Shares of Expedia Group, Inc. (EXPE) declined sharply in Friday's trading session, shedding approximately 5% to close at $215.89. This drop occurred against a backdrop of a generally flat to slightly positive broader U.S. equity market, highlighting investor disappointment with the company's forward-looking guidance. The sell-off was primarily driven by concerns over the projected pace of margin expansion for the full 2026 fiscal year, despite the company posting strong quarterly bookings figures.
Strong Quarterly Performance Overshadowed by Cautious Outlook
The online travel giant reported robust financial results for the fourth quarter. Revenue climbed 11% year-over-year to reach $3.547 billion, while gross bookings, representing the total value of travel reserved on its platforms, also grew by 11% to $27.003 billion. Adjusted earnings came in at $3.78 per share. For the upcoming year, management provided a revenue forecast ranging between $15.6 billion and $16.0 billion, with gross bookings anticipated to be in the range of $127 billion to $129 billion.
However, the market's focus zeroed in on profitability metrics. While Expedia indicated it expects a stronger boost to its adjusted EBITDA margin in the first quarter, the full-year 2026 guidance calls for a more modest expansion of 1 to 1.25 percentage points. This tempered outlook for operating leverage throughout the remainder of the year contrasted with the strong quarterly performance and seemed to give investors pause.
Management Cites Macroeconomic Headwinds
Company executives pointed to an uncertain macroeconomic environment and uneven consumer spending patterns as key reasons for maintaining a prudent stance. Chief Financial Officer Scott Schenkel characterized the outlook for the rest of 2026 as "relatively muted." In commentary to the press, CEO Ariane Gorin did highlight positive operational trends, including a 70% surge in Black Friday partner participation and noted that roughly 30% of fourth-quarter bookings included promotional deals or discounted inventory.
The current investment climate has shown a distinct preference for travel sector stocks that can demonstrate clear operating leverage—growth that does not require proportionally higher marketing or operational spending. Consequently, any guidance hinting at potential margin pressure has been met with swift selling. For Expedia, the path forward involves balancing promotional activity to drive bookings, nurturing its business-to-business segments, and maintaining strict cost discipline to meet its 2026 targets.
Capital Return and Analyst Sentiment
In conjunction with its earnings, Expedia filed its annual 10-K report with the Securities and Exchange Commission. The filing confirmed a declared quarterly cash dividend of $0.48 per share, payable on March 26 to shareholders of record as of March 5. Additionally, the company reported that as of December 31, it had approximately $1.6 billion remaining under its existing share repurchase authorization.
Despite these shareholder-friendly actions, analyst sentiment cooled. Cantor Fitzgerald analyst Deepak Mathivanan notably reduced his price target on Expedia shares to $245 from $285. The downgrade was attributed in part to persistent market debates concerning the long-term risks that artificial intelligence (AI) developments may pose to the traditional online travel agency business model.
Looking ahead, investor attention will likely remain fixed on demand indicators for the first quarter, particularly in the business travel segment. The key question is whether demand can remain robust enough to support growth without necessitating heavy discounting that would erode the company's profit margins. The performance of peers like Booking Holdings (BKNG), which held steady, and Airbnb (ABNB), which edged higher, will provide further context for Expedia's competitive positioning and sector health as the year progresses.
