Booking Stock

Hello, and welcome to Booking Holdings' Third Quarter 2026 Conference Call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guaranteed of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical facts are intended to identify forward-looking statements.

For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements in the Booking Holdings' earnings press release as well as the Booking Holdings' most recent filings with the Securities and Exchange Commission. Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of Booking Holdings' earnings press release is available in the For Investors section of Booking Holdings' website at www.bookingholdings.com.

Booking Holdings intends to use the Investor Relations page of its website, ir.bookingholdings.com to disclose material information for purposes of the SEC's regular fair disclosure. Booking Holdings incurred as investors to monitor this website in addition to other public announcements and SEC filings as an information posted on that page could be deemed to be material information.

[Operator Instructions]

And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Go ahead, gentlemen.

Good afternoon, and thank you for joining us today. I am pleased to report that our teams delivered another quarter of strong operating performance, with results exceeding the high end of our guidance across each of our key financial metrics. These results reflect the resilience of travel demand and the work our teams have done to strengthen our products and services. While travel trends can fluctuate in the near term, we remain focused on making travel easier, more connected and more personalized. This quarter, we continue to advance several priorities that support that goal.

Let me begin with AI, which is creating significant opportunities to better serve travelers and partners while strengthening our business. We believe this is the most transformational time for industries since the dawn of the Industrial Revolution. Particularly in travel distribution, AI is opening up new ways for people to discover, plan, book and manage travel. The technologies and the way people use them are evolving quickly. We are actively testing AI across the traveler journey, learning from real-world usage and scaling the capabilities that create the most value for travelers and partners. We have made tangible progress across our brands over the last several months. For example, at booking.com, we're expanding AI tools that help travelers explore destinations in greater detail at the top of the funnel. We also continue to advance our agent capabilities, enabling customers to cancel a booking or get answers about their stay without having to contact customer service.

Early testing is showing encouraging customer satisfactory results and fewer escalations to our service teams. Agoda launched its new AI assistant, which is now live across 21 markets and helps travelers move from an initial idea to a bookable trip using Agoda's live selection of accommodations, flight and activities. At Priceline, we continue to develop Penny, its AI travel assistant and bring more of Penny's capabilities into the main price line experience so more customers can benefit from them. These experiences show the difference between recommending a trip and actually enabling someone to book it seamlessly whether it's comparing locations, photos, room choices and prices, we can combine the ease of an AI assistant with the information, life inventory, booking capabilities and service of our platforms.

We're also excited to see the birth of new AI native experiences beyond our existing brands. In September, we launched Lola, which helps people access unique travel, dining and event inventory across platforms beyond our company through a conversational experience in a membership model. A few weeks later, we launched Aveo, a proactive AI travel agent designed to help travelers from initial planning through booking and beyond. It can bring existing reservations from our travelers e-mail history into one place and use that history to create more personalized offers and suggest ways to fill gaps in an itinerary.

They also continuously monitors prices and stays engaged after booking, alerting travelers to changes in helping them adjust their plans along the way. These platforms are testing rounds where we can explore new AI capabilities, entering quickly and apply what we learn across Booking Holdings. Our established brands give us the scale to bring successful capabilities to our partner and customer bases. This combination allows us to produce several approaches and direct resources towards the experiences that prove most useful to travelers and partners. Alongside these investments, our partnerships give us additional ways to reach travelers wherever they choose to engage. We continue to work with leading technology and AI companies, including Meta, OpenAI, Google, Anthropic and Amazon. Open Tables need an integration with OpenAI has become one of the brand's fastest-growing channels from a small base, and Open Table recent debut as the first dining partner with [indiscernible] personal agent. And Agoda is live on Muse as a launch partner in Asia, connecting Muse directly with Agoda's new AI assistant.

Finally, AI is helping us operate more efficiently. We use it to help customer service teams handle routine requests, accelerate product development and improve our internal processes. As an example, in the third quarter, customer service costs declined despite higher booking volumes while satisfaction remained high. We are also seeing higher engineering productivity while the cost per merger request continues to decline. These are real efficiency gains we are seeing today. And we believe AI can deliver more over time.

Now let me turn to the value we provide to our supplier partners. As the benefits of these AI improvements that we bring to our traveler customers have been built on the foundational relationships we have developed with our suppliers over many years. Independent hotels and alternative accommodation partners generate the vast majority of our room nights at Booking.com. Another way to look at this is the 10 largest global hotel chains account for only a low double-digit percentage of room nights at Booking.com. So many of our partners do not have significant resources. The value we provide to them is to improve their business by enabling them to have incremental travelers from around the world at lower cost and by providing services and expertise they may not be able to develop on their own.

For example, small and even medium-sized accommodation providers are generally not able to efficiently market themselves globally. Our brand and marketing reach supported by years of investment in machine learning and AI helps connect partners offers with travelers across markets and channels. Partners benefit from that reach without upfront marketing costs, paying us only when they earn revenue from a room night that might have otherwise gone empty.

To help our partners, we provide them with sophisticated data and tools to better understand travel demand patterns and improve their performance. And we provide different products like Genius that offer them opportunities to be more competitive. Our value goes beyond just showing a property to a traveler with advice on how to display it to improve conversion, we provide payment services, we provide customer service in over 40 languages, we built AI agents and people available around the clock. Our dedicated partner service teams are on the ground across the world, working directly with properties to help them improve their operations.

Local knowledge matters, traveler preferences, payment methods and regulations vary widely from one market to another. Payments are a good example. Travelers want to use methods. They know and trust even when those methods are unfamiliar to the property where they are staying, Today, we can process more than 100 pay methods in over 50 currencies. That helps properties welcome guests from around the world without having to manage that complexity themselves or lose bookings because they cannot accept a traveler's preferred payment method. This combination of global reach and local expertise supports our growth in markets where we see significant opportunity. The U.S. and Asia are 2 such important priorities. In the U.S., we have mentioned in the past seeing significant room to grow over the long term. We've invested in product, supply, brand, marketing and technology to build a strong offering over the past several years, and our progress is clear. We have outperformed the broader market in terms of room night growth for the last 3 years as we have deepened direct engagement and more travelers have chosen to book multiple parts of their trip on our platform. These results reflect the consistent execution of our strategic priorities and reinforces my confidence in the opportunity ahead.

Asia is another important area of growth. It's many distinct markets call for local execution, and we believe Booking.com's global reach and Agoda's local expertise position us well to deliver it. Across the region, we continue to invest in products, payments, marketing, distribution, supply relationships that reflect how people travel in each market. As we discussed last quarter, that can mean adapting payment options, working at local properties or reaching customers through the social and messaging platforms that they use every day. These investments help us better serve travelers and partners while supporting our long-term growth in the region. Across all of our markets, we are focused on building relationships that extend beyond a single booking.

We want to help travelers with more of their trip and give them more reasons to choose us again for the next one. Our connected trip efforts and Genius loyalty program are central to that goal. Travel can be fragmented. The treatment involve accommodations, flights, ground transportation and attractions, often with different providers. By bringing these pieces together, we can engage travelers earlier help with more of their trip and seek to build a stronger relationship over time. Genius adds value for travelers and encourages them to return to Booking.com, and we are seeing progress on both. Connected trip transactions where a traveler books more than 1 travel vertical with us for the same trend grew 3x faster than Booking.com's overall transactions from a relatively small base. Those travelers also tend to return more frequently.

Higher tier Genius members plan further ahead returned more consistently and booked directly at a higher rate than non-Genius travelers. Over the last 12 months, Level 2 and Level 3 members represented more than 30% of Booking.com's active customer base and accounted for a high 50% share of room nights, up from a year ago. In closing, our teams executed well in the third quarter, delivering solid results while advancing the priorities I discussed today. I want to thank them for that work. The pace of change in technology is accelerating and therefore, the pace of change in travel is also accelerating. AI is creating new ways for people to discover and plan trips, compare various travel options and do it all in an easier way. And we are building quickly to continue to help shape that future. Through it all, though, our mission remains the same, to make it easier for everyone to experience the world.

We have spent years building the brands, partner relationships and services that help us deliver on that mission. We help travelers turn ideas into trips that they can book with confidence, and our services help our partners welcome customers from around the world. However, a traveler begins their travel inspiration and planning we see opportunities to make the whole travel process better, easier with less frustration and anxiety. In the end, it comes down to providing more value to both sides of the travel marketplace. That is the work our teams are focused on is why I am confident in the future of Booking Holdings. With that, I'll turn the call over to Ewout to discuss our financial results and outlook.

Thank you, Glenn, and good afternoon, everyone. I will now review our results for the third quarter and provide our current thoughts for the fourth quarter and full year. All growth rates on a year-over-year basis and the reconciliation of non-GAAP to GAAP financials can be found in our earnings release. I'm pleased to report that room nights gross bookings, adjusted revenue and adjusted EBITDA all exceeded the high end of our guidance for the third quarter. We delivered profitable growth in a complex macro and travel environment while investing in our long-term priorities.

Our results reflect the fundamental strength of our global business and the continued focus and discipline of our teams. Travel demand was resilient in the quarter, although we saw some moderation towards the end of the period. Prices increased as we saw constant currency ADRs up approximately 3% year-over-year, primarily driven by Europe, but also by the U.S. and Asia.

We saw a slight expansion in the booking window in Europe and at the global level, while the booking window in the U.S. modestly contracted. Average length of stay increased year-over-year for our business outside Asia as Asia domestic travel outpaced international travel by the widest margin of any region.

Now let's turn to our third quarter results. Room nights grew 7%, up from the 5% in the second quarter, driven by an improvement in international travel from bookers in Europe and Asia, while domestic room night growth was stable at a higher level. Globally, domestic room nights grew high single digits and international room nights grew mid-single digits. We continued to navigate the indirect impacts of the conflict in the Middle East with elevated airfares and reduced capacity on certain routes weighing on long-haul travel demand, looking at room night growth by Booker region, Europe grew high single digits with domestic room nights up high single digits. Asia grew high single digits with domestic room nights up low double digits.

The U.S. grew mid-single digits, driven by domestic room night growth. We're pleased to see another consecutive quarter of direct channel growth in the U.S. Rest of World grew mid-single digits, which was stable from the second quarter as we continue to see growth from bookers in the Middle East. Over the past 4 quarters, our B2C direct mix remained stable in the mid-60% range as room nights booked through the direct channel continue to grow in line with the rest of the business. While the mix of room nights coming from direct visits to our websites and mobile apps increased year-over-year. LLM referrals have accelerated over the last several weeks, it still accounts for significantly less than 1% of Booking.com's room nights.

Organic referrals increased following the release of the latest ChatGPT models, which improved citation rates and drove more traffic to our platforms. paid referrals are also growing as we continue to partner with OpenAI by expanding into additional markets and testing and refining our approach. The mobile ad mix of total room nights over the past 4 quarters was in the high 50% range, up from the mid-50% range a year ago and the mix of Booking.com room nights booked by travelers in Genius Levels 2 and 3 was in the high 50% range, which also increased from a year ago.

What is particularly encouraging is behavior of travelers who engage with Booking.com across all 3 dimensions, looking directly using our mobile app and participating in Genius Levels 2 and 3. Room nights booked by this cohort grew meaningfully faster than those booked by other travelers, both in the third quarter and year-to-date.

These trends reinforce our confidence in the investments we are making to deepen our direct relationships with travelers, and we believe our broader selection of accommodations slides and attractions, together with progress in payments, the connected trip and more personalized and proactive AI-powered experiences will give travelers even more reasons to choose us and return for future trips.

Alternative accommodations represented approximately 37% of Booking.com's room nights up about 1 percentage point from the third quarter of 2025 with room night growth of 7% improving from 4% growth in the second quarter as we saw an acceleration across all of our major regions. We also saw alternative accommodation listings growth accelerate to 9%, which is an encouraging signal for our future growth in this category.

In our other travel verticals, flight tickets increased 19% year-over-year, a strong acceleration from the second quarter and ahead of the broader market despite continued pressure from elevated ticket prices and reduced capacity on certain routes. Attraction tickets grew 24% year-over-year, also an acceleration from the second quarter. Importantly, connected trip transactions growth accelerated to almost 20% year-over-year and represented a low double-digit mix of Booking.com's total transactions. This year has increased substantially over the past few years as we have expanded our supply across travel verticals beyond accommodations. We expect further increases as we deliver more peripheralize and Gen AI-powered experiences and bring these offerings together more seamlessly through our Genius loyalty program. Our data shows that travelers who book with us across multiple travel verticals return more frequently, reinforcing our confidence in the connected trip opportunity.

Our total merchant gross bookings represented approximately 75% of total gross bookings, up about 3 percentage points year-over-year. Our merchants payments platform is a key enabler of our connected trip vision, providing travelers with a more seamless and flexible booking experience, helping partners accept customers' preferred payment methods and generating incremental contribution margin dollars for our business. Total gross bookings increased 10% year-over-year or approximately 11% on a constant currency basis.

Constant currency growth bookings growth was approximately 4 percentage points higher than room night growth, primarily reflecting the higher constant currency ADRs and the contribution from flights and other verticals. Adjusted revenue increased 9% year-over-year or approximately 10% on a constant currency basis.

Adjusted revenue as a percentage of gross bookings was about 15 basis points lower year-over-year due to a higher mix of flight bookings and the timing of bookings versus travel partially offset by higher revenues from facilitating payments. Marketing expense increased 11% year-over-year, slightly faster than gross bookings, driven primarily by faster growth in B2B affiliate marketing expenses. Excluding our B2B affiliate business, our B2C business at marketing leverage in the quarter as we continue to aim to grow our top line metrics faster than marketing investments.

Adjusted sales and other expenses were 2.0% of gross bookings and were a source of leverage. Efficiencies in third-party customer service, supported by AI-enabled tools more than offset higher payment expenses associated with our increasing merchant mix. Disciplined cost management continued to support operating leverage in the quarter. Adjusted fixed operating expenses increased 6% year-over-year, reflecting actions we have taken to manage our cost base. As our use of generative AI scales, we are applying the same cost discipline, including price caps on higher cost models and model routing simpler tasks to more cost-effective models.

For example, at Agoda, our blended cost per 1 million AI tokens declined by more than 25% between June and September. For the company overall, developer productivity continued to improve while cost per merch request declined double digits. These gains are helping us deliver new capabilities faster, including several Glenn highlighted in his opening remarks. Adjusted EBITDA of approximately $4.6 billion grew 9% year-over-year. We delivered 9% adjusted revenue growth, while expanding our adjusted EBITDA margin slightly to 47.0%, including stock-based compensation as an expense a powerful combination of growth and profitability that underscores the strength of our business model and disciplined execution.

Adjusted EPS of $4.66 per share increased 17% year-over-year, faster than adjusted EBITDA growth, helped by a 7.5% reduction in our average share count. We continue to execute on our transformation program and remain on track to achieve the full $650 million in annual run rate savings in 2027. We incurred approximately $23 million of transformation costs in the third quarter, the majority of which were excluded from our adjusted results.

Now on to our cash and liquidity position. Our third quarter ending cash and investments balance was $16.2 billion compared to $17.7 billion at the end of the second quarter. During the quarter, we generated free cash flow of $1.1 billion, which was impacted by a working capital decrease driven by a $3.6 billion seasonal unwind of deferred merchant bookings. We also returned $2.4 billion to shareholders, including $2.1 billion of share repurchases.

During the first 9 months of 2026, we returned $10.5 billion of capital to shareholders, including $9.5 billion of share repurchases. We remain committed to a disciplined capital allocation framework, investing behind the highest return growth opportunities across our business while also actively returning capital to shareholders and maintaining a strong balance sheet.

Moving to our thoughts for the fourth quarter. The travel environment is mixed. As I mentioned earlier, we saw some moderation in global demand trends toward the end of the third quarter, driven by international travel. Domestic travel continues to hold up as we are seeing travelers take shorter trips and choose destinations closer to home.

In October, a number of external factors have also affected demand, including disruptions to travel to and from the Middle East, the conflicts broader indirect effects, such as elevated airfares and localized unrest in certain European cities. Our guidance reflects these near-term disruptions and assumes that both the direct and indirect impacts of the Middle East conflict on travel persists through the end of the year.

Our guidance also assumes recent FX rates for the remainder of the year, including the euro-U.S. dollar exchange rate at 1.12. We estimate changes in FX will negatively impact our fourth quarter reported U.S. dollar growth rate by about 2 percentage points. For the full year, we estimate changes in FX will positively impact reported growth rates by about 1 percentage point for gross bookings and about 0.5 percentage point for adjusted revenue.

We currently expect fourth quarter room nights to increase between 1% and 3%, reflecting the toughest prior year comparison of 2026 and the uncertainty around the impact of recent events on travel demand. We currently expect gross bookings to increase between 2% and 4% or between 4% and 6% on a constant currency basis, which is higher than room night growth due to higher constant currency ADRs and flight ticket growth.

We currently expect adjusted revenue to increase between 0% and 2% are between 2% and 4% on a constant currency basis slower than gross bookings due to flight bookings mix and differences in the timing of bookings versus travel, partially offset by higher revenue from payments. We currently expect adjusted EBITDA to be about flat year-over-year or up about 2% on a constant currency basis and to be impacted by increased planned investments behind our long-term strategic priorities including expanding capabilities across non-accommodation verticals, such as flights, attractions and dining advancing our AI capabilities and enhancing our underlying technology infrastructure and platforms.

We expect these investments to be partially offset by marketing leverage. For the full year, on a reported basis, we continue to expect gross bookings, adjusted revenue and adjusted EBITDA to be up high single digits and adjusted EPS to be up low to mid-teens. At the high end, this outlook is broadly in line with our long-term constant currency growth ambition of at least 8% for gross bookings and adjusted revenue and 15% for adjusted EPS.

In conclusion, our third quarter results demonstrated the resilience of our global platform and the disciplined execution of our teams in a dynamic environment. We continue to focus on key areas that we believe can further strengthen our long-term growth outlook, including expansion in key markets, deepening traveler relationships through connected trip and Genius creating greater value for our partners and advancing our approach to AI. As agentic AI evolves, we are taking a multipronged approach: First, building our own AI agent powered experiences; second, participating in new distribution channels that bring incremental demand at attractive economics; and third, using AI to improve customer service, developer productivity and operating efficiency. We believe Booking Holdings is well positioned to win as the landscape evolves.

Our confidence is grounded in the capabilities that matter when inspiration turns into an actual trip, extensive supply, real-time price and availability, trusted brands, attractive loyalty programs payments and service capabilities and long-standing relationships with travelers and partners. We believe these will create economic value, both within our own platforms and through emerging channels supporting sustained growth and attractive returns over time. With that, we'll now take your questions. Operator, will you please open the lines?

[Operator Instructions]

Your first question comes from the line of Doug Anmuth with JPMorgan.

I have two. Just first on the tangible AI progress that you're seeing in brands. Obviously, good to see the customer service cost efficiencies. Is there anything that you can share in terms of some of the top line benefits perhaps that you're seeing around either conversion rates or frequencies or just other ways to quantify and then on those accelerating AI referrals in recent weeks, are you seeing any differences in some of the newer agents like Muse and Grokbot relative to what you saw previously with kind of the other LLMs.

This is Ewout. First, on some of the tangible AI progress. There are 4 key categories where we see some positive early indicators. So let me explain that and give us a couple of examples around that: First, we're seeing higher engagement. So examples here are Booking.com's daily AI search visitors are up 10x with Trip surge in the third quarter compared to the second quarter. And second example here is our new Vayo platform users are connecting their e-mail, and we're seeing strong conversational engagement with Vayo at the moment.

Second area is higher conversion. So a couple of examples, again, price line spending and Agoda's AI assistant, users have converted at approximately twice the rate of nonusers. Third area, higher booking value with Agoda's AI assistant users have an average booking value of approximately 20% higher than nonusers. And the fourth category is incrementality. So again, some examples. OpenTable's native integration with OpenAI has become one of the brand's fast and growing channels and had in September 190,000 seat covers and then OpenTable's agentic interactions with Muse and other horizontal agents have brought a significant number of completely new customers to our platform.

So 4 key areas where we see improvements and really positive indicators, higher engagement, higher conversion, higher booking value and incrementality. It's early days, but we're encouraged by the momentum, and we really think these are really nice positive uplifts on these metrics. In terms of your question around referrals from LLM versus the newer horizontal agents, what we are seeing that this traffic is still very small in aggregate. So nothing is really jumping out there in terms of one that is growing faster than another. So it's still very small.

Yes, we have seen some acceleration in the recent weeks, but it's still significantly below 1%. I also would like to point out that the vast majority of that traffic is coming to us and that is based on third-party data sources. So we're not missing out on the traffic, but it's still really small.

Your next question comes from the line of Mark Mahaney with Evercore ISI.

Two questions, please. I know you've got this partnership with Muse in -- with Agoda in Asia. And just what's the -- just talk a little bit about the strategy of -- you've got three, sort of, global brands. Why work with Muse, with Agoda versus [indiscernible] one of the others? And then the marketing deleverage in B2B, and I think that's been the case for a quarter or 2 or 3. I think you're leaning into this as a channel. Could you talk about any signs of traction or success more momentum you're getting just in the B2B segment?

Mark, why don't I take the first one, and then I'll let Ewout will take the second one. So it's interesting, which agreements with whom we get done first and priorities, et cetera. Look, I think the important thing to recognize is that we are working with everybody all the time, some things are going to happen faster than others, something is going to get complete faster than others. But you should not think just because we have Agoda getting launched in Singapore is somehow more important than what we end up in the U.S. with Muse or anyone else. Please don't misinterpret that.

And I have confidence that we have great relationships with all the players and not just the ones that you know now because we know there are a lot more coming down the road.

