“We estimate changes in FX will weigh on our third quarter reported U.S. dollar growth rates by about 1 percentage point for gross bookings and revenue.”

In context

“Ewout Steenbergen (CFO): Thank you, Glenn, and good afternoon, everyone. I will now review our results for the second quarter and provide our current thoughts for the third quarter and full year. All growth rates are on a year-over-year basis, and the reconciliation of non-GAAP to GAAP financials can be found in our earnings release. Room nights, gross bookings, revenue and adjusted EBITDA all exceeded the high end of our guidance for the second quarter. These results reflect the resilience of our global business in an uncertain travel environment and the disciplined execution of our teams. Glenn covered many of the underlying travel trends, so I'll focus on what they meant for our financial results and our outlook. Overall, consumer demand remained resilient in the quarter, although we observed some modest shifts in travel behavior. Constant currency ADRs increased approximately 2% year-over-year, demonstrating continued pricing strength, primarily driven by Europe and the U.S. Globally, we saw a modest contraction in booking window and length of stay during the quarter, although both began to normalize in June. Importantly, in Europe, our largest region, both metrics were approximately flat for the quarter. Now let's turn to our second quarter results. Room nights grew 5%, exceeding the high end of our guidance by about 1 percentage point. Globally, domestic room nights representing travel within the same country grew high single digits. In contrast, international room nights increased slightly, reflecting continued pressure on long-haul travel due primarily to the indirect impacts of the situation in the Middle East. Looking at room night growth by booker region. Europe grew mid-single digits with domestic room nights up high single digits. Asia grew mid-single digits with domestic room nights up low double digits. U.S. grew high single digits, driven by domestic demand. We're also pleased to see another quarter of direct channel growth in the U.S. Rest of World grew mid-single digits, improving from a low single-digit decline in the first quarter due to stronger bookings from Middle East bookers. Over the past four quarters, our B2C direct mix remained stable in the mid-60% range, while direct room nights continue to grow. This performance came despite the continued pressure on SEO, which we're seeing across much of consumer Internet. SEO remains a small component of our overall room nights. The mobile ad mix of total room nights over the past four quarters remained in the high 50% range, while the mix of Booking.com room nights booked by travelers in Genius levels 2 and 3 was also in the high 50% range. Both metrics increased year-over-year. Alternative accommodation room nights at Booking.com were also affected in part by the Middle East conflict, growing 4%. This growth was slightly lower than our overall 5% room night growth due to brands and regional mix as we saw higher growth from Agoda and Priceline and also in the U.S., where our alternative accommodation offering is relatively smaller. Alternative accommodations represented approximately 37% of Booking.com's room nights, similar to the second quarter of 2025. In our other travel verticals, attraction tickets grew double digits, while flight tickets increased 4% year-over-year despite pressure from the Middle East conflict, including reduced capacity on certain international routes and higher flight ticket prices. We believe this growth continued to outpace the broader market. Connected Trip transactions grew low double digits, more than twice the rate of Booking.com's total transaction growth. This matters because our data shows that travelers who book with us across multiple travel verticals return more frequently. Our total merchant gross bookings represented approximately 73% of total gross bookings, up about 4 percentage points year-over-year. Our merchant payments platform is foundational to our connected trip vision, enabling a more seamless customer experience while generating incremental value and contribution margin dollars. Total gross bookings increased 9% year-over-year or approximately 8% on a constant currency basis, exceeding the high end of our guidance by about 3 percentage points. Constant currency gross bookings growth was approximately 3 percentage points higher than room night growth, primarily reflecting the approximately 2% increase in constant currency ADRs and the contribution from flights and other verticals. Revenue increased 8% year-over-year or approximately 7% on a constant currency basis. Revenue growth was lower than gross bookings growth, primarily due to elevated cancellations in March that affected second quarter revenue. Marketing expense increased 11% year-over-year, modestly faster than gross bookings, driven by changes in traffic mix, incremental investments in paid marketing at attractive ROIs and a shift of merchandising spend to performance marketing. As always, we aim to grow our top line metrics faster than marketing investments, but are willing to lean in when we see positive long-term value for the business through both attractive ROIs and repeat rates. Adjusted sales and other expenses were 1.9% of gross bookings and provided a leverage despite the higher merchant mix as higher payment