Expedia Group, Inc. (EXPE) Q3 2026 Earnings Call Transcript

Operator: Good day everyone and welcome to the Expedia Group Third Quarter 26 Financial Results Teleconference. My name is Joel, and I will be the operator for today's call. If you wish to ask a question at the end of the presentation, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 1 again to cancel your request. For opening remarks, I will now turn the call over to Rob Bevegni. Please go ahead.

Rob Bevegni: Good afternoon, and welcome to Expedia Group's third quarter 2026 Earnings Call. I am pleased to be joined on today's call by our CEO, Ariane Gorin and our CFO, Derek Andersen. As a reminder, our commentary today will include references to certain non GAAP measures. Reconciliations of these non GAAP measures to the most comparable GAAP measures are included in our earnings release. Unless otherwise stated, all growth rates are on a year over year basis and any reference to expenses excludes stock based compensation. We will also be making forward looking statements during the call, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions, are subject to risks and uncertainties that are difficult to predict. Actual results could materially differ to factors discussed during this call and in our most recent forms 10 Q, 10 k, other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward looking statements. This call is being webcast on the Investor Relations section of our website at ir.expediagroup.com. A replay will be archived on our site. A slide presentation containing financial highlights has also been posted to our IR website. For today's call, Ariane will begin with a review of our third quarter results. Derek will then provide additional detail on our financial performance, as well as our fourth quarter and full year guidance. After our prepared remarks, we will turn the call over to the operator to begin the Q&A portion of the call. And with that, let me turn the call over to Ariane.

Ariane Gorin: Thank you all for joining us today. We had a strong third quarter and outperformed the industry. Growing bookings 11%, revenue 12%, and expanding our margins by more than 1 point. Our results reflect our track record of consistent execution and progress on our strategic priorities. Based on our performance, we are raising our full year guidance, and Derek will cover that shortly. In the third quarter, travel demand remained healthy, especially in The US. Consumers continue to prioritize travel, even as airfares stayed elevated. And as in previous quarters, we saw strength with more affluent consumers. Booked room nights grew 7%, up mid-single digits in The U. S. Low single digits in EMEA, and mid teens in the rest of the world. Our B2B business had another strong quarter, delivering 19% bookings growth. Our consumer bookings were up 7%, accelerated in The US. Expedia remains our fastest growing brand, And across our consumer brands, active loyalty members grew low single digits. We are seeing faster growth in our Silver Plus tiers, and members within these tiers book more direct. This quarter, we continued to advance our 3 strategic priorities. First, delivering more value to travelers. As we do this, we build trust and give travelers more reasons to return to our brands. In our product, it is about making travel more personalized, rewarding, and flexible. On Expedia, where our strength has always been booking and managing everything in 1 place, Our enhanced recommendation capabilities delivered record third quarter attach rates. Just last week, we launched a new dynamic package search experience that gives travelers even more power to customize their trip. And we recently launched Reserve Now Pay Later across all of our brands. Giving travelers further flexibility in their trip planning. We also continue to infuse our products with conversational experiences. From search on our home pages to conversational agents in the booking flow. While still early, these experiences give us valuable information on traveler intent. And can drive stronger engagement, higher conversion rates, and larger bookings. In supply, we are focused on having the most complete marketplace and being a valuable driver of demand for our partners. Our September sale marked our third consecutive sale event to exceed $1 billion in bookings, demonstrating the power of our 2 sided marketplace. Product, supply, servicing, loyalty remain fundamental to our differentiation. And our core drivers for why 2-thirds of our bookings come direct. Turning to our second priority investing where we see the greatest opportunity to drive growth. Travelers are increasingly planning their trips using natural language. We are capturing this demand in our own products, with the conversational experiences I mentioned earlier, as well as in third party experiences. As traditional search traffic diversifies to AI services, we are making sure our brands show up where travelers are. We moved early, and we are learning quickly. This quarter, we partnered with Google in AI mode, and announced an integration with Meta. While traffic is still small, we see agents as a new audience. And are building the capabilities to engage them. What we learn from AEO carries directly into how we engage agents. So our progress compounds as these channels and traveler behaviors evolve. In b 2 b, our strategy is to be the 1 stop travel platform for partners. Enabling them to grow their businesses and better serve their travelers. This quarter, we expanded our relationship with Qantas, making it the first partner to use our new Agentic template. Our template brings together our existing B2B technology, supply, and servicing infrastructure with a customizable UX layer to create a tailored customer experience. We also closed our acquisition of CarTrawler, and launched our activities API. Adding these services makes our marketplace more complete, deepens our relationships, and strengthens our competitive position. Moving to the third pillar of our strategy, driving operating efficiencies and margin expansion. We delivered record margin performance, reflecting the flow through of higher revenue growth further consumer marketing leverage, and disciplined cost management. We continue to execute on initiatives to run the company more efficiently and with greater speed. And AI is amplifying our efforts. For example, in marketing, AI is enhancing our content production and experimentation, meaningfully increasing our testing velocity. In servicing, we released our new agentic experience on Vrbo, And already in the first 2 months, it is effectively resolving over 15% of inbound contacts. Driving higher satisfaction scores at a lower cost. AI is also enabling us to accelerate product development. Our new autonomous hotel onboarding agent was built in less than a quarter by a small focused team. While historically, it would have taken multiple quarters and many more people. Together, these actions support margin expansion, and create capacity to invest in growth opportunities. As we look beyond the quarter, the question I hear most is how AI will reshape online travel. Our focus remains understanding and meeting travelers' evolving needs and preferences. What we are seeing is that while discovery is spreading across AI assistance, search, and social platforms, the hard parts of travel are not getting any easier. Connecting to global supply across multiple lines of business with accurate prices. Handling bookings and payments, standing behind bookings, and fixing problems when plans change. That complexity is where trust is earned. And where scale, reliability, and service remain differentiators. Our advantage is our ability to turn emerging channels into new sources of demand while our trusted consumer brands and loyalty ecosystem bring travelers back to us directly. In closing, we are pleased with our third quarter results. I want to thank our teams for their hard work, and our partners and travelers for their continued trust in us. With that, I will turn it over to Derek.

