Expedia’s Margins Surpass Expectations Amid AI and B2B Surge

Date of Call: Feb 12, 2026

Financials Results

• Revenue: $3.5B, up 11% YOY
• EPS: $3.78 per diluted share, up 58% YOY
• Operating Margin: EBITDA margin of 24%, up nearly 4 points YOY

Guidance:

• Q1 gross bookings growth expected between 10% to 12% (includes ~3 points FX tailwind).
• Q1 revenue growth expected between 11% to 13% (includes ~4 points FX tailwind).
• Q1 EBITDA margin expected up 3 to 4 points.
• Full year 2026 gross bookings growth expected between 6% to 8% (includes 1 point FX tailwind).
• Full year 2026 revenue growth expected between 6% to 9% (includes 2 points FX tailwind).
• Full year 2026 EBITDA margin expected to expand 100 to 125 basis points.

Business Commentary:

Revenue and Bookings Growth:

• Expedia Group reported gross bookings growth of 11% and revenue growth of 11% for Q4 2025.
• The growth was driven by strong performance in both B2C and B2B segments, particularly a 24% increase in B2B bookings and a 19% increase in advertising revenue.

Margin Expansion:

• The company expanded its EBITDA margin by nearly 4 points in Q4 2025.
• This was attributed to revenue growth, expense leverage, and cost optimization, particularly within the B2C direct sales and marketing.

B2B and Advertising Strength:

• B2B gross bookings grew 24% to $8.7 billion, with double-digit growth across all regions.
• Advertising revenue grew by 19%, supported by the expansion of new ad formats and increased marketing activities with partners.

Supply and Inventory Expansion:

• Expedia increased its lodging property count by over 10% compared to 2024.
• This expansion was aimed at providing travelers with more choices and better value, enhancing the company's competitive advantage.

AI and Product Enhancements:

• The company is leveraging AI to enhance product personalization and improve the traveler experience across its brands.
• This includes using AI for personalized recommendations, natural language engagement, and optimizing inventory management.

Sentiment Analysis:

Overall Tone: Positive

• Management stated they 'accelerated both bookings and revenue growth and expanded margins,' 'exceeded our expectations,' and are 'well positioned to build on our momentum.' They noted 'strong bookings momentum,' 'clear momentum across our strategic priorities,' and are 'confident in our strategy and our ability to execute to drive long-term value.'

Q&A:

• Question from Mark Stephen Mahaney (Evercore ISI): Could you talk about product/features to enhance travel planning and capture more people up the funnel? Also, talk about B2C marketing leverage and other sources of leverage.
  Response: CEO: It starts with personalized marketing to make brands top-of-mind; product improvements include AI agents and natural language flows for trip planning. CFO: B2C marketing leveraged ~50 bps YOY through discipline, improved targeting, and reallocation; more of the same expected in 2026.

• Question from Eric Sheridan (Goldman Sachs): How would you characterize current competitive positioning of consumer-facing brands and realignment progress?
  Response: CEO: Feels good about brand positioning after 12-18 months of work (Expedia as one-stop shop, Hotels.com as hotel pure play, Vrbo as vacation rental marketplace). Brands are in a healthy place for growth, with international growth stronger than U.S.

• Question from Jed Kelly (Oppenheimer & Co.): What is the vision for the business's medium-term margin trajectory?
  Response: CEO: Sees more margin expansion ahead from effective execution, scale, and growth in B2C, B2B, ads, supply, and AI. CFO: Q1 margin expansion will be strong (3-4 points), but full-year 2026 expansion will be more muted (100-125 bps) due to prior cost actions lapping.

• Question from Conor Cunningham (Melius Research): How has the 10% supply growth trended into Q1 2026, and parse branded vs. non-branded hotel growth?
  Response: CEO: Supply growth continues; AI has sped up property onboarding. Business is growing, and work with LLMs (like Google) aims to surface brands better. The 'pie will expand' as long as Expedia delivers strong value propositions.

• Question from Jacob Seed (TD Cowen): Is Expedia seeing changes in traffic from Google's AI features? And talk about B2B direct sales & marketing costs drivers.
  Response: CEO: Not seeing material changes yet; experimenting aggressively with AI integrations to reach more travelers. B2B marketing costs align with revenue growth (24%) as it's a commission model recognized at time of stay.

• Question from Kenneth Gawrelski (Wells Fargo): What drives B2B growth and margin pressure? Is 2025 B2B margin the long-term norm?
  Response: CFO: B2B growth driven by partner wins, supply work, marketing investments, and product innovation. Margin pressure from near-term investments in growth initiatives; long-term outlook not specified. CEO: Team is adding partners and innovating, with confidence in future growth.

• Question from Deepak Mathivanan (Cantor Fitzgerald): How are AI experiences developed (current LLMs vs. custom)? What tech investments are needed?
  Response: CEO: AI used for personalization and natural language engagement; both approaches live side-by-side. Platform is grounded in company data and evolving with partnerships. CFO: Tech spend is continual to keep platform contemporary; reshaping teams to be more efficient while investing in AI talent.

