EXPE Q4 Deep Dive: B2B Growth, AI Investments, and Strategic Supply Expansion

Online travel agency Expedia (NASDAQ:EXPE) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 11.4% year on year to $3.55 billion. On top of that, next quarter’s revenue guidance ($3.35 billion at the midpoint) was surprisingly good and 3.7% above what analysts were expecting. Its non-GAAP profit of $3.78 per share was 12.2% above analysts’ consensus estimates.

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StockStory’s Take

Expedia’s fourth quarter saw a notable disconnect between its financial outperformance and the market’s reaction, as shares declined following the release. Management attributed the quarter’s revenue and margin expansion to several key initiatives, including robust growth in B2B bookings, a double-digit increase in lodging supply, and targeted marketing strategies. CEO Ariane Gorin highlighted that all three core brands—Expedia, Hotels.com, and Vrbo—returned to year-over-year bookings growth, citing product improvements and sharper brand positioning. She noted, “We accelerated both bookings and revenue growth and expanded margins by over two points.” The company also pointed to increased operational efficiency, driven by AI-powered customer service enhancements and disciplined cost management.

Looking forward, Expedia’s guidance is underpinned by continued investment in AI-driven personalization, a disciplined approach to marketing efficiency, and expanding partnerships in both B2B and advertising segments. Management believes the integration of new AI capabilities will further improve traveler experience and conversion rates. CFO Scott Schenkel emphasized that the company expects ongoing margin expansion through 2026, supported by headcount reductions and cloud cost optimization. Gorin added that direct bookings and loyalty initiatives remain central to Expedia’s strategy, stating, “Our work to make our products even more personalized and intuitive along with our work on supply, customer service, and loyalty, will deepen our competitive advantage.”

Key Insights from Management’s Remarks

Management cited strong B2B momentum, supply expansion, and marketing discipline as primary drivers of Q4 performance, while ongoing AI investments and operational efficiency were emphasized as foundational for future growth.

• B2B Business Momentum: Expedia’s B2B segment achieved double-digit bookings growth across all regions, boosted by new partner additions and higher activity from large travel agents. Rapid API integration and new product offerings, such as cancel-for-any-reason assurance, contributed to the segment’s outperformance and are viewed by management as central to sustaining future growth.
• Supply Expansion: The company grew its lodging property count by more than 10% year-over-year, with increased participation in promotional events like Black Friday. Management linked this broader inventory to higher traveler value and incremental demand, noting that AI-driven onboarding processes have reduced integration times by 70%.
• AI-Driven Product Enhancements: AI was leveraged to accelerate site performance, improve checkout experiences, and personalize recommendations. Gorin highlighted that AI-powered recommendation models delivered the best attach rates ever, meaning more customers bundled products—an important driver of higher spend and repeat usage.
• Operational Efficiency and Marketing Leverage: Expedia expanded margins by nearly four points, primarily through disciplined marketing spend, improved targeting, and a leaner organizational structure. Schenkel credited improved measurement and reallocation of marketing dollars to higher-return channels, leading to better conversion and lower overhead.
• Advertising and Third-Party Platform Initiatives: Advertising revenue reaccelerated in Q4, supported by the rollout of new ad formats, including video ads on Expedia’s homepage. Management noted that AI is being injected into both ad targeting and product experiences, while partnerships with major platforms like Google and ChatGPT are seen as important for capturing emerging travel demand.

Drivers of Future Performance

Expedia’s outlook for the next year is shaped by its focus on AI-powered product innovation, expanding supply partnerships, and maintaining cost discipline to support margin gains.

• AI and Personalization Investments: Management is prioritizing the rollout of advanced AI features across its consumer brands to enhance traveler discovery, booking, and service. Gorin described upcoming product flows that leverage natural language processing, aiming to guide travelers from trip planning through booking within a more intuitive interface. These efforts are expected to drive higher conversion and repeat usage.
• Direct and Partner Channel Expansion: Direct bookings are growing faster than bookings from third-party channels, and the company is investing in loyalty programs and differentiated experiences to deepen customer relationships. Management is also pursuing deeper B2B partnerships and new product lines, such as the acquisition of Tickets, to broaden its reach and future-proof its offering.
• Margin Expansion and Cost Controls: Schenkel outlined that ongoing headcount and cloud spend optimization, coupled with improved marketing efficiency, should support further margin expansion in 2026. However, investments in AI talent and technology, as well as B2B product launches, may temporarily weigh on certain segments’ margins.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely monitor (1) the rollout and adoption of AI-powered product enhancements, especially natural language search and trip planning tools, (2) the pace of lodging supply expansion and effectiveness of onboarding automation, and (3) continued momentum in B2B partnerships and advertising growth. The integration of new acquisitions, such as Tickets, and the impact of loyalty program updates on direct bookings will also be important signposts for sustained performance.

Expedia currently trades at $219.49, down from $227.24 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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