VALUATION HIGHLIGHTS

1. Retail constitutes 55% of the Trefis price estimate for Expedia's stock.
2. B2B constitutes 39% of the Trefis price estimate for Expedia's stock.

WHAT HAS CHANGED?

1. Expedia's Q4 2025 Snapshot

Expedia Group reported a strong Q4 2025, with adjusted earnings per share of $3.78, beating consensus estimates by roughly 9%. Revenue came in at $3.55 billion, up 11% year over year, driven by double-digit growth in gross bookings and a 9% increase in room nights booked. The B2B segment led growth with a 24% rise in gross bookings, while B2C bookings grew more modestly at 4–5%. Lodging gross bookings rose 13%, and adjusted EBITDA expanded, reflecting margin improvement from cost discipline and a favorable mix. The company ended the year with $5.7 billion in cash, returned capital through share repurchases of 9 million shares, and increased its quarterly dividend.

2. Looking Ahead

The company expects full-year gross bookings to be in the range of approximately $127 billion to $129 billion, slightly above consensus, underpinned by continued strength in business-to-business demand and travel activity. Management signalled that profit margin expansion may moderate compared with 2025, with first‑quarter adjusted core profit margin expected to rise 3 to 4 percentage points but the full‑year margin increase forecast more modestly at about 1 to 1.25 percentage points amid macroeconomic uncertainty and cost mix dynamics.

BUSINESS SUMMARY

Expedia (NASDAQ: EXPE) is the second-largest online travel service provider in the world, in terms of revenue. It operates online travel portals such as expedia.com, hotels.com, and hotwire.com, that help connect travelers with travel suppliers, such as hotels, airlines, cruises, and car rental companies.

While serving as a global travel marketplace, Expedia broadly makes money by either (i) acting as a travel agent and charging a commission (known as the processing fee or the booking fee) on every transaction, or by (ii) acting as a merchant and purchasing the travel inventory (air tickets and hotel stays) from the travel providers (airlines and hotels) in bulk at discounted prices and selling the same to the customers at a premium. In addition, Expedia sells advertising on its websites, and companies (mostly travel suppliers, hotels, and airlines) either pay-per-click or pay a flat fee for the duration of advertising.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Expedia’s value that present opportunities for upside or downside to the current Trefis price estimate:

• B2B Revenue Growth: The company’s B2B business has delivered consistent double‑digit growth, with around 24% growth in Q4 and strong booking momentum, suggesting continued share gains as Expedia expands its product offerings and partnerships beyond core lodging. We expect Expedia's B2B revenues to increase gradually from $4.8 billion currently to $8.5 billion by the end of our forecast period. However, there can be an upside of close to 10% if this figure ends up around $11 billion by the end of our forecast period. This scenario is likely if market penetration, strategic partnerships, AI-driven efficiency, and favorable macroeconomic conditions converge, enabling Expedia to capture both higher booking volumes and recurring, high-margin revenue fueled by online growth and expansion into underpenetrated markets.


• EBITDA Margin: Expedia's EBITDA margins have increased from 20.9% in FY 2023 to 23.8% in FY 2025, due to improved revenue mix, operational efficiency, higher-margin streams, and disciplined reinvestment. We estimate this figure to stabilise at current levels over our forecast period. There could be a downside of about 10% to our price estimate if lower-margin bookings, rising costs, and macroeconomic weakness lead to a decline in margins to about 22.3% by the end of our forecast period. On the contrary, if the retailer keeps growing in high-margin B2B/lodging segments, AI efficiency, and advertising scale and margins reach 28%, there can be a 10% upside to our price estimate.

KEY TRENDS

The following factors determine the fate of the online travel industry:

Macroeconomic Environment


Leisure travel is discretionary, and online travel providers earn revenue proportional to travel bookings. Corporate travel serves as a leading indicator of business activity. Consumer confidence, employment levels, and disposable income directly influence demand, while advertising revenues benefit from higher business activity but can be impacted by economic uncertainty.


Foreign Exchange


Leisure travelers generally do not hedge against foreign exchange fluctuations. Spot FX rates influence demand for international travel, with weaker home currencies making foreign travel more expensive. Travel providers earn revenue from international bookings but report most expenses in dollars, so adverse FX movements can affect margins. Growing bookings from emerging markets increase exposure to currency risk.


Fuel Prices

• Rising fuel costs increase airfares and can indirectly reduce bookings for flights, hotels, and other travel services, impacting overall revenue.
• Higher fuel costs can reduce discounts offered to travel agencies under merchant models, affecting revenue margins for providers like Expedia.



Significant impact of unforeseen events on travel

• Unpredictable events, including natural disasters, geopolitical tensions, or public health crises, can sharply reduce bookings. Travel demand can rebound quickly, but such risks remain a constant factor for online travel providers.



Internet Penetration


High global internet penetration supports online travel bookings. Growth in e-commerce and digital adoption benefits providers like Expedia, particularly in emerging markets where online travel penetration is still expanding.


Airline Industry

• Fuel is the largest cost for airlines, making them vulnerable to price volatility. Many airlines hedge fuel costs to manage risk.
• Demand for flights correlates closely with economic growth. Strong travel demand supports higher occupancy rates and profitability, which in turn benefits online travel providers.
• Airlines are growing revenue through ancillary services such as baggage fees, in-flight WiFi, and premium seating.
• Low-cost carriers continue to expand market share, attracting price-sensitive travelers.
• Industry consolidation has improved profitability and disciplined capacity growth, supporting stable air travel volumes for online travel providers.



Hotels and Lodging Industry

• Hotel occupancy and average daily rates are key drivers of revenue for online travel providers. Higher occupancy and rates support bookings and profitability.
• Hotel bookings generate higher revenue margins compared with air travel, making them a critical revenue source.
• Markets in Europe, Asia, and other regions remain fragmented, providing growth opportunities for online travel agencies partnering with independent properties under merchant models.



Online travel services are a highly competitive niche segment within the travel industry

• Competition remains intense. Providers offer promotions, loyalty programs, and value-added services to capture bookings.
• Consumer shopping behavior increasingly involves visiting multiple sites before booking, reducing advertising efficiency and increasing marketing spend relative to gross profit.



Threat from Online Search Engines


Large search engines with substantial traffic and commerce expertise are expanding into travel, creating competitive pressure for U.S. and international bookings.