Is Booking (BKNG) Still a Buy Despite Slowing Growth and a Volatile Outlook?

Booking Holdings (BKNG) has long been a bellwether for the travel industry's resilience, but the question now is whether its recent performance justifies its premium valuation in an era of macroeconomic headwinds. The company's Q2 2025 results, while impressive, reveal a mixed picture: robust short-term execution, strategic AI-driven innovation, and a cautious outlook amid rising geopolitical risks. Let's dissect the numbers, assess the long-term sustainability of its growth, and determine whether BKNG remains a compelling buy.

Q2 2025: A Strong Outperformance, But With Cautious Signals

Booking's Q2 2025 report was a standout. Revenue surged 16% to $6.8 billion, crushing the $6.54 billion estimate, while adjusted EPS hit $55.40—a 32% YoY jump, well above the $50.14 forecast. This performance was driven by a 13% increase in gross bookings ($46.7 billion) and 8% growth in room nights (309 million). The company's adjusted EBITDA rose 28% to $2.4 billion, reflecting disciplined cost management and the scalability of its digital platform.

However, GAAP net income fell to $895 million ($27.43/share) from $1.52 billion ($44.38/share) in Q2 2024, a 41% decline. This gap between GAAP and adjusted metrics underscores the impact of non-operational factors, such as foreign exchange volatility and higher operating expenses. While the company's cash flow remains robust ($800 million in working capital-driven free cash flow), its $18.99 billion debt load and negative equity position raise concerns about leverage.

Valuation: Premium Growth, But Is It Justified?

BKNG's valuation appears stretched. Its forward P/E of 24.38 is above the Travel & Leisure industry average of 22.48, while its PEG ratio of 1.44 suggests the stock is priced for growth that outpaces its 5-year EBITDA growth rate of 27.10%. This premium reflects investor confidence in Booking's AI-driven innovation and global scale but also highlights the risk of a re-rating if growth slows.

The company's debt-heavy balance sheet further complicates the valuation. With $18.99 billion in debt and only $18.2 billion in cash and investments, BKNG's liquidity is secure, but its debt-to-equity ratio remains elevated. In a rising interest rate environment, this could pressure margins. Conversely, its 86.70% gross margin and 33.19% operating margin—among the highest in the industry—provide a buffer against macroeconomic shocks.

Competitive Edge: AI and Connected Trips

Booking's strategic investments in AI and digital transformation are paying off. The AI Trip Planner, Penny (Priceline's AI assistant), and OpenTable's AI Concierge are enhancing user engagement and driving cross-selling in non-accommodation verticals like flights and attractions. These tools have boosted connected trip transactions by 40% YoY in 2024, creating a “flywheel” of data-driven personalization and customer loyalty.

Airbnb, by contrast, is playing catch-up. While it dominates the short-term rental market (44% share), its cautious AI approach and focus on core listings leave it vulnerable to Booking's broader ecosystem. Airbnb's Q2 2025 guidance—$2.99–$3.05 billion in revenue, with flat average daily rates—highlights the challenge of competing against Booking's AI-powered diversification.

Macro Risks: Debt, Geopolitics, and Currency Volatility

The travel sector's exposure to macroeconomic risks is no secret. Currency fluctuations in emerging markets (e.g., Brazil, Mexico) and geopolitical tensions could erode Booking's margins. Additionally, the company's $16.5 billion debt load becomes a liability if interest rates remain elevated or if global demand weakens.

Yet Booking's financial flexibility—$9.58 billion in 12-month operating cash flow and $8.48 billion in free cash flow—provides a safety net. The company is also on track to realize $350 million in annual cost savings from its transformation program, which offsets some of these risks.

Long-Term Outlook: Can AI Sustain Growth?

Booking's long-term thesis hinges on its ability to leverage AI to expand its “total travel wallet.” With 30%+ growth in connected trip offerings and a 35% year-over-year surge in multi-vertical transactions, the company is capturing a larger share of each customer's spending. This diversification reduces reliance on accommodations and insulates it from sector-specific downturns.

However, the path forward isn't without challenges. The Q3 2025 guidance of 7–9% revenue growth (below the 8.8% expectation) signals slowing momentum. Management cited “higher prior-year comparisons in August and September” and macroeconomic uncertainty as headwinds. For full-year 2025, BKNG expects low double-digit growth in gross bookings and revenue, with adjusted EBITDA margins expanding by 125 basis points.

Is BKNG Still a Buy?

The answer depends on your risk tolerance and time horizon. On the bullish side:
- Strong execution: Q2 results beat on all metrics, driven by AI and digital transformation.
- High gross margins: 86.70% gross margin provides resilience.
- AI moat: Booking's AI tools are outpacing competitors and driving customer retention.
- Bullish analyst consensus: A $5,622.82 average price target (0.57% above current) reflects confidence.

On the bearish side:
- Premium valuation: A PEG of 1.44 and forward P/E above the sector average suggest overvaluation.
- Debt concerns: $18.99 billion in debt and negative equity pose risks in a rate-hike environment.
- Macro headwinds: Geopolitical tensions and currency volatility could disrupt growth.

Investment advice: For long-term investors, BKNG remains a compelling buy due to its AI-driven innovation and dominant market position. The stock's 2.08% post-earnings dip offers a potential entry point for those comfortable with the valuation premium. However, short-term traders should monitor the July 29 earnings report and Q3 guidance for signs of deceleration. If Booking can maintain its 15.6% EPS growth trajectory and expand margins, the stock could outperform the sector.

In a world where travel demand remains resilient and AI reshapes the industry, Booking Holdings is well-positioned to adapt. The question isn't whether it can grow—it's whether the market is pricing its future correctly. For now, the answer leans toward “yes,” but vigilance is key in these volatile times.