expenses were more than offset by customer service efficiencies. Additionally, payment expenses grew less than merchant gross bookings due to a one-time benefit from processing fee reversals. Adjusted fixed operating expenses increased 6% year-over-year, including 1% higher adjusted personnel expenses and were a source of leverage as a percentage of revenue, reflecting the targeted cost management actions we implemented last quarter and our continued focus on managing our fixed expense base while investing in key strategic priorities to drive long-term growth. Adjusted EBITDA of approximately $2.6 billion grew 9% year-over-year, exceeding the high end of our guidance. Adjusted EBITDA margin expanded nearly 40 basis points, reflecting disciplined execution and cost management. Adjusted EPS of $2.54 per share increased 15% year-over-year, faster than adjusted EBITDA growth, helped by a 6% reduction in average share count. Beyond the quarter's financial performance, we also continue to make meaningful progress improving the efficiency of our business. As we continue to execute on the transformation program, we identified additional opportunities, increasing our expected annual run rate savings from approximately $550 million to approximately $650 million. We expect the approximately $100 million of incremental annual run rate savings to be realized primarily in 2027. We incurred approximately $30 million of transformation costs in the second quarter, the majority of which were excluded from our adjusted results. Now on to our cash and liquidity position. Our second quarter ending cash and investments balance increased sequentially by $1.2 billion to $17.7 billion. During the quarter, we generated strong free cash flow of $3.6 billion, raised $3 billion of debt, paid down $1 billion of debt and returned $4.1 billion to shareholders, including $3.7 billion of share repurchases, marking another record quarter of capital returns. During the first half of 2026, we repurchased $7.4 billion of our common stock at an average price of approximately $173 per share. We remain committed to a disciplined capital allocation framework, first investing behind the highest return growth opportunities across our business while also returning meaningful capital to shareholders and maintaining a strong balance sheet. Moving to our thoughts for the third quarter. Global travel demand has remained resilient so far in the third quarter, supported by healthy domestic travel trends. As we look ahead, we remain mindful of the situation in the Middle East and continue to monitor the direct and indirect impacts on travel demand. Our guidance assumes stability in the broader travel environment, in line with recent trends. It also assumes that the indirect impacts of the conflict, including elevated flight ticket prices, reduced flight capacity on certain routes and softer long-haul international travel demand persist through the third quarter. In terms of the direct impact of the conflict, we continue to assume some pressure on inbound travel to the Middle East, while travel demand from Middle East bookers remains largely normalized. Our guidance also assumes recent FX rates for the remainder of the quarter and year, including the euro-U.S. dollar exchange rate at $1.15. We estimate changes in FX will weigh on our third quarter reported U.S. dollar growth rates by about 1 percentage point for gross bookings and revenue. For the full year, we estimate changes in FX will positively impact full year reported growth rates by about 1.5 percentage points for gross bookings and about 1 percentage point for revenue. We currently expect third quarter room nights to increase between 3% and 5% and for gross bookings, revenue and adjusted EBITDA to each increase between 4% and 6%. On a reported basis, our full year expectation is for gross bookings, revenue and adjusted EBITDA to each be up high single digits and for adjusted EPS to be up low to mid-teens. Our expectation for gross bookings is lower than our prior expectation, primarily due to lower flight ticket growth, while our accommodation outlook remains largely unchanged. In conclusion, our second quarter results demonstrate both the resilience of our global platform and the disciplined execution of our teams. Despite the external environment, we delivered robust results and exceeded the high end of our guidance across our key financial metrics while continuing to invest in the strategic initiatives that we believe will drive long-term growth. Our strategy remains unchanged. We are continuing to invest in the Connected Trip, expanding our presence in key markets, advancing our AI capabilities and strengthening the value we create for both travelers and partners. At the same time, we remain disciplined in how we allocate capital, balancing these investments with strong operational execution, solid free cash flow generation and meaningful capital returns to shareholders. Together, these strengths give us confidence in our ability to continue creating long-term value. Finally, I would like to thank my colleagues across the world for their continued dedication, passion and execution throughout the quarter. Their commitment to serving our travelers and partners in such a dynamic environment is what continues to strengthen our business and positions us well for the future. With that, we will now take your questions. Operator, will you please open the lines?”