• Question from Naved Khan (B. Riley Securities): What is the mix and growth for alternative lodging (vacation rentals) vs. hotels? Also, talk about 2026 CapEx.
  Response: CEO: Alternative lodging on Brand Expedia is growing but not at maximum potential; progress made in 2025 with UX changes and inventory additions. CFO: 2026 CapEx expected roughly in line with 2025.

• Question from Lee Horowitz (Deutsche Bank): Does 2026 outlook assume B2C accelerates above 5%? And urgency to invest in loyalty as chatbots take over customer relationships?
  Response: CFO: Full-year guide high end implies stable, healthy growth on constant currency basis; no material shift expected between business units. CEO: Urgency to build trust and value for travelers; loyalty is one part, but reviews, customer service, and reliability are also key.

• Question from Trevor Young (Barclays): Was supply growth largely B2B? And is there B2C opportunity from the Tiqets acquisition?
  Response: CEO: Supply growth (10% properties) flows to both B2C and B2B. Tiqets acquisition is for B2B but expertise will benefit B2C product development.

Contradiction Point 1

B2C Marketing Leverage and Future Potential

Contradiction on the potential for future marketing leverage.

What are your key insights on the current earnings performance? - Mark Stephen Mahaney (Evercore ISI Institutional Equities)

2025Q4: B2C marketing has already leveraged about 50 basis points as a percentage of gross bookings value (GBV) through disciplined efficiency improvements... This discipline will continue into 2026. - [Scott Schenkel](CFO)

What new products or features are being rolled out to enhance travel planning and capture more users up the funnel? How much additional B2C marketing leverage is available going forward, and are there other sources as impactful as previously achieved? - Lee Horowitz (Deutsche Bank)

20251107-2025 Q3: The team is agile. If conversion and traffic metrics improve, they can lean into marketing to drive volume. - [Scott Schenkel](CFO)

Contradiction Point 2

Growth and Positioning of Alternative Lodging (Vacation Rentals) on Brand Expedia

Contradiction on the growth outlook for alternative lodging on Expedia.

What is your outlook for the company's financial performance in the next quarter? - Naved Khan (B. Riley Securities, Inc.)

2025Q4: Alternative lodging on Brand Expedia is growing, but there is still significant upside. - [Ariane Gorin](CEO)

What is the current mix and growth trends of alternative lodging (e.g., vacation rentals) versus hotels on Expedia's platform, and what is the CapEx outlook for 2026? - Kenneth Gawrelski (Wells Fargo Securities, LLC)

20251107-2025 Q3: Vacation rentals are also being distributed through B2B partners, opening new demand channels for vacation rental owners. - [Ariane Gorin](CEO)

Contradiction Point 3

Impact of AI on Traffic and Marketing Effectiveness

Contradiction on the material impact of AI on traffic.

What are your thoughts on the recent market trends? - Jacob Seed (TD Cowen)

2025Q4: No material changes in traffic from Google yet, but the company is experimenting aggressively with AI features like answer engine optimization and agentic browsers. - [Ariane Gorin](CEO)

Is Expedia seeing changes in Google traffic from advanced AI travel features? What drives the 27% YoY rise in B2B direct sales and marketing costs, and how will this trend continue in 2024? - Mark Stephen Mahaney (Evercore ISI)

20251107-2025 Q3: It’s still early days; volume is small but growing. Quality seems good... - [Ariane Gorin](CEO)

Contradiction Point 4

Competitive Positioning of Consumer-Facing Brands

Contradiction on the portrayal of brand positioning progress and confidence level.

What are your key insights on the current market conditions? - Eric Sheridan (Goldman Sachs Group, Inc.)

2025Q4: The positioning of all three brands (Expedia, Hotels.com, Vrbo) is strong after significant work over the past 12-18 months. - [Ariane Gorin](CEO)

What is the current competitive positioning and realignment of your consumer-facing brands, and is further work needed to achieve normalized growth by 2026? - Justin Post (BofA Securities, Research Division)

2025Q3: The last 12-18 months have focused on sharpening each brand's value proposition. This work drove strong performance... - [Ariane Gorin](CEO)

Contradiction Point 5

Medium-Term Margin Expansion Trajectory

Contradiction on the expected pace and drivers of future margin growth.

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2025Q4: More margin expansion is expected as the company executes more effectively, scales, and invests in growth areas... Confidence is high due to potential in these areas. - [Ariane Gorin](CEO)

How do you see the business's margin trajectory evolving in the medium term? - Mark Stephen Mahaney (Evercore ISI Institutional Equities, Research Division)

2025Q3: Margin expansion is driven by multiple factors: ongoing optimization... improvements in cost of sales through AI and expense management, continued focus on reducing overhead, and favorable mix dynamics... - [Scott Schenkel](CFO)