Derek Andersen: Thank you, Ariane, and good afternoon, everyone. Our third quarter performance exceeded the high end of our guidance. Reflecting stronger than expected travel demand continued momentum in our B2B segment, improved consumer marketing returns, and ongoing cost discipline. Gross bookings increased 11% year-over-year driven primarily by 7% room-night growth and 3% ADR growth on an FX neutral basis. The overall operating environment was favorable in Q3, which contributed to the robust room night growth, while strong air bookings growth was supported by higher ATPs. Our business also benefited from pulling forward the timing of our fall sale to better capitalize on seasonal demand in Q3. Revenue increased 12% exceeding our expectations entering the quarter on higher booking volume. Foreign exchange impacts were mixed, with a 0.5-point headwind to bookings growth and 1-point tailwind to revenue growth. Adjusted EBITDA was $1.7 billion in Q3, representing a margin of 34.2%, which is an improvement of over 1 point compared to the prior year. The margin expansion was driven by higher than expected revenue growth, combined with continued consumer marketing leverage and overhead cost discipline. Adjusted EPS grew 24% year-over-year, reflecting 19% growth in adjusted net income. And the accretive impact of share repurchases that reduced adjusted weighted average shares outstanding by 4% year-over-year. Free cash flow reached $3.7 billion on a trailing 12 month basis. up 25% year-over-year, which has fueled the return of capital to shareholders. During the quarter, we repurchased approximately 2 million shares for $576 million This brought our year to date share repurchases to approximately $1.5 billion Our capital allocation priorities remain unchanged. Including investing organically in the business, pursuing disciplined M&A in support of our strategic priorities, and returning cash to shareholders in the form of dividends, and opportunistic share repurchases. For our fourth quarter outlook, we expect gross bookings of $27.9 billion to $28.4 billion, representing growth of approximately 3.3% to 5.2% year-over-year. We estimate that FX will be a headwind of approximately 0.5 a point in Q4 at current rates. Our guidance reflects a moderation from the stronger than expected third quarter, due to a softer operating environment in Q4 the impact of lapping the benefits from B2B partner promotional activity in the prior year. And the timing of our fall sale, which pulled demand into Q3 of this year. The softer operating environment in Q4 reflects several factors, including the U. S. Election cycle, and ongoing geopolitical events driving travel disruptions across EMEA. We expect revenue of $3.69 billion to $3.75 billion, representing growth of approximately 4% to 5.7% year-over-year with minimal FX impact at current rates. We expect adjusted EBITDA of $830 million to $880 million implying a margin of 22.5% to 23.5%. The EBITDA guidance and implied margins for Q4 reflect sequentially slower revenue growth as well as the impact of strategic investments including the incorporation of costs from recent acquisitions. Following our outperformance in Q3, we are raising our full year guidance. We now expect gross bookings of $131.4 billion to $131.9 billion. Representing growth of approximately 10%, and revenue of $16.37 billion to $16.43 billion representing growth of approximately 11% to 12%. Our guidance continues to assume foreign exchange tailwinds of 1 point for gross bookings, and 2 points for revenue for the full year. We are also raising our margin guidance for the full year. And now expect adjusted EBITDA margin expansion of approximately 180 basis points to 200 basis points versus last year. Based on this updated full year guidance, we expect to exceed the top end of the full year guidance ranges that we provided at the beginning of the year for each of bookings revenue, and EBITDA margin expansion. With that, let's open the line to take your questions.

