Expedia Group, Inc. (EXPE) Earnings

Management highlights

- Overall Quarterly Performance * Exceeded the high end of top and bottom line guidance for the 5th consecutive quarter, with 12% bookings growth, 14% revenue growth, and 23% adjusted EBITDA growth YoY * U.S. consumer travel spending remained healthy, with travelers continuing to prioritize longer stays and advance booking even amid rising prices; the 2026 World Cup delivered modest incremental late-quarter demand, as expected * Total booked room nights grew 6% YoY: mid-single digits in the U.S., low single digits in EMEA, low double digits in the rest of the world; EMEA outbound travel remained pressured by macro headwinds and reduced air capacity, while APAC rebounded from prior Middle East-related disruption * Active loyalty membership grew low single digits, with faster growth in higher tiers - Strategic Progress * Delivering more traveler value: Launched updated AI-powered conversational tools including natural language search on the Vrbo homepage, and Property Expert/AI Compare for hotel shopping; AI personalization drove record attach rates for the Expedia brand * Expanded marketplace supply: Became the first OTA to distribute Allegiant flights, achieving full coverage of all U.S. commercial airlines; over 40% of Vrbo bookings included supplier-funded promotions in Q2, and the May 2026 sale became the first campaign to exceed $1 billion in bookings for participating properties * Growth investment: Increased investment in fast-growing AI and social marketing channels, became an early adopter of ChatGPT's newest ad product and expanded partnerships with Google's AI services; acquired Layla (AI conversational travel planning app) to capture new traveler segments, and announced the planned acquisition of B2B car rental/insurance platform CarTrawler to build out the one-stop B2B travel shop vision * Operating efficiency and margin expansion: Delivered nearly 2 full points of margin expansion in Q2 via tight cost management and marketing leverage; deployed AI to improve operations, including a new agentic voice solution for Vrbo partner inquiries that delivers faster resolution and lower costs, and faster product development cycle times across the business - Capital Allocation * Repurchased 880,000 shares for $200 million in Q2, bringing year-to-date repurchases to $900 million, in line with prior year first half levels; capital allocation priorities remain: organic business investment, disciplined strategic M&A, and returning capital to shareholders via dividends and opportunistic repurchases

Guidance

- Third Quarter 2026 Guidance * Expects gross bookings of $32.2 to $32.8 billion, representing 5% to 7% YoY growth; growth moderates due to tougher year-over-year comparisons and an estimated 1 percentage point FX headwind at current rates * Expects revenue of $4.65 to $4.75 billion, representing 5% to 8% YoY growth, including an estimated 1 percentage point FX benefit at current rates * Expects adjusted EBITDA of $1.51 to $1.56 billion, implying a margin of 32.5% to 32.8%; margin expansion will moderate in Q3 due to lapping prior year cost actions, ongoing B2B investments, and unfavorable net FX impacts, with faster expansion expected to resume in Q4 - Full Year 2026 Guidance (Upward Revision) * Raised gross bookings guidance to $129.5 to $130.8 billion, representing 8% to 9% YoY growth * Raised revenue guidance to $16.05 to $16.22 billion, representing 9% to 10% YoY growth; guidance continues to assume ~1 percentage point FX tailwind for bookings and ~2 percentage points for revenue * Raised adjusted EBITDA margin expansion guidance to 150 to 175 basis points versus full year 2025

Segment performance

Expedia Group reports overall Q2 2026 results: gross bookings grew 12% YoY, revenue grew 14% YoY, adjusted EBITDA reached $1.1 billion (25.9% margin, up nearly 2 percentage points YoY), adjusted EPS grew 36% YoY, and trailing 12-month free cash flow hit $4.5 billion. No separate segment-level absolute financial results or revenue contribution percentages were explicitly provided in the call. Key segment performance highlights: B2B segment delivered 20th consecutive quarter of double-digit YoY growth, with near-term overhead increases driven by investments to build out the one-stop travel shop offering and acquisition integration; Consumer segment saw 8% YoY booking growth, with fastest U.S. growth in 15 quarters, and strong margin expansion driven by marketing leverage.

Risks & headwinds

- Forward-looking statements are based on current expectations, and actual results could differ materially due to unforeseen risks and uncertainties, including macroeconomic headwinds that impact consumer travel demand * AI search and agentic channels are rapidly evolving, with frequent changes to algorithms and user interfaces that create uncertainty around long-term traffic acquisition dynamics and performance * Ongoing geopolitical conflict in the Middle East creates secondary demand impacts across global travel markets, even though Expedia's direct exposure to the region is small * B2B travel services market continues to face competitive pressures that require ongoing investment to maintain market position and contract stickiness

Analyst Q&A

• Q: How does Expedia see the interplay between on-platform AI consumer solutions, off-platform AI-native channels, and traditional advertising for medium-term conversion and ROAS? /

  A: Management splits AI product work into two categories: existing use cases like personalized recommendations, ranking, and UX improvements that are already delivering immediate conversion and ROAS improvements across all traffic channels, plus internal AI use that speeds up product development. New natural language and AI agent tools on-platform are not yet driving large conversion gains, but capture over 60% more traveler intent data that will deliver compounding conversion benefits over time. Off-platform AI channels are an early but fast-growing opportunity to reach new travelers; Expedia is testing and participating across all evolving AI platforms to capture new demand, and sees this as a long-term growth opportunity despite current complexity around traveler intent matching.

• Q: What are B2B's competitive advantages and contract stickiness, and how much more marketing efficiency can Expedia deliver after the large gains of the past year? /

  A: B2B travel has a large addressable market and is always competitive; Expedia's advantages are its broad supply, strong technology, full-service support, and ongoing buildout of a complete one-stop travel shop offering via acquisitions like CarTrawler. While the second half of 2026 will lap the large marketing efficiency gains from 2025, the structural improvements to marketing are permanent, and Expedia continues to deliver incremental overhead efficiency (overhead was flat YoY in Q2 even as revenue grew 14%), supporting the raised full-year margin guidance.

• Q: What is driving B2C margin expansion this quarter, and how much runway exists for further expansion into 2027? /

  A: B2C margin expansion came from 8% booking growth with only 1% marketing spend growth, driven by product improvements across the booking funnel, expanded supply, strong performance of higher-tier loyalty members, and better incrementality measurement and personalized ad creation at scale via AI. Management credits cross-functional team execution for the strong results, and sees continued upside for further margin expansion from ongoing operational efficiency work.

• Q: Why is AEO growing faster for Expedia than some peers, and how meaningful will the channel be? /

  A: AEO is still a small channel overall, but Expedia was early to organize a dedicated team to adapt to AI search changes, combining technical optimization, content updates, and alignment with new AI platform features like micro-apps. Management notes it is still too early to declare long-term market share differences between players, but Expedia's focus on highlighting its full value proposition (complete content, loyalty program, multi-currency payments) positions it well to capture share as the channel develops.