Expedia's International Grit Can't Fully Offset U.S. Demand Slump

Expedia Group’s Q1 2025 results highlight a travel industry in transition. While the company’s global reach and operational discipline helped it navigate turbulent demand, the U.S. market’s weakening performance has cast a shadow over its top-line growth. Shares dipped 5% in after-hours trading after the report, but a closer look at Expedia’s financials reveals a story of resilience—and lingering risks tied to discretionary spending.

Revenue Growth Stalls in U.S., Despite Global Gains

Expedia’s total revenue rose 3% year-over-year to $2.988 billion in Q1, but it fell short of expectations by $26 million. The miss was driven by a sluggish U.S. consumer, where weak demand for domestic and inbound travel dragged down B2C revenue by 1% YoY. This contrasted sharply with its B2B segment, which surged 14% thanks to stronger international bookings.

The lodging segment, a key revenue driver, saw gross bookings grow 5% YoY, fueled by B2B and Brand Expedia’s performance. Booked room nights rose 6% to 107.7 million, a sign that travelers are still moving, even if they’re spending less in key markets.

Profitability Improves, But Net Loss Widens

Expedia’s bottom line tells a more nuanced story. The company reported a net loss of $200 million, up 49% from a year ago, due to non-operational factors like stock-based compensation and foreign exchange losses. However, adjusted metrics shine brighter: adjusted net income jumped 81% to $53 million, while adjusted EBITDA rose 16% to $296 million. Adjusted EPS more than doubled to $0.40, far exceeding Wall Street’s $-0.41 estimate.

This divergence underscores Expedia’s focus on margin discipline. CEO Ariane Gorin emphasized “operational excellence” in her earnings call, noting cost controls and pricing strategies helped offset U.S. weakness. The company also returned $330 million to shareholders via buybacks, reinforcing its commitment to capital allocation even amid headwinds.

U.S. Softness vs. Global Resilience

The U.S. consumer remains Expedia’s Achilles’ heel. Economic uncertainty, rising interest rates, and cautious spending have slowed discretionary travel. Meanwhile, international markets—particularly Asia-Pacific and Europe—are compensating. These regions accounted for much of the B2B growth, while lodging bookings in these regions rose 5% overall.

Expedia’s global strategy is paying dividends. Its B2B platform, which connects travel agencies and corporations, now accounts for 36% of total gross bookings. This segment’s insulation from U.S. economic cycles gives the company a critical hedge against domestic slowdowns.

Risks and Opportunities Ahead

Investors should weigh two key factors: the durability of U.S. weakness and the pace of global recovery. While Expedia’s cash reserves ($5.7 billion) and strong free cash flow ($2.76 billion YoY) provide a buffer, prolonged softness in its largest market could strain growth targets.

On the positive side, Expedia’s adjusted EPS beat suggests the company can grow profitability even in a tough environment. Analysts remain bullish, with an average price target of $201.88—19% above current levels—reflecting confidence in its long-term strategy.

Conclusion: A Stock Split Between Resilience and Risk

Expedia’s Q1 results are a mixed bag, but they underscore its ability to navigate choppy waters. The company’s focus on B2B, margin discipline, and shareholder returns positions it to outperform peers if global travel demand continues its rebound. However, U.S. consumers remain a wildcard.

The data is clear: Expedia’s adjusted net income has grown at a 29% compound annual rate over the past three years, while its free cash flow has remained robust. Yet, the U.S. B2C segment—still a major revenue driver—needs to stabilize.

Investors should monitor two key metrics: lodging gross bookings in the U.S. (a leading indicator of consumer confidence) and the trajectory of B2B growth. If Expedia can replicate its international success domestically, it could reclaim its growth narrative. For now, the stock trades at a 15.7x forward P/E ratio, a discount to peers like Airbnb (24x), suggesting some skepticism around U.S. recovery.

In short, Expedia’s resilience in Q1 is a testament to its strategic agility. But until U.S. demand recovers, the stock will remain a test of investors’ patience—and their belief in a global rebound.