Operator: As a reminder, if you would like to ask a question, please press star followed by 1 on your keypad. If you would like to retract your question, please press star followed by 1 again. Our first question comes from Mark Mahaney with Evercore ISI. Your line is now open. Please go ahead.

Mark Mahaney: Let me try to get 2 questions in, please. First, just on the Q4 outlook, Ariane and Derek, are there any drag factors you would call out The Middle East disruption is still there. There were some issues in Europe European cities. Are there any other areas that you think are unduly pressuring growth rates and profitability in the fourth quarter? And then secondly, Ariane, you mentioned, of course, the agentic deals or whatever with Muse and with AI overviews. Are the are the economics of these at all settled, or is that all on the come? And anything more you can say about the. How you view that as a as a as a as a channel, as a customer acquisition channel? You know, does it look at all competitive, better than, worse than all the many other channels that you use? Thank you very much.

Ariane Gorin: Thanks, Mark. Derek, why do not you take the first 1? I will take the second.

Derek Andersen: That sounds great. Mark, on the Q4 guidance for growth, I would say, yes, we had a stronger than expected Q3. So we are expecting some moderation in Q4 on the growth. This is a few factors driving that. The first is we are seeing a bit of a softer operating environment to start the quarter, and that is really driven by a couple of factors. 1 of them is the U. S. Election cycle where we are seeing an impact that is roughly similar to what we have seen in election cycles in terms of softer demand there. The other is the ongoing geopolitical events that we are seeing in The Middle East and Europe and the impact that they are having both on disrupting demand within those regions but also on the long haul corridors that run through those regions. The second impact I would call out is within our b 2 b segment. We are now beginning to lap the robust promotional activity that we saw from some of our largest partners that really ramped in Q4 of the prior year. While the fundamentals of the b 2 b business are still really strong, we are going to see a bit in our seeing a bit of a moderation in the growth rate in that business in Q4. And then finally, the last factor I would note is we did pull forward some of the timing of our fall sale. So that more of it occurred in Q3 this year. And that was helpful in terms of capturing seasonal demand in Q4, and we saw that benefit in the efficiency of our marketing or, sorry, of capturing demand in Q3. But we are gonna now lap the timing of the sale in the prior year in Q4. So that is another factor. The only thing I would sort of close on there, though, is that we are on pace for a really strong 2026 in total. And we are now on track to beat, the top end of the full year guidance range that we set at the beginning of the year. For each of bookings and revenue. So pleased with the growth that is shaping up for the year in total.

Operator: And then, Mark, on your question on the agentic partnerships, not surprisingly, I will start out by saying it is early days.

