Online travel platform Expedia has forecasted stronger first-quarter adjusted core profit margin growth on February 12, driven by one-time gains and robust demand from business clients, according to a company announcement. However, the Expedia Group tempered expectations for its full-year outlook, citing ongoing macroeconomic uncertainty and uneven consumer spending patterns. Expedia shares declined more than 5% in extended trading following the mixed guidance.
The company projects its adjusted core profit margin to expand by 3 to 4 percentage points in the first quarter of 2026, a significant improvement compared to the 1.05 percentage point rise recorded in 2025. However, for the full year, Expedia expects adjusted core profit margin growth to slow to just 1 to 1.25 percentage points, down from a 2.4 percentage point increase in 2025, according to finance chief Scott Schenkel.
Cost Reductions Drive First-Quarter Expedia Profit Margin Gains
The anticipated first-quarter margin expansion stems primarily from strategic cost-cutting measures, Schenkel explained. Reductions in headcount, marketing expenses, and cloud infrastructure costs are expected to provide a temporary boost to profitability. Meanwhile, the company cautioned that margin improvements could be relatively muted for the remainder of the year as these one-time benefits taper off.
Expedia cited “ongoing macro uncertainty” as a key factor behind its cautious full-year stance. The company noted that consumer spending remains uneven amid rising prices of goods and a shifting U.S. trade policy environment, creating headwinds for the travel industry.
Strong Business-to-Business Performance Offsets Consumer Weakness
Despite margin concerns, the Vrbo parent company’s business-to-business segment has emerged as a bright spot. The B2B division, which serves airlines, offline travel agents, and financial institutions, has benefited from the addition of new clients. Fourth-quarter gross bookings in the B2B segment surged 24%, significantly outpacing the 5% growth in Expedia’s direct-to-consumer unit.
Additionally, the company’s full-year gross bookings projection of $127 billion to $129 billion exceeded analysts’ average estimate of $125.95 billion, according to data compiled by LSEG. This forecast suggests continued demand for travel services despite economic headwinds.
Deal-Seeking Travelers Boost Online Travel Agency Performance
Online travel agencies are experiencing increased traction from cost-conscious travelers seeking value through promotional deals and discounts. CEO Ariane Gorin told Reuters that Expedia had 70% more partners participating in its Black Friday sales than ever before. Furthermore, approximately 30% of Expedia’s fourth-quarter bookings came from inventory that included promotional deals, highlighting the growing importance of value-oriented offerings.
The Hotels.com parent company reported strong fourth-quarter financial results for the period ended December 31. Adjusted profit reached $3.78 per share, up from $2.39 per share a year earlier and beating analysts’ average estimate of $3.36 per share. Total revenue rose 11.4% to $3.54 billion, also surpassing estimates of $3.42 billion.
Market Reaction and Future Outlook
The market’s negative reaction to Expedia’s guidance reflects investor concerns about the deceleration in profit margin expansion despite solid revenue growth. In contrast to the robust first-quarter projection, the full-year outlook suggests challenges in sustaining momentum throughout 2026.
Investors and analysts will be monitoring Expedia’s ability to balance cost management with revenue growth amid an uncertain economic environment. The company has not provided specific timelines for when macroeconomic conditions might stabilize or when it expects more consistent margin expansion to resume.
