ABNB: Solid results, but now a cyclical? ---

Alt. stays leader Airbnb$Airbnb(ABNB.US) released FY2025 Q3 results this morning, coming in ahead of expectations. Contrary to prior guidance calling for a potential slowdown, both GBV and revenue growth accelerated across the board, hitting a 25-year high. The rub: expenses expanded sharply, margins compressed, and profit growth lagged revenue.

Details below. Key points follow.

1) Volume and pricing both up; travel demand remains resilient: Versus the earlier cautious guide, actual booking growth proved much sturdier this quarter. GBV rose 16% YoY, accelerating by 2.4pct QoQ to a two-year high.

On drivers, volume did the heavy lifting: nights booked grew 9.8% YoY, up ~1pct vs. last quarter, also a 25-year single-quarter high and well above the prior mid-single-digit guide. This outperformance came as travel demand improved after a weak setup at the Oct. guide.

Helped by FX tailwinds and broad hotel price hikes across markets, ADR rose nearly 6% YoY. Pricing momentum also picked up vs. last quarter.

2) North America held steady; Europe accelerated: By region, upside to orders partly came from a better-than-feared showing in North America, the largest market. Night growth stayed in the mid-single digits, avoiding the feared deterioration.

More notably, Europe was the key source of acceleration, with night growth improving from mid-single digits last quarter to high-single digits. It was the only region explicitly cited as speeding up.

3) Take rate slipped again; financials less impressive: On strong bookings, revenue grew 12% YoY, more than 2pct faster than last quarter and above estimates, with about 1pct tailwind from FX. However, net take rate declined ~52bps, a larger-than-expected drop, causing revenue to trail GBV growth.

The company attributed the lower take rate to shifts in the timing gap from booking to stay. As revenue recognized this quarter maps to earlier bookings, the booking-to-stay interval can affect the calculated take rate.

That said, with take rate down for two straight quarters, we still suspect longer-term mix effects may be at play. With take rate lower, GPM narrowed by ~0.3pct YoY; GP grew 11.6% YoY, again lagging revenue growth but coming in slightly above Bloomberg consensus.

4) Expenses surged; revenue up but little profit flow-through: Management has repeatedly flagged heavier spend on new initiatives, squeezing margins. Total opex jumped nearly 25% YoY, a marked step-up from low-teens growth in the first three quarters of FY25.

All major opex lines accelerated vs. last quarter. Sales & marketing rose 25% YoY, with R&D up 21%, underscoring heavier investment in acquisition and new biz. G&A jumped 66% YoY on a low base last year, reflecting an aggressive stance on internal spend.

As a result, adj. EBITDA margin contracted ~2.6pct YoY, a bigger decline than last quarter, leaving adj. EBITDA up only 2.7% YoY—classic revenue up, profit barely up. Still, results were better than more conservative Bloomberg consensus.

Dolphin Research view:

1) In-line to better quarter, and guidance is constructive

Results were meaningfully better than the cautious tone last quarter. Core growth not only failed to slow but hit multi-year highs, though at the cost of heavier spend and flattish profit growth.

After shares bottomed near $110 post last print and later rebounded to ~$140, the market had partially priced in an outcome better than guidance. Overall read is positive, but not a blowout beat.

Management also guided optimistically for next quarter. Revenue is expected to grow 14%–16%, with roughly 3pct FX tailwind, implying ~12% at constant FX, about 1pct faster than this quarter and above expectations.

On operating metrics, management expects nights to remain up high-single digits YoY, with ADR rising further on FX. This points to still-solid travel demand.

For FY2026, revenue is guided to grow at least 10%, while margins are expected to be roughly flat YoY given investment needs. That implies limited profit growth near term.

2) Street stance has shifted from bearish to neutral-to-constructive

After a long stretch of range-bound to down performance since 2021, the market has digested the bear case that alt. stays’ relative advantage has faded. We note sell-side views have moved from bearish to neutral overall.

Reasons include a better-than-feared North America demand backdrop, with the Street now assuming steady industry growth in coming years. In other words, perceived macro/industry headwinds have eased.

From a company lens, with valuation at a relatively lower level, focus has shifted from nitpicking to looking for upside levers. The market currently sees three potential drivers.

a) Reserve Now, Pay Later (RNPL): a new feature that lets some North America users defer payment from upfront at booking to one week before check-in. Management claims it lifted nights growth by 2–3pct in covered regions.

We think the feature does not fundamentally improve UX, and the lift is likely temporary. Still, it can help growth in the medium term.

b) World Cup in 2026 could boost travel demand. It is a one-off, but with the US–Canada–Mexico host setup in ABNB’s largest market, it can serve as a near- to mid-term catalyst.

c) Expanding hotel supply: the only lever with potential long-term upside would be materially adding hotel inventory and rolling out paid recommendations (ads). The Street has anticipated this for a while.