Ariane Gorin: I am excited about the possibilities here, and we are working with all the big players to make sure that our brands are showing up well. They are showing up well, whether it is organically or through direct integrations. We are using the integrations to learn about how our customer behavior is changing. Understand how are the agents making decisions, what tech integrations are required, what kind of customers are using these. You know, right now, again, it is a small amount of traffic. it is high intent traffic. So we are pleased with that. From the third party data we are seeing, we are leading in citation share in The US. So I would just caution us all that it is important to remember that these models are changing frequently, which can lead to big swings on small volumes. But that is why we have got a team focused on it. I also say that the integrations are helping us to learn not only about consumer behavior on those agents, but also to bring those learnings back into the natural language experiences in our products. So it is early days. You know, the economics of the partnership are being worked out. We have a track record of being able to work with big advertising platforms or tech platforms to use them as channels to acquire customers at attractive economics. And that is what I think we will see And I will close by saying so far, what we are seeing is that Agentic AI's real strength is in discovery, but that when it comes to bookings, people still want to book with a trusted brand where they know that they will be taken care of if something goes wrong, they know they can trust the content and the prices and the like. But it is an exciting time. Thank you, Ariane. Thank you, Derek.

Operator: Your next question is from Eric Sheridan with Goldman Sachs. Your line is now open. Please go ahead.

Eric Sheridan: Thanks so much. I will ask a 2 parter on b 2 b. When you think about the growth sustainability of B2B over the next 12 to 18 months, can you break down to us a little bit how you are thinking about the components of growth across wallet share with existing partners? New partners and verticals, and continued supply expansion. And the second part of the question would be on the margin for B2B. Is there a way we should be thinking about investment cycles in B2B and different outcomes for margin over shorter duration periods of time that we should be aware of that b 2 b could operate in as a segment? Thanks so much.

Ariane Gorin: Hey. Why do not I. Let me start, and then Derek can pick up. Yeah. As you said, b 2 b had another solid quarter. it is important to note that the growth was broad based. It was double digit growth across all of the regions. And when we look at the performance drivers, that we expect to help us continue to grow, it starts with growing with existing partners. How are we growing wallet share through adding to improving the integration, supporting them on their promotion, and you know, supporting them as we are sourcing promotional deals that they can surface. Next, it is about enhancements to our existing products. I talked about the Agentyx template that we just announced with Qantas. You know, our 3 main products in b 2 b are the rapid API, our travel agency platform, our template. And as we enhance the template with agentic capabilities, as we add activities to the travel agency platform, we think that those will be growth levers in order to grow with existing partners. Of course, also with the new partners. And then the last piece is our investment to really be a 1 stop travel shop. Because we have got a lot of partner relationships These partners are building travel programs. And if we can be the provider of everything that they need for the travel program, that creates growth opportunities. it is why this year, we closed the acquisition of Car Trawler. it is why we acquired tickets. And so we will continue to invest to make sure that we really can be that 1 stop shop for our partners.

Derek Andersen: And then, Eric, just on the margin question. I think in the very near term, we are seeing a little pressure on the B2B margins. The primary drivers of that in the very near term are, you know, 1 partner mix As we help our partners grow and succeed and grow their business, they get into higher tiers. And all else being equal, that is gonna put a little pressure on margins as we help our partners succeed and grow the overall scale of our business. The second but smaller factor is just the recent investments that we have been making as Ariane said in the 1 stop travel shop, and we do see a little bit of pressure on the margins there in Q3 in Q4 on the business as a result of that. But as I zoom out longer term, this is a really attractive segment with a huge TAM, and that is why it is very important for us to make these long term investments in the business so we can better serve our partner grow our overall number of partners, which hit 75 thousand more recently, but also drive differentiation and be able to grow the relationship by servicing more of it, which is why the 1 stop travel shop is so important. So really excited about the longer term opportunity for the B2B business to contribute as it is scales to our EPS growth as a business. Then across 180 to 200 bps, which is again, above the high end of the ranges we communicated at the beginning of the year.

Operator: Your next question comes from Justin Post with Bank of America. Your line is now open. Please go ahead.

Justin Post: Great. Thanks for the question. First, on agentic traffic, I know it is very early, but I just was wondering if you could help us understand if that traffic might be coming in lieu of paid or direct traffic, or really is it just incremental at this point? And then second, the margin leverage on the B2C side has been really impressive over the last year. You have drawn out a lot of efficiencies but Q4, you know, does look like there is more spending. Is that in marketing And how do you think about efficiencies there going forward? Thank you.

