Expedia Group Q3 2026 Earnings Call - EXPEDIA GROUP INC

Explicit Guidance:

• Q4 2026 Gross Bookings: $27.9B–$28.4B, representing 3.3%–5.2% YoY growth.
• Q4 2026 Revenue: $3.69B–$3.75B, representing 4%–5.7% YoY growth.
• Q4 2026 Adjusted EBITDA: $830M–$880M, implying a margin of 22.5%–23.5%.
• FY 2026 Full-Year Gross Bookings: Raised to $131.4B–$139.9B (approx. 10% YoY growth).
• FY 2026 Full-Year Revenue: Raised to $16.37B–$16.43B (approx. 11%–12% YoY growth).
• FY 2026 Adjusted EBITDA Margin: Expecting 180–200 basis points expansion vs. prior year.
• FX Assumptions: Full-year guidance assumes FX tailwinds of ~1% for bookings and ~2% for revenue; Q4 FX expected as ~0.5% headwind at current rates.
• Capital Allocation: Commitment to opportunistic share repurchases and dividends; YTD share repurchases were ~$1.5B.

Business-Segment Outlook:

• B2B Segment: Anticipates near-term margin pressure due to partner mix shifts (partners moving to higher tiers) and recent acquisition costs (CarTrawler) and "one-stop shop" investments. Long-term outlook remains attractive with significant TAM expansion as partners adopt agentic capabilities and the company integrates tickets and activities.
• Consumer Brand Growth: Expedia identified as the fastest-growing brand; active loyalty members growing low single-digit, with accelerated growth in "Silver Plus" tiers who book directly.
• Product Features: New dynamic package search and "Reserve Now Pay Later" (across all brands) launched to enhance flexibility; conversational agents (agentic voice) in servicing expected to resolve 15%+ of inbound contacts on Vrbo.
• Advertising: Recent slowdown in growth rate (13% to 7%) attributed to implementation of new campaign management capabilities and AI-enabled tools; long-term high-margin runway remains intact with expansion to Vrbo display and off-platform.

Market and Competitive Outlook:

• Travel Demand Trends: U.S. and affluent consumer demand remains resilient despite elevated airfares. Q4 demand moderation anticipated due to softer operating environment, specifically U.S. election cycle impacts (historical patterns) and geopolitical disruptions in the Middle East and Europe affecting long-haul corridors.
• AI & Search Dynamics: Traditional search traffic diversifying to AI services; company actively integrating with Google AI Mode and Metamuse (Muse). Early data shows high citation share in U.S. AI agents; agentic traffic viewed as high-intent and likely incremental or shifting from paid channels rather than cannibalizing direct traffic.
• B2B Market Size: Addressable B2B market estimated as the remainder of the >$3T total travel market after excluding direct supplier and major OTA traffic; includes corporate agencies, offline agents, and loyalty programs. 75,000+ partners currently active.
• Competitive Positioning: Trust, scale, and reliability in supply connectivity and post-booking servicing remain key differentiators against AI discovery tools that lack booking/transaction execution capabilities.

Macro / Industry Outlook:

• Economic Environment: Management expects a softer operating environment in Q4 due to U.S. election cycle uncertainty and ongoing geopolitical events causing travel disruptions.
• Pricing Dynamics: Airfare (ATPs) expected to remain elevated and steady from Q3 to Q4. ADR growth moderating (from ~5% in Q2 to ~2-3% in Q3) and expected to continue this moderation into Q4, while room nights remain positive but modest.
• Supply & Partnerships: Continued expansion of supply via CarTrawler acquisition (tickets) and Activities API launch to deepen partner relationships.

Strategic Initiatives:

• AI & Product Innovation: Accelerating autonomous hotel onboarding (built in <1 quarter vs. historical quarters) and conversational search to capture intent earlier in the funnel; early data indicates conversational users are 2x more likely to book activities within 7 days.
• B2B Technology: Launch of "agentic template" with Qantas; expanding Rapid API and Travel Agency platform with activities to become a "one-stop travel shop" for partners.
• M&A & Integrations: Completed acquisition of CarTrawler (late Q3); integrating with Metamuse and testing Google AI Mode to ensure brand visibility in emerging AI channels.
• FY2026 Expectations: On track to exceed the top end of the original full-year guidance ranges for bookings, revenue, and margin expansion.

Risks and Headwinds to Outlook:

• Q4 Moderation Drivers: Pull-forward of Fall Sale timing into Q3 (lapping higher prior-year Q4 volumes), lapping of strong B2B partner promotional activity from Q4 2025, and the U.S. election cycle.
• Geopolitical & Political Risk: Ongoing disruptions in the Middle East and Europe impacting demand on specific routes and regions; potential volatility from the U.S. election cycle.
• AI Volatility: Agentic AI models changing frequently, causing potential "slings" in citation share; current traffic volume is small, making metrics volatile.
• Investment Drag: Near-term margin compression in B2B and overall business due to "one-stop shop" infrastructure investments and acquisition integration costs.
• FX Volatility: Guidance subject to currency fluctuations; Q4 FX assumed as a modest headwind at current rates.

Management Tone on the Future:

• Confidence: High confidence in the full-year 2026 trajectory, expressing pleasure with outperformance and a belief in sustaining margin expansion despite near-term headwinds.
• Strategic Stance: "Early days" but proactive regarding AI; willing to accept lower initial returns on new AI advertising channels (e.g., OpenAI) to test and learn.
• Execution: Emphasis on "disciplined cost management" and "overhead cost discipline" (up only 1% YoY) to fund growth investments.
• Outlook: Acknowledges a "moderation" in growth rates for Q4 compared to the strong Q3 but frames this as a normal fluctuation within a strong full-year performance.

Miscellaneous:

• FY2026 Share Count: Adjusted weighted average shares outstanding expected to decrease 4% YoY due to repurchases (2M shares repurchased in Q3, $1.5B YTD).
• Vrbo Fee Changes: Recent adjustment to host fees implemented to simplify traveler experience; no expected impact on overall take rate.
• Q3 Performance Context: B2B bookings grew 19%; consumer bookings grew 7% (accelerated in U.S.); room nights grew 7% (mid-single digits US, low single digits EMEA, mid-teens RoW).