Mark, with respect to your second question, with respect to B2B and marketing deleverage. So let me point out the following. So we are pleased, of course, the third quarter marketing leverage for B2C and also, of course, pleased with the growth of our B2B business volumes. So specifically, your question about B2B, yes, that is a business that is getting more focus and attention internally. I think you know about our plans that we're launching on January 1, a combined B2B business. So you will also see then more details about the numbers because most likely, we will break that out going forward. What is happening there is if the business is growing and they are reporting more revenues, usually the commission structures are based on a rev share.

So therefore, also the rev share and the commissions are going up. and that is flowing through the marketing line. But that's for a good reason because if that is going up, it means that from an economics perspective, it's also very healthy for the company.

Your next question comes from the line of Matt Cost with Morgan Stanley.

I'm sure you've seen data out there showing that a lot of the commercial activity that's happening on these early agents is skewing towards travel. And I guess to the extent that you're seeing that comes to your brand. Should we view that as something that is just a convenience for people who are going to book travel already? Or is there an aspect here where by removing friction from a very complex purchase process, there may actually be incremental demand that's engendered by these tools?

So that is an interesting thing, and we are seeing the value you're mentioning. Lots of people using these personal agents or any form of AI to do travel discovery, it's easy. It's interesting. People like to do travel discovery throughout all the time. It does end up with a lot of bookings as Ewout mentioned, getting the referral numbers are pretty darn small, and we believe we're getting a good number of the total number out there. So what does it mean for us though.

Over time, it may end up being another perhaps significant way that we get business the way we've gotten business in the past from other people who had a front door discovery and may be making it easier for people, less friction to try and learn what they need to do. So perhaps we end up with things that are actually going to convert at a higher rate.

We believe it's important enough that we're coming out with things like Vayo, like [indiscernible] and all our brands coming out with things, too. So people can come to us first. And look, what I really want to do is complete our connected trip using AI to make it easier, provide more value to the consumer so that when they're thinking of travel, they always want to come to us first. And we know we're not going to get everyone. But we absolutely believe that we should, with the technology capabilities that we have, with the capital we have, with the reasons we have, with the relationship with the suppliers, so we can help provide more value to the consumer. And of course, that customer service that is so important, being able to make people able to trust that when they come to us, they're going to be able to have the best experience in their travel. Those type of things are really important. I believe this is actually a wonderful thing that there could be much more of a fragmentation of the way people are beginning their discovery so that enables us to actually be able to gain customers at a lower cost. We could see that happen. Ewout, anything you want to add to that?

Just to say one more thing is strategically, of course, these new channels are important for us because it gives us an opportunity for diversification of third-party channels, and that ultimately drives an economic advantage to us. We have been talking about that in the past, but I think that is already really showing up in practice because clearly, there are many AI platforms now many AI tools, agentic tools out there. They're still figuring out their economic model. They haven't really come to a conclusion because the competition is very high. And we get the vast majority of the traffic because they like to connect to aggregators that is much better for them, and that is good for us. But from an economics perspective, the diversification looks like is going to be a positive for us at the end.

Your next question comes from the line of -- I'm sorry, of Alex Bruno with Redburn Atlantic.

I'll ask a follow-up on that previous question. It's something I've asked in the past about fragmentation. You're obviously seeing some leverage. If you could talk about the components of that, that would be very helpful. And then sat over here in Europe, we have, obviously and specifically Continental Europe, seen the DMA impact on Google's search results such as doing a bit of a spanner in what they can display when people search for travel. I wonder if you could give us some thoughts on that and how it might affect your numbers.

Alex, with respect to our B2C leverage, nothing is different than what we have always done. We're managing that in a disciplined way. We see 2 advantages there are flowing through. One is we're always trying to drive up higher ROIs in our paid channels. And then also, what we are seeing is that the direct traffic is up at the same time. So both in combination are helping us to achieve B2C marketing leverage in the third quarter. And also, we are looking at the possibility to deliver on marketing leverage in the fourth quarter as well. So this is always our standard, what we are going after. Glenn, do you want to take the question about Europe, the DMA and Google?

Yes. I'll talk a little bit about that. We -- right now, we don't see any great advantage from this change. Obviously, it's early, et cetera. We haven't seen anything in terms of numbers change. I know some people have been talking about that, oh, it's going to be such an advantage for the OTAs. I hope it is. I haven't seen it yet. We'll see. What's interesting is since you mentioned DMA, it gives me an opportunity to talk about something that I don't see a lot of people writing about. And that talks about the regulatory framework in many parts of the world, particularly in Europe. And how these personal -- the horizontal personal agents are going to be able to do things or not. What sort of access they're going to be allowed to have in terms of personal information, what the requirements are going to be, what's going to be allowed in being a commerce platform, along with being an advertising platform.

It's very complex. There's a lot of regulatory stuff out there, whether it be the DMA or the EUAIA or the DSA or the [indiscernible] LAP laws or you get into the U.K. And I saw something but I wanted to see or senior executives, I think it was out of the treasury. It was regarding the [indiscernible], I think, in terms of being able to allow to do monetary things in Muse or not. I think there's parts of the world where the adoption of these horizontal personal agents may be much slower than is anticipated. And we'll see what that -- what that may mean for ourselves, we don't know. But it is interesting that I don't see a lot of deal talking about that.

Your next question comes from the line of Justin Post with Bank of America.

Great. A couple on agentic. I think in addition to economics, one of the concerns is they might be preferencing direct sites versus OTAs. Are you seeing any evidence of that? And what can you do to really improve your relevance in AI results?

And then second, just thinking about the cost increases in Q4, I think there's some questions on how you're thinking about investment in '27 and what that could do to your algorithm? Any help with that would be very helpful.

So I'll talk a little bit about the first question, I'll let Ewout talk about investments going forward. So it's interesting you say that because I haven't -- I've heard some of that, but I see other things too, where the OTs are actually getting a greater advantage right now. Here's the end -- the real story is -- and this is the way we believe we need to play it is you got to buy more value, whether it be to a human traveler or to the agent, such that the agent, we want that agent or that person to be using us look ourselves on to us transacting with us.

If we are able to do that, in the long run, we will have a competitive advantage. And that's really the way it is. Now one of the things that we provide is to the small independent. Ewout mentioned a little bit about that how a very small percentage of our business comes from the big hotels. And so much is the small, medium-sized. We don't have the resources. We absolutely are afraid that in the new world, they won't be seen at all. But that's okay because we're there to provide them what they need. That's what we've been doing for the almost 27 years I've been with this company, is providing value to our partners being able for them to get incremental travelers because they could not where it was 20 years ago, go online and have a website or then they don't have an app or now it's how do I show up in an LLM, how is an agentic horizontal [indiscernible] see me or whatever. We are there to provide it for them. And we do it at a risk-free rate. Essentially, they don't have to pay anything unless they get ahead in the bed, and that's what we are able to do for them.

So I absolutely believe that we have an advantage. So this is the great time for us now being able to use our [indiscernible] all these things to be able to provide even more value to both the travelers and the partners, and I see the future is very bright. So Ewout, do you want to talk about investments need to achieve all this?

Yes, Justin, let me give some commentary about the fourth quarter, and you also asked about 2027. So first, about the fourth quarter. Our philosophy is to make disciplined investments for the long term of the company, while also protecting profitability in the near term. So from a big picture perspective, I think everyone knows that we have already industry-leading EBITDA and EBITDA margins, and that is on a fully loaded basis. So we're not capitalizing a lot, we have a fully loaded expense base, including stock-based compensation. We don't understand how people are pulling that out.

That's a real cost of running your business. At the same time, we also have strong execution and discipline regarding the delivery on our productivity programs, efficiency targets, operating leverage and that is then offset by increased investments in strategic initiatives. And those were planned in the fourth quarter at a higher level, but obviously, we have attractive business cases underneath. I also would like to point out that our full year EBITDA margins we expect to be stable. So with respect to 2027, it's a bit too early to provide commentary. We'll do that in February with our fourth quarter results. But what I can say is that we remain confident with respect to our long-term growth outlook, and we will stay disciplined how we are planning to invest in the business also next year and in the future.

Maybe one thing to throw out for 2027, and this is not related to cost, but more on the commercial side. It's a very early directional indicator. So it's still subject to change, like cancellations and others. But if you look at our on-the-book statistics for the first half of 2027, that actually looks healthy. So that gives us confidence in the outlook for next year.

Your next question comes from the line of Ron Josey with Citi.

I want to go back to your comments on just applying the learnings from Lola and Vayo and sort of using bookings platforms as a testing ground. Just talk to us about the metrics inside you're looking for from those tools and the other AI tools that you have before applying the learnings. And then we sort of just talked about it, but I'd love to hear your thoughts on just the value of the supply that booking has as agents become a larger part or potentially a larger part or a new front door for the Internet overall. So just the value of booking supply.

Ron, so in terms of what we use in terms of learnings and why we started up to greenfield operations to be able to come up with a new agentic way to do our travel business in 2 different ways, 2 different companies in different -- I mean not the same, probably reading about what they're doing. The way we do this is seeing what customers like, what is converting well what people are signing up for, whether or not, for example, at Vayo, will they take an e-mail -- we have the whole e-mail history in the thing or not? Well, we've learned and actually, yes, most will, which is really good to know. And that's how we do it.

Now in terms of the actual specific metrics, I'm not going to go around in the details of how we're going to do it. But obviously, when we see things that are working, that is such a value to bring to the much bigger companies booking, Agoda, Priceline and being able to transfer that so that they can then take the advantage of doing that. It really is a wonderful place to be when you have the capabilities, the capital, the resource of [indiscernible] that you can afford to do this type of agile creating new things and being able to test it out and then test bed type stuff, come bring it back when it's working or don't bother. And it didn't hurt you because you tried it on a much bigger platform than it wasn't working. So that's on that one. In terms of supply, what is the value -- I make sure I got you right, Ron, if you're asking, what what value do we provide to the supplier in a new AI world? Is that -- was that the question?

More like the other way around. So in other words, when we do our searches on Muse, we see bookings show up whether we're looking for a hotel in Panama City Panama or in Paris, for example. And so booking inherently is always there. And I think that's because of the supply, but I wanted to get your thoughts there.

Yes. Why are we showing up more there than others. That's a hard thing to say. I think we have a lot of theories about why the models are choosing us. We believe it has lots deal with the level of the content, the reliability of it, the value that the way the models look through and see what value this content guides. Two things, though, there is no handbook out, how do you show up more in an LLM show more in a personal agent or not. In the end, what we really want is what I said earlier, though, and this is being able to provide the more value. So the agents -- agent to agent, our agent is talking to the personal agent of the horizontal and really being instantly giving all the reasons. It's better -- and it's not just price, of course, all the elements that we've talked about over the last measure about what we provide to the traveler and to the partner that is the best place to do this trial in such a way that the horizon agent recognizes it and he's recommending or saying, do it here because this is best. That's what we want to achieve.

If I can add a few elements there, Ron. I think brand credibility is a very important element. So I think that's why those horizontal agents want to work with us because it gives them instant credibility, being associated with our brand. As I said before, they like to partner with aggregators. It's going to be very expensive for them to connect to 4.7 million properties directly and get all the information about real-time data, pricing availability. So they can get that through us and immediately have also the possibility in the future of a potential monetization model with us.

So those are a couple of reasons why we think that we are showing so much up on those platforms.

And just to add to Ewout's point, if these horizontal agents do go down the route of some type of monetization that is not dissimilar to what we have been doing over the last 2 decades, we will be even in a better position.

Your next question comes from the line of Benjamin Black with Deutsche Bank.

So Genius has become a much larger part of your transaction mix. So can you dig into how you're thinking about the next evolution of the program and how you can deepen loyalty without maybe becoming more reliant on supplier-funded discounts? And then maybe a follow-up on the [ 88 15 ] framework. AI begins to drive real efficiencies across customer service, across engineering, across other parts of the cost base. Does [indiscernible] 15 still seem like the right long-term sort of EPS algorithm? Or is there a scenario where AI driven operating leverage allows you to outperform that framework without even driving faster top line growth.

Thanks, Benjamin. I'll take the first. I'll let Ewout take the second there. It's -- to be fair, repeat that first one again, gives me a little more time to think exactly how I want to answer it.

Yes, it's really about Genius and how you're thinking about evolving it here. It's already become a much larger part of your transition mix.

Yes. All right. So here I not kind of tease this out a little bit in the past. Just want to be very careful what I say. We are going to improve Genius. It's going to be an even better program down the road. I obviously believe -- and as I said earlier, I said it several times now, the issue, the importance of providing value, providing value to that traveler and it's also valued to the partner. Genius works right now very well because the partner is funding a lot of it and is getting a good ROI out of that. And of course, the traveler is getting a great deal too because again, lower cost further holiday. So it works both ways. But there are a lot of other ways we can improve upon that tremendously. There are other things that travelers want and maybe the partner will be willing to give it up either and no cost because there's very little marginal cost to them or perhaps they'd be will do at a lesser cost that we could help work with.

These are ways we have to think about down the road is how do we continue to make sure that we are giving more value and in a way that travelers us get even more value because they use us loyalty, spend more with us, stay with us more, do things more with us, get more benefit, continue to do that in a way that it creates a flywheel effect and continues to grow.

Now not going to give away when we're going to bring out what or what they're actually going to be, but I absolutely recognize the importance of continuing to come up with a differentiating value that enables us to continue to show up as the better way for the traveler to users and for the partner to participate. And about, I think the question about algo is yours.

Yes, Ben, with respect to the [ 88 15 ] and the benefit from AI that might flow into that, I think it is a little bit too early to tell you exactly how we will see that changing our long-term algorithm. But what I can say is that we're already moving from experimentation to measurable operating value across the company coming from AI. So in a couple of areas. First, we are fundamentally improving the travel experience for our traveler customers, think about engagement, think about conversion, think about booking value about incrementality and some of the examples that I gave earlier during this call.

Then we have been speaking before about the benefits, for example, in customer service, where the average cost per booking are coming down and the customer satisfaction remains high and also in our engineering groups where the average cost per merch request are coming down in a significant way. And then the third area is our head count growth has been very minimal over the last 2 years, and that has been mostly in lower cost locations like our center of excellence in India, where we also can find great talent. So we're pleased that we're already seeing some tangible results, but it is a little bit too early to exactly determine in which way that will impact our long-term algorithm.

We have time for 1 last question, and that question comes from the line of Meredith Jensen with HSBC.

I just had one question, a little bit related to the last, but potentially a smaller piece to the pie. But if you might talk about a little bit of the changes in the distribution landscape and how it might open some new doors for booking and hotel suppliers in ways that they could collaborate particularly around loyalty programs and guest recognition. So if you could -- I know Glenn, you've spoken a little bit about this in the past and interviews, and I would just love some updated thoughts.

So Meredith, so I make sure I understand your question, you'd like to know a little bit more about how in terms of recognition for the suppliers in the process? Or were you talking more for the...

The loyalty program connectivity between some of the hotel programs to -- if they book through Muse and booking is the connector, how that kind of could play out over time because everything is moving so quickly.

It is. It absolutely is. And that's one of those interesting questions in terms of networks and how do you create a loyalty program, so you have more and more people who want to participate in it gives more value. We all know the value of a network and the more nodes you have, the exponential increase in the value of that network. So absolutely talking with hoteliers, talking with every travel player and non hotelier players, non-travel players, people outside the travel ecosystem. If you're out ways again in these types of late programs, you can actually, though, give more value to both the person is participating in the traveler and anyone who's on the other side supplying some type of service or product. We absolutely believe that's an important part of helping build out and ensure that the Genius program remains one of the most valuable programs there is and the reason people will want to come.

And again, I don't want to give away too much of what we're building down the road, but we absolutely understand the need to continue to provide more value to both sides of that network. Is that helpful?

Yes.

Thank you. Well, I guess that was our last question. So let me conclude. First, as always, I want to thank our employees, the dedication and strong execution. I thank our shareholders for the continued support and of course, I've got to thank the travelers and the partners who place their trust in us every day. I and we, together, we are so excited about the role AI is going to play in travel. And I'm absolutely encouraged by the progress we are making across our strategic priorities. Look, we're going to continue to navigate this near-term uncertainty with the discipline we've always had, and we're going to be investing thoughtfully in the opportunities ahead, our people and the capabilities we continue to develop gives us the confidence in our ability to continue to play a leading role in shaping the future of travel and delivering lasting value for our shareholders. Thank you very much, and good night.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Okay. I think in the interest of time, we're going to kick off. I know everyone's moving from room to room. It's my pleasure to welcome back to the conference, the team from Booking.

I'm going to read a quick safe harbor, and then we're going to get right into it. So, some of the statements made today by Booking Holdings may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of its most recent earnings call on August 4, 2026, and Booking Holdings undertakes no obligation to update them. Please refer to Booking Holdings' Form 10-K for a discussion of the risk factors that may impact actual results. Ewout, thanks so much for being part of the conference again this year.

Good to see you, Eric.

I always like to dive in with a little bit more of how did the summer go. So you are a travel company. You are an experiences company. How was your summer? Did you do anything at your stake?

Of course, a lot of travel. By the way, happy to be here live in the room, so not on the screen. So I think that makes it much more engaging. Yes, lots of travel, but I'm very passionate about travel, lots mostly for business. I had to be a few times in the Netherlands for Booking.com that is headquartered there. I was early summer in Bangkok for Agoda, had to go to France, a couple of other places and had a few days after the earnings call. Usually, it's a sprint, of course, until the reporting of the second quarter results. And then I had a few days afterwards with the family, which was also nice.

And always good to know...

Well, it's great to see it, by the way, when you're in places across the world and you see a lot of tourists. It's very busy out there. And in the past, I would think, oh, it's busy. And now I think it's a lot of business. So that's -- I see it now as a clear positive.

Okay. Good stuff. And we certainly have a lot of people here in the Palace Hotel this week that came from all over the world. So travel continues to -- we're playing our part at Goldman Sachs to some degree. But maybe just to level set, I always love to take a step back before we take a step forward. You guys have been on this journey as a company, talking more about connected trips, some of the investments you wanted to make. Talk a little bit about the evolution of the company and the platform and the journey you've been on and how that level sets with where you guys are today.

Yes. Yes, the way how I look at us as a company is I think we have really evolved from a transactional platform to a marketplace, a convenient, sophisticated, highly engaging marketplace. So let me explain that. I think when the company started, let's say, 20 years plus ago, it was very transactional.

We were bringing travelers and traditional hotel owners together. It was all through paid traffic, the traditional Google search, and it was all only traditional hotels and mostly the agency model. So in the end, someone was still paying ultimately at the check-in at the hotel. I think how the company has evolved is, I think, in a tremendous way. So we have added alternative accommodations. We have added a lot of other verticals, flights, attractions, rental cars, ride share, restaurants and so on.

We are now having 2/3 of the traffic coming directly to our marketplace. Yes, we are still paying for 1/3 of the traffic. We like that because it's, of course, bringing new customers to us, but 2/3 is coming direct. We are facilitating the payments at a low 70% of all those transactions. And we see people moving up in the loyalty program coming back more frequently to our marketplace. So I think we are a very different company today than we were many years ago.

Okay. Well, we're going to get into a lot of those details as we talk today. But maybe just to level set, you obviously did report earnings as we referenced just about a month or so ago. Paint the picture or the framing you wanted to leave investors with around that earnings as did the demand dynamic or the demand environment that the company found its way itself with in the middle of the year because there were some currents around the Middle East as well as some of the pockets of international that you saw. Just repeat some of that framing so people know what they -- what the key messages were.

Yes. I think for us, really the word that is describing the theme of the quarter was resilience. I think if you look in general, travel is probably one of the most resilient categories in consumer discretionary. And why is that the case? Because you see if there's something happening across the world, a natural disaster, geopolitical event, you have at the beginning a reaction of the consumer. They're careful. They don't know what's going to happen. They see the news every day, and they decide to wait.

But at some point, I think that first shock effect is gone. Of course, the news is also sometimes moving on. And then you see that demand really coming back. So what we saw was, of course, at the onset of the conflict in the Middle East, March, April, May, consumers, travelers were very careful to get their bookings in. But then actually from June onwards, we saw that travelers were saying, I'm not going to give up on my summer holiday. I still want to make that trip. And we saw actually the demand picking up in a very strong way.

So that was very encouraging. What we saw was actually the direct impact of the conflict of the Middle East was starting to normalize. So both Middle East inbound and Middle East outbound. What we saw still continuing at the same time was more the indirect impact of the Middle East conflict. And what I mean with the indirect impact, mostly the impact on oil prices, jet fuel prices, airline capacity and therefore, airline ticket prices.

So, definitely, there was a change in terms of behavior, what we saw that travelers were picking different kind of destinations. So far less long-distance travel, intercontinental travel, more intra-regional travel or domestic travel because people were sitting less on a plane. But in the end, the alternatives are great for us as well because we're still picking up on the demand even if people ultimately go to other destinations. And therefore, I think our results were very solid for the second quarter. So we're very pleased with the results we're able to report.

Okay. And maybe just one follow-up that I know we talked about around earnings. Just different behaviors you're seeing globally? Are you seeing different behaviors of travels of the way consumers are sort of interacting with travel brands in different geographies of the world?

Well, the U.S. as a market was the strongest travel market in the second quarter, which is great to say because for a couple of years, actually, the U.S. was the weakest of all the large markets in the world. So it's nice to see that U.S. is doing very well. We have been speaking, by the way, about the K-shaped economy or the bifurcation that last year and the year before, we saw the top end of the market doing much better than the lower end of the market. It's hard to prove that at this moment. So we actually see the strength across the board. So that's good from a U.S. perspective.

The shift to more intra-regional or domestic travel, we were more observing in Europe and in Asia because those 2 regions are more impacted by the Middle East situation. For example, most of the oil that comes from the Strait of Hormuz actually is going to Asia. So Asia, there was definitely the most pressure on airline ticket prices. But again, there was just a shift in terms of the destination and not so much a shift in the absolute level of demand. So that was good for us as a company.