Ariane Gorin: So I will take the first 1. So as you say, it is agentic traffic is very small so far. We think it is high we see it as high quality traffic. We do not see it as impacting the direct traffic. I think it is, you know, it is either incremental or it is taken from other paid channels. But you know, right now, again, it is so small that it is hard to draw any conclusion. I do want to take a minute, though, to add to this, which is you know, we talk about agentic being quite small. Even in our products, we have got these new natural language conversations, which are high intent. it is driving more conversion. And even there, they are small. What excites me is the way we are using AI in our products to get more personalization, to get better recommendations. So I think just for all of us, as we think about the role of AI, both in agentic and, you know, use in our product, we can you know, spend a lot of time on the conversational search, which is important. But there are also a lot of real near term tangible drivers of improvements in the business and the product from using AI in the product.

Derek Andersen: Hey, Justin, it is Derek. I will take the margin question. We had a really strong Q3, and that allowed us to have outsized margin expansion as a result of that. We do expect some moderation on margins in Q4, and there is a couple of factors on that. 1, as we noted earlier, we do see a slower pace of bookings and revenue in Q4. And that diminishes the leverage that we are going to get on the fixed elements of our cost structure in the quarter as a result. A second is a year ago, we made some really significant changes in the efficiency of our marketing spending by removing inefficient spend and we have been delivering outsized leverage from the consumer marketing line as result of that over the last year, we still see opportunity for incremental leverage from the consumer marketing line, just likely at a slightly diminished pace relative to what we have been able to do when we made those really big changes a year ago. I also spoke earlier about some of the pressure that we will see on the b 2 b margin side. It will contribute to the overall picture as a result of the investments that we have made in recent acquisitions. And so, yeah, sort of stepping back a little bit, while the overall operating environment may fluctuate, from quarter to quarter, it is important that we sustain these investments in the long term of the business. I think we have demonstrated we can deliver leverage over time through a efficiency initiatives and our overall cost discipline, and that really is reflected in the update we made to our full year merchant guide that I already mentioned earlier. Great. Thank you.

Operator: Your next question is from Douglas Anmuth with JPMorgan. Your line is now open. Please go ahead.

Douglas Anmuth: Great. Thank you. Ariane, I just wanted to go back to the agent's And can you just talk a little bit just about the integration with Muse, just what that provides you exactly? And how differentiated that is and then also if you could talk a little bit about some of the AI experiences on your own platform for those customers coming in directly and some of the benefits you are seeing there? Thanks.

Ariane Gorin: Sure. So on Muse, we announced an integration. In fact, I believe potentially while we are on this call today, it is going live in The US. Basically, what the direct integration allows is that you know, Muse is going to have access to our prices, our content, and the like to be able to recognize travelers and then send them to us either complete the booking in Muse or send them directly to us. Know, it is early days. I think it is gonna be fascinating to watch what is it that the users choose to do. Again, right now, there is a lot of discovery in these agents, and then the booking ends up happening, you know, in a trusted provider in our app. But we want to be there early to test and understand how consumer behavior evolves. In terms of AI experiences in our own products, Look. 1, we have been using AI in our products for quite a while. what is changed in the last few quarters is the power of AI to help us personalize. In recommendations and rankings and that is part of what is behind the record attach rates on Brand Expedia. Because we are just so much better in helping travelers figure out what different parts of the trips to put together. The other thing that is new is the natural language conversations. And, again, it is relatively small traffic, but let me talk you through how we think about those natural language touch points. It starts with natural language search on the home page. So instead of someone just typing in a destination and dates and number of travelers, they can use natural language to describe what they are looking for. That not only gives us more information about their intent, which we can then personalize, think it will allow us to capture people earlier in their journey to sort of move up funnel. Next is conversational experiences in the booking flow. So we have got an AI compare agent and property expert agent that while people are in the lodging booking flow, allows them to make better decisions, comparing properties, understanding what the amenities will be without necessarily having to go into the hotel cards themselves. And what we have seen is that pushes people deeper into the funnel and leads to more conversion and larger purchases. And then finally, post booking, we have had our servicing agent, and we just recently introduced an activity agent which helps a traveler build an itinerary and we have already seen. it is very early days, but we have seen that the people who are using that are twice as likely to book an activity within 7 days of using it. So, again, all of this is early, it is exciting sort of proof points that we are seeing of what happens when people have conversations and then just to close, last week, we had our fall product release We released over 30 features across our brands. Most of them were not related to natural language search. It was things like the updated flexible package search path on Expedia. Reserve Now Pay Later on Vrbo and the like. So with the team, we are focused on what are all of the product features that we can bring out that we know travelers want some of which are natural language search. K. Thank you, Ariane.

