeing in the growth on that business. In the very immediate term, the big drivers on B2B margins include partner mix and the pace of our own investments in the long-term growth of that business. So on partner mix, we've continued to see strong partner promotional activity. We saw that in Q1. It persisted throughout Q2.

And so that's a big driver, is that some of our larger partners are active in that space. In addition, we are prioritizing the growth of that business long-term, given how significant the opportunity is. And so we're investing in building out, and or acquiring, in the case of tickets, new lines of business to support our one-stop travel shop, enhancing our product capabilities to better support our existing partners, and also in our partnership and sales to grow our partner base. We have over 70,000 partners today by looking to grow that, and through lines of business to deepen our partnerships and business over time. And that's shaping the drivers of the business in the near term, both from a mix and margin perspective.

Hopefully that gives some context. I would just reiterate, we can invest and continue to make progress on margins. And if you think about our strategic pillar around efficiency and margin expansion, we're committed to that, and are driving that across the business.

Sure, I'll take the second one first, because it's going to be quick, which is we don't comment on individual partners. So I'm not going to comment, and it's not going to be material to our guidance. On the first point on attach, it really depends on does the trip start with a flight? In which case, we're more likely to attach a lodging, a hotel, or a vacation rental, or a car. Does it start with a hotel? In which case, we might attach a car or insurance.

And actually, part of what's behind the record attach rate is the personalization we're able to drive by understanding what is the next best thing to recommend to a traveler. As I said, if they've taken a flight, they've already booked a flight, and it's in a certain destination, we might know, actually, the next best thing to propose is a hotel, and it's one of these three properties. Or it can be based on the trip and information we have on the trip, or it can be based on what we know about that traveler.

And the team has really been honing in and optimizing those recommendations. In addition, they've done a great job really optimizing the UX and the design, figuring out where is it that we put the attached messaging? Where is it in the app? Where is it in the post-sale communications? So it's really a combination of all of the above.

Yeah, so I would say there's still quite a bit of runway. We have good stats that tell us of people who book one trip element with us, how likely are they to have another trip element somewhere else? And without going into what exactly those numbers are, I certainly see additional runway to have more multi-item trips. Even if I believe right now we're best in class, but there's still a lot of fun ahead of us.

Well, thank you all for joining our call. Thank you for your questions. As you saw, we delivered strong results ahead of our expectations as consumers continue to prioritize travel. As we look ahead, we remain confident in our strategy and our ability to execute and drive long-term value for travelers, partners, and shareholders. And finally, a big thank you again to our team.