Okay. Let's get into some of what you laid out in your first answer and talk about how the strategy has evolved and the platform has evolved. Talk to us a little bit about alternative accommodations. It's become a much bigger part of the business today than it was a couple of years ago. Talk to us a little bit about the scope for supply growth going forward on the alternative accommodation side, and how the company is positioned to take a variety of supply across the hotel and the alternative accommodation and match it against the demand signals and the demand scale that you guys have as a company?

Yes. So first of all, we see alternative accommodations still as a great opportunity for us and really an idiosyncratic growth driver for the next few years. And why is that the case? So if we, again, look at it more from a regional basis, we're already very strong in Europe from an alternative accommodations perspective and really in a market-leading position.

I think in Asia, we're also quite strong. Alternative accommodations is less in demand today in Asia, but that will probably come just in general for the industry, people are still more focused on traditional hotels, but that will probably shift over the next few years. So we will take some advantage from that growth. And our position in the U.S. is still relatively the smallest. So we see it as a clear opportunity to push harder and drive more growth over the next few years.

We're working on familiarity. We're working on supply. We're working really on getting the product in a better place. So we expect that the U.S., our position will improve over the next couple of quarters and years. In terms of supply, which is really encouraging is that we were able to report 8% listings growth in the quarter year-over-year to 9.1 million listings because that is an early indicator of future growth that we're able to deliver in terms of room nights. So we're still working very hard to expand the supply, and that will ultimately be a clear catalyst then for the growth.

Okay. Understood. Widening out the conversation to the broader connected trip initiative. Talk to us a little bit about similar dynamic, growing the supply base of experiences that you can put in front of consumers as well as, again, how you can build scale and marry it with the demand side because you're already getting people that are booking the travel to go to a specific location and then marrying what they're going to do there and widening out the basket size and what that presents as an opportunity, but also how you build scale.

Yes. So I just want to say, today, connected trip is already real. It's a low double-digit percentage of our overall transactions, and it's growing faster than just a single individual bookings that we're seeing within the company. So it is definitely adding value already for travelers today. And the way how we do that is the expansion of our offering.

So the fact that we can combine an airline ticket with an apartment or a rental car with a hotel, add an attraction on top of it. We know where travelers are going based on the booking they're making with us, the first booking, which is usually a flight and an accommodation. And then we can offer attractive propositions on top of it. We usually have to pay only once for the acquisition and then the cross-sell happens then afterwards. So from a unit economics, it's also very attractive.

So, therefore, we see this demand. But I think this is not something that stands on its own. This is a part of the overall flywheel that we are seeing because we are seeing customers coming more direct to us. We see more repeat of those customers. They're moving up in the loyalty program. They get more benefits in terms of discounts. And therefore, they're booking more across multiple verticals and coming back to us more frequently.

So that's really a self-reinforcing flywheel that we're having within the company. The numbers were a little lower, again, due to the conflict in the Middle East in general, but we would expect the same with alternative accommodations, also connected trip to see that reaccelerating again in the future. And then the most important and most exciting thing for connected trip is the AI layer that we can put on top of it because now we can put an intelligent layer on all those elements to connect the dots.

So think about it in a way of the airline has announced that they are changing their flight schedule and the flight is now departing later. We can automatically inform the hotel for a late check-in or we can automatically update the restaurant reservation and shift it to a later date. We're seeing that it's bad weather on Thursday of next week, and we can now immediately suggest to change your itinerary and let's move the museum tour to Thursday and do the outside walking tour to Wednesday.

And there are so many of those things that we can now logically put together as part of that connected trip package that we can deliver to travelers that experience. So this is what we are exactly building, and we are making, I think, great progress in that. So I think that experience is going to be only better, and therefore, it's going to be only more attractive for our traveler customers to put more of their elements of a trip with us.

Okay. Let's build on that theme because I think, obviously, we're at a technology conference. AI has been the dominant theme over the first day plus so far in the conference. Maybe go a little bit deeper for us on how you see AI changing the discovery process for the consumer. So how you're going to layer elements of AI into what consumers see on your site, in your app and how that might translate into higher conversion, less friction, all the things where discovery turns into action.

Yes. We see customer-facing generative AI tools as a clear opportunity for us as a company. And let me explain the different ways how we are going to do that. First of all, it's going to help to expand the total addressable market because still about 70% is online, but 30% is still offline of travel. So we would expect that more people would move faster to really make bookings in a digital way. That's good for us.

The second is what we would expect is that our paid channels, so our performance marketing channels, we would see a more diversified set of providers, set of auction platforms. So you could say the last decade, we're very much dominated by one very big party traditional Google search. So more of those platforms is good for us because we are running very large optimization algorithms. And if we have more platforms where this PPC is happening, that will be good for us because we can diversify and really increase the optimization and get to higher returns.

But then I also need to say that the core of our strategy is to make sure that the 2/3 of the travelers that come direct to us today that we want to make sure that they continue to come direct to us today.

So we are introducing a lot of AI planning tools on our own marketplace itself. So the people that know us, that trust us, that like to come direct to us, that know if something goes wrong, we will fix it for them, that are part of our loyalty program and see the benefits of that they will say, you know what, yes, I can do that AI trip planning with that stand-alone LLM, but I can do the same thing in your environment. And actually, I like that because then it's interconnected to everything I have there with you, and I know it's taken care of and I know who's handling my money, and I know things get fixed if things go wrong.

So we're very much protecting the direct channel, taking advantage of the diversification of more performance marketing channel. And then we also think there will be a benefit of the total addressable market that will be expanded.

Maybe just to ask a follow-up there that comes up in a lot of investor conversations I have about the industry broadly. How do you make sure as a company, and we've talked about this on some earnings calls, protecting the -- what comes to you from the LLMs is good traffic and doesn't eventually become another proxy for Google and expensive traffic over time while continuing to grow and scale probably your most valuable experiences when consumers are coming direct and have higher conversion than they did in prior periods. How do you make sure you continue to strike the right balance in those relationships?

So let me then dive a little bit deeper in what I just explained. So if we look at the LLM traffic that was coming to us today, that's still very small. So we said during our last earnings call, still significantly below 1%, and that's both the paid and the unpaid traffic.

So what we see is a lot of consumers are doing research on LLMs. By the way, people have always done and used 5 different platforms on average to do research before they actually make the booking. So people do that research also today on ChatGPT or on any other platform, LLM platform. But then in the end, that's not where they do the booking because booking travel is high stakes, high emotions, high value, and it can't go wrong.

So they still very much would like to go to the platform they know and trust and they rely on. But we are working together with all of these LLMs and we are a launch partner with all of these LLM providers because we learn a lot. We learn where they're moving from a technology perspective. We can observe the behavioral aspects from consumers because we don't know really what has tractions. And because it doesn't have a lot of traction today from an Agentic e-commerce perspective, it doesn't mean it won't have traction in the future. But what we are seeing is that they are all migrating, converging to a PPC type of monetization model.

And so, we think that in the end, it will be like PPC. And by the way, we are a launch partner with OpenAI for their testing of that, and they're expanding those tests to several other countries at the moment. So it will be very much Google-like auction models in many different platforms. And again, given our optimization expertise, we think that is going to be a positive.

But we are so focused on making sure that people that ultimately start through a pay channel migrate to become a direct customer. And that doesn't happen on day 1. That is you first have one time an experience with us, a second time experience. And then third time, someone might come direct to us. And so we are, therefore, introducing so many of those AI customer-facing trip planning tools in our own environment.

We have today 5 different of those initiatives going on. Two are start-ups. So, quite innovative concept that are developing, not part of any of our existing organization, so not really constrained by any of the existing thinking. And we will expect that those will see some launches in the fall of this year. Then we have 2 initiatives, which are more starting at the planning phase, if you think about the funnel and then working down to the booking and the in-trip phase.

One is today live, and this is Penny, which is launched by Priceline. By the way, we have on our Investor Relations website a video of Penny. I would strongly recommend you to look at that because this is actually seen by many research parties as the best AI trip planning tool that is out there today. So really look at that.

And then also Agoda will launch something similar in the near future. And then Booking.com is actually working in the other direction. Instead of top of the funnel down, they're working on their existing place in the funnel, their existing UX are working themselves up because -- bookings platform is so optimized. You don't want to mess up with customers, confusing customers and impact conversion.

So they're adding AI tools in their existing UX and then slowly moving themselves up within the funnel. So we're taking different approaches there. But in the end, that's all focused on making sure that consumers will have the same experience in our environment as they can get with stand-alone tools.

Okay. You've also been very upfront and talked a lot about how AI is also driving internal efficiencies and savings in the organization. I'll -- you've been one of the few companies that have actually articulated some of the returns you've gotten from deploying AI internally. Talk to us a little bit about what you've learned about the cost structure of the company and deploying AI inside the company and where that might go over the next couple of years?

Yes, we have -- I think this nature of AI is deeply embedded in our DNA because even before GenAI, of course, traditional AI, machine learning, we're already applying that as a company in a very early stage. So we have started to apply more of the newest GenAI tools maybe about 2 years ago in customer service, and that's still further being enhanced and improved. And what we are seeing is that more and more of customer service tasks can be solved by agentic interactions.

It's -- the time for resolution is shorter and the customer satisfaction is higher. And from a cost perspective, actually, we are in a better place. So we see the actual customer service cost -- total customer service cost for the company coming down. And we have, of course, unit growth. So in other words, the customer service cost per booking is coming down in a very meaningful way, more than 10% already year-over-year. So that's a huge benefit.

Another area, as an example, is in our engineering groups. So we're applying a lot of the AI tools for software development and for coding. We have introduced a number of specific metrics around it. So adoption levels. We're looking at productivity, not just the amount of code written by AI, but ultimately, which of -- the percentage of merge requests that is being put in production, what is the increase there. And we see about a 30% uplift in terms of merge requests that are being put in production because it's not only writing the codes, it's, of course, also the quality controls and the checks and all of that needs to happen before it can be put in production, 30%.

And then we're also looking at the total cost per merge request because, yes, we have AI token costs that are going up and AI license fees that are going up. But because of the 30% merge request productivity uplift, actually, the average cost per merge request are coming down in a meaningful way for us as a company. So that's including the people cost and the AI cost at the same time.

So clearly, very positive ROI we are having there. And we're looking now at implementing many other tools in many other parts of the company. The other part where it's also very positive from an ROI perspective is very early stage, but in the consumer facing part of the AI tools, we see shorter time to booking. We see higher conversion rates, and we see also lower cancellation rates. So all of that is, of course, also very positive in the end from a unit economic perspective for us.

Understood. Okay. I want to come back to what you said before about direct bookings and the mobile app. Can you talk to us a little bit about personalization and loyalty and building scale around those offerings and how that builds more momentum around direct traffic and direct to mobile traffic? And the second part of the question would be, how do you think about the optimal mix? Because interestingly before you said we want direct traffic, but we also want some indirect traffic because those also can generate newer customers for us. So against the efforts of building scale in direct, how do you also think about the optimal mix?

Yes. I love that you're bringing this up, Eric, because this is, of course, a very important part of where we are focused on because what is our strength? The data that we have of our travelers, I think the trust that we have that people know that we are taking care of their data, of their payments, of their booking in a very careful way.

The loyalty, the fact that people are coming back and the benefits they get from the loyalty, the brand recognition that we're having, the investments we can make around it and that we can connect to this very broad set of very fragmented supply. So we have 4.7 million properties, 4.7 million properties that we have real-time data about availability, pricing, what kind of rooms and so on.

So we have a lot of benefit on that marketplace and that value proposition that we have for the suppliers there because how can that small hotel, family-owned hotel really reach the world and market itself and particularly in a busy world with AI and everything that's happening from ASTRA to any new tools like they are confused. So they need players like us to help them to really get that demand to them.

And please don't forget, just to throw one more statistic out, from the number of room nights that is being booked on our marketplace, almost 90% is coming from alternative accommodations, independent hotels, and smaller chains. So smaller chains is not the top 10. So people here in the U.S. are often confused. They think the whole market is dominated by Marriott, Hilton and IHG. That's not how the accommodation market looks in the world. It's actually very fragmented. And we have only just over 10% coming from the top 10 chains and almost 90% is coming from all the small supply partners that we're helping to really get the reach in the world.

So what does that mean for us? We are, therefore, explicitly investing and will be investing in the near future in even more benefits coming from the loyalty program, even more in the brand, even more in the AI tools. so that we can really strengthen -- further strengthen all those assets we have around our marketplace for travelers and suppliers.

Okay. Understood. You've laid out the goals around your transformation program. Can you just go a little bit deeper into the building blocks of what drives some of the efficiencies you're finding in the business and how investors should think about the SKU of reinvesting some of those savings back in all these growth initiatives we've talked about today and how much of it will inform the potential for margin trajectory going forward as well?

So maybe first, it's important to frame this particular point by stating that we already have today industry-leading EBITDA margins. And that's on a fully loaded basis, including stock-based compensation and so on. And it's about 70% higher than our largest peers. So it's already -- we have a very strong starting point.

It's definitely in our DNA that we are always focused on managing our expenses in a disciplined way. We're always trying to drive efficiency, both marketing leverage and fixed operating leverage. And we do that through, for example, that transformation program. We announced during the last earnings call that we found another $100 million of savings opportunity. And this was in the existing categories that we put out.

So in this case, it was mostly in procurement because think about the procurement in the past, each of our brands were doing their own procurement that their own -- buying their own cloud compute at AWS, for example, or their own servers from HPE and so on. So we have really started to put that together and take advantage of the scale we have as a company.

So we have found more opportunities. And so, therefore, we could increase it by another $100 million. We're always trying to drive the top line growth faster than our fixed operating expense line. Travel is a skilled business. We are the largest player, so we should take advantage of that. We have a fixed cost base that shouldn't really step up with more volume. So that's another benefit that we have there.

And then we will find other opportunities. For example, none of this, except for customer service benefits on AI, none of this is really taking into account the GenAI benefit in terms of internal productivity yet. So that's still what comes on top of it.

Eric, you make a very other important point around reinvestments because, yes, we have a lot of opportunities to reinvest in the business. From our perspective, there's so much more we can do in growing the company in the future. So we are reinvesting in the business, but that's a separate mechanism. So on the one hand, driving the efficiencies, taking really the cost benefit out, freeing up resources and then reinvesting it in other areas where we can really drive growth in the future and with very clear business cases we have around that.

So every year, we make decisions around how much we want to reinvest and what are the best opportunities we have there. But these are very -- two very separate mechanisms. And basically, what is seen in the margin line is basically the net of those two effects. But there's a lot of self-funding, in other words, in our system.

Understood. Speaking about how that translates into external, talk to us a little bit about capital allocation. You guys have returned a lot of capital to shareholders over the last couple of years. Talk a little bit about the journey you've been on with capital allocation and how investors should think about the balance you're trying to strike between growth investments, capital returns and potentially if it ever presents itself, maybe M&A or external investments as well.

Yes. I think the way to look at our capital approach is I always think about 3 words. It's disciplined, it is predictable and it is consistent. I think the benefit we are having is very strong balance sheet, very strong cash position, very strong free cash flow generation north of $9 billion.

So overall, that gives us a lot of opportunity to do a few things. As I already said, organically reinvest in the business. That's always our priority. We know our businesses. We know our management. We know our opportunities the best.

Secondly, if there are attractive M&A opportunities to step into that. But generally, we don't do a lot of M&A because we are very careful always from a valuation perspective, and it has to be really attractive from a strategic perspective. But we could definitely find opportunities there we want to also invest inorganically.

And then there's always a lot of room also to return capital to shareholders. And we are definitely taking advantage if there are certain periods where there is a dislocation of our share price that we're actually scaling up our buyback activity. So in the first half of this year, we bought back $7.3 billion of our own stock, so at a very attractive level. So when those opportunities arise, we will continue to do that as well.

Very clear. We only have a few minutes left. When you talk to investors and you look at where the company is going over the medium to long term, any messages you want to leave investors with in terms of what you think might be underappreciated or misunderstood about Booking as a company?

Yes. I would say, I think what is misunderstood is the underlying durability of our marketplace, because this is a marketplace where a lot of value is added on both sides. On the one hand, we have those 4.7 million properties where we provide them with marketing, with sales, with insights.

We provide them with data protection, with regulatory, with the payments, with customer service. And as I said before, almost 90% are those individual property owners, family owners or the smaller chains. So they need that help, and we can provide that to them. So we have a very strong value proposition on the supply side.

And then we have this value proposition on the traveler side where people like our platform, come back more frequently. We have about 2/3 that comes direct. We have high 50% of the bookings are coming from our Genius Levels 2 and 3. So it's about 30% of our customers, but they do almost 60% of our actual bookings. So it's that really we have a lot of loyal customers that like to come back and do more of their trips with us. And we see that frequency, therefore going up.

And I think that's the value we're adding there on the traveler side, plus, of course, the data we have and the personalization. And so the investments we're making on that whole marketplace, I think, in the future, will make it only more durable. So we're not just the owner of an antiquated search engine because I think that's a real misperception. I think we're on a very sophisticated, very high value-add marketplace, and we will continue to invest in that in order to really strengthen that value proposition. And so we very much believe this flywheel will stay into effect for a very long period of time.

Well, look, I always appreciate the opportunity to have a conversation. Thanks so much for being part of the conference. Please join me in thanking Booking for being here this year.

And I'm thrilled to have with us today, Glenn Fogel, who, as a keynote speaker for this year, is one of the keynote speakers for this year's Global TMT Conference. I think everybody here knows what Booking Holdings is, right? It's one of the largest online travel agencies out there, 1.3-plus billion room nights this year, maybe 36% or 1/3 around alternative accommodations or so. And you combine the room nights with air and rental cars, you're talking close to $200-plus -- or over $200-plus billion of gross bookings this year. Suffice it to say, not a small business. And we operate in 3 brands, obviously, Booking, Priceline, Agoda, and many more. So with that, Glenn, welcome.

Thank you for having me.

Thanks for joining us. Look, it's the end of summer. Maybe I will just start with some ice breakers to get the cobwebs off if there's such a thing. But let's see. Let's do some ice breakers. First thing that comes to mind, see if you can just fill in the blank.

Okay.

All right. Connected trip is blank.

Great.

Great. Genius creates...

Value.

AI can?

Solve everything.

We'll get into that in a little bit, I'm sure. Conversion rates have...

That is something that we have to be very careful answering right now.

Could...

Could be great.

There we go. And I've got 2 more, 3 more maybe. SEO?

SEO is something that is on a trend.

Okay. B2B.

Great future.

And how did you book your summer travel? Did you go on summer vacation and how did you book it?

I did. And we did use Booking, and we also used a third-party outfitter called Backroads for hiking and biking in Switzerland. And I was -- it was a fantastic trip, and I saw so many opportunities for us at Booking in the connected trip where it could have done certain things I wanted to do in the future that will make travel so much better.

Always good to have an eye-opening experience and now you have even more to work towards.

Absolutely.

That's helpful. So that's helpful around connected trip and Genius and what AI can do, make everything better. Maybe let's back up for a little bit, and we have about 30 minutes or so. We'll go to questions with around 5 minutes left, so get them ready. But I listened to your podcast the other day on Grit. I thought it was fantastic because it made me relive a bunch of my memories growing up in Internet world and realize I'm old.

Not as old as me.

But what I wanted to do is ask you a little bit about how would you compare the current environment, Internet world, just to what we have lived through, what you have lived through around the proliferation of Internet in 2000s, the transition to mobile and smartphones. I was even -- as I was putting my questions together, the transition to broadband, but we're going way back. But like with AI, how do you compare the experience on the Internet today to what could be today or what's coming to what you've seen in the past?

So we're all familiar that technology continues to accelerate its growth. Things are getting better all the time. And I go all the way back to the early '80s, my first job out of university, I was a coder or a developer. I was working with mainframe technology way back then. Now we're talking more than 40 years later. I never envisioned what we have today would ever come. That's all sci-fi, and it is so fantastic now, but it will be so much better in the future. Our job is to stay ahead and is to execute that potential.

And how do we execute? What is the potential in your mind? And how do we execute it?

Right. So in the way back, and I've talked with people in the audience, I've seen a bunch of you and talking and you've heard me talk about this in the past. Travel in the past, you had a human being travel agent, kind of knew you a little bit. They would choose certain things that they thought you would like and you had conversation with the person face-to-face. And then you went on your travel, you gave that person one payment and off you went. And if anything went wrong, you called her and she fixed it. It was all fine.

But, of course, the person who is traveling had limited knowledge. She had limited access, didn't have a giant database. She certainly didn't have what we currently have in terms of what is possible. And she had only certain choices she could make it is very complicated. Now, because of technology, we have everything possible. Now we can create the truly personalized, the connected trip that really will make it easier, better, flexible, and personalize it such that I will really get the value that is best for me and my family.

We're not there yet, but we are so much better than we were with that offline travel agent, and we're so much better off than we were 20 years ago. It's really -- when I think about when I went traveling around Asia in the '80s -- it was like I was on another planet. I forget about the other side of the planet. Now what we can do instantly, it's fantastic. But there's still problems. Everybody who travel knows you got problems, you travel, it happens. You got delays, you got cancellations. The hotels are not what you thought it was going to be. The rooms are not what you wanted. The activity you wanted got canceled, all this stuff.

We need to make it so it's easier to come up with the initial planning, then easier to actually do all the actual bookings, reservations, get all that set up. And then when stuff falls apart, which it will, weather, mechanical, stuff happens -- and it's dominoes, one after the other. One goes down, they all go down. You want to have a system that will fix it immediately. What I really want, and this is what we know about AI, what is AI? It is a prediction machine. That's all AI is, is predicting. I want it predicting the problems before the customer even knows it may probably happen and be ready and able to fix it before it happens. That will be the success. That is why we'll have customers coming back to Booking because it is so much better.