Operator: Your next question is from Jed Kelly with Oppenheimer and Co. Your line is now open. Please go ahead.

Jed Kelly: Great. Thanks for taking my question. Over the last couple of years, you have had really strong margins. Expansion, probably over 200 basis points last 2 years. As we kind of move into 2027, has most of the low hanging fruit been chopped or how we think about margins expansion in balancing growth versus profitability going forward into next year? Thank you.

Derek Andersen: Hey, Jed, it is Derek speaking. Yeah. We have had a lot of progress on the margin expansion, as you noted. If you actually look over the 3 years from 2024 through the full year guide here for 2026, it is more than 4 points of margin expansion. You know, we have really done that across a number of different dimensions. Number 1 is the investments we have made in our own products. And in operational execution that have helped to drive steady solid top line growth in a healthy demand environment. And that gives us the opportunity to drive leverage over the fixed elements of our cost structure. The second is we have had much improved consumer marketing returns. We have also driven out efficiency across cost of sales. And I think 1 recent example I would cite there is just the work that we have done to leverage AI and traveler support and how we have seen that improve cost efficiency there, but also deliver higher satisfaction scores, which is great. And, finally, just we have maintained discipline over the overall overhead cost structure. In the most recent quarter, it is just 1 example, we were up 1% year-over-year even as we drove bookings and revenue growth double digits. So we have had a pretty good run here of really good margin expansion. As I look forward, I see a lot of opportunity for us to continue to make incremental progress across the cost structure. 1 is the investments that we have made to continue to drive longer term growth and pointing to things like 1 stop travel shop, on B2B is just 1 example of that. The things that we are doing to improve services and experiences for the consumer business that Ariane touched on. We also see, you know, many of the changes that we have made on the consumer marketing side to drive leverage there. Some of that was big gains that we got from removing inefficient spend. there is things that we have done around how we measure and calibrate those results and how we can move spend effectively and measure accurately to drive it to the most efficient channel. And that is more durable, and we see room for incremental margin improvement on that as well. So we do believe that we can continue to make incremental progress on margins by staying disciplined on the cost, and continuing to drive efficiency out. And, you know, hopefully, you can see that reflected in the updates we made to our full year margin for this year. We now expect to see about 180 to 200 bps. And hope to make some incremental progress as we go forward and execute on our strategy. Thank you.

Operator: Your next question is from Kenneth Gawrelski with Wells Fargo. Your line is now open. Please go ahead.

Ken: Thank you so much. 2, if I may, please. 1, kind of more strategic. there is a lot of discussion of agents around the consumer side of the B2C side. Could you talk about the opportunities that you are very well established B2B operations and capabilities might enable in a in an agentic world. that is question 1. The second question is just a bit more, tactical. As you are thinking about the 4Q bookings guide that you offered, could you give any sense about the contributions how we should think about ADRs versus room nights? And any factors we might think about either from a comparability standpoint or other factors that play into the mix between those 2? Thank you.

Ariane Gorin: Yeah. On the agentic opportunities in B2B, I have really separated into 2. 1 is for our existing partners, how do we help them as they are adopting agentic capabilities in their travel experiences. So making sure that we have got technology that allows them to build, whether it is conversational experiences or other agentic experiences, and opening themselves up to agentic commerce. So that is sort of 1 thing, which is just on the existing business. The second is, you know, if there are agents who say, you know what? We wanna be the provider ourselves, of travel booking rather than being a demand channel for existing travel brands, we clearly are well positioned to be able to do that. So again, it is early days on all of this, I think what is important to know is that the technology investments and the infrastructure and supply and all of that we have in B2B, that global reach that ability to do servicing allows us to both help our existing partners and potential new partners as they look at e commerce.

