EXPE Q2 Deep Dive: B2B and International Growth Offset U.S. Travel Softness

Online travel agency Expedia (NASDAQ:EXPE) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 6.4% year on year to $3.79 billion. Its non-GAAP profit of $4.24 per share was 2.7% above analysts’ consensus estimates.

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StockStory’s Take

Expedia’s second quarter results were shaped by a robust performance in its B2B and international businesses, offsetting continued softness in the U.S. leisure travel market. Management pointed to resilience among higher-end consumers and strong execution of strategic priorities, including investments in supply partnerships and loyalty initiatives. CEO Ariane Gorin highlighted the positive impact of new supply, such as the partnership with Southwest Airlines and Premier Inn, as well as improved conversion rates driven by AI-powered product enhancements. CFO Scott Schenkel emphasized that cost discipline, particularly in direct marketing and customer service, contributed to increased operating efficiency.

Looking forward, Expedia’s guidance is driven by expectations of sustained momentum in B2B and advertising, ongoing international expansion, and further integration of AI across its platforms. Management believes that continued investment in technology and a focused approach to key markets will support revenue growth and margin expansion. Gorin stated, “We are working with all large tech partners to ensure our brands are visible in emerging AI-driven travel search channels,” while Schenkel noted that additional cost actions and productivity gains are anticipated to bolster profitability in the second half of the year.

Key Insights from Management’s Remarks

Management attributed second quarter outperformance to growth in B2B and advertising, operational efficiencies, and product enhancements, while also acknowledging challenges in the U.S. consumer market.

• B2B and advertising strength: The B2B segment delivered its 16th consecutive quarter of double-digit growth, particularly in Asia and Europe, reflecting the success of partner integrations and new API offerings. Advertising also grew at a double-digit pace, driven by new ad formats and increased automation, with management citing a record number of active partners and rising partner engagement.
• International expansion gains: Bookings outside the U.S. grew at a high single-digit rate, with notable strength in Asia (nearly 20%) and select markets such as Japan and Brazil. Management credited a focused approach to market selection and tailored brand strategies for driving outsized growth in these regions.
• Product innovation and AI integration: The company continued to roll out AI-powered features, including enhanced search filters and personalized insurance products, which have improved conversion rates and customer satisfaction. In addition, AI has enabled faster product development cycles and contributed to operating cost reductions.
• Loyalty program momentum: Expedia’s loyalty membership base grew at a high single-digit rate, with faster growth among higher-tier members. Management highlighted the program’s evolving structure, tailored to individual brands, as a driver of repeat business and retention.
• Supply partnerships and promotional activity: New partnerships, such as with Southwest Airlines and Premier Inn, expanded inventory and supported air ticket sales outpacing the market. The company also saw increased use of supplier-driven promotions in response to heightened U.S. consumer price sensitivity.

Drivers of Future Performance

Expedia expects continued B2B and advertising momentum, expanding international presence, and operational efficiencies to drive revenue and margin growth, while monitoring U.S. consumer trends and competitive pressures.

• Growing B2B and ad businesses: Management anticipates B2B and advertising to remain primary growth engines, supported by new product rollouts and geographic expansion, particularly in fast-growing Asian markets. These businesses are expected to provide margin stability due to their scale and diversification.
• Operational efficiency and cost actions: The company plans to build on recent cost reduction efforts, aiming for further improvements in marketing leverage and overhead productivity. AI-driven automation and disciplined expense management are expected to underpin adjusted EBITDA margin expansion in the coming quarters.
• Consumer business and U.S. market risks: While international markets are expected to drive incremental growth, management remains cautious about the U.S. travel recovery, noting persistent uncertainty and price sensitivity among lower-end consumers. The company will continue to optimize promotional strategies and loyalty offerings to maintain competitiveness.

Catalysts in Upcoming Quarters

In the coming quarters, key factors to watch will include (1) the pace of B2B and advertising growth, especially in Asia and Europe; (2) operational efficiency gains from AI integration and cost actions; and (3) signs of a rebound or further weakness in U.S. leisure travel demand. Execution on loyalty program improvements and the rollout of new supply partnerships will also be important indicators of progress.

Expedia currently trades at $192.11, up from $188.16 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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