The personalization is key.

It's very important.

Having the data behind it is...

Critical.

Critical. You can't replace that.

No.

And so you brought up how AI can solve everything.

Yes.

And so just talk to us a little bit about how you view AI helping the business solve everything, so to speak?

Right. So examples are a good way to demonstrate, and I talked about some of them today. And one of my favorites is because I spent a lot of time in Amsterdam with our Booking.com office, every tourist that goes to Amsterdam always wants to take the canal trip on the boat, going through the canals, everybody does that. And everybody wants to go to the Rijksmuseum because they've got some of the greatest paintings, Old World masters-type stuff. Okay. So it's Wednesday, you're planning to do the boat tour. You got your ticket from that from Booking.com. Tuesday, you got your museum ticket scheduled to enter at 2:00 p.m., let's say.

On Monday, you're there. What I want happening is AI, a whole thing, we -- obviously, it's not hard to know what the weather is going to be. We see it is going to be raining on the boat day. It's sunny on the museum day. We are proactively reaching out travel agent is in the phone in your pocket, and we are reaching out on Monday, suggesting that we change it around. We'll do the boat tour on the sunny day. You go to the museum on the rainy day. Would you like to do that? Just say yes, we'll handle it all. We'll do the rebookings. We'll make sure we'll get you the time. Here it all comes. And there are so many examples of that.

And as an agent, you're working for the customer. And that's what we really want to have happen. I have 1,000 examples to give where I want it. And I believe when we have that, that will be somebody says, I like using Booking because they truly are looking out for me 24/7, 365 days a year, and it really makes a difference.

So let's talk about -- because this is the discovery side. So to your point, you know to go on the canal, maybe you'll go to museums, what have you. How do you know to do that? So in other words, talk to us when you're in the trip planning stage and how the experience can change. Understood when you're there, the experience changing is having that in your pocket incredibly helpful. But when planning is half the fun.

Truly.

And so how do you think about discovery? How do you think about how that evolves?

The same way it was 40 years ago with the offline travel agent, and that is through a conversational interface type thing, but the personalization, you already have the history. We have customers who have been with us for 20-something years. I want us using what we know about the person. So another example, which I like because I just used, I'm in Switzerland, in Zurich. And I made this comment a couple of times today to some of our investors, where we were in Zurich and my family, we like to swim in lakes.

Now Booking you should know this because we book a lot of hotels that are on lakes. So, infer they probably like to swim. We're in Zurich. It was a hot day. It would have been wonderful to have gotten a notification telling us, hey, there's a public beach type area on the lake in Zurich for CHF 5. It's only about a mile down the road. We can get you direction all that. That would have been wonderful. We didn't get that. That's something that we need to have coming. But that conversational, would you like to go swimming in the lake? That could have been much earlier when we were first doing the planning. You're going to Zurich. What would you like to do?

Well, there's a beautiful lake at summertime, you may want to go swimming. Those kind of interactive using the personalization of what we already know about the person and help drawing it out to make it what could be really great.

And how far away are we from drawing it out?

We're not there yet. We're getting there. It will take some time.

We often get the question, the tools that are available on Booking between AI Trip Planner, Penny, Agoda's bot, different experiences across the board, so to speak. Anything to call out on lessons learned from those experiences thus far that -- I think we talked about maybe hotel cancel rates have improved.

Yes. So it is nice to see small samples, people who use these products, particularly, I'll give you Priceline, Penny because we recently did a revamp to it. And I'm using it now. And I'm like, wow, that's cool, interesting, helpful. And we're definitely getting good CSAT numbers. We're getting good engagement. We're getting higher conversion, all the good numbers, all good things. That's great, small sample, though, very small sample. I believe one of the great things is being of the size that we are enables us to do a lot of different experiments at once.

Now a lot of people know about from way back that you do a lot of A/B testing on the front end of Booking. That's right, and that's way in the way back, okay? But now, for example, we are doing experiments because I got Agoda, I got Priceline, I got Booking, all of them coming from a different end with different AI ways to come with discovery, exploration and booking. But even more, I got 2 separate AI native things being started, one by Steve Hafner, who formerly founded KAYAK. He's got one, a guy, a person now on the West Coast, also an entrepreneur who had previously started a company telling them both. "Look, I want you just to pretend you're not part of the company and start something fresh." Greenfield, you're out of the thing. Just here's the money, go pretend you're a start-up and see where you come up, AI native.

So that we got. So that's five, and then we have all the other things. So being the size that we are enables us to do a lot more experimentation and that will then bring us back knowledge information that we can then share what's working really well, what else is a disaster, don't touch that one, and that will help us get ahead faster.

Yes. A lot of what we're talking about is really a connected trip.

Absolutely.

Right. Knowing what to do or how to change tack if you need to or that's...

That is travel.

So connected trip is, I think, a strategic priority for the company. We've been talking about it for several years now. We're at low double-digit penetration of total transactions today. The question that we often get are, talk to us about the lifetime benefits to the user as you go through and you book with Booking or Priceline or Agoda of the connected trip.

Right. And we have to add in another thing, which is Genius, because it's phase II. And we're revamping. Genius is a fantastic loyalty program, but I want to be even better. And it all ties together, the connected trip, Genius personalization, the flywheel effect, the more you use it, the better it is. Look, we're all familiar with different types of loyalty programs, different things that when you use it more, the supplier knows more about you and they provide better service to you and you get more value. That's how it should be with our travel offerings to our travelers and to our partners because one part of this is a 2-sided marketplace.

I got to provide great value to the partner, to the hoteliers, to the airlines, to the car rental, to the attractions, to the insurer. I want to provide it for both sides of this marketplace, they're both getting more value by being part of this system. And overall, there's no reason, given the science, given the data, given the ability to do the right calculations to come up with what will really be advantageous to both sides. And I think we're seeing it. Look, the numbers are showing good. We talked about the last quarter. I'm pleased with the progress we're making. Somewhat, but I'd like us to go even faster and better.

Sorry, faster and better...

Better.

So I think we've talked about connected trip and Genius as a superpower was a comment. And I'm always floored when we hear Level 2 and Level 3 Genius is upwards of what, 30% of the customer base, maybe 50%, if I have this right, of high 50% of share of room nights. That 30% of your active customer base.

Greater than 30% but go on.

Greater than 30% -- let's talk about how that superpower can become an incredible power if that's possible.

So we're always looking at how do you provide more benefits to your most loyal customer. The people really are the ones who are providing a great deal of the value to the company. And then the question is, well, who's going to pay for that? And what is? Well, the issue really comes down to how do we incorporate it as we've done so far with Genius, how do you bring in the partner even further? Because one of the great things about the travel industry is just the nature of the way the businesses work in terms of their financial profile.

A hotel that has an empty room when they're at 65% occupancy, approximately, let's say, picking a number, depends on the hotel, of course, but let's just pick that one. That empty room goes empty that night, 0 revenue, fill it up, and almost all of it goes to the bottom line. The only part pretty much that doesn't go to the bottom line is the part it costs the hotel to get that head in the bed. So if we can get the hotel to participate, say we're going to get you that incremental person, they would be happy to help contribute, which is why we have things like Genius, where they are willing to give us lower prices. You're Genius 3, you're getting some darn good price cuts there to get you in there.

And a lot of this is funded. Did I hear you correctly? You said funded by the hotel.

It's by the hotel, right. Now that doesn't mean that we aren't also willing to contribute, too, for the right propositions the right time for the right customer, we'll do that, too. And I am thinking of how can we do it even more sophisticated in different ways. And we do it now just not just hotels, car rental, activities. We should be doing it across everything. And if you do more than one, give me more benefit. And then as we learn more and more about you, we're able to give you an even more -- a closer look at what you want and be able you to feel even better about using it because you're not seeing a lot of c*** you weren't interested in.

I still get that. We got to improve this. I mean the fact is when I was younger, I stayed at hostels and 1 stars. I'm 64 years old. I am never staying at a 1 star hotel.

Although in the podcast, I think you're still very aware of where you're staying.

Yes, but I stayed at a 4-star. That's fine. Yes, I do care about price. We're not -- I don't care that much.

I understand. We can't have bed bugs in the operation...

I'm not sharing bathrooms anymore. I'm not doing that.

I think you deserve it.

I deserve that.

So the question then becomes 30% of your active customers are Level 2 and 3, high 30 -- more than 30%. Can we get to why can't -- why aren't we at 50%? Why are we not at a greater level than that?

Yes. And that's something that we absolutely should now. Part of the issue, though, is if it was 100%, our partners may not feel it's so special. And they may not feel they may have a little problem saying, am I really getting incremental now or not? So there's a balancing act there and how you're going to do it or not. One of the things I really want to make sure we're doing is giving the -- making sure it's incremental for our partners that they really do believe they are getting true value out of the programs they work with us. Again, it shouldn't be that hard to do. But sometimes you do feel that do they understand that we really are giving them more value and it really is worth participating. Sometimes I'm concerned we're not doing -- explaining it well enough.

It's something to certainly watch as we go forward for sure, Connected Trip and Genius. Maybe shifting gears a little bit, talking regionally U.S. specific. I think the comment that it's a long-term growth opportunity in the U.S., but we're adding more supply, I think. And we're seeing supply drive high single-digit growth in room nights and certainly outperforming what appears to be the broader market. Just talk to us a little bit more where are we on adding the supply on building the brand of Booking and how you manage or balance the brand of Booking to the performance of Booking, if that makes sense. More of a marketing question, I guess.

Yes. And they obviously intersect. We talked about today with some of our investors, and this is an old story for us because Booking started in Europe, we have incredible brand awareness in Europe. And our alternative accommodation business in Europe is really great. If you're in Paris, it's a summer and you're saying, I want to go to the south of France. I need an apartment though. I want an apartment in Nice, okay? Where should I go? And people on the street of Paris will say, well, you go to Booking.com, of course, and that will be absolutely top of mind. If I walked outside this building here, and I said, think about going from the weekend to Southampton, I want like a home near the ocean, where should I go? I can almost guarantee you not a single person going to say Booking.com, that's a problem. That's something that we need to work on.

Well, we don't have a lot of homes on the ocean in Southampton. That's the supply issue. We've got to make sure to get that up, which is a great opportunity. It's something I see as something that is great because we haven't done it yet, and we're still doing really well. And then you have to get the awareness around that, that people know, hey, I need a home in Southampton. I'm going to go to Booking.com. There's not that awareness, so we need to get the market. Chicken and egg, you got to have the supply before you start marketing and you get the marketing, you got to have the back and forth. We're working on that.

I'm pleased with the progress we've made to date. I'd like us to do more, and I've been talking about this for some time, and people have seen the numbers over the last few years. Our home business has been growing very well. Our number of accommodations in that area has been growing very well. But I wanted to do even better, I particularly want to do better in the U.S.

And so how do we -- I think we've been talking about adding alternative accommodations in the U.S. specifically for some time. I think there was partnerships with maybe professional services firms to do that. We've been talking about going to Hamptons or what have you. What needs to happen so that when you walk outside, you have the supply so people can start talking about this?

Yes. There's no magic bullet. It's just grinding away, grinding it away, grinding away, going out. Now we did have -- I don't know how much people know there were a couple of professionally managed companies that had some problems recently, [ Vacasa, Sunder ]. There were some blowups there caused -- there were some issues there in terms of supply. We got to get that back on. Again, it really is just a ground -- it's basically groundwork. You just go out. You got to sign them up and you got to then provide them with volume.

And how do we make the experience superior to others? So you have -- maybe supply is the right answer, but then you need the great experience that you can be that competitive.

Yes. You got to make sure that your product is matching up with other peoples or even better. And that may be something like, do you offer the same type of insurance that you're offering a homeowner or are you offering the same type of services that they want. Those are things that -- again, the great thing is it's not a secret because you can just go on to the website of a competitor and see what are they offering? They pretty much know. So that's really good. We just have to grind it out. And Rome not built in a day, neither will our ability to get to where I want to be in the America home business, but we are on the right path and it is growing.

Perfect. Let's switch gears a little bit and talk about Asia, another focus area. I think Bookings, integrating -- Booking's reach with Agoda seems to be resonating with the results there. I wanted to understand a little bit more about the Asia market and specifically how Booking is attacking it across the board, but let's call it AI specifically.

So one of the important things we always like to remind ourselves is that we say Asia...

The launch market. Many different markets in there.

Exactly, exactly. And I'm very pleased, though, Agoda has done a great job of really becoming one of the absolute leaders pan-Asia. Many different markets are doing very well in many of them. It's one of the things where we have the localization of Agoda. It was really helpful our headquarters there in Southeast Asia to have people there who are actually knowledgeable there working with all time and they localize those sites, localize it. So it really fits. And they are different. If you go to Agoda in Korea, it looks different. And if you go to Japan, it looks different, you go to Vietnam, it looks different, you go to India, it's all different. So that's great. But then you can combine that and work with -- we have Booking, which is the global with the scale and breadth. And we get the benefits from both working together. It's really a [ 1 or 2 ] punch that I think has been very effective so far. And I actually so encouraged because we now look at the demographics of Asia. They are very positive for travel over the very long term.

So -- let's see, I've got so many more questions. We'll open up to the audience here in a little bit as well, so we can get our questions ready. Let's see.

Maybe switching gears somewhat going to B2B. B2B is something that comes up in many of our conversations that we have on Booking. And I think we just condensed leadership, combined leadership to have one solid leader here. So just talk to us a little bit about the incrementality, if you will, to Booking's business overall. So this is not a new -- this is a newer thing, I guess, that we're talking about, not newer for you because the business is sizable. But talk to us a little bit about how the organization is now structured to really go after this market.

Yes. So the B2B business is interesting for us. It's been there all the time. We've been doing this for a really long time. So it's a bit of a surprise when we hear other people are surprised because we decided to bring together the 3 units. So we had separate B2B units at Agoda, Priceline and Booking. And looking at it and thinking about it, there are pluses and minuses of having different units doing a very similar business now. One of the things in the end that we said, there's duplication going on here. Each one of the 3 units has some really good things, but they're not the same for each of them. So we'd end up with going out to a client, and we have 2 teams calling on the same potential client and the client might say something, I really like that part from Agoda. I like that part from Booking. Can I have both? And, it's not how it works. And they're like, oh, we'll probably this is not the best thing. Let's combine them into one, which goes live January 1. Let's have one leader of all of them. Let's avoid which you would be surprised. Sometimes there's competition among internal groups when they call on the same client, you may be shocked to hear that it never happens decision, right?

No never.

Never. So by doing that, it'll be more efficient and be more effective. I believe we'll be able to get even more business, and it is a sizable business and such, it's one of those things that maybe we should have talked about it more in the past, but okay, we'll talk about it going forward in next year.

I'll try to get something like -- so you said sizable business. Any way to frame it or think about that from our perspective?

Well, it's bigger than not sizable.

Bigger than not sizable. That's a fair comment. Fair.

You can see I'm not actually going to tell you.

I didn't expect it to, but now we can dissect with that word.

We'll come back to you [indiscernible] near future.

Let's talk about, like, let's stick with B2B, but the differentiated approach here that Booking offers on January 1 compared to others out there or not even compared to others, such that a partner will choose to work with Bookings. Is that partner an "and" or an "or"?

Many times, it's an "and" because many, many very large partners, clients, they'll take supply from anybody. They have -- we'll take from anybody. And then they'll choose what they want to show or not, depending on price, et cetera. There are a lot like that, which makes sense to me actually. Why wouldn't you do that if you can, right? So some of them are unique. Some say, I only want to work with you for a particular reason. But -- so you get both. It's and/or. But I'll say that, yes, officially, if you go live January. But we've been working on this bringing them together over the years. But then going forward, it's going to take even more as we create that one technology platform. So I will never have that client who says, I like that one from him and I like that one from her and why can't we do together, that will be gone, but it won't be gone January 1.

Right. And now we can operationalize it.

Right. So more questions coming.

Be prepared.

So let's see, there's about 6 minutes left or so. If there's any questions in the audience. I think there's mics in the back or of course, I can keep going here. Maybe as we think of ideas.

There's one over here. If there's a mic or -- or you just ask, I can repeat it. Yes, exactly.

So my question is, which proprietary data or supplier relationships protect Booking's for discovery?

The discussion is, which partnerships protect Bookings role in discovery? Did I get that right?

Proprietary data.

Proprietary data. What proprietary data protects Bookings role in discovery?

All right. So I've been here 27 years. There's almost no proprietary data of any kind. That may seem somewhat negative. Why would a CEO of this company say something that it's not. Look at all this exclusive stuff we have because it's true, okay? You can get data from almost any source. Hotel, somebody says like, can you get hotel information? Sure, you can. But is it live? Is it accurate? Is it right away? And even more so, is it what the customer is going to want. So when I say customer, we're talking about the partner. So for example, one of the great things that we do is working with our partners, of which is a huge number. But sure, somebody can go find a channel manager and hook up and have it. But they're not working the way we work with them to help them build their business better. So for example, we see they're having a problem with their sales for a month or something. And we come back to them.

But I guess, maybe what would be right now is you should enter into our preferred program right now or maybe you're not participating in Genius right now and you lost out on this amount. So it's really using the data that's proprietary, what we learn, what we know. That's the real secret sauce is then being able to use that, working with the partners to be able to construct things that enables them to improve their business even more. That's why they like to work with us. They would never work with us if they didn't have to. If they could get all their business themselves, they would very happily do that. If they could, they work with us because it's a good ROI for them to work with us. And that is maybe while not proprietary, it is a symbiotic relationship that improves both of our businesses and being able to do it globally around the world, there's nobody is able to do it the way we do that. That's one of the reasons we'll be able to build the business that we've had. And sometimes there's a naive belief that, oh, well, I just set up an MPC server and I'll get the data. It isn't going to work that way at all.

So we often get the question, a lot of -- we'll come to your question in a second. A lot of -- I think one of your largest -- one of the largest vacation rental competitors out there is going into hotels. Airbnb is doing this. So -- but your answer is, is it live? Do we have the inventory, the supply, the integration? Talk to us about how you think about that.

Well, I think even more important is -- and this will be interesting how it plays out over time. So one of the interesting questions may be, if somebody who is thinking about getting a home goes to a site, sees a hotel instead says, "Oh, okay, I'll get that hotel. Fine. Now the hotel doesn't get that sale instead. So over time, when you start getting to scale, right now, there's no scale at all. I mean, like, less than -- like, find a microscope, maybe you'll see it. But they grow, good, why not? If it does, though, does that just mean then that the homes aren't getting as much business they used to from that person, that partnership? And then does that give us even more opportunity in the home area? Because now the homes who maybe in the past might have said something like, yes, I'm thinking about working with you, but I get a lot of -- I got a lot of business right now. It's a pain. I'll come back to you next year. Maybe now it would be a little different, like -- yes, my sales are down now. It seems a lot of people now are going to hotels instead. So that could actually be an advantage for us and could be a benefit. We'll see.

Interesting. We had a question over here.

How do you assess the risks of social media apps or search engines using AI themselves to -- because they have customer base already. Do you trying to get to your own business and planning customers and using their data. So...

How do you assess the risk of AI apps and social media was included to potentially doing your business?

So forever, people have used many different ways to discover travel, learn about travel, explore travel, have fun looking at travel, pretty pictures, things that may want to do, things that my friends do, things that people I don't even know do, but it looks really cool, okay, that's gone on forever. That's not new. There's nothing to know about here at all. Just a different way to do that. Some people say though, but then won't they then go directly to the supplier and such. Well, if only it was so simple as we just talked a little bit, it's a little bit harder than that. And even more so, and that's where the connected trip really comes to the forefront, being able to provide what the customer really wants, which is a much easier way to construct and execute and feel the trust that will be taken care of, that my money is being put in a place where it's safe, that when things go wrong, somebody will fix it for me, that the person has obeyed all the rules and regulations that the property actually exists. All those things that people do, it's that trust issue.

Why do we get the numbers that we do? Because people believe booking with us makes a difference. There's no shortage. Nobody has ever had a shortage of ways to do their booking ever, nobody. No matter what a government says about dominant positions right, the truth is every day, you can go on and you can go out and get a booking anywhere. People come to us and -- approximately mid-60% of people are coming to us directly on the B2C. Why? And I'll repeat this. Why do people do it? Why? Because they are getting -- we are providing them a better service, a better way to do it. And I don't believe that the fact that somebody can go to social media and there's some AI thing or whatever, I don't see that is really going to change much in the long run. I really don't. However, we will continue to have to do very well in improving the product, improving things for the customers because there are a lot of other very big players who are very good, and we recognize competition never ends.

Potentially, if we get into an agentic world where agents can be booking agents on your behalf and everything else, maybe the trust issue is the...

The trust issue comes up and how -- does the customers, the travelers, agent think, we should use Booking because it's better.

That should be a tagline, Booking because it's better. Any other questions? I got maybe one more over there, and then we're close to over time.

When you look at the dispute resolution process, how much more improvement do you think you can get through usage of AI, et cetera, to make it a little less clunky? It still feels like you still have to talk to a human at the end of the day to get something done.

Repeat the question...

The question, I think, is around customer service and specifically dispute resolution and can AI help to...

So look, one of the wonderful uses of AI as many, many companies have been able to prove out, we certainly are very proud of how we've been able to use AI to lower our costs while increasing our customer satisfaction numbers for the customer service area. And the truth is there are many, many, many issues that are being solved by AI, absolutely no human intervention, which enables the human then to be able to spend more time on it, and the human can also use AI to be able to come up with what the right answer is how to deal with it much better, much faster and be able to do their own job even more effectively because they have all these AI tools. It will get better and better, absolutely. I agree. There are a lot of things where you really do want to talk of a human being right now. However, over time, that will continue to decrease, decrease, decrease. And I know for a fact, some people, they absolutely do not want to talk to a human. In fact, they just want the darn thing solved. Whenever solves it fastest, it fixes it immediately. They don't care if you use whatever 2 tin cans and a string, just fix it. And we're seeing it.