Derek Andersen: Hey. it is Derek. I am sorry, Ken. I will take the part on just what we are seeing on bookings drivers going into Q4. I touched a little bit on the drivers of the overall number. But under the hood, as you are thinking about room nights and the other drivers, first, just touching on Air. We have seen really elevated ATPs in Air. And so we expect that dynamic to persist and be relatively steady from Q3 to Q4, at least that is what is assumed underlying the guide. Terms of room nights and ADRs, we saw a moderation in ADRs from Q2 to Q3. So ADRs were up about 5 points in Q2 and moderated to 3 in the most recent quarter, or 3% on an FX neutral basis. We expect relatively to have basically that moderation continue through. And so you will see what we are assuming under the hood in terms of room nights is that the growth there will be positive in Q4 but more modest than the decel will be roughly in line with what we are guiding to on bookings on a FX neutral basis. So that, to you know, with the assumptions around there, should give you a pretty good sense of the components under the hood that are driving the bookings into Q4. Thank you both.

Operator: Your next question comes from Deepak Mathivanan with Cantor Fitzgerald. Your line is now open. Please go ahead.

Deepak Mathivanan: Great. Thanks for taking the questions. We wanted to ask a couple of ones on marketing. there is a lot of changes happening on Google Search with traffic shifting towards AI mode and other AI services. Is that in any way impacting Expedia at all, both positively or maybe negatively? Can you talk about what you are seeing also with paid marketing and search? And then secondly, OpenAI launched many advertising products in the last few months as well. You participating in those programs? Can you talk about what you are seeing there as well? Thank you so much.

Ariane Gorin: So traffic is changing as you would like, with Google search. Things are changing very quickly. The good news for us is that we have got really good metrics and measurement on incrementality and returns of various channels. So we are keeping an eye on obviously, where all of the traffic is coming from over the last 12 to 18 months as we have improved our understanding of returns and incrementality. We have moved our investments across channel from search to social and the like. And, you know, we have teams who do this day in, day out who are very technical in making sure that we are getting the best returns possible. As you alluded to, OpenAI has launched some advertising products. Yes, we are participating. I think it is important as there are new products that come out on the market to be to take the posture of testing, being willing to maybe accept some returns that are not as high as more established products that are more optimized. And that is our approach across the board as some of these new AI services come out with new products. We will be you know, testing and learning. And then over time, I believe many of these will become big channels for us. And you know, to the extent that there is more fragmentation at the top of the funnel, that is a good thing for us.

Operator: Next question comes from Lloyd Walmsley with Mizuho. Your line is now open. Please go ahead.

Lloyd Walmsley: Thanks. Can you just give us a sense of the contribution from CarTrawler in I guess, the partial quarter in 3Q and then in the 4Q outlook? And like where does that fall from a segment basis? And then second 1 was just the advertising growth. Looks like it slowed a bit, especially on the Expedia side. So anything unusual there? And how should we think about that? Sort of steady state advertising going forward? Thanks.

Derek Andersen: Hey, as it pertains to the CarTrawler acquisition, that closed near the end of Q3. Relatively minor impact there. Into Q4, no 1 of our acquisitions is really material to the overall results in total. But the combination of CarTrawler and the other acquisitions we have made earlier this year and the investment investments that we are making in our 1 Stop Travel Shop organically as well, all of that combined is a little bit of upward pressure on the overall investments there. And that falls, CarTrawler specifically into the B2B segment, in terms of, where it, contributes. In terms of advertising, yeah, advertising did see a deceleration in the quarter. We grew 13 points last quarter, 7 in the most recent. While it did, slow the rate of growth, it did still continue to grow. We are in the middle of implementing some really important product improvements that we believe are really important to the long term success of the ad business. These changes will give advertisers a number of things, including better campaign management but also layering the groundwork for more AI enabled tools going forward. But if I step back a little bit, the advertising business has is already becoming large, and it is a high margin business for us, and we see a long runway ahead in it. We reach travelers as they are deciding where to stay and what to book, which is incredibly important. We are also in the midst of broadening the business. We expanded our sponsored listings offering to Vrbo this year, and we are growing display advertising as well as off platform. And we are using AI in our products to make it much simpler for partners of any size to set up and run campaigns. So while there is a lot of changes happening in our ads business at the moment, we continue to have high conviction in the long term opportunity ahead here, and we are excited to see our team land some of these changes for our partners in the months ahead. Thank you.

Operator: Your next question comes from Alex Brignall with Rothschild & Co. Redburn. Your line is now open. Please go ahead.