However, on the last call, management signaled restraint on hotel expansion. The concern: while more hotels would mechanically lift GBV and nights, it could dilute Airbnb’s 'brand-as-category' positioning in alt. stays.

With Booking and Expedia already heavy in alt. stays, Airbnb’s true differentiation today is not having lots of alt. stays, but having very little hotel inventory. As with China e-comps, adding supply is easy; allocating traffic is hard.

If traffic is allocated fairly, ABNB loses distinctiveness; if alt. stays get priority, added hotel supply matters less. Hence we remain skeptical that hotel expansion will be a durable growth engine.

3) Potential impact from AI

AI’s cross-industry disruption is front and center for investors. Conceptually, OTAs are more exposed to AI, as travel is low-frequency, non-standardized, and decision-heavy—areas where AI can add material value.

By contrast, high-frequency, goal-clear shopping needs AI less. Relative to peers, Airbnb’s brand-as-category positioning drives most traffic from direct channels, lowering reliance on external search or social, which should reduce exposure to external AI gateways.

That advantage likely holds for existing users with strong alt. stay preferences. But if AI agents become the main entry point for trip planning and booking, ABNB could still face pressure on new-user acquisition from AI-controlled front ends.

4) Valuation: given limited near-term profit growth, pre-result mkt. cap implied 23x and 20x PE on FY26/FY27 net income est. (Approx. $3.0bn and $3.4–3.5bn). Against a mid-teens profit CAGR run-rate, the multiple bakes in some vertical-leader premium, but is not expensive.

Positioning-wise, ABNB screens more as a cyclical tied to macro travel demand. Most near-term catalysts are transitory, and we do not yet see a sustained alpha edge vs. peers or the market. It can be a tactical opportunity, but not an obvious long-hold.

Detailed take:

I. Volume + price in sync; GBV growth at a two-year high

Actual growth was far sturdier than the earlier cautious guide. GBV rose 16% YoY, accelerating 2.4pct QoQ to a near two-year high, even after accounting for some FX tailwind.

On drivers, nights grew 9.8% YoY, ~1pct faster than last quarter, well above the prior mid-single-digit guide. This reflects a weak setup at Oct. guide, followed by a clear recovery in Nov–Dec.

With FX tailwinds and broad hotel price hikes, ADR rose nearly 6% YoY. Pricing also accelerated vs. last quarter.

By region, North America nights growth was roughly flat vs. last quarter at mid-single digits, avoiding the feared slowdown. Europe was the main area of acceleration, improving from mid- to high-single digits.

Across all operated regions, ADR generally rose 2%–5% YoY, with LATAM up as much as 9%. Pricing strength appears broad-based.

II. Take rate fell again, but revenue and GP still beat

On strong bookings, revenue grew 12% YoY, more than 2pct faster than last quarter and above estimates, with ~1pct FX tailwind. However, net take rate fell ~52bps, making revenue trail GBV growth.

Management cited timing shifts from booking to stay (revenue recognized this quarter reflects earlier bookings, while the displayed take rate uses this quarter’s revenue over this quarter’s bookings). Hence, interval changes can distort the take rate.

Still, two straight quarters of decline suggest possible longer-term mix effects. With lower take rate, GPM narrowed ~0.3pct YoY; GP grew 11.6% YoY, slower than revenue but slightly ahead of the Street.

III. Opex expanded sharply; margin compressed; limited profit growth

Management has noted heavier investment in new initiatives would lift expenses and compress margins. Total opex rose nearly 25% YoY, a clear acceleration vs. low-teens growth in the first three quarters of FY25, and +28% YoY ex-SBC.

Growth quickened across line items: S&M +25% YoY, with R&D +21% YoY. G&A +66% YoY on a low base and not driven by SBC, reinforcing the aggressive internal spend stance.

Accordingly, adj. EBITDA margin contracted ~2.6pct YoY (worse than last quarter), leaving adj. EBITDA up just 2.7% YoY. Again, revenue up with little profit growth, although better than more conservative consensus.

Past Dolphin Research coverage on Airbnb:

Earnings reviews

Nov 7, 2025: Airbnb: Real recovery, or just a dead-cat bounce?

Aug 7, 2025: Airbnb: Headline OK, but operating metrics keep weakening

May 2, 2025: Tariffs hit travel hard: Airbnb lost both growth and profits?

Feb 14, 2025: Airbnb finally back?

Feb 14, 2025 call: Airbnb (Trans): This year’s spend won’t significantly hurt margins

Nov 8, 2024: Growth slows & margins narrow; Airbnb still in the tunnel

Nov 8, 2024 call: Airbnb 3Q24 call: How much can new biz contribute?

Aug 7, 2024: Airbnb: Even the Olympics could not lift it?

Aug 7, 2024 call: Airbnb: Any trade-down in travel?

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