I mean, I think we've seen double-digit reductions in customer service costs while bookings continues to go up.

Yes. And the CSATs are going up, too.

And CSAT continues to go up as well.

Yes. That's great.

Would you argue maybe AI adoption of the customer service is further along than on the discovery or the front end?

Say it again?

Would AI adoption or AI benefits better on the -- further along on the customer service side than maybe on the Booking side, discoverability?

So to make sure I'm -- so you're saying using AI, will we see similar types, increased satisfaction, et cetera, using that. I think people right now are already seeing it right now, using it right now. Absolutely.

Great. Any other questions? We have one more over here, and then I think we're in overtime. So but Glenn, we can go on and on. It's up to...

We're keeping you from drinks.

We are keeping everyone from the U.S. Open watch party. Hopefully, you'll join us. But...

You've really scaled and grown your margins significantly in the last, I don't know, 3 to 5 years as you make all these investments in the next-gen technology. Just how you think about margins for the firm?

Yes. That question comes up an awful lot. So people are always asking, well, could you please increase your margins in the same time, shouldn't you lower your margin and invest more? So my thinking is not raise margins, lower margins. I see what are the opportunities. We have free cash flow, how do we want to put it to work? What do we think will increase the value of the company over the long run? Where should we place it? How should we place it? Are there opportunities or not? And that's the way we're looking at it, and it certainly starts with organic growth, and then we'll be looking, is there anything we could acquire inorganic things that will make it better for the long run. And then at the end of the day, if we don't have use of that, then it's up to the shareholder, you guys find a better use of the money. If I can't figure out ways to do it better, then let's return it to the shareholders and let's let them invest it the way they want to invest it, right? So it's not looking specifically to a target margin. It's where are the opportunities, how much should we spend on, what do we think the ROI, what is the probability it will be successful or not.

That's great. Any other last questions or -- with that, I think we'll wrap it up. Glenn, thank you very much for your time. Super insightful, very helpful. Appreciate it.

Thank you.

Welcome to Booking Holdings' Second Quarter 2026 Conference Call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guaranteed of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements in the Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission. Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

A copy of Booking Holdings' earnings press release is available in the -- for Investors section of the Booking Holdings website, www.bookingholdings.com. Booking Holdings intends to use the Investor Relations page of its website, ir.bookingholdings.com, to disclose material information for purposes of the SEC's Regulation Fair Disclosure. Booking Holdings encourages investors to monitor this website in addition to other public announcements and SEC filings as information posted on this page could be deemed to be material information.

We ask that you please limit yourself to one question so that we may give as many analysts as possible an opportunity to participate. [Operator Instructions]

And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Go ahead, gentlemen.

Good afternoon, and thank you for joining us today. I am pleased to report that our teams delivered another quarter of strong execution. We exceeded the high end of our guidance across all of our key financial metrics while continuing to invest in the strategic priorities that we believe will drive long-term value. These results reflect the strength of our diversified global platform, disciplined execution across our businesses and our ability to deliver strong returns to our shareholders while also investing for future growth.

As you know, the world remains an uncertain place, with the Middle East conflict and related macroeconomic developments continuing to affect travel demand, both directly and indirectly through the impact on major Middle East transit corridors and higher travel costs. These dynamics create near-term volatility, yet we know from decades of experience that the underlying desire to explore, connect and experience the world is remarkably resilient and travel demand recovers once the underlying disruption subsides. This resiliency was clearly evident during the second quarter. While long-haul international travel remained pressured by elevated airline prices and reduced capacity due to the conflict in the Middle East, domestic and intra-regional travel remained relatively healthy across many parts of the world.

As I have stated many times, we remain focused on creating long-term value and look beyond near-term uncertainty. During the quarter, we further increased our capacity to invest for future growth as the expected annual run rate savings enabled by our transformation program continued to increase. These savings provide us with additional flexibility to accelerate innovation, enhance our products and strengthen our business over the long run.

Our focus is on what we can control, delivering strong value, reliability and great service through differentiated solutions for travelers and partners. This focus is reflected in the strategic investments we are making across our business, starting with our Connected Trip vision. Travel remains a fragmented experience, often requiring multiple providers, transactions and customer service interactions. Our Connected Trip vision is about fundamentally improving that experience, making travel easier while creating greater value for travelers and partners, and we're encouraged by the progress we are making. During the quarter, Connected Trip transactions, where travelers booked more than one travel vertical with us for the same trip, grew in the low double-digit range and represented a low double-digit percentage of Booking.com's total transactions. Importantly, these transactions continue to grow meaningfully faster than our overall transaction growth.

As travelers increasingly choose to book accommodations, flights, rental cars, attractions and other travel services with us, we are creating a more seamless end-to-end journey, which strengthens our offerings for both travelers and partners. And our Genius loyalty program is a key enabler of this strategy. We continue to see strong engagement from our higher-tier Genius members who plan their trips further in advance, return more consistently and have a higher direct booking rate than non-Genius travelers. During the second quarter, Level 2 and Level 3 Genius members represented more than 30% of our active customer base and accounted for a high 50% share of room nights, both up from the prior year. Given the importance of loyalty and the success of Genius so far, we see additional opportunities to further strengthen the Genius offering going forward.

Another important strategic priority is strengthening our presence in the U.S. and Asia. The U.S. remains one of our largest long-term growth opportunities. Over the past several years, we've made disciplined investments across product, supply, brand, marketing and technology, and we're encouraged by the progress we are seeing. These investments continue to deliver encouraging results during the second quarter. Unit room nights grew in the high single digits, supported by healthy domestic demand. We also saw continued growth in our direct channel and increasing engagement across multiple travel verticals. While we still see significant room for growth, some of which will come from further product improvement, we remain encouraged by our consistent progress and remain confident in our ability to continue strengthening our offering in this important market.

We are also continuing to invest in building our presence in Asia, which we believe represents one of the most attractive long-term opportunities in global travel. Despite a dynamic competitive environment and indirect impact from the conflict in the Middle East, underlying domestic demand remained healthy during the quarter. By combining Booking.com's global reach with Agoda's deep local expertise, we are continuing to invest in localized products, payments and distribution capabilities that position us well for long-term growth across the region. The final strategic priority I'd like to discuss is AI. AI's rapid and continuous development is having a profound impact on all areas of society. Our approach remains focused on deploying this technology in measurable ways and scaling when we see clear benefits. The combination of trusted brands, proprietary travel data, broad supplier relationships and global reach creates a differentiated foundation as AI reshapes how travelers discover, plan and book travel. As travelers increasingly begin their journeys through AI-powered experiences, trusted brands will play an even more important role in where they ultimately choose to book. That's why we continue to work closely with leading AI organizations to ensure travelers can engage with our brands wherever their journey begins.

We're also encouraged by the early progress we're seeing in AI-powered discovery. While AI-driven referrals remains a relatively small contributor to our overall business today, we are seeing encouraging momentum that reinforces our belief that the strengths we've built over many years, helping travelers find the right travel options with confidence positions us well as travelers further gravitate towards AI-powered discovery. At the same time, we're embedding AI across our own platforms to make every stage of the travel journey more personalized, seamless and intuitive.

During the quarter, we continued advancing AI capabilities across our portfolio, including beginning to roll out testing of Booking.com's new AI-powered discovery experience, which helps travelers in the early inspiration phase of planning a trip. For destination searches, the experience combines flight prices, real traveler reviews and AI-generated insights, including the best time to visit travel tips and itinerary suggestions to make it easier to move from inspiration to booking. We're also deploying the next generation of Priceline's agentic AI travel assistant called Penny. And we're launching Agoda's new Gallery View, which gives travelers a more visual way to browse search results by pairing hotel images with relevant guest reviews.

We're already seeing how AI can transform the customer experience. For example, initial testing of Penny's integrated hotel checkout experience has shown that beginning more of the booking journey into a single seamless experience has the potential to improve traveler engagement while delivering stronger business outcomes. These innovations are just a few examples of how we're using AI to reduce friction throughout the travel journey while advancing our broader connected trip vision.

AI is also strengthening our partner value proposition. We are investing in tools that help partners better engage with guests, improve their property content and operate more efficiently. For example, our AI-powered messaging capabilities enable accommodation partners to respond to guest inquiries more quickly and consistently, reducing operational friction and improving the traveler experience. These partner innovations were a central focus of our recent Booking.com Click. conference, where hospitality partners from around the world explored how AI, personalization and data-driven insights can improve both guest experiences and business performance. This conference also reinforced our collaborative approach to innovation, including co-developing new AI capabilities using direct partner feedback.

Finally, we're increasingly applying AI across our own business to accelerate software development, enhance customer service and streamline internal workflows. One area where we continue to see meaningful benefits is in customer service. Our AI initiatives are reducing customer friction, lowering contact rates and improving operational efficiency. We have now scaled voice AI support across the majority of eligible inbound traveler calls while continuing to expand digital automation. At the same time, AI-powered analytics and real-time agent assistance are helping our teams resolve issues faster and more effectively. As a result of these combined AI and human capabilities, customer service cost per booking continues to decrease at a double-digit rate, while overall customer satisfaction remains high.

We're also seeing promising early results in our technology organization, where AI is accelerating software development and improving developer productivity. These signals give us confidence that AI will continue to be an increasingly important driver of innovation, operational efficiency and better experiences for both travelers and partners.

Looking ahead, we recognize that the external environment may remain dynamic. We believe consumer preferences will continue to evolve. Technology will continue to advance and competition will remain as has always been competitive. These changes create challenges, but they also create opportunities. What gives us confidence is not the expectation that the world will become more predictable, rather, it is our confidence in our ability to execute our strategy to address our customers' long-term needs. Whether it's advancing the connected trip, strengthening our offering in the United States and Asia, deepening our partnerships or harnessing AI across our business, we are making the investments that we believe will create better experiences for travelers, greater value for our partners and a stronger company for the long term.

With that, let me turn the call over to Ewout to walk through our financial results and outlook in more detail.

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 onetime 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?

[Operator Instructions] As a reminder we ask that you please limit yourself to one question. Your first question today comes from the line of Mark Mahaney from Evercore ISI.

Glenn, I want to ask -- I want to try to draw you out a little bit more on the AI impact, particularly on the top line and customer satisfaction. And maybe it's still too early, but I would think at some level, AI can potentially materially improve personalization, which should show up in things like book-to-look ratios, match rates. So what do you -- is it too early? Or have you seen any quantitative evidence that in this year, 1.5 years you've had with Penny that it's somehow improved conversion rates or increased booking per customer?

Mark, I think that's a great question. And we've talked about this a little bit. Penny, especially, we've mentioned how people using it do come back with more satisfaction, and we talk about how we want to increase conversion. It makes sense, common sense. If you provide somebody with a better way to do the business, they'll be happier doing it. And the whole idea of getting personalization, well, I certainly as a customer, I prefer someone that actually matches up with I need versus a large mortgage board, most of which I want to ignore.

So all these things are good, but -- and this is important, it's still very small, and we're not at a stage where we're going to start giving away percentages, numbers, increases in CSAT or anything of that nature. However, I am very pleased with it. And I will say what makes it so exciting now with this technology is the ability to do things we never would have been able to do before. If you recall, when I first started talking about, for example, the connected trip, bringing it together, and we are talking about AI in terms of machine learning models. So ending up with different types of mathematical predictions of what we thought they want. But now using Gen AI, we'll be able to do it so much better. And I envision in the future, we're going to get even more personalized than I ever thought we could, which will lead to what you're asking about in terms of a much better way to actually complete a transaction. And then God forbid, something goes wrong, a much better way to solve the problem.

Ewout, anything to add?

Yes, Mark, let me add one other dimension to your question. So if we look at the traffic we're currently receiving from large language models -- so this is not what we are receiving directly in terms of traffic, but from large language models, both on a paid and an unpaid basis that is still significantly below 1% of our room nights. And that hasn't moved so much recently. So no material change over the last few months or quarters. I'm not saying that, that will never change in the future. This, of course, at some point, might go in a different trajectory. But at this moment, it's still very minimal and is not really moving so much.

Going a little deeper, the organic traffic, what we are receiving from the LLMs, we believe the vast majority is coming to us according to third-party data sources. And if I look at the paid traffic, we are part of the test group of OpenAI for CPC. We like that from a diversification perspective in terms of our paid channels. And it's very much playing to our strength, the optimization models that we are running in order to convert at an optimal way traffic into bookings. But as Glenn said, strategically, we are, of course, very much focused on learning ourselves, diversifying our channels, but then in the end, focused on keeping the direct traffic to us by investing the AI tools, the customer-facing AI tools in our own environment.

Your next question comes from the line of Alex Brignall from Rothschild & Co. Redburn.

I'll carry on with the AI theme, which I suspect many will. We've seen some evidence on our surveys of the LLMs raising kind of a broader mix of independent content, and they rely more on kind of inspirational content as well as kind of just standardized booking style content. Could you talk about what -- obviously, it's very low volumes, but could you talk about how you -- what you have seen on that side, how you're presenting the data within the LLMs? And also, just if I could, on the e-commerce side of things, obviously, lots of conversation on Google and OpenAI's different e-commerce expeditions. Could you just talk about how they have evolved?

Alex, on the first one, everybody would like to know what's the secret sauce. So they'll show up in any sort of prompt regarding travel that the results will be their property or their OTA or their service, everybody wants to, well, how do you do it? What's the right way to do it? One of the things that we believe is very helpful is to have tremendous amount of content that is very reliable and has been around for a very long time. Now we don't actually have any sort of handbook saying exactly how we can show up more often than others. However, and I think Ewout may have just mentioned this, I think about the fact that third-party people are saying, "Hey, we're showing up an awful lot, which is great. On the other hand, he also mentioned we're showing up a lot, but the referrals aren't showing much. So that's an interesting difference between the two.

That being said, we hope it actually reminds people when they do get ready to book, they are still thinking of us having seen us show up in the results of their prompt. We believe that in the long run, it's very important to continue to work very closely with all of the frontier players, which we are doing, and we've talked about this a lot in the past. In fact, the most recent thing is, I believe, maybe today even, I think Google may have come out today, a small percentage of their traffic seeing their agentic booking, which we are one of the first with them. We've been working very hard with them as we have for many years, but working hard on this one. And we believe it's -- I think it's out. I didn't see it myself yet, but I think it's out there, and we'll see how that one does.

Point of this, summing it all up in that area is that we are working hard with the third-party frontier players to make sure we're properly placed when somebody wants to book if they want to start there. But even more important to me is making sure that we are offering our own opportunities for people to come to us direct. And that's why we talked a little bit about in the prepared remarks about Booking has come out with their way to do discovery. We've got Priceline Penny. We got the new thing we mentioned about Agoda and their gallery thing. And we're going to keep on working with that so that people, when they think of travel, they think I can go to one of our brands, and they will get everything they knew -- could get from any of the large language models, but get even more because we're able to personalize it from what they've done with us in the past, either give them value that they could not get because we're going to work with our partners to provide incredible opportunities to help them get incremental business. So we see this as a win-win-win as it's always been. We always work with third parties to bring in customers, but we also like them to come to direct.

And regarding your second question on e-commerce, I don't know if I really answered that or not. If you want to restate it, please do.

Well, just in terms of, obviously, Google and OpenAI have talked about different either agent offerings that they will give the consumer or the Google UCP that you mentioned. Have they been broadly as you expected sort of a few months ago? Have they gone in the direction that you were kind of working with them? Or have you seen anything that has surprised you there?

Well, I'll say we continue to work with them. When they change, we change, too. And there have been many changes over the last couple of years in the way they were going to go and things will come up. And personally, I like to take a little pride in the fact that I thought that one of them would start going for a performance marketing advertising platform, which is right in our wheelhouse that we're very, very good at, and they have, and we're working very hard on that. So I'm pleased about that. But again, the important things are make sure we work with them closely, one; two, being the big player that we are, we have the expertise, the knowledge, the people who can work with them. We can spread it across all of them to make sure we're not letting anybody out. And the last thing is, if they want to change to do something else, we'll work with them.

Your next question comes from the line of Justin Post from Bank of America.

Glenn, Connected Trip is obviously a big focus, and you had some positive comments there. But it looks like air really decelerated and rental cars were down a little bit. Any thoughts on why those are going to kind of a little different direction than room nights and what that means for connected trip?

Okay. So there are different issues, clearly. Why don't I take the first one, talk about Connected Trip in general. And Ewout has some really good thoughts on why those numbers are -- have diverged and really why you should understand that's not a big deal, very much exogenous factors.

But in terms of Connected Trip, all these elements are important for the long run. And that means having all of the verticals being able to work together. And that's the whole idea is to bring something that is actually better than the way people buying individual verticals that aren't Connected at all. And one of the critical things, of course, is our payments platform, which I was very pleased that we were able to announce how the percentage going through is even higher, up 4 percentage points, 73% is a great number to continues to go up because that is critical. That's the glue that brings it all together. And by the way, then as we bring in Genius too, it's a flywheel that keep on increasing. Now you would say, well, wait, your flywheel, you had two little parts here seem to have a little bit of a hiccup here, what's up with that.

And Ewout, you have some good thoughts on that. Why?

Yes. Specifically, Justin, with respect to flights, our flights business continues to outperform the market even in a challenging overall airline environment. So if you look at global demand, that was clearly impacted by airline capacity and also higher flight ticket prices during the second quarter. So therefore, our 4% growth of ticket is actually higher than the global airline industry. And if you then add 8% of ticket growth on top of it, so we had actually 12% growth -- bookings growth for tickets.

We saw in Europe, a couple of carriers actually have a contrarian strategy to the rest of the airline world. So they were more focused on lowering prices to increase demand, but the airlines in the rest of the world were actually doing exactly the opposite. And Asia was particularly hit hard because of their dependency on the Strait of Hormuz. So we expect the capacity of the airline industry gradually to come back over the next few months. But most importantly, if we think about travelers, what have they done in the quarter? They have found alternative options. They have been looking for travel domestically for intra-regional travel. We saw some healthy pickup of still people that want to get their summer bookings in. So that is happening. Therefore, the shorter booking window with the higher ADRs that we are seeing. And please keep in mind that the biggest part of our economics is actually coming from accommodation bookings, and that wasn't so much impacted by those dynamics with respect to the airline industry.

And even with that, we're still very pleased with the growth of our Connected Trip, that low double-digit number, the percentage of our total transactions in the low double digits. These are still very good numbers even with this incredible exogenous impact of the Middle East war.

Your next question comes from the line of Kevin Kopelman from TD Cowen.

Great. Could you talk more about the testing you're doing on the AI-powered discovery experience on Booking.com? What's the extent of the testing today? What are you learning? And how do you see it potentially being deployed more broadly in the future?

Kevin, it 's very early. I don't have any data to come back to you. I'm sure I would right now. But we don't have enough to say anything except certainly looking at it as is being put together, I was very pleased with what I saw. I find it adding convenience, making it easier for people to go through their ideas, their inspiration, working from that all the way through to be doing their booking.

It looks sweet to me. We'll see when -- in the end, in my opinion, is not the important thing. The important thing is seeing how the customers use it and if we need to make modifications or not. Certainly, I think last quarter, I mentioned to people how I stressed how if you want to see what we're building, what's going on, just keep using our products and services and see it. Now this is testing. So you may not see some of it because, obviously, we're not rolling out to everybody at once. But I am pleased with what I'm seeing, but I'm also -- I recognize that, that's not the important thing. The important thing is the data.

Got it. And if I could ask one just separate follow-up on Iran. Last quarter, you did quantify -- I know it's difficult to quantify, but you said you're assuming a 300 basis points headwind for the second quarter. Could you just tell us where that ended up and what you're assuming for the third quarter there?

Yes. Kevin, if we look at the impact from the Middle East, we said that it was about a 2-point impact on the first quarter. But keep in mind, that was actually only from the month of March and the elevated cancellations we had in March. If you look at the second quarter, the impact was actually a bit higher than in the first quarter because we saw the impact continuing in April and in May. But as we said then in June, actually, the situation started to normalize more, and that continued in the month of July.

If we look now forward to the third quarter, we expect that there will be a little bit less of an impact than we have seen in the second quarter because I think of the normalization. But as we said, we still expect that the indirect impact, particularly on airline capacity and flight ticket prices will continue until the end of the third quarter in our assumptions and guidance.

But overall, we are encouraged by the resiliency in demand, including in July, the healthy pickup of the summer bookings. And overall, if I also may point you to our full year guidance, actually, if you look at our full year guidance, we are at a high single-digit level for growth bookings and revenues and at mid-teens level for EPS at the high end. and that is still in line with our long-term algorithm and is also in line at a constant currency basis with our original guidance for the year despite the fact that in our assumptions, we have 7 out of 12 months impact of the Middle East. So, overall, I would say, great resilience of the market and demand and very strong execution by our team.

Your next question comes from the line of Ron Josey from Citi.

Glenn, I wanted to follow up on your comments around progress in the U.S. market. And specifically, I think you said room for growth and continued investments on inventory. So I would love to hear more thoughts on just the road map here. Is it adding inventory? Is it a greater focus on alternative accommodations or maybe just a consistent rollout of Penny. Any insights there would be helpful.

And then, Ewout, you talked about an additional $100 million of incremental savings identified or efficiencies. Just would love to hear more about where that's coming from.

Thanks, Ron. And I am very pleased with the overall progress we have made in the U.S. over the years. And I talked about this last quarter also, but I'll repeat it because I think it's important. We talked some years ago, I said the U.S. is an important strategic goal for us, and we're going to put time, energy, effort, money to work. And if you look over the last quarters, go back a bunch of them, and you'll see us doing very, very well. We come down to high single digit, and that's less than some of the other ones last quarter, but it's still really, really good numbers compared to how the market overall was doing. So we're doing something right, and I'm really pleased to shout out to the team for what they've been accomplishing.

