Online travel agency Booking Holdings (NASDAQ: BKNG) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 16% year on year to $6.35 billion. Its non-GAAP profit of $48.80 per share was in line with analysts’ consensus estimates.
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Booking (BKNG) Q4 CY2025 Highlights:
- Revenue: $6.35 billion vs analyst estimates of $6.13 billion (16% year-on-year growth, 3.6% beat)
- Adjusted EPS: $48.80 vs analyst expectations of $48.67 (in line)
- Adjusted EBITDA: $2.20 billion vs analyst estimates of $2.11 billion (34.6% margin, 3.9% beat)
- Operating Margin: 32%, in line with the same quarter last year
- Room Nights Booked: 285 million, up 24 million year on year
- Market Capitalization: $136.2 billion
StockStory’s Take
Booking’s fourth quarter drew a negative market reaction, despite revenue and non-GAAP profit meeting or exceeding Wall Street expectations. Management attributed the period’s growth to robust travel demand across all major regions and increased investment in performance marketing and social media channels, particularly in Asia and the U.S. CEO Glenn Fogel highlighted the continued expansion of the Genius loyalty program and the integration of generative AI into customer service operations as key contributors. Chief Financial Officer Ewout Steenbergen noted, “Our absolute number in terms of customer service costs are down and our bookings are up approximately 10%.”
Looking forward, Booking’s guidance centers on sustained investment in AI-powered agentic travel tools, further development of the Connected Trip strategy, and targeted expansion in Asia and the U.S. Management expects to fund these initiatives through continued cost savings from its Transformation Program, aiming for additional operational leverage and margin expansion. Fogel emphasized the strategic importance of AI, stating, “We focus on where AI can deliver tangible, measurable outcomes for our customers, partners and our business.” Steenbergen added that reinvestments in areas like fintech, advertising, and international expansion are expected to drive top-line growth and maintain profitability targets.
Key Insights from Management’s Remarks
Management attributed fourth quarter performance to strong travel demand, particularly in Asia and the U.S., increased marketing investments, and ongoing cost efficiencies enabled by the Transformation Program.
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Marketing spend strategy: Management leaned into performance marketing and social media channels, particularly in the U.S. and Asia, to capture incremental demand. CFO Ewout Steenbergen explained that higher brand marketing and social media investments were made when attractive returns were identified, despite temporary deleverage in marketing expense ratios.
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AI-driven operational efficiency: The integration of generative AI into customer service operations led to a 10% decline in customer service cost per booking, even as overall bookings grew. Steenbergen highlighted this as a rare example where artificial intelligence delivered visible cost savings on the income statement.
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Genius loyalty program expansion: The Genius loyalty program, especially its higher tiers, continued to drive direct bookings and multi-product engagement. Management noted that Level 2 and 3 Genius members now account for a high 50% share of room nights, with growing engagement across additional travel verticals.
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Connected Trip vision progress: Connected Trip transactions, where travelers book multiple services for a single trip, grew at a high 20% rate and now represent a rising share of total transactions. This strategy aims to increase customer retention and drive cross-selling opportunities.
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Transformation Program savings: The Transformation Program generated significant cost savings, enabling reinvestment in strategic priorities such as AI, fintech, and market expansion. Steenbergen reported $130 million in quarterly savings, which were used to fund new growth initiatives while expanding adjusted EBITDA margins.
Drivers of Future Performance
Booking’s outlook is shaped by continued investment in generative AI, loyalty programs, and geographic expansion, aiming for steady revenue growth and modest operating margin improvement.
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AI and Connected Trip investments: Management plans to allocate substantial resources to agentic AI tools and the Connected Trip strategy, which are expected to enhance personalization and customer retention. These initiatives are forecasted to contribute $400 million in incremental revenue in the coming year, with a net benefit to adjusted EBITDA after reinvestment.
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Geographic and vertical expansion: Strategic focus remains on accelerating growth in Asia and the U.S., leveraging the complementary strengths of Agoda and Booking.com. Additional investments will support expansion into flights, attractions, and fintech offerings, broadening Booking’s addressable market and reducing reliance on traditional accommodation bookings.
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Ongoing cost discipline and margin expansion: The Transformation Program is set to deliver further operational efficiencies, targeting $500-$550 million in annual run-rate savings. These cost reductions are intended to fund new initiatives while supporting a roughly 50-basis-point increase in adjusted EBITDA margin, despite headwinds from higher marketing and technology investment.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will focus on (1) the pace of adoption and monetization of Booking’s agentic AI tools and Connected Trip features, (2) the effectiveness of continued investment in Asia and U.S. market share gains, and (3) the company’s ability to sustain operational efficiency gains from the Transformation Program. Additional watchpoints include enhancements to the Genius loyalty program and progress in alternative accommodations.
Booking currently trades at $3,923, down from $4,308 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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