Booking Holdings Balances Strong Quarter With Cautious Outlook

Booking Holdings ((BKNG)) has held its Q1 earnings call. Read on for the main highlights of the call.

Booking Holdings’ latest earnings call painted a picture of resilient growth tempered by geopolitical risks and softer guidance. Management highlighted strong demand in key markets, expanding margins and record capital returns, while acknowledging that the Middle East conflict, volatile March trends and higher marketing costs are weighing on near‑term visibility and investor confidence.

Room Nights Grow Solidly Despite Middle East Drag

Booking reported 338 million room nights in Q1, up 6% year over year and closer to 8% when excluding an estimated 2‑point hit from the Middle East conflict. The U.S. led with low‑teens room‑night growth for the fourth straight quarter, while Asia delivered high single‑digit growth with intra‑Asia travel running in the low double digits.

Gross Bookings and Revenue Post Double‑Digit Gains

Gross bookings reached $53.8 billion, rising 15% year over year, or about 8% on a constant‑currency basis, underscoring the impact of FX tailwinds. Revenue climbed 16% to $5.5 billion, translating to roughly 10% growth in constant currency and reflecting healthy travel demand despite regional disruptions.

Profitability Outperforms With EPS Supported by Buybacks

Adjusted EBITDA came in around $1.3 billion, up 19% year over year and above the high end of guidance, showcasing strong operational leverage. Adjusted EPS rose 14% to $1.14, helped by a roughly 4% lower average share count, although EPS growth lagged EBITDA due to a higher tax rate from discrete items.

Merchant Model and Other Verticals Accelerate

Merchant gross bookings surged 24% and now represent about 72% of total gross bookings, a mix shift of roughly 5 percentage points. Other travel verticals continued to scale, with airline tickets up 28% and attractions tickets growing around 25% in Q1, broadening Booking’s revenue base.

Connected Trip Strategy and Loyalty Drive Engagement

Connected transactions grew in the high teens and now account for a low double‑digit share of Booking.com transactions, roughly tripling the growth rate of the overall platform. Loyalty remains a powerful driver, with Genius Levels 2 and 3 making up over 30% of the active base and generating a high‑50% share of room nights over the past year.

AI Initiatives Deliver Early Product and Cost Benefits

Early artificial‑intelligence features such as Priceline’s Penny and natural‑language search on Booking.com are showing promising conversion and engagement in limited tests. On the cost side, Agoda achieved a double‑digit year‑over‑year reduction in customer‑service cost per booking through AI‑assisted automation, hinting at broader efficiency gains ahead.

Cash Generation Fuels Record Capital Returns

Booking generated approximately $3.1 billion of free cash flow in the quarter, reinforcing its cash‑rich profile. The company returned about $4.0 billion to shareholders, including a record $3.6 billion of share repurchases, and ended Q1 with $16.5 billion in cash and investments to support ongoing buybacks and strategic investment.

Cost Discipline and Transformation Program On Track

Adjusted fixed operating expenses increased only in the low single digits on a normalized basis, underscoring disciplined cost management. Management said they remain on course to achieve $500–$550 million of in‑year savings from the 2026 transformation program, with just $25 million of transformation costs incurred in Q1.

Middle East Conflict Weighs on Growth Metrics

The company estimates that the Middle East conflict reduced Q1 room‑night and gross‑bookings growth by about 2 percentage points, with the headwind intensifying into March. For Q2 guidance, Booking assumes roughly a 3‑point drag as conflict‑related disruptions and traveler caution continue to affect demand patterns.

March Volatility Highlights Elevated Cancellations

March room‑night growth slowed sharply to 1%, with management estimating a 6‑point impact from the conflict split between weaker bookings and higher cancellations. Beyond the region itself, disrupted Europe‑Asia transit corridors and cross‑regional knock‑on effects contributed to volatility and added uncertainty around near‑term booking trends.

Marketing Spend Delevers Amid Conflict‑Driven Cancellations

Marketing expense grew 16% year over year, slightly outpacing revenue growth and pushing marketing to 3.8% of gross bookings, up roughly 4 basis points. Part of the deleverage stemmed from paid‑channel bookings that were ultimately canceled due to the conflict, diluting marketing efficiency in Q1.

Regional Weakness Concentrated in Rest of World

The Rest of World region, which includes the Middle East, saw room nights decline in the low single digits, contrasting with strength in the U.S. and Asia. Management noted that bookers in the Middle East, including Turkey and Egypt, account for about 4% of global room nights, and including inbound trips, the region makes up around 7% of 2025 global room nights.

EPS Growth Trails EBITDA on Higher Tax Rate

While adjusted EBITDA advanced 19% year over year, adjusted EPS increased a slower 14% as tax headwinds offset some operating strength. The higher effective tax rate, driven by discrete items, partly counteracted the benefits of robust profit growth and a lower share count for shareholders.

FX Tailwinds Inflate Reported Growth Versus Constant Currency

Reported gross bookings growth of 15% materially exceeded the roughly 8% constant‑currency increase, underscoring how currency movements boosted reported metrics. Management emphasized that investors should focus on constant‑currency trends for a cleaner view of underlying demand, as FX added notable uplift in Q1.

Guidance Reflects Caution but Confirms Long‑Term Ambitions

For Q2, Booking expects room nights up 2–4% and gross bookings, revenue and adjusted EBITDA up 4–6%, assuming current FX and a roughly 3‑point conflict headwind through June, with FX adding about 2 points to reported growth. For 2026, the company targets high‑single‑ to low‑double‑digit gross‑bookings growth, high‑single‑digit revenue growth, slightly faster adjusted EBITDA growth with up to 25 basis points of margin expansion and low‑ to mid‑teens adjusted EPS growth, while reiterating longer‑term constant‑currency goals of at least 8% growth in gross bookings and revenue and 15% in EPS.

Booking Holdings’ earnings call underscored a business that remains fundamentally strong, with solid demand, rising margins and ample cash supporting aggressive buybacks even as geopolitical shocks introduce noise. Investors will be watching how quickly conflict‑related headwinds and cancellations abate, and whether AI, loyalty and the Connected Trip strategy can keep powering sustainable growth through the next travel cycle.