And how we've been doing it? We've been doing it the way we do everything is grind it out, improve the product, improve the service, get more inventory, make the marketing better, do all the things that are necessary so that people, when they're thinking about where they're going to book, they think of us, they use us, they like us, they come back to us, and they got a problem, we solve it fast. That's business. And that's what we've been doing forever. But we had to make a little bit of a concentration of it to make sure that we fixed some things that perhaps weren't the best. When you're a global player like us, sometimes things that are localized are not being addressed and need to be addressed, and we've been doing that.

Now what are we going to do going forward? It's exactly the same stuff, continue to improve it, get more product, get more inventory, make sure we're doing a better job of marking it out. I still say, and you know it, that 4% growth in alternative accommodations, well, I'd like that to be a lot higher specifically want to be a lot higher in the U.S. And boy, this sounds like a broken record, I know about how much we need to make sure we have the right inventory and we need to make sure that the U.S. customer is aware of it. We got to make sure the partners like we're doing, but we are working on that, and I see different things we are going to be improving, and I think that will enable us to continue this very good path we've been on.

Then Ron, with respect to your question, your second question on the additional $100 million savings from the transformation program. So, first of all, philosophically, I think you know how we run the company, we are focused to optimize for long-term shareholder value. So very happy that the team has done so well. We found additional savings opportunities within existing categories, so no new categories. So this is all existing categories to go deeper in some of those areas and the additional $100 million mostly came from the procurement work stream.

So we are happy because now we raised the overall target to $650 million from $550 million. But you probably remember originally, when we launched this program, we were at $450 million. So what we are doing in the end is creating capacity to self-fund and invest ultimately in our strategic initiatives that then will help to drive long-term growth for the company.

Your next question comes from the line of Lloyd Walmsley from Mizuho.

Two questions that are sort of related. I guess, first, correct me if I'm wrong, but I don't think you all have called out SEO pressure before. And so the question there is sort of do you think this is a shift to AI search or more just a function of pressure on sort of organic visibility in favor of SEM? And the follow-up would just be, it sounds like AI search traffic is still miniscule, related to the first one, do you think that there are higher share going directly to hotels coming out of AI? Is that -- could that be part of what's going on? I know that's a big question investors have. Maybe you guys could talk to it.

Lloyd, I do believe that some of the changes that were made in the display at Google definitely put some pressure on SEO. Putting in that AI overview probably has done it. Now here's an important thing to keep in mind. So our direct mid-60s hasn't gone down at all. In fact, total number, absolute number, obviously had to go up to maintain the same percentage share in the direct because obviously, we grew. That's good. That says that we are doing a good job of making sure that people come to us think using, yes, losing SEO, don't like it.

It was never a big part of the business, a small part of the business. But obviously, I don't like that. And I wonder, okay, somebody they didn't come to us from SEO, which would have been in that direct category, where did they go? Did they come to us direct or what happened because our direct number didn't go down. I don't know. I do know, though, however, that I am pleased, I am very pleased that we continue to develop what we need to make sure people understand the better service we are offering to them to get them to come back direct. I mean look at what we're doing with our app in that high 50s percent -- when you look back a year ago, that was mid-50s, you go back two years ago, there was low 50s, people going to the app going to the app and they're coming direct, like that.

Now your second question, did some of the -- are some of the people coming off of the AI, whichever model you want, are they going direct to the hotels more or not? I don't know, they don't tell me. I will say, though, again, I doubt that anybody is getting a huge amount of business directly from what they're doing with their travel prompts, their discovery. I think what we are seeing, and I think this shows how we are still performing very well, is people are doing what they used to do always. They do a lot of search, do a lot of looking, a lot of thinking, a lot of discovery, it's called. But when they are actually ready to buy for real, that's when they get serious, and that's why we are seeing still nice growth rates.

And Lloyd, if I just may clarify one additional thing because you also made a comment about that you didn't believe we talked about SEO before. Yes, we did. Last quarter, we also talked about it. And again, just to emphasize, it's a very small component of our overall direct mix, and we see some slight headwinds, but the overall direct channel is growing in absolute numbers. So although that the ratio of direct mix is stable, that is because that's a ratio of two positives. So we are growing the absolute channel and the paid channel. So, in absolute terms, both are going up, but the ratio, therefore, is staying stable.

Seems remarkably stable out there despite all the noise.

Your next question comes from the line of Stephen Ju from UBS.

So I'll ask the AI question in a slightly different way. I mean we talk to a lot of companies, they're talking about how greater usage of AI, whether it's coding or product development, seems to have accelerated the pace of innovation for folks that have kind of jumped into the pool. So I'm just wondering at Booking, like what you're seeing in terms of your pace of product development, whether the experimentation with new products, that sort of thing has picked up over the last year or so.

Yes. And it is an incredible great part of the story of AI is how it really is improving all aspects of our business. And we mentioned a few times about the internal improvements that we're seeing using AI. Certainly, everybody talks about the improvements in coding. But of course, you got to talk about the whole software development life cycle. And actually, it's improving all areas, and we're working very hard, and we are seeing real results. Some people have talked about, wow, we're not seeing much ROI on it.

Well, I don't know what they're doing, but we absolutely are seeing benefit from it. And it's great, and I believe we will continue to improve. As we know, the models are going to continue to improve. And I believe when they improve, we will improve along with it. That's great. Then look to something else that's internal, but it's also external. Look at how we've improved our customer service. So we've been talking about how our cost per book -- the cost per interaction with a customer going down. That's because of AI. That's using it, and we're getting them with better CSAT numbers. The customer likes it, and it costs us less. This is a win-win. It's great. But it's not just those easy that everybody knows about. It's throughout the entire business is being used. It's being used in finance. It's being used in PR. It's being used by our public affairs that came back with stuff that they're doing. It's great throughout if it's done the right way.

Now here's the careful thing though. As I made this very clear to everyone and Ewout has been echoing it fully. What we do not want is any surprise because people went bunkers with spending money on tokens or somehow doing something that costs a lot more than we thought it would. So, Ewout, I don't know if you want to talk about is actually come up with some things to talk about to make sure that we are making sure when we are spending money on AI, we're going to get a good return on it or stop it.

So, Ewout, why don't you talk a little bit about that?

Absolutely. And Stephen, I think it's really important to emphasize what Glenn just said. So we are already seeing an ROI that is positive on our AI investments today as a company. So if I'm looking specifically about our AI costs, yes, they're going up. It could be token costs or license fees. It's still at a low single-digit level of our overall technology spend. So it's not really a driver of the growth of that line item, but it is going up.

We have introduced very specific metrics to measure the benefit of this. So think about, for example, in the engineering world, metrics around adoption, metrics around productivity. But the most important one from my perspective is that we are having a cost aware model routing so that we make sure that for simple task, we are using cheaper models and that for more complex tasks, we're using more expensive models. So we're measuring that, for example, by looking at our AI cost over merge request and our technology cost over merge request. And actually, those are coming down in a meaningful way. So again, very positive internal usage of AI.

Your next question comes from the line of Kenneth Gawrelski from Wells Fargo.

Just one for me, please. Could you talk about as you consolidate your B2B operations, what opportunities to invest might emerge in B2B? And how do you view the opportunity, whether it be share gain or just absolute growth?

Sure. So just to make sure everybody is on the same page on this. So we have three brands, Agoda, Priceline and Booking that all had separate B2B operations units. And last year, looking at how we could improve things, it was let's put it together as one unit. All of them were very good. All of them were making good progress, lots of this. But some of them had better aspects than others, different tools, different things that a customer wanted. And we said, why don't we put it together and get the best of all of them. And that when we go to a potential customer, we can offer a very best-in-class platform. So that's what we're in the progress of doing. It's being headed up by -- we announced Omri Morgenshtern, who is the CEO of Agoda, an incredibly talented individual, and he's leading this, putting it together. Now it's obvious the part of why it's better to put it together.

Your question is, what do we think is going to happen? Well, we have -- it's a big business now, but I want to make it even bigger. And I want to make sure that no customer says, "Well, gee, I would have used you except you have these two things that I wanted, but you only have in the different units, you don't have it as one platform. So by improving the platform, making it best-in-class, we will be more competitive than we already are, which we are because we have a whole bunch of great big customers, small customers throughout the world. But I am really looking forward to the future when you'll be saying, "Gee, wow, that B2B business is really going great, and I expect that to happen.

And then Ken, one other additional thought on that. It's very important to be focused in the B2B business on incrementality because it's easy to some extent, to grow a B2B business very fast, but cannibalizing your existing B2C business where the unit economics are much higher. So this is a business where you have to be very disciplined from that perspective in terms of being able to measure incrementality. So that is something that we are having a real expertise in, are always doing and we'll continue to do that, of course, also when we put the three B2B businesses together in the future.

Your final question comes from the line of Jed Kelly from Oppenheimer.

So just following up on the B2B and then those comments you just made, should we imply that your B2B sort of focusing more on, call it, corporate travel clients that might be using you for supply? Or are you still going to power some leisure-focused brands, too?

So Jed, it does it for everyone and anyone who needs inventory and supply. Of course, though, we want to go with the bigger players able to achieve a lot more with the big players like, for example, a U.S. bank, we have some of those. Maybe an airline, we got a lot of those. All these bigger players are really, really the ones that are going to really move the dial, and that includes things like TMCs, which are the corporate travel players who are looking for inventory that we can supply to them. all them. But that doesn't mean we're going to neglect the small players, too. It's good. If it's easy to do it, if it doesn't take time, if it's easy self-service and be able to put it up, that's fine, too.

In the thing, we want to make sure that we are always looking for what's going to be the most efficient use of our resources, bring back the best return to us. And in the end, we'll make sure that we're absolutely looking to do the best thing we can in all areas so long as it does provide that positive return.

Okay. That is our final question, I think. Is that correct? Operator?

That is our final question.

Great. Well, let me wrap up here. Listen, first, to thank you. And one thing I got to always put out is the thanks to our dedicated employees. Very important, obviously, it's not a business without the employees. And of course, I have to thank our stockholders, too, but most important, the travelers and the partners whose trust and support has been instrumental to our strong execution and solid performance this quarter. But we remain mindful of the current macroeconomic and geopolitical environment. We've successfully navigated periods of uncertainty before, of course, and we remain confident in the enduring resilience of travel demand. And as always, we will stay focused on what we can control, and we will continue executing against our long-term strategy. Thank you very much, and good night.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

All right. We're going to get started. I think one of the last sessions of the conference. But we're very pleased to have with us today, Glenn Fogel, CEO and President of Booking Holdings.

So Booking is the world's leading provider of online travel and related services. The company's mission is to make it easier for everyone to experience the world. Booking has more than 32 million listings across 4.5 million properties, including hotels, homes, apartments, other unique places to stay, some treehouses in there, too? I believe.

Absolutely.

And it serves global travelers across more than 220 countries through Booking.com, Priceline, Agoda, KAYAK and OpenTable. And over the last 12 months, 1.3 billion room nights were booked across Booking Holdings. Glenn joined the company in 2000, became the group CEO in 2017, and also expanded his responsibilities to lead Booking.com as CEO in 2019. So welcome, Glenn.

Well, thanks for having me, Doug.

All right. Let's start kind of big picture. There's been this kind of long-running debate just around whether travel is structurally taking share of wallet versus other discretionary categories. How do you think about whether we're still in this secular growth phase for travel spending globally or whether you're seeing some of these markets approach maturity?

So long term, travel has always in the past, and I absolutely believe always in the future, will be a growth industry. No matter how you want to measure it, you can look back over a number of implements, you can go back and just look at any statistics about total spend on travel. It has exceeded global GDP by 1% to 2% for a very, very, very long time.

And it's obvious to see why. As people get wealthier, they generally want to travel more. You have the basics of people who are too poor to travel, enter a lower middle class and now can afford to travel. About half the people on this earth. So you're talking about 4 billion people cannot afford to travel. Those people are slowly becoming wealthier, becoming able to travel. So that's an absolute tailwind for travel.

Then you get into our business where we do stuff digitally. And it's hard to measure, but we'll pick round numbers. Maybe 1/3 of the people do not buy their travel digitally. So that's another tailwind. Those people who do it non-digitally, they will die, and then the younger people will come in, and they will be able to -- they'll do their travel, and that will be digital. So that's another tailwind for our business.

I absolutely believe and once you have established your basic needs, what are the things that give you the most enjoyment in life? How many people say, "Well, I'm sick of traveling, I don't want to go anywhere. I just want to stick at home." Nobody practically does that. Everybody wants to travel more. So definite tailwind for us. For us, the bigger issue is not the secular industry, which I know, it's how do we continue to gain share, how do we continue to get more than other ways people can do their travel digitally. And that is where we are focused on. And I think we've shown some great progress over the 20, almost -- well, it's more than 26 years, 27th year of doing it.

Okay. We'll certainly get into all of that in a minute. You noted on the call, and you kind of just said it, but people have this deep and enduring desire to explore and connect and that demand has proven resilient over time. How would you characterize the current health of the global travel consumer today?

Well, so don't talk a lot about short term, after we do the call, that's kind of all we're going to say about the short term. One of the things I really would emphasize, every time I have one of this meeting with you, Doug, or anybody, and I understand the business. I understand how important it is for many people on the buy side to understand what's happening now? What's happening next month? It's important in the quarter. And I'm saying, look, that's not -- my mindset is always, how are we building for the long term? How are we going to increase the value of this franchise over the long run that's going to continue to provide a great return for our long-term shareholders.

And I absolutely believe that as long as we focus on making better products, better services that truly, truly are differentiating so that our customer who is the traveler, that's one of our customers, they absolutely see value benefit to using us for somebody else and our partners 2-sided marketplace, 2 customers, that partner, the hotels, the airlines, the car rentals, the attractions, all those things, are we providing a better service for them to work closely with us, work so that we are giving them benefit.

As long as we continue to do that, as we have done for a very long time, we will continue to do well. And look, do I want every quarter to be better than the quarter before? Of course, I do. Does that have something I can control? No, I cannot control the war. I can't. I'd like to, I can't. So there's always a tsunamis, pandemics, yes, it goes on and on and on. That's the nature of the world, unsure travel. But when you look long term and it averages out, it's very good.

Okay. Just given some of the near-term headwinds from the Middle East conflict, some macro uncertainty, how are you thinking about just pace and prioritization of investment into strategic growth areas? When you think about things like connected trip and AI payments, geographic expansion, for example?

So as I just talk about, important is to build for the long term. And one of the things I absolutely believe is don't let the short-term volatility make you do things that are going to be hurtful for the long term. And that's so obvious to say, but sometimes it's harder to do. Sometimes you feel the pressure. You think, gee, maybe we should pull back a little bit on this. Yes, I know it's going to be great, and a real big value, but it's not going to come for another year. So maybe we just pull it back a little bit. I believe that's a fundamental mistake for a company. If you really believe in the long term, if you really believe that this product is going to be better. Don't you want to have it out to your consumer sooner? Don't you want it to be better there sooner? So yes, we do it. No, we have a great advantage, though. This is what's so wonderful.

And everybody -- boy, this is almost -- you almost want to ask like a quiz to the -- everybody here is like, I do remember worst year of travel ever, 2020, right, pandemic, right? We still made almost $1 billion in EBITDA, I don't know, a little under $900 million, I'm rounding off. How did we do that? In the worst -- how did you do that? And by the way, we were the only large company I know of that actually made money, let alone almost $1 billion. How did we do that? Because so much of our costs are variable.

So it's almost automatic. If there's no demand, I ain't going to spend a lot of money on performance marketing when there's no demand, okay? So that way, I don't have to then say, "Oh, things are bad. Let's not spend the money on this project, which I know is really important. I don't have to do that." So that's the answer. I believe in the future is always going to be determined by your investments in making better products and services and don't be one of those people who's just trying to hit this quarter.

Okay. Let's shift gears, talk about AI. You've expressed strong conviction that AI is a net positive for booking. Just as AI-driven discovery emerges as a new traffic channel, how do you think about where kind of AI share of funnel comes from? What happens to traditional search and how you pull in kind of net new users? Is there a risk to competing at all with your direct channel? How do you think about all those dynamics?

Yes. I think about those things all the time because what we're trying to do is predict the future. We're still very early. We're in America. So I can say very early innings, and everybody understands what I'm talking about. You go to France, they have no idea what you mean.

So we definitely believe in the first thing you pointed out that AI is an absolute net benefit to our future. I absolutely believe that, I see what we're building. I see how we're doing it, et cetera. Now there are so many things that are changing, though. So are people using chatbot, AI chatbots, OpenAIs, ChatGPT or is it Gemini or anyone, our people are using that for travel discovery, exploration? Absolutely. In fact, I bet if I ask you all here, any of you not done that, I don't think we'd get a hand.

But how many of you then actually went straight and booked off of that? And I know the answer to that one, too, 0, 0. Because you can't do it yet anywhere practically. Now maybe some of you went -- we were one of the earliest ones that had the app at ChatGPT -- we were the first ones going to ChatGPT with that opening, you go, yes, you had to come to our -- you come to us. We do the book and you don't book off of that.

The question will be, though, over time, how will this change? And that's why we are working very closely with every single player, every single player. And I'm not talking just about the U.S. ones. We're in Boston, the U.S., okay, most of the people here, if I say, tell me in a large language model, and they'll come up with the usuals. And I'll say, you ever use Quinn, well no. Well, why? Ernie, I don't know. Anything about Falcon? No. I can go on and on around the world, DeepSeek, maybe some of you are probably testing it for your own things. But that's one of those issues that we want to work with everybody so that if there is a way we together working, which we're working with some of them, I think, we're working pretty good. We get the people spilling off of that on to us. That's great. And also to be honest, we don't pay as much as we pay Google right now.

On top of that, I want to increase. So 65% of the people right now, 65% of the people are coming to our Booking.com site direct right now. I want that to go up. I want that to get even higher. I want us to be what we're doing internally with all the things we're building in the AI world, in better products and services or the things we are doing in terms of creating our other services, building up our Genius program, much better. The Connected Trip, I talked about all the time, and AI is going to help -- is helping a great deal on that, all those things, that too. The most important thing is right now being so early is being agile, being able nimble, changing on, making sure we're putting the investments in the right places, enough poker chips on the table so that we can make sure whichever way it flows out. It's -- as described, I was Head of Strategy and Head of Corporate Development. We had a lot of different jobs.

One of the jobs I talked a couple of times this morning about is I was head trader at asset management -- Morgan Stanley asset management, for guy named Barton Biggs. But before that, I was an M&A banker for a long time dealing with the air business. One of the things when I was head here at what was then the Priceline Group, one of the things I recognized was, well, there's a lot of different ways to do travel. So I went out and we bought Active Hotels and Booking.com because they had an agency play in Europe. Agency is very different than merchant. Pricing was merchant only. Then you want to get something in Asia, I said, I want to get Agoda, which is a merchant player in Asia, why? And people have said to me, this is our company, I'm bored. Well, why do we have to do that? Booking has stuff in Asia, why do you want to duplicate? Well, the same thing when I bought Active, I wanted to buy Booking. And we already have Active, why are you buying Booking?

I wanted to maintain that flexibility. It was so early. We're talking 2005, 2006, 2007. I'm buying early because I don't know which way the future is going to go. So I got to make sure I've got everything covered, and luckily enough, they're all doing great. That's good. But that's the same thing right now. You're saying, what is this going to be in the future? I don't know the answer yet. I do know I need to maintain that flexibility and be doing all the different things, working with all the LLMs, building up on our own stuff on our own, and using AI to create a better experience. Come back in 5 years, Doug, and we'll say, this is the one that ended up being, I'm really glad I chose to invest in that one, too.

But when you think about this, though, and we kind of struggle with this for a lot of different companies across our coverage with companies, obviously, who want to leverage all the channels that you talked about, all the AI providers, and we'll see what happens, how that all develops. But then, of course, building out the products on your own channel, how do you think about what the functionality looks like kind of between the two, what advantages you might have from the direct AI products versus those going through some of the AI -- some of the LLMs essentially?

So let's separate it out. Let's move back from the AI only, let's say, what are the general things because that's really -- the question comes up a lot. So the business is much more complicated than a lot of people really understand because, while everybody is a traveler, say, well, I can see which the travel part, it's harder to understand the partner side and the amount of effort work that goes involved in maintaining the connectivity, the content, keeping it all together and working with the partners to create different pricing, different types of things to offer up to help them do their business the best. So you've got hoteliers right now in the Middle East, who we are dealing with all the time. But right now, our account managers talking to them day by day, look, here's where we are. This is what we see as demand. This is what we think you can do. There's only so much here's how we think you can maximize, okay?

That's a lot of people don't understand. It's not just throwing a bunch of content into a ChatGPT and hope the God it works. That's not the business. The reason we have 4.5 million properties that deal with us. The reason we have all those listings, is because we provide a value to them, a service to them. If we did not, they would not go to all the trouble of being part of it. Doing those things together is really helpful.

Now throw on top of that, personalization. And everyone says, "Well, Google knows everything about you." They don't know everything about you. Here's something they don't know. They don't know what I can offer to you because you are a Genius Level 3. And that's why you should to be booking with us because I'm giving you these benefits that nobody else is getting. Google doesn't know that. We know that. Now do you think I'm going to tell Google? No, no, I'm not telling them. And that's the reason I go through so many different things. One of the benefits of Connected Trip is being able to give an opportunity to our suppliers to get more business by offering up something that is an opaque product that is not going to cannibalize their regular parts of their business.

