Executive Summary / Key Takeaways

• Expedia Group delivered strong third-quarter 2025 results, exceeding expectations with 12% gross bookings growth and 9% revenue growth, driven by an improved demand environment and disciplined execution.
• The company's B2B segment continues its exceptional performance, achieving 26% bookings growth in Q3 2025, marking its 17th consecutive quarter of double-digit expansion, significantly diversifying Expedia's geographic mix.
• Expedia is leveraging a unified technology platform and aggressive AI integration across its products, operations, and marketing, yielding tangible benefits like enhanced personalization, increased conversion, and improved internal efficiencies.
• A strategic focus on revitalizing its core B2C brands (Expedia, Hotels.com, Vrbo) and disciplined cost management, including significant marketing leverage, is driving substantial Adjusted EBITDA margin expansion.
• Despite macroeconomic uncertainties and competitive pressures, Expedia Group has raised its full-year 2025 guidance, projecting continued profitable growth and further margin expansion into 2026, supported by robust free cash flow and a reinstated dividend.

Powering Global Travel: Expedia's Strategic Evolution and Technological Edge

Expedia Group, Inc., founded in 1996, has evolved into a global online travel powerhouse, committed to "powering global travel for everyone, everywhere." The company's core business model is diversified across three main segments: B2C, B2B, and trivago, offering a comprehensive suite of travel services from lodging and flights to car rentals and activities. This broad portfolio, encompassing brands like Expedia.com, Hotels.com, and Vrbo, positions Expedia as a versatile player in the highly competitive online travel industry.

A pivotal element of Expedia's recent transformation has been the unification of its technology, product, data engineering, and data science teams, a process largely completed between 2020 and early 2024. This initiative migrated core B2C brands like Hotels.com (2022) and Vrbo (2023) onto a unified Brand Expedia technology front-end infrastructure. This shared platform infrastructure is designed to develop configurable technical capabilities that support various travel products using simpler, standard architecture and common applications, enabling the company to ship new capabilities and features faster, create a foundation for more innovative solutions, and achieve greater economies of scope and scale.

Expedia's technological differentiation is increasingly centered on its aggressive integration of Artificial Intelligence (AI). Since early 2025, AI has been embedded into various product experiences, including AI filters, property Q&A, guest review summaries, and service agents, driving enhanced engagement and effectiveness. For instance, new design flows in lodging search and post-booking paths, coupled with enhanced AI recommendation models, have led to double-digit growth in vacation rentals and record attach rates for additional services. Internally, AI is significantly improving operational efficiency; virtual agents now resolve over 50% of traveler queries, and when human support is necessary, AI delivers concise summaries to agents, reducing service costs per transaction. Engineering teams have also broadly adopted AI-powered developer assistance, leading to reduced cycle times by more than 20% in some teams and faster feature delivery. This technological leadership not only strengthens Expedia's competitive moat by enhancing traveler experience and operational efficiency but also contributes directly to financial performance through lower costs and improved conversion.

In the competitive landscape, Expedia Group faces formidable rivals such as Booking Holdings and Airbnb , as well as metasearch companies like its own trivago and TripAdvisor (TRIP), and even tech giants like Google (GOOGL), which increasingly prioritizes its own travel products. While Booking Holdings often demonstrates greater efficiency in user acquisition and retention, and Airbnb excels in the niche, experience-based alternative accommodations market, Expedia's strength lies in its diversified offerings and integrated travel ecosystem. The company's ability to offer comprehensive packages, combine flights and hotels, and leverage its B2B segment provides a unique value proposition. Expedia's strategic partnerships, such as listing Southwest Airlines (LUV) and Ryanair (RYAAY) inventory, further enhance its supply and attract new customers, directly impacting its ability to compete effectively.

Strategic Pillars and Operational Momentum

Expedia's strategy for 2025 is built on three pillars: delivering more value for travelers, investing in growth opportunities, and driving operating efficiencies. The company's recent performance underscores the effectiveness of this approach.

The B2B segment has been a standout performer, consistently delivering double-digit growth. In the third quarter of 2025, B2B bookings surged by 26%, contributing significantly to the company's overall gross bookings increase. This growth is broad-based, with 65% of the B2B business originating outside the U.S., and Rapid API emerging as the fastest-growing product. The B2B segment's success is fueled by strong product differentiation, solid execution, and a focus on expanding its reach through diverse partnerships, including airlines, offline travel agents, and corporate travel management companies.

Advertising revenue also demonstrated robust growth, increasing by 16% in Q3 2025 and 18% for the nine months ended September 30, 2025. This segment benefits from momentum across core product offerings, the addition of new partners, and the delivery of new advertising solutions, including video ads and AI-driven bid optimization tools. Advertising is a high-margin business for Expedia, and the company sees significant opportunities for continued expansion, particularly outside North America and by monetizing more areas of its platforms.