Alex Brignall: Thank you so much for taking the question. I will jump back to B2B if I could. 1 of the most frequent questions I get is just sizing the market and how you think about the share that you have. It obviously is very different across the different products, the commission rate and margin structure very different between lodging and air. But to the extent that you can, could you just give us as much info as you can share on the size of the opportunity added globally within The US? What share you think you have of it? How fragmented it is, how big the biggest participant is, all of it. Thank you so much.

Ariane Gorin: At the highest level, the way I think about the size of the DVD travel market is you take the overall travel market, which is over $3 trillion you remove from that sort of all of supplier direct. You remove from that couple of the biggest OTAs in the world, and you say, all of the rest is the addressable market for b 2 b. Now there is a lot in there. There are corporate travel agencies. There are offline retail travel agents. There are companies that use travel for their loyalty program. There are smaller online travel agents in emerging markets. So it is a large market. You do need to look at each of them individually. So where are we on offline travel agents? We work with tens and tens and tens of thousands of them, but it is not only can you work with more travel agents, but it is also with the ones you work in can you gain share of wallet? Because in a lot of our partnerships, they are not necessarily exclusive partnerships. And so it is that day in, day out gaining share of wallet. So that is sort of how I think about it at a high level. There are some partners in which we are high in the share of wallet. And so if you think about the potential there, it is about how much will that partner itself grow so that we can grow with them. And then there are a number of partners we work with where we are still sort of a lower level of share of wallet. So it is really multidimensional. it is know, where can we grow share of wallet with the existing partners and what is that opportunity Where are there new partners where we can displace someone else? And then also what new businesses are being created that want to use travel as a way of, you know, driving customer loyalty. Thank you.

Alex Brignall: I guess the natural follow-up would be in the past, you have split out the growth organically within each of your partners, then the number of partners that you have into the components of your b 2 b growth. Is that something that you can share with them?

Ariane Gorin: Ariane. Are you referring to something we did a couple years ago when we went to I am trying to think of what you are referring to because we have never disclosed it in our financial statements. I believe a couple years ago, we did a presentation in which we provided a click down within b 2 b. Is that what you are talking about? You used to give commentary on the quarterly call about the split of your growth sort of organically within each partner and then the number of partners that you were adding. Okay. We will look at what we will disclose in future quarters. I think, again, what we have said in the past, and Derek just said we have got 75 thousand partners that we work with, and we have talked about double digit growth across all of our regions. And we have talked about there is not a concentration, an inordinate concentration in any particular partner. So I will go back and look at what is it that we have said in the past that you may be looking for. Thank you so much.

Operator: Our final question comes from Naved Khan with B. Riley Securities. Your line is now open. Please go ahead.

Naved Khan: Hey, thanks a lot. A couple of questions from me. Maybe just on the on the bookings. Ariane, you spoke about September promotions kind of contributing over $1 billion. Is that something that. And you talked about timing. So last year, did that fall into October and then, obviously, that is affecting the booking for Q4, but helps in Q3. Is that the right way to understand that? And then the second question I have is around Vrbo. I think you recently made changes to the host fee. And just wanted to get some clarity on how does it affect the overall take rate as well as what has been the reception of that. Those changes so far. Thank you.

Ariane Gorin: Sure. So on the first 1, yes, the September, the fall sale that we did this year was pulled forward a few weeks versus where it was last year. So that is why more of it fell into the fourth quarter last year. As we looked at the calendar this year and where we saw demand, we just thought it made more sense to do it on these dates. And it just happens to move across quarters. On the second 1, yes, we made. We just made some changes to the commission fee. We do not expect that to impact the take rate all up. This is really about simplifying things for travelers. And if you. it is. Whenever you make a change like this, there is always a lot of discussions and education as hosts think about sort of what does that mean for them for them, especially because across the industry, we are all getting closer to similar structures, that there are some uniqueness across players. So we are having really productive conversations with our partners. And we think at the end, this is going to be a good thing for travelers. Thank you.

Operator: There are no further questions at this time. I will now turn the call back to Ariane Gorin, CEO, for closing remarks.

Ariane Gorin: So thank you all for joining the call and for the questions. As you saw, we delivered a strong third quarter and we are pleased to see consumers continue to prioritize travel. As always, I want to thank our teams for their hard work and our partners and travelers for their continued trust in us. Thank you.

Operator: That concludes today's call. You may now disconnect your lines. Have a nice day.