Second-quarter results beat expectations, but reduced profit guidance and AI distribution risks keep Bernstein on the sidelines

Overview

Booking delivered solid second-quarter upside, with improved constant-currency ADR driving gross bookings, revenue, EBITDA, and EPS above Bernstein’s forecasts. However, the Middle East conflict continues to weigh on flight supply and long-haul travel, leading the company to lower its full-year gross bookings and EBITDA growth guidance and remove the previously implied margin expansion expectation. Bernstein believes the current weakness is more cyclical than structural, but maintains a neutral stance given the fourth-quarter recovery assumption, insufficient explanation around margins, and AI distribution risks.

Core views

Positive factors include unchanged core accommodation expectations, resilient domestic and intra-regional travel demand, Booking’s typical tendency to expand beats in the second half, and a lower comparison base in 2027. Based on the usual roughly 1% guidance conservatism, third-quarter room-night growth could exceed 6%, and fourth-quarter growth could return to around 7%, implying year-end revenue growth of more than 10%. However, the company is effectively assuming that the Middle East impact disappears in the fourth quarter, while providing insufficient explanation for the reduced EBITDA guidance and the lack of further margin expansion. AI has not yet had a clear impact on operating metrics, but Google’s new hotel booking product will open a more genuine phase of channel competition, so the current valuation does not adequately compensate for the related uncertainty.

Analysis framework

The report compares second-quarter actual results and guidance with market consensus and Bernstein forecasts to analyze variances, and adjusts the 2026–2028 model accordingly. It also evaluates fundamentals through growth cadence, historical second-half beat patterns, Middle East demand scenarios, and AI channel evolution, before determining the target price using both forward EV/EBITDA and P/E methodologies.

Methodology notes

• Performance analysisActual-versus-expected variance analysis

  Comparing actual results, company guidance, market consensus, and research institution forecasts

  The report measures the degree of outperformance across room nights, ADR, gross bookings, revenue, EBITDA, and EPS to assess growth quality and profit pass-through.

• Forecast analysisGrowth cadence and scenario analysis

  Projecting quarterly growth based on guidance conservatism, historical beat patterns, and regional demand recovery assumptions

  The report focuses on testing the assumptions of third-quarter acceleration and fourth-quarter normalization of Middle East demand, and uses this to assess growth continuity into the end of 2026 and into 2027.

• Valuation analysisRelative valuation method

  Dual valuation using EV/EBITDA and P/E

  The USD 188.00 target price is based on Bernstein’s forecast NTM+1 EV/EBITDA multiple of 14.1x and P/E multiple of 17.4x, with reference to sales growth, EBITDA margin, cash conversion, and comparable company levels.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BKNG.US

  Core research target

  Strengths

  Among large online travel platforms, growth quality is relatively high, accommodation demand is resilient, and the company has a strong record of second-half outperformance; loyalty, direct traffic, and app penetration continue to improve.

  Weaknesses

  Full-year profit guidance was reduced and the margin expansion commitment was removed, while the outlook depends on the recovery of Middle East flights and cross-border travel.

  Comparison

  Compared with some travel peers, Booking does not face the post-World Cup demand payback pressure, but similar mid-teens EPS growth opportunities can be found in other travel companies with lower AI distribution risk.

  Risks

  Middle East demand recovery falling short of expectations, AI changing hotel distribution, intensified OTA competition, declining monetization rates, and Asia-Pacific growth diluting ADR and monetization rates.

Key data

• Second-quarter room-night growth5.2%120 bps above the high end of guidance and 140 bps above market consensus.
• Constant-currency ADR growth2%Above the 1% recorded in the first quarter, mainly driven by a stronger U.S. market.
• Constant-currency gross bookings growth8%270 bps above market consensus.
• Revenue beatUSD 170m2.3% above expectations.
• EBITDA beatUSD 87m3.4% above expectations.
• Alternative accommodations performance37% of room nights, up 4% year over yearGrowth was affected by the Middle East conflict.
• AI channel contributionLess than 1% of room nightsNo meaningful change in recent months, with limited near-term operational impact.
• 2026 adjusted EPS forecastUSD 10.44Reduced by about 1% in this model update.
• 2027 adjusted EPS forecastUSD 12.05The absence of further margin expansion lowers 2027–2028 EPS forecasts by about 2%.
• Valuation2026E P/E of 18.6x, EV/EBITDA of 13.7xBased on the closing price of USD 194.27 on August 4, 2026.

Impact & implications

The earnings beat and stable accommodation outlook help ease market concerns about structural deterioration in demand, while a recovery in Middle East travel could drive a notable acceleration in the fourth quarter. However, the removal of the margin expansion expectation means revenue improvement may not fully translate into upward earnings revisions. With the target price below the current share price and Google’s agentic hotel booking product potentially weakening traditional online travel platforms’ control over traffic, the report suggests investors wait for clearer evidence on demand recovery, margins, and the impact of AI channels.

Risks

• The company’s full-year assumptions imply the Middle East impact lasts only seven months; if conditions do not normalize in the fourth quarter, revenue and earnings may be revised down again.
• EBITDA growth guidance was lowered and is no longer expected to exceed revenue growth, while cloud computing and software licensing costs may continue to weigh on margins.
• Google’s agentic hotel booking product and other AI channels may change search, checkout, and supplier customer-acquisition methods, weakening OTAs’ traffic advantages.
• New OTA competition may lead to a decline in Booking’s market share.
• Consolidation on the hotel supply side may put pressure on platform monetization rates.
• If Asia-Pacific growth comes more from lower-ADR or lower-monetization businesses, it may dilute overall profitability.
• Higher flight prices and lower capacity caused by the Middle East conflict may continue to suppress long-haul international travel.

What to watch

• Whether third-quarter room-night growth can accelerate from 5.2% in the second quarter to more than 6%.
• Whether Middle East traveler demand and flight supply can normalize in the fourth quarter as management assumes.
• Whether fourth-quarter revenue and EBITDA growth can reach the implied exit level of more than 10%.
• The features, user engagement, supplier interest, and impact on direct bookings of Google’s agentic hotel booking product.
• Whether the share of room nights from AI and LLM sources remains below 1%, and the effectiveness of OpenAI’s CPC advertising test.
• The impact of cloud computing, software licensing, and AI investment on EBITDA margins.
• Changes in the share of B2C direct traffic, app share, and the contribution from higher-tier Genius members.