In the B2C segment, where Expedia faces intense competition, the company is focused on sharpening the value propositions of its three major brands. Brand Expedia continues to be the largest and fastest-growing consumer brand, leveraging its strength as a "one-stop shop" for packages and scaling newer products like vacation rentals. Hotels.com, which experienced challenges during the platform migration, is seeing a revitalization with a brand relaunch, new visual identity, and product capabilities like "Save Your Way" and hotel price insights. Vrbo, specializing in whole-home alternative accommodations, is strengthening its pure-play value proposition through new features like member deals and a promotions suite, which accounted for over 20% of its bookings in Q3 2025.

The One Key unified loyalty program, launched in the U.S. and U.K. and expanded to 11 new markets, is a critical component of Expedia's strategy to drive repeat and direct bookings. Active loyalty members grew mid-single digits, with the fastest growth observed among Silver members and above. Strategic adjustments, such as removing the "always on earn" for Blue tier loyalty members on Vrbo, reflect a disciplined approach to optimize loyalty program returns and ensure sustainable growth.

Financial Health and Outlook

Expedia Group's financial performance in Q3 2025 showcased significant strength. The company reported revenue of $4.41 billion, a 9% increase year-over-year, and net income attributable to Expedia Group, Inc. of $959 million. Diluted earnings per share (EPS) reached $7.33, up from $5.04 in the prior year. Adjusted EBITDA for the quarter was $1.45 billion, representing a 16% increase year-over-year, with a margin of 33%. This margin expansion was primarily driven by revenue growth exceeding operating costs, disciplined cost management, and significant marketing leverage in the B2C segment.

The company's cost structure reflects ongoing efficiency initiatives. Cost of revenue decreased by $12 million in Q3 2025, driven by transactional efficiencies in payments and customer service. Technology and content expense also saw a reduction, primarily due to lower salary costs and cloud spending optimization. While direct selling and marketing expenses increased due to higher B2B partner commissions, the B2C segment achieved significant marketing leverage, with direct sales and marketing down 4% and leveraging over 0.5 point as a percentage of gross bookings.

Expedia maintains a robust liquidity position, with $6.20 billion in unrestricted cash and short-term investments as of September 30, 2025, and an untapped $2.50 billion revolving credit facility. The company actively manages its debt, having successfully refinanced $1 billion of senior notes in February 2025, and maintains investment-grade credit ratings.

Free cash flow on a trailing 12-month basis was $3 billion, underscoring the strength of its operating model. Expedia's commitment to shareholder returns is evident in the reinstatement of its quarterly common stock dividend of $0.40 per share and ongoing share repurchase program, which has reduced the share count by 22% net of dilution over the last three years.

Looking ahead, Expedia Group has raised its full-year 2025 guidance, expecting gross bookings and revenue growth of approximately 7% and 6% to 7%, respectively, with Adjusted EBITDA margins projected to expand by approximately 2 points year-over-year. For Q4 2025, the company anticipates gross bookings and revenue growth of 6% to 8%, with Adjusted EBITDA margins expanding by approximately 2 points. Management also provided a preliminary outlook for 2026, expecting further margin expansion, albeit at a more moderated pace, driven by continued cost-out efforts and investments in growth initiatives.

Risks and Competitive Dynamics

Despite the positive momentum, Expedia Group operates in a dynamic environment with inherent risks. Global macroeconomic and geopolitical pressures, including currency fluctuations and energy price volatility, can impact travel demand and consumer discretionary spending. While U.S. travel demand showed improvement in Q3 2025, earlier softness in the first half of the year highlights the market's sensitivity. The company also faces increasing scrutiny from domestic and international taxing authorities, including "pay-to-play" requirements in some jurisdictions and ongoing VAT and withholding tax audits, which could impact liquidity and financial results. As of September 30, 2025, Expedia recorded a $90 million reserve for a proposed Italian withholding tax.

The online travel market remains intensely competitive. Beyond direct rivals like Booking Holdings (BKNG) and Airbnb (ABNB), Expedia faces competition from search engines prioritizing their own travel products and emerging AI-powered digital planning tools. Hotel chains are also aggressively pursuing direct bookings, potentially impacting Expedia's market share. Expedia's strategy to counter these forces involves continuous innovation in its products, leveraging its diversified brand portfolio, and deepening partner relationships to offer unique value propositions. The company's ability to maintain or grow market share, particularly in its B2C segment, will depend on its execution of brand-specific strategies and its capacity to adapt to evolving traveler behaviors and technological advancements.

Conclusion

Expedia Group is demonstrating a compelling investment thesis, driven by a successful technological transformation, a revitalized brand strategy, and disciplined financial management. The company's unified platform and extensive AI integration are not merely buzzwords but are yielding quantifiable benefits in operational efficiency, traveler experience, and ultimately, financial performance. The robust growth in its B2B and advertising segments, coupled with the strategic repositioning of its core B2C brands, provides a strong foundation for sustained expansion.

With a healthy liquidity position, a commitment to shareholder returns through dividends and share repurchases, and a clear roadmap for continued margin expansion, Expedia Group is well-positioned to capitalize on the enduring demand for travel. While macroeconomic headwinds and intense competition remain persistent factors, Expedia's strategic agility, technological leadership, and focus on delivering value for both travelers and partners underscore its potential for long-term profitable growth in the evolving global travel marketplace.