So I got, for example, a car service right now. Well, what they don't want to do is offer their -- is lower their standard rate for everybody. But they're more than happy to give us a lower price for somebody who's buying a hotel with us, which we can then offer over to our customer. Customer wins because they got the cheaper car service. Car service wins, they got the incremental. We win, because we got a little money from both of them. This is win-win-win. And AI, one of the benefits is, along with -- we say AI. I say AI, every single person here is immediately, I am certain going to Gen AI, right? But there's a lot of things. Our ML models, our machine learning models, and what the right pricing, what the right thing we should offer at the right time, how we should rank stuff. All of this AI, call it, globally and all the internal things put together is creating a more scientific way to offer up the right offers to people at the right time.

And here's the thing because we are the biggest, because we have the most data, what is the most important thing in AI is having data that you can then train, can then do models off of. It's a win-win-win. It's a flywheel that just keeps on spinning faster. That's why I'm so positive. That's why I say to people, and say, Oh my God, this aren't you worried about AI? I'm saying it's the greatest thing ever. For us, it's so much better than it used to be. This is a net positive. And it's weird when people say, all right. I'm like, no, I see it much better.

What are the efficiency gains and the biggest areas internally that you're benefiting from right now.

So everybody knows the obvious ones, right? Everybody has their people using Claude Code, and your technology is being done at a much cheaper price and it's much better, and it is. It really is. So either your savings come because you don't need as much in terms of personnel or you're able to develop things you need to do faster to provide better products and you balance between those things, so that's fine. Everybody knows that one. Other one, obvious one, everybody is talking about it, and it is absolutely true, and Ewout mentioned this a couple of times in the calls, customer service, customer service costs going down per contact, reducing contact. And what's really interesting is higher customer satisfaction with an actual AI answer instead of a human. That's really good. Anybody here use -- maybe who use OpenTable here, anybody? Oh, that's good.

And how many times have -- you actually ever call for reservation? You made a phone call, right? Yes, probably did. I know you did. Okay, here's the interest thing, though. You may even talk to an AI and you didn't know it, because that's part of the things we've been building out and developing with other third party doing open -- with OpenTable and restaurant. Well, throughout, when you call us for a customer service contact on your Booking.com and having an answer that is a voice that sounds like a human, you think it's a human, but it's not a human. That's really inexpensive when it's coming out of token instead of a person, right?

And it comes back with better answers, make so much better. How many times you go -- first of all, I dare say, everybody here has called customer service on a travel problem and waited like forever, and it's so frustrating, kills you, right? Well, that's because you only -- you do your staffing to have an optimal number of wait minutes, so you don't want to do it, everybody can pick up immediately, that would cost fortune. But with AI, you can do it, so you do pick up. It does pick up immediately, and it's not much more cost. That's a real improvement.

And then you call in the old style and the person finally picks up and they tell you, "Oh, I'm sorry, I had to put you on hold and talk to somebody else," which you basically at that point, you're into ready to throttle somebody. But with AI, with knowing so much more, it actually comes up with a solution faster. These are really big things.

And then you go beyond all the things I mentioned about content, bringing it together. And look, Connected Trip things. Where every has been to Amsterdam. You always -- I have said this story before, so if you've heard it, I'm sorry, but the fact is, every goes to Amsterdam as a tourist, you want the Canal ride and you want to go to the Rijksmuseum, you want to see like Night Watch, okay?

You want to go to the museum, though, on the rainy day. You want the boat ride on the sunny day. Amsterdam, it's rain a lots, something they won't tell you. But with AI and all that and Connected Trip, you come in, you booked it, let's say you had the boat was going to be on Wednesday, the museum was going to be on Thursday, it's Tuesday. We -- it's not hard to know what the weather is, all the stuff. We're reaching out. We're saying, we think we should switch this around because of the weather. One push the button, click yes, and we'll switch it, and here's the day's time, we'll switch the tickets, all that, no cost to you, really, that's the type of things we're going to be seeing down the road.

It will be so much -- and that will be the reason somebody says, I use Booking because you're walking around cities with a travel agent in your pocket, that's your phone, you're having that one-on-one relationship all the time that makes it so much better for you. And that's what we're seeing coming on. That's what we're building. We're building a much better thing. I can't improve the boat ride. I can't improve the narration by the person who's doing the boat ride, but I can make it a lot better so you do it on a day that will be most enjoyable.

Okay. Let's talk more about Connected Trip. So connected transactions, I think, grew high teens in 1Q. They're now a low double-digit percentage of Booking.com's overall transactions. What are the -- you've been at this for a number of years and the products kind of keep getting better, numbers are obviously increasing. But what are the one or two biggest like friction points to overcome until you really see like step function kind of increase with Connected Trip.

So I am very proud of what the team has built from nothing to something. We had no flights a few years ago. Last quarter, 28% increase. And we're now, I think, if you exclude Ctrip.com's domestic flights, we may be the biggest third-party seller of flight tickets from nothing. It's off. but it's so early -- again, I'll use again, early innings, why not? So it says everything. We are so far from where we're going to be, and anybody who's been on our sites knows that because you don't see it. So I don't see it now. I'm like, I'm in a city, why am I getting more things to be, why don't I get more push notifications to something better with a special deal. We've done nothing practically with OpenTable. It kills me.

But again, Rome wasn't built in a day and neither is our company. But in Mayfair, it's one of the most expensive parts of the world. I'm seeing at Claridge, it's so expensive. I got to take out a mortgage, okay? I'm there. There are incredible restaurants in Mayfair, and they would love to have me because they know I would pay a fortune there. They want me to go there, I'm a transient. They would pay, but they don't know I'm there. But Booking know I'm there because I booked it through a Booking, OpenTable knows I like food, how do we put it together?

And by the way, I like Cabernets, and that restaurant should knows that from OpenTable and somehow the restaurant to OpenTable to Booking to me should be offering, Glenn, come by this restaurant and you will get this beautiful 64 million Rothschild, whatever. And that's the way it should be. It's not yet. But that's just one little opportunity, it's so big. So you ask where are we? We are so early. It's like we're not even -- we're not even on the -- forget early innings, we're still putting on our clothes in the clubhouse, but that's all upside. That's all upside, and I see it coming.

And in fact, when it does work really well, when I do see those connections or I do see that offer coming to me in the Connected Trip, that's wonderful. And that's a beautiful start.

And what role does Genius play in Connected Trip?

It adds all in. It's a superpower on top. It superpowers everything. So for example, Genius was originally started out as a way for hotels to be able to offer a discounted price in an opaque way, or a hidden way, closed user group way. So it wouldn't be cannibalizing things, and it was being offered only to people who were very frequent travelers who we were able to show to the hoteliers, there's real value here because these people are high-spending people, you'll do better than that, and they did.

So it wasn't coming out of our pocket. The hoteliers were discounting the price. They were happy, we're pricing -- happy. But now we're doing more. Now it's not just hoteliers, now we are going across all the verticals. And then being able to combine it all and things and then be able to offer more. Look, everybody here probably has a platinum or special credit card where you get special things, you're probably all frequent flyer members of different and probably all the airlines, et cetera. What we're building something right now, I want to build some of that is even better. Now I know it's going to be hard to get people who already have a couple of million points on American Express Platinum and get you switch out because you're already stuck there because you want to use those points on that. But there are so many people out there who don't have that, particularly in the rest of the world. We're not talking America.

Don't forget, America, U.S., relatively small part of our business, most of the rest of the world. Those people are not yet locked into those things at all. So bring those people in, in a way that they really see a true advantage, Connected Trip, Genius together, offering them things they wouldn't get elsewhere. And then go on to that, the AI way to do it. I've talked to this before, I urge you all.

So a competitor of yours, we'll mention names, at a different shop, did an analysis of all the AI trip planning type things, came out and said, Priceline's Penny was the best, okay? I urge you all to go to Priceline Penny, put in a really complicated thing. Say, I'm thinking about going a trip this summer with my family. I got 3 kids, and 1 kid is actually away at school, so it's going to fly from another city. And I'm not sure whether or not we can take the dog or not. And really complicated, put it in, see what comes out.

I'm telling you, it's going. Now it's not perfect yet, and there's still things come out. I'm like, oh my God, that's horrible. But I'm telling you, I did it last night with a complicated trip for myself and my family. I did that, I used the exact same prompting language, I did the same that copied to an LLM, and one we got partners, another one. I believe -- and I think anybody else would say, ours war better. It was giving better results, better with ways to do it, better ways to book it, test it yourself, just do it. You'll see, and we are so early in that, too. And we'll be seeing more of those things coming down the road over time. So I absolutely am confident that we are producing that truly is better. And that's how you win in the long run, it's a better service, a better product.

Okay. When you think out over, let's say, 3 to 5 years and think about the growth vectors, really driving the top line. So when you think across geographic expansion, Connected Trip, payments, new verticals, how do you kind of rank those vectors in your mind?

Which one is going to be the biggest one? Is that the way...

Yes.

So I think it's -- so one of the things we used to always say in the back was -- and we still -- I don't remember who said it first, is that, in God we trust, everybody else brings data, it's an old saying, from a long time ago, and we still believe that. So I don't try and predict the future in that area. I just make sure that we are being agile and testing all out, and may see what return. And yes, we put more money to one versus the other, but I'm not telling anybody else this. But we definitely are making sure that we are covering the entire playing field, so we are not surprised.

Okay. EBITDA margin expanded about 200 basis points per year really over the past several years. How should investors think about sustainable margin trajectory from here, particularly just as you balance reinvestment in AI and other products versus leveraging some of those fixed costs.

Yes. It's really hard because -- and I know it as a banker, and we're putting together models and trying to guess what should it be going this long time ago. But it's hard. I understand the need for people to get a sense of that. So I would say this. We can make those margins whatever we want them to be. And the question is, what's the balance? What do you want to do? How fast do you want to grow? What products do you need to build? And then you have to do your own guessing, which is as we build this out, how much does this increase loyalty, increase direct, thereby, we don't have to now pay as much for marketing, perhaps.

On the other hand, though, you have the flip side that all the other verticals, except hotels has a much lower margin profile. So there are a lot of complications that go into that. So I would say for -- you're asking to give guidance to the investors. I would say that our CFO has said it very clearly in the calls, and I'll defer to the way he says it. I think that's the best way. I won't repeat it, but I will say that I know that it's important for us to continue to be agile and make investments when they're important and not. And it also to recognize, though, as a shareholder myself, I am also very cognizant of the need to maintain discipline. And at the end of the day, it's free cash flow, grow that one. Grow that one really well, Glenn, and we'll all be really happy. And buy back shares to it, with the free cash flow.

Yes. Well, let's hit that on capital returns. So you do pay a dividend. You've repurchased, I think, about $6.5 billion in stock each of the last couple of years, $18 billion in authorization at the end of 1Q. How do you think about optimal capital return framework just given that free cash flow generation, the growth opportunities? And where does M&A fit in?

Yes. So the way we've always looked at it is, first, build the business. Are there opportunities that we think deploying cash for investment internally is going to produce a great return that we think is really good. Then are there M&A opportunities that we have high confidence will also be a good thing. Then if we don't, make sure that you're paying back cash to your shareholders because they can deploy it better than you can. And that's been for 27 years. We've been -- well, not because we didn't have cash in the beginning. But later, when we started getting cash, we started doing that.

And I believe that's still the way to do it. I believe the way we've done it over the last couple of years has been wonderful, buying back 40% of the outstanding shares over the last dozen years. I'm really pleased with what we've done that. We didn't waste the money, one. And two, what I'm really glad is that when we buy back shares, they really reduced the total outstanding. A lot of companies, that doesn't quite work. They buy a lot of shares, but for some reason, it doesn't seem to be dropping. Like why is that? What's happening? Oh, they're giving a lot of new shares out, too. We don't do that, and we make it very clear that all of our expense is stock-based compensation, it's a real expense. We make certain that everybody understands that. No cash or stock to a shareholder, it's a cost, and we make sure we're very clear about that.

Okay. And maybe just last question, which kind of sums it all up, you have this long-term growth ambition for constant currency, 8% gross bookings growth, 8% revenue growth and 15% adjusted EPS growth. What drives your confidence in that long-term growth ambition?

Well, I think one of the things is the very important term in there is long. You heard that long term, right? Because I can't predict what's going to happen tomorrow in the Middle East, I can't predict. We can -- I mean you look at the numbers last year. Well, we blew those numbers away, didn't we, in all those numbers. And the year before that, too. So if you're looking at short term, there'll be volatility. I don't know what's going to happen next week, next month, next quarter, next year. But over the long term, I'm fairly confident that GDP will continue -- world global GDP is going to grow at this percent. I'm fairly confident, I'm very confident that travel will grow that digital will increase tailwind. All those things, all those reasons.

And then we just need to continue to improve the product to take share as we have done over -- do you see our U.S., did you look at that? So for 4 quarters, increasing our U.S. growth rate, low-teens last one we just announced from where -- in the past, we were like nothing, and now doing. So we are improving the product, improving the service, making people do it. Continue to do those things, we will continue to do that. And then throw on top of that, the efficiencies through better technology and all that and then throw on top of that, buying back shares, helps in your EPS, helps make sure you get that up to that number. So in the long term, Yes. I mean it's almost why should I not be.

Okay. All right. It's a great place to leave it there. Thank you.

Thank you.

I just got the thumbs up that we are good to go. So good morning, everyone. My name is Trevor Young. I am one of the Internet analysts here at Barclays, and I'm very pleased to be hosting the Booking Holdings team, Ewout Steenbergen, CFO. First time here at the conference. Thanks for joining us.

In this capacity.

In this capacity.

In previous capacities, I've been here before.

You've been here before. Very fair. So I'll start with a very easy question. As someone in the travel space, any upcoming travel plans that you're excited about besides joining this conference.

Yes, this is actually a happy travel month. For me, I had to go quickly last week to Europe, came back on Friday, last Sunday night here. I'm going tonight to Bangkok. So I spent a few days with Agoda, I have to make a stop on the way back in Paris for a Board meeting. And that's all business related.

And then after that, this is actually the really fun part of the travel. Then my wife, my daughter and I, we have a trip planned for visiting a program with UNICEF. So we're a very big UNICEF supporters. And one of the programs that we have supported is in Tajikistan. So we might go to Tajikistan. It depends a little bit on the situation in the Middle East, if that's going to happen or not. Otherwise, we might end up somewhere in Florida, I think. But I hope I can go to Tajikistan at the end of May.

So all over. Excellent. Good stuff. Well, actually, that's probably a good segue to our first topic, which is on the Middle East situation. That seems to be most topical in terms of near-term impact on travel demand. You spoke to it a little bit last week in terms of quantifying the impact, but perhaps you could expand a little bit on the broader implications for travel demand. How does the conflict in Iran disrupt the EU to APAC corridor? Is it causing changes in destination choice, booking windows or flexibility preferences? And is there any kind of substitution benefits that are offsetting that?

Yes. So the Middle East is a very important element in travel globally. I think you all here in Europe realized that a lot. We had to explain it a lot in the U.S. because I don't think it was fully understand in the U.S. How much people travel from Europe to Asia through the Middle East, these very large carriers like Etihad or Emirates or Qatar Airways or the other way around, of course, people that live in Asia or Australia, how much they travel through the Middle East, for example, if they want to come to London. So very important travel corridor.

About 4% of our room nights in 2025 were from Middle Eastern bookers. About 3% was Middle East as a destination. So it's about 7% if you combine that. By the way, Middle East includes Egypt and Turkey. So obviously, it's not the whole of the Middle East that is impacted by this conflict. But then also, you have the impact of the travel corridor. So all of that has been reflected in our results. Obviously, first quarter numbers were still quite strong, but that was because the impact was mostly in the month of March. So for the rest of the quarter was quite strong, but more reflected for the full second quarter guidance that we have provided.

You asked specifically about some other indicators around the booking window or other elements. So what we saw is booking window definitely started to come in due to the situation in the Middle East in March. So that was one of the impacts. In our guidance, we have also assumed that ADRs will come down a bit. So some of those we have reflected in the outlook.

But most importantly, I think what we are doing and how we look at the situation is this is ultimately going to be temporary. We are, as a business, because we are so global, because we bring travelers to and from 220 countries in the world. We do 1.25 billion room nights globally. If something happens across the world, if it is a geopolitical event, if it is a natural disaster, if it is a pandemic or anything, obviously, that impacts our business.

But in the end, these situations are temporary. And what we've seen with situations in the past is usually travel comes out of this in a much stronger way. People like to travel. They like to have great experiences in their lives. They like to go to other places and explore the world, looking to other cultures and really spend their time there. So yes, the situation is temporary. But more importantly, we're looking at the structural elements in terms of performance of the company underneath.

And actually, those looked really strong in the first quarter, and that's really encouraging, of course, for the medium- and long-term outlook of the company.

That makes a lot of sense. Just digging deeper on the actual impact in 1Q, you called out about a 2-point headwind on 1Q room nights and bookings, even though that was a full quarter impact. For 2Q, you actually guided to about a 3-point impact, which some might actually argue isn't all that bad considering because you're now contemplating a full quarter impact here versus just 1 month. So has some of that initial uncertainty or uptick in cancellations started to wane, which is why that 2Q impact isn't greater? Is that kind of what you're speaking to where folks are like, hey, we want to still travel, initial panic has subsided?

Yes. Two thoughts on that. The first is definitely in March, we saw an uptick in cancellations. So this is basically a catch-up past bookings that were made by travelers that are planning to travel to the Middle East or people in the Middle East are traveling to go outside. And suddenly, all those past bookings then get canceled because it's obvious that, that travel is not going to happen. So that's a bit of a spike and then it comes down.

So we said that is March stand-alone growth was 1%. That impact was about 3 points. So if you normalize for that, it's about 4 points -- 4 percent point growth in March, which is in line with the top end of our guidance for the second quarter. So I think that is definitely one element. But more importantly, we're also looking at travel growth in other parts of the world that is not impacted by the Middle East.

So if we look at Europeans traveling within Europe, it's still up high single digits in the first quarter, and that is basically in line with the growth we have seen at the end of 2025. If you look at Asians traveling within Asia, it was up low double-digit level, the same as what we have seen in the fourth quarter of 2025. We saw that growth in the U.S. was really strong. We saw that growth in Latin America was really strong. So again, the regions and parts of the world that are not being impacted by this, all look very healthy. And that's why I think when we look at the full year guidance, actually, I think it's still very robust guidance that we have provided for the whole year, particularly taking into account the assumption that this conflict will last for 4 months.

Of course, anyone can put another assumption in. We can't predict better than anyone how long this is going to last. If people think it will end shorter, you can make your own adjustment or will take longer. But under the assumption that 1/3 of the year is being impacted by this conflict in the Middle East, we think that the guidance is actually still very solid. And that's driven by all those underlying positive trends in other regions, plus I think a lot of the structural elements in terms of the execution of our strategic initiatives.

Right. And let's actually hit on one of those other regions that you alluded to. The U.S. market actually was a bright spot for you in 1Q. I think you accelerated for 4 consecutive quarters on room nights there. You're now kind of in teens type territory. Some data would suggest the U.S. market is faring much better than other regions. How much of your strength in the U.S. is coming from kind of your own efforts to ramp versus just the broader demand backdrop being healthier than other places in the world?

So let me maybe first, Trevor, explain what we see in general in the U.S. market. And then I can explain then on top of it, what we have seen more, how we have performed relative to the market. So U.S. market by itself definitely continued positive signals. You recall that a number of quarters ago, we were one of the first to start to highlight the bifurcation in the U.S. consumer economy. We saw the top end doing very well. People that go and travel internationally, stay in 4- or 5-star hotels, sit in the front of the plane, all doing very well.

But the lower end was really under pressure. We saw less travel, shorter booking windows, ADRs down, length of stay down. So a lot of more of those indicators. Fortunately, it looks like the lower end of the market is improving. So we saw ADRs now flat. That is definitely better because we saw down for a long period of time. You see the booking window now stable. So all of that is more encouraging and positive. So if we have the top end continuing to do well and the lower end improving, that's, I think, a very good overall setting for the U.S. travel market.

Now how did we perform relative to the market? I think our third-party data sources are telling us U.S. market grew low single digits in the first quarter. So we grew low teens. So this is probably the widest gap we have seen in a very long period of time in terms of our relative outperformance to the U.S. market. That's a result of a number of reasons. The first is we see very strong domestic travel. The second is what is really encouraging, we see very strong direct booking growth. And direct booking growth, you can't change overnight. That's the result of many years of investments in product, in supply, in performance marketing, in brands. Definitely, I think the familiarity with our brand in the U.S. is much stronger than a few years ago.

And then you get the effect of someone comes to you the first time through a paid channel. They have a great experience. They like it. They come the second time to you through a paid channel. They like it again. And then maybe the third time, they say, you know what, I opened up the app, I book just directly in the app and then they become a direct booker and then you get much more repeat to yourself. So that's an effect we're seeing in the U.S. So we think that's really positive. We also saw outbound doing well. We saw also our B2B business, which is smaller, but doing well. So it's a combination of factors in the U.S. where we see that growth so much above the market in general.

So strong backdrop, that lower-end consumer maybe firming up a little bit, but you're really seeing compounding benefits from all the work you've been doing in recent years, in particular, driving that direct mix.

Absolutely.

Got it. Okay. Shifting gears a little bit. We have to hit on AI. As agentic AI shifts more trip inspiration and planning into some of the horizontal platforms illustratively like a ChatGPT, what are the important factors or control points that preserve -- bookings direct customer relationship? What parts of the business are more defensible versus AI? Is it payments? Is it the customer service and accountability? Is it loyalty? Is it something else?

Yes. With 28 minutes still to go, I can probably talk for the next 28 minutes on this topic. But let me keep it high level and then we can dive deeper in whatever direction we can -- you want to go, Trevor. So let me really take this at the highest level of what is the strategy we are following. And the strategy has a couple of components. I'm leaving the whole internal efficiency benefits and all of that out of it. I'm speaking really about the go-to-market strategy here.

