EXPE Q3 2025 Deep Dive: B2B Momentum and AI Drive Outperformance Amid Improving Travel Demand

Online travel agency Expedia (NASDAQ:EXPE) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 8.7% year on year to $4.41 billion. On top of that, next quarter’s revenue guidance ($3.41 billion at the midpoint) was surprisingly good and 4.2% above what analysts were expecting. Its non-GAAP profit of $7.57 per share was 9% above analysts’ consensus estimates.

Is now the time to buy EXPE? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Expedia’s third quarter was marked by strong operational execution and improved travel demand, leading the company to surpass market expectations. Management credited the performance to accelerated momentum in both B2B and consumer brands, with CEO Ariane Gorin highlighting, “We saw longer lengths of stay and longer booking windows, both signs of a stronger consumer.” The company also cited growth in room nights and the successful integration of AI features across its platforms as contributors to margin expansion and business growth.

Looking forward, Expedia’s raised guidance reflects confidence in continued demand strength and further margin gains. Management’s outlook is shaped by ongoing investments in AI-driven personalization, expanding partnerships in B2B, and marketing efficiency. CFO Scott Schenkel stated, “We expect further margin expansion, albeit at a more moderated pace than what we drove in 2025 as we continue our cost-out efforts and invest behind our growth initiatives.” However, leadership remains attentive to macroeconomic uncertainties and competitive dynamics as they execute their strategy.

Key Insights from Management’s Remarks

Management attributed third quarter outperformance to a blend of robust B2B growth, new feature rollouts, and operational discipline, while emphasizing the role of AI in both consumer and partner experiences.

• B2B Expansion Remains Strong: The B2B segment delivered its 17th consecutive quarter of double-digit growth, supported by new partnerships and expanded offerings, such as car rentals and advertising. Management highlighted that over 65% of B2B activity is now outside the U.S., underlining its geographical diversification.
• AI Integration Across Offerings: Expedia advanced its use of artificial intelligence in both traveler-facing and partner tools. Examples include AI-powered recommendation models, property Q&A, and automated customer service, which CEO Ariane Gorin said are “driving engagement and getting even more effective with time.”
• Brand-Specific Product Improvements: Vrbo introduced property comparison tools and partner-funded promotional rates, while Hotels.com launched the Save Your Way program. Expedia’s main brand achieved record attach rates through new lodging flows and improved recommendation models.
• Marketing Productivity Gains: The company reported its fourth consecutive quarter of improved marketing productivity, particularly in B2C, by optimizing spend and leveraging AI to enhance efficiency in customer acquisition and engagement.
• Operational Efficiencies and Cost Control: Management noted meaningful cost leverage across categories, with sales and marketing expenses down in B2C and overhead contained, resulting in margin expansion and improved free cash flow.

Drivers of Future Performance

Expedia’s outlook is anchored by persistent investment in AI, expansion of B2B relationships, and a focus on operating efficiency, even as the company navigates a dynamic competitive and macroeconomic environment.

• AI-Driven Personalization and Efficiency: Management believes ongoing AI adoption will further enhance user experiences, drive higher conversion rates, and improve internal productivity—particularly in marketing and customer service. These efforts are expected to support continued margin growth, even as competitors increase their own technology investments.
• B2B and International Growth: The company’s diversified B2B segment, with exposure to offline and online partners worldwide, is seen as a key engine for sustainable revenue expansion. Leadership plans to keep investing in partner tools and product enhancements to maintain a growth trajectory above market rates.
• Competition and Economic Uncertainty: While demand trends remain favorable, management identified macroeconomic volatility and heightened competition, especially in U.S. hotels and alternative accommodations, as ongoing risks that could influence both topline and profitability. The company is monitoring these factors closely in its guidance.

Catalysts in Upcoming Quarters

Moving forward, key catalysts to watch include (1) the pace of AI feature adoption and its measurable impact on customer engagement and margins, (2) the strength and sustainability of B2B growth across geographies and partner types, and (3) competitive shifts in the U.S. hotel and alternative accommodation segments. Execution in driving repeat bookings and loyalty will also be key signposts for operational success.

Expedia currently trades at $245.51, up from $220 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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