EXPE Q1 Earnings Call: U.S. Travel Weakness Offsets International B2B and Advertising Growth
Is now the time to buy EXPE? Find out in our full research report (it's free).
Revenue: $2.99 billion vs analyst estimates of $3.01 billion (3.4% year-on-year growth, 0.8% miss)
Adjusted EPS: $0.47 vs analyst estimates of $0.36 (31% beat)
Adjusted EBITDA: $296 million vs analyst estimates of $269.7 million (9.9% margin, 9.7% beat)
Operating Margin: -2.3%, up from -3.8% in the same quarter last year
Room Nights Booked: 107.7 million, up 6.5 million year on year
Market Capitalization: $22.45 billion
Expedia's first quarter performance was shaped by divergent trends between its core U.S. consumer business and its expanding international operations. CEO Ariane Gorin pointed to 'weaker than expected travel demand in the US and into the US,' which weighed on the company's consumer segment, particularly for Hotels.com. In contrast, Expedia's business-to-business (B2B) segment, benefiting from its geographical diversification, delivered double-digit bookings growth, while advertising revenue also expanded at a robust pace. Management emphasized ongoing product enhancements—such as new supply partnerships and AI-driven features—as key levers supporting traveler engagement and operational efficiency.
Looking ahead, Expedia's updated guidance reflects continued uncertainty around U.S. travel demand but increased confidence in margin expansion due to recent restructuring and operational streamlining. CFO Scott Schenkel stated the company expects '75 to 100 basis points of EBITDA margin expansion for the year,' supported by cost controls and organizational simplification. Management sees further upside in its B2B and advertising businesses, which are less exposed to U.S. consumer trends, and highlighted ongoing investment in AI to drive both product experience and internal productivity. Gorin noted, 'While none of us can predict with certainty how the economy will evolve, we do know that people will always want to travel.'
Management attributed the quarter's results to the resilience of its B2B and advertising segments, offset by softness in its core U.S. consumer business and external macroeconomic pressures.
B2B segment momentum: Expedia's B2B business, which provides travel technology and inventory to third-party partners, posted 14% bookings growth and continued to diversify the company's geographic exposure. Management cited particularly strong performance in the Asia-Pacific region, with room nights up 30% year-over-year.
Advertising revenue acceleration: The advertising business grew revenue by 20% as Expedia added more partners, optimized existing ad products, and launched new offerings such as video ads. Management noted a 'record number of $1 million plus deals' and a 22% increase in active hotel partners using sponsored listings.
Product and supply innovation: New supply additions—including Southwest Airlines in the U.S. and Ryanair in Europe—helped attract new customers. Early results showed that a significant portion of travelers booking these airlines were new to Expedia, supporting management's 'supply flywheel' strategy.
AI-driven product enhancements: Expedia continued to integrate artificial intelligence into its platform, including AI-powered property Q&A, dynamic deal discovery, and partnership integrations with OpenAI and Microsoft Copilot. Management described AI as an accelerator for both customer experience and internal efficiency.
Disciplined cost management: The company emphasized restructuring efforts, with a reduction of about 4% of employees and 7% of contractors since last year, and targeted overhead savings. These actions were credited with driving EBITDA margin expansion and underpinning increased full-year margin guidance.
Expedia's management expects international B2B and advertising growth, disciplined cost control, and further AI adoption to drive performance this year amid continued U.S. market headwinds.
International and B2B diversification: Management believes continued double-digit growth in the B2B segment and strategic expansion in international markets will offset U.S. consumer softness. The B2B business's exposure to both corporate and leisure travel partners globally is seen as a buffer against localized economic weakness.
Operational efficiency and restructuring: The company projects that recent organizational streamlining and ongoing cost review will drive 75 to 100 basis points of EBITDA margin expansion in 2025. Management indicated that savings from workforce reductions are expected to benefit margins over the next three quarters, with some reinvestment into strategic priorities.
Evolving consumer and pricing trends: Management highlighted a shift among travelers toward lower-rate plans and increasing hotel partner discounting. There is also ongoing uncertainty around U.S. travel demand and inbound travel, which could continue to pressure the consumer segment. However, the company is focused on leveraging packaging, loyalty, and bundling capabilities to maintain engagement and value for partners.
In future quarters, StockStory analysts will monitor (1) trends in U.S. and inbound travel demand for signs of stabilization or further weakness, (2) the ability of B2B and advertising segments to sustain double-digit growth despite macroeconomic uncertainty, and (3) progress on margin expansion from cost reduction and AI-driven efficiencies. Execution on new supply partnerships and customer engagement features will also be key markers of strategic success.
Expedia currently trades at a forward EV/EBITDA ratio of 7.1×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it's free).
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