BKNG Q3 Deep Dive: Loyalty, AI Features, and Direct Bookings Drive Growth Amid Margin Pressures

Online travel agency Booking Holdings (NASDAQ:BKNG) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 12.7% year on year to $9.01 billion. Its GAAP profit of $84.40 per share was 10% below analysts’ consensus estimates.

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StockStory’s Take

Booking’s third quarter results were met with a positive market response, as revenue surpassed Wall Street expectations despite a shortfall in GAAP earnings per share. Management attributed the strong top-line performance to robust demand across both domestic and international markets, with notable acceleration in the U.S. driven by outbound travel and growth in the B2B business. CEO Glenn Fogel pointed to the success of the Connected Trip initiative and ongoing enhancements in the Genius loyalty program, emphasizing that these efforts led to a higher share of direct bookings and deeper customer engagement across multiple travel verticals.

Looking forward, Booking’s guidance is shaped by continued investment in AI-powered tools, product expansion across travel segments, and strategic marketing to drive direct and repeat bookings. Management stressed the importance of building an intelligence layer through generative AI to create more seamless, personalized travel experiences. CFO Ewout Steenbergen noted that while the company expects steady demand, macroeconomic uncertainties and rising competition—particularly in Asia—remain key watchpoints. Fogel stated, “We are building products that engage travelers, generate incremental demand and value for our partners and create differentiators.”

Key Insights from Management’s Remarks

Management cited multi-vertical product adoption, loyalty program growth, and AI-driven personalization as key drivers of third quarter performance, while also acknowledging the impact of a shifting channel mix on margins.

• U.S. growth acceleration: Booking saw higher growth in the U.S., supported by stronger outbound travel and increased B2B bookings. Management highlighted investments in brand awareness and improved direct channels as primary contributors to this momentum.
• Loyalty program expansion: The Genius loyalty program expanded its influence, with Levels 2 and 3 members now accounting for over 30% of the active user base and a mid-50% range of total room nights. These members tend to book more frequently and directly, driving higher retention and lower cancellation rates.
• Connected Trip progress: The Connected Trip initiative, which allows travelers to book accommodations, flights, car rentals, and attractions in an integrated experience, achieved mid-20% year-over-year transaction growth. Multi-vertical users showed higher repeat booking rates, supporting long-term engagement.
• AI and personalization focus: Booking rolled out new AI-powered tools, such as natural language search and automated partner messaging, across its platforms. These features are already contributing to improved conversion rates, faster customer support, and reduced cancellation rates.
• Alternative accommodations and Asia: Listings in alternative accommodations grew 10% year-over-year, with double-digit room night growth outpacing the core business. Asia remained a key growth region, led by localized strategies through Agoda and global reach via Booking.com.

Drivers of Future Performance

Booking expects its performance to be driven by direct booking growth, expanded AI capabilities, and ongoing international momentum, though it remains mindful of evolving competition and macroeconomic headwinds.

• Generative AI integration: Management believes that enhancing the traveler experience with generative AI—offering personalized recommendations and more efficient trip planning—will increase conversion rates and customer retention. AI-powered features for both travelers and partners are expected to drive incremental demand and operational efficiency.
• Direct and mobile channel growth: Sustained investment in brand awareness and product quality is intended to further increase the share of direct and mobile app bookings, which management sees as critical for reducing reliance on third-party channels and improving margins over time.
• International and segment diversification: The company is focusing on growth in Asia and expansion in alternative accommodations, flights, and attractions. While these areas offer higher growth potential, management acknowledged increased competition and the need to localize offerings, particularly in fast-growing regions like Asia.

Catalysts in Upcoming Quarters

In future quarters, our analysts will focus on (1) the rate of adoption and monetization of Booking’s AI-powered travel and partner tools, (2) continued expansion of direct and mobile app bookings as a share of total transactions, and (3) progress in key international markets, especially Asia and alternative accommodations. The ability to manage margin pressures amid a changing channel mix and competitive landscape will also be closely monitored.

Booking currently trades at $5,233, up from $5,142 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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