One is we're partnering very closely with all the LLM developers. We're a launch partner with OpenAI. We're a partner with Microsoft, with Google. You probably have seen with the latest developments of Anthropic in their B2C efforts. We were a launch partner for Cloud for Life at 2 weeks ago. Why are we doing that? Because, first of all, we learn a lot from a technology perspective, what are they working on? What is the latest? We get an early heads up when they are having a product launch, and they ask us to be part of that. And we know -- so we know where that is heading from a technology perspective. And so that is great for us.

We learn a lot from consumer behavior. We see how consumers are reacting on those latest products. That's great information and knowledge we have in the very early stage. Third is these channels will become future performance marketing channels for us. Like, for example, OpenAI is testing PPC now at this moment. We're part of a very small testing group with them on that. So this is playing to our strength, more performance marketing channels. We are -- I look at us as a very scientific company.

We run very large optimization algorithms that is continuously determining the next incremental dollar or euro, where should we spend that? What is the highest incremental return and if we have many more performance marketing channels on top of the traditional gorilla that has been in traditional search for a very long period of time, and we have expanding already from that, of course, over time with social media and others. This is just additional channels, good for us, more diversification.

Second part of the strategy is what do we do in our own environment because you were talking about direct. This is, of course, very important because as a company, over the last 15 years, we have moved from 100% dependency on performance marketing channels to 2/3 of our B2B traffic is coming direct to us today, 2/3, which is really incredible. Obviously, what we want to make sure is that, that is not moving backwards. So why are we -- how are we going to do that? We are working on a lot of top-of-funnel AI tools, that should give traveler customers the same experience as they can get in ChatGPT or Gemini. But then you can do the same kind of inspiration, the same kind of itinerary building, the same kind of planning and putting away and come back.

By the way, we can make it very personalized because we know what you have done in the past and where you have traveled and what kind of hotel you like. If you like a small hotel with a great gym or a great bar and et cetera, we can curate all of the information for you around that. But then, of course, we can give that kind of an experience with a trip planning tool that is as good as the hyperscalers, but provided by a party that our travelers know, they trust, they have their loyalty program with. We have their credit card information. It's all taken care of. If something goes wrong, they know who to contact to fix it for them.

So I think trust is a huge element today in AI, and we all have our experiences with AI hallucinations and very strange outcomes. So if we can provide the same experience, but in an environment that has that trust and then we're also working on expanded loyalty benefits of our Genius program, I think that's going to be a very strong proposition to the market. So those are the elements that we're thinking of and working on strategically in order to be ready for the future.

Yes. And I think an underappreciated aspect of that is all the work that you're doing to incorporate it for the consumer experience on your surfaces, right? It's perceived that you can only do this stuff on ChatGPT or Gemini, which just actually isn't correct, right? You're working on building this stuff out yourselves.

And actually, we already have a couple of tools out there that are really strong. I can, for example, point to Penny, which is an AI trip planner from the Priceline platform. It's generally seen by a lot of research as one of the best or maybe the best that is out there. And that is further advancing. You now can book directly through Penny. So that's actually in many of the trip planners an issue, you can't make that step to doing the booking that can be done.

In Booking.com, there's a lot of AI tools that are being added to the existing UX. So we like that because, obviously, existing UX and Booking.com is optimized over 2 decades. So we -- it's more of a different strategy to really take customers gradually along the way with more and more AI tools that are embedded. Agoda is working on an AI trip planner. We have 2 start-ups, one in the West Coast, one on the East Coast that are working on something that is even more innovative from a concept perspective. So there will be a lot of new initiatives that will come to the market this year.

Okay. A lot of your comments there were actually focused more on the end consumer side of things. Let's hit on the supply side of things because this is often a worry we hear from investors about maybe some of the major hotel platforms, what are their aspirations on AI surfaces and the ChatGPTs of the world. Do you have any concerns about scaled partners trying to figure out their own integrations directly such that they may not need to rely on booking in some future state for a portion of their business?

Yes. That question came up a lot, I think, a couple of months ago. It seems to have gone away a lot. And the reason is I think the element that we have tried to explain and what was probably underappreciated at the time was the complexity that goes into the fulfillment for travel. What we do is in terms of 4.5 million properties, 4.5 million properties where we should have real-time data around availability, around pricing. So that connection should be really a like-to-like connection all the time.

What we're doing around payments, we facilitate payments on over 100 local payment methods. This traveler from Asia wants to pay in his local payment method. That's not what this accommodation partner in Italy is accepting. We take care of that. By the way, it can be in different currencies as well. We facilitate over 50 different currencies. We do customer service in many different languages. We take care of a lot of modifications and cancellations and adjustments that have to be made along the way. There's a lot that goes there into the sausage making that isn't so much like, oh, yes, there's one agent that talks to another agent, and that is happening there.

But more importantly, actually is the supplier value proposition. So think about this in the following way. So let me take Italy again as the example. So you have this small family hotel in Tuscany. So today, traditional search is already very hard for them. So how am I going to be more visible to, let's say, travelers from Asia? They want to really focus on travelers from Asia coming to their hotel. If you think about ChatGPT, how will a small family hotel ever show up on ChatGPT? How will they ever be visible? So what we do is we help them with global marketing, global reach, global promotion.

They are very much in control on our platforms because they can say, it's a high season, I have a lot of regular customers coming to me, I only put 30% of my inventory on the platform, but in the low season, it's 60%. I can sit with Booking and say, you know what, I want to be more focused on getting Asian travelers. So from a pricing perspective or from a visibility perspective on the platform, they can make sure that, that is happening. So in a world where it's actually even becoming more unclear how you ever show up in an AI chatbot, I think that added value we have from a supply value proposition is, from my perspective, even becoming more important.

Yes, you'll solve a lot of pain points for them as the world gets more complex. Yes, makes a lot of sense. To wrap up on AI, let's hit on the internal usage a little bit. You saw some decent operating leverage last year by reducing customer service costs even as bookings continue to grow double digits. How much more opportunity is there in customer service specifically? And then beyond customer support and maybe developer productivity, where do you see the next step function improvement in cost structure or conversion efficiency from AI, again, internally facing?

Yes. In this field, the developments are going really fast. I would probably have given you another answer 2 months ago or 3 months ago than today. If I see how our developers are using cloud and how much benefit they take out of that, that's really a step change compared to, let's say, 2025. So really impressive how fast these developments are going and the benefits. I mean, we, of course, have to make a choice of how much of that is going to be converted into more productivity, so more development versus efficiencies, but the benefit is clearly there.

I think in customer service, as you already mentioned, I think it's a fantastic example where, first of all, it's going to be much faster. Your resolution time as a traveler customer is much shorter. And you are having a much higher satisfaction. So we all have experience with customer service in general with any company where it sometimes can be very painful. You wait very long in line. And then in the end, you get someone on the phone and can't answer your question, you have to be connected to another department and so on. And in the end, 30 minutes later, 45 minutes later, you're still on the phone.

So the fact that AI can give you a human-like experience, things can be resolved very quickly. Even if 100,000 people call at the same time, everyone can be supported at the same time only for very difficult cases, it really needs to escalate to a real human. Cost down, satisfaction scores up, I mean, it's the best combination. And there's much more that still can be done there in the future as well.

Okay. So more runway for potential savings there. Okay. Got it. Let's shift a little bit to supply as well as kind of growth verticals. First, we'll hit on accommodations. You're now at nearly 9 million active listings. How is Booking differentiating itself to attract high-quality independent host rather than just professional operators, particularly as competitors like maybe the Expedias of the world reinvest aggressively in their platform verbo?

Yes. I think this is a little bit a U.S.-centric question, Trevor, because I think if you think about the rest of the world, there is not so much of a question of both on the demand and on the supply side of people considering to be on our platform. Actually, we are a very large alternative accommodation platform in Europe. We're also one of the largest in Asia and the rest of the world. So in the U.S., our position is definitely smaller, particularly with the single homeowners. But that needs time. Again, we are relatively smaller. We're challenging in the U.S. market. We're growing.

And in the end, this is the effect of creating more demand, create more supply interest. We're improving our product, have more listings on our platform. And then it's just a flywheel effect that will start and will turn faster and faster in the future. So this will come naturally over time. I think our differentiation in terms of alternative accommodation has nothing to do with exclusive supply. We never think about supply in an exclusive way, like it's only on our platform, and therefore, people have to come to us. By the way, that isn't a great model from an antitrust perspective as well. But in the end, we add value in a different way why people come to our platform.

And particularly in alternative accommodation, it is that on our platform, you have traditional accommodations and alternative accommodations side by side. So we see so many times that people are looking for one type of accommodation and end up booking another type of accommodation. This family that goes on a trip, they need 2 hotel rooms, they prefer it to be connected, but the hotel doesn't give a guarantee. We show in the same city an apartment with 2 bedrooms -- a 2-bedroom apartments. They like it or they like, by the way, that they have a small kitchen with it, and that's ultimately what they book. So the fact that we show it all side by side, I think that is really a differentiator on our platform.

Okay. That makes a lot of sense. So let's stick with kind of some of the other pockets where you've had growth. Obviously, flights has been a big one for you, but probably more to come on some other verticals. You've ring-fenced $700 million in gross investments this year, a $300 million net EBITDA impact. Where are you reinvesting this year and why? And what are some of the areas of future growth as we look maybe beyond alternative accommodations and flights? What are the next big growth drivers for Booking?

Yes. I think the first category where we're investing is really the expansion of our proposition -- our core proposition. So think about other verticals like the advertising business, the attractions business, the flights business. We're expanding the international network of our restaurant business, OpenTable. We're expanding in business lines like B2B. So in B2B, we're bringing our B2B businesses that are part of our 3 OTA brands together in a new business in the future. So that is an element there. We're expanding internationally. Think about the U.S. and Asia, where a lot of investments there in localization, in product and supply, so to make those propositions better in Connected Trip. So that's all expansion of the proposition, both from a product and from a geographical perspective.

The second category is in AI. So what I just explained, a lot of those top-of-the-funnel AI tools, some of the foundational AI investments, some of the investments around having our data ready and prepared for AI models and that we can train those models very, very quickly. Just to be clear, we are not the type of company that needs to spend a lot of CapEx on it. We're not developing foundational models ourselves. We're using models that are being developed by others that are training them and fine-tuning them for our use cases. And by the way, that gives us also, from an architectural perspective, the opportunity to swap models in and out, depending on what is the best model at any point in time. So those AI investments is the second category.

And the third category is in fintech. We believe fintech is a really large opportunity for us in the future. So if you think about it, about -- now today, we said in the first quarter, low 70% of transactions, we facilitate the underlying payments of the transaction. Last year, we did $130 billion of payment transactions of those bookings. And that's already a huge number. If you compare it to the scale of some of the largest PSPs, that's already a huge number. People often don't realize that we are already quite a decent-sized PSP within our organization. And that's growing. That leads to a lot of benefits from an economics perspective.

The most important way to think about it is it's the same transaction, but we are adding incremental contribution margin euros or dollars to that same transaction. So it's a net benefit for us as a company. But more importantly, fintech is really a strategic opportunity because we can expand in many different directions with additional products. We have started with paying their own currency on the traveler side in a number of currencies. We're expanding that. We're going to the supply side. There's many other products that we can think of more expansion of the insurance products, wallets. So there's a lot of things we can do there in the future around our fintech strategy. And so we have actually only just started with that.

So strategically very important because it comes down to what we discussed at the beginning. This is an added value we provide for the traveler and for the supplier, but it is also something that is economically really good for us. So we're bringing actually all of that together.

Okay. You actually hit on one of my next payments. So just to recap on kind of fintech and payments, pretty high payment penetration already. It sounds like a lot of runway ahead across a suite of fintech type products, very attractive economics. Is that a fair way to summarize it?

Yes. And it's still going up. This is what we call merchant bookings. So merchant bookings is where we facilitate the payments. And it's still going up each and every period. It will be at some point an equilibrium. There will be always people that say, you know what, I just want to pay when I check in at a hotel. That's what we call the agency model. So that will be there. But I think we still see the merchant model still growing, still also this period.

Right. Okay. And to the earlier part of your prior answer, you hit on Connected Trip. This has been an initiative you've been working on for a number of years. I think trip volumes grew high 20s percent last year. It's now a double-digit percentage of mix. At what penetration rate does this kind of meaningfully change your ROAS, cancellation behavior, lifetime value of customers? And are you already seeing that contribution already? Or is there still a lot more to come?

Yes, we are already seeing that today. So the way to think about this is people that come more often to us. So our more repeat customers are more likely to book across multiple verticals, are more likely to combine many different elements of a trip in one booking are more likely to come direct and use the app, are more likely to be in the higher Genius loyalty program tiers. And so this is -- all of these elements are all interrelated and connected.

So this is something we do deliberately, make sure that we have customers that become more repeat, more direct, more satisfied, come back more often. And the economics, of course, with that are also there. Think about this in the following way. If we have someone that makes one booking, let's say, okay, we know that someone goes to Barcelona because they book their flight ticket with us or an accommodation in Barcelona. Then we don't need to incur second time the acquisition cost for that customer to make a proposition of, hey, do you also want to have a tour there or do you want to have a rental car there or any other element to the trip. So the more we can do that, the more actually it adds to the overall economics of this particular one trip and this particular one traveler customer.

Right. Acquire them once and get as many of those modes of travel as you can as part of the trip.

Exactly.

Makes a lot of sense. Before we open it up to Q&A, I do want to hit on margin. You're guiding to '26 being potentially the sixth consecutive year of margin expansion. The last 3 years, you've averaged about 2 points expansion, but you're now starting to approach high 30s, 38%, which kind of puts you close to where Booking was pre-pandemic.

And while the business is much larger now than kind of pre-pandemic, you've also layered in some areas such as flights and payments, which could be a bit of a headwind on overall EBITDA margin. Can you speak to any pockets of incremental savings for 2026? And how should we think about the path ahead on EBITDA margin maybe for the next 3 to 5 years? Can you surpass prior peak?

Yes. A lot went into that question. So let me try to unpack that a little bit. First, yes, our margins last year were -- EBITDA margins were close to 37%. I cannot emphasize enough, you know what I'm going to say there, that it is a fully loaded EBITDA margin. So we have very low CapEx. So we're not playing the game of let's CapEx everything under the sun and then it never shows up in EBITDA. It's fully loaded from a stock-based compensation perspective. We think stock-based compensation is a normal cost of running your business. If you wouldn't pay it, then you have to replace it with cash compensation.

And by the way, you need the cash flow at the end if you have stock-based compensation to take the dilutive effect of it out. So it's a normal cost of running a business. I'm still flabbergasted that people think that it's a kind of free component in running a business. So fully loaded and therefore, on a like-for-like basis, higher than any of our direct competitors. But we have done very well with the expansion. And that is because although we are investing a lot in those strategic initiatives, we're also running transformation programs where we're looking for efficiencies and taking the benefits from that.

So we have done that, for example, with the transformation program where we have said that we're going to take out $500 million to $550 million. We had in the run rate last year at the end of the year -- sorry, in year 2025, about $250 million. And this year, it will be fully in our numbers. So let's say, another $250 million to $300 million benefit that will come in this year. We've also said due to the situation in the Middle East, more short term, we're pulling back on some discretionary spend. That's about $100 million or so additional savings that we will achieve this year.

And then the third element of this is the following. Travel is a scale business. If you're a small player, it's really hard. If you have scale, then you can run so much more volume over your scale, you can be more price competitive on the one hand, but that also will help you, I think, from an overall EBITDA margin perspective because the next incremental traveler that comes to us and book a hotel night on an airline ticket, we don't need new infrastructure costs, new office building, new layer of management. So all of that, the incremental contribution to the margin is high.

So yes, you are right that we have been growing in verticals that are all stand-alone lower-margin verticals. Flights is lower margin, Asia growth is lower margin and several of that. But scale matters, plus I think the unit economic benefits of Connected Trip and combining those elements. So that's why we have been able to continue to expand margins over the last period. Even in a year like this, we said that up to 25 basis points, we still think that we can achieve EBITDA margins from the current level.

You also asked if I'm -- unpacking the last part of your question, you also asked what that will mean for the future? Well, we haven't given specific guidance on it. But implicitly, we have said the following because we are following the framework, the algorithm, what we call 8-8-15, being at least 8% growth from a gross bookings and revenue perspective and then 15% -- at least 15% growth from an EPS perspective. The step from 8% revenues to 15% EPS, you need to get your EBITDA and then, let's say, a low double-digit level and then with the buyback benefit, get your EPS to the mid-teens. So which implicitly means from 8% revenue to low double-digit EBITDA, you need to have some kind of leverage, some kind of an efficiency benefit that goes in between there. So you can read implicitly something out of that.

Yes. That's actually probably a great place to pause, just being mindful of time. I do want to open it up to the audience for any Q&A. So we will start passing around the mic if anyone has any questions.

Given what you just laid out on the cash generation in the business, can you just explain how you're thinking about leverage going forward?

Yes. Our leverage is what we have said as a target, approximately 2x growth leverage through the cycle. So we don't want to be bound. It has to be always 2x. But we said through the cycle, we would like to be at that level. We were at the end of the first quarter at a leverage of 1.8x. So we have a lot of leverage capacity still. Actually, as we speak today, we're in the bond market with a new offering. So -- but we have also some debt maturing over the next few months. So all of that is happening at the same time.

Not so much of a different story. We think actually stability, predictability in terms of our capital philosophy approach and targets is very much the same of what we have done in the past. We generate a lot of free cash flow last year, north of $9 billion. We are reinvesting a part of that back into our businesses because we think that's the most attractive way to really make sure that we continue to be a high-growth business in the future. M&A is always a possibility, but we have some regulatory restrictions there in certain businesses, in certain regions across the world. And then we're also actively returning capital to shareholders, both through dividends and buybacks. So I think it's a very repeatable model, very stable model. And I think nothing has changed there also with respect to the overall capital targets.

I think we have time for one more up here in the front.

In a world where I'm going to say to my AI agent, book me a hotel in New York City, how is it that ends up going to you over someone else?

Yes. So that can happen that people is saying that. By the way, this is where we not see a lot of traction today, the number of leads we get from those LLMs is relatively limited. It's not going up so much. And I think it still has to do with people that are not really sure because that's a big question, whereas that chatbot going to book you and through which platform and how do you know it's a decent hotel? And if you want to make a change, who do you have to call to make that update. So I think that's not happening a lot, but that might happen more in the future.

So that's exactly why we are partnering with all of those LLM developers because we want to be the one where they are referring to at that moment, and that traffic is coming to us. But more importantly, I think is the other way. And we have said this with our fourth quarter earnings call, almost 90% of our supply base or independent hotels are alternative accommodations and are smaller chains. So smaller chains, meaning not the top 15. So leave out the Hiltons, the Hyatts, the Marriotts, the Wyndhams and so on. So almost 90%. These are the hotels that if you want to go to a Marriott, by the way, you're probably part of the Bonvoy program and you book it directly with them, and it's already the case.

But the ones that are the independent ones, I think this is the one where we add the value that they are visible, that they get the traffic, that people know about them and that they do that through a platform that is a trusted platform for them. So I think that is the differentiation and the added value that we can deliver in that ecosystem, also very much, I think, if that's all driven by AI interfaces and agentic interfaces.

And I think we will wrap it there. We are up on time. Ewout, thanks so much.

Thanks.

Welcome to Booking Holdings First Quarter 2026 Conference Call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements which are made pursuant to the safe harbor provisions of the Privacy Securities Litigation Reform Act of 1995.

These forward-looking statements are not guaranteed of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted any such forward-looking statements.

Expressions of future goals or expectations and similar expressions reflecting something other than the historical fact are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statement in Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission.

Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. A copy of Booking Holdings' earnings press release is available in the -- for Investors section of Booking Holdings' website, www.bookingholdings.com.

Booking Holdings intends to use the Investor Relations page of its website, ir.bookingholdings.com to disclose material information for purposes of the SEC's Regulation Fair Disclosure.

Booking Holdings encourages investors to monitor this website in addition to other public announcement and SEC filings as information posted on that page could be deemed to be material information.

And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Please go ahead, gentlemen.

Good afternoon, and thank you for joining us today. We began 2026 with solid execution across our global business. Our results this quarter reflect the continued momentum of our long-term strategy and progress in advancing our mission to make it easier for everyone to experience the world.

Before turning to our results, I want to acknowledge the current macro environment, including the impact the Middle East conflict is having on travel and recognize the resilience of our employees and partners in the region. Periods of uncertainty, whether driven by geopolitical developments or economic conditions are not new to our industry. We have navigated similar moments many times before, including the global shutdown of travel during the COVID period and more recently, the Russia, Ukraine war, which began in 2022 and the Israel Hamas conflict, which began in 2023.

Each time, while the near-term environment can be difficult to predict and there are immediate consequences to travel volumes. The fundamental drivers of travel demand the desire to experience the world do not change. People have a deep and enduring desire to explore and connect and that demand has proven resilient over time, generally growing faster than the broader global economy. So we remain focused on what we can control delivering strong value, reliability and service for both travelers and partners through differentiated innovative solutions. That focus earns trust, it's why customers choose us today and why we believe they will continue to choose us tomorrow, next quarter, next year and over the long term.

This disciplined approach was one of the drivers of our performance in the first quarter, and it remains the foundation of our long-term strategy. Despite the start of the Middle East conflict at the end of February, our team delivered a quarter with strong execution and solid results. We booked 338 million [indiscernible] which was in line with our prior expectations and represented 6% year-over-year growth. We estimate that the Middle East conflict impacted our room night and gross bookings growth by approximately 2 percentage points. Accounted for directly impacted countries in the region as well as bookers whose trial was affected by the conflict.

Excluding this impact, we believe our room nights would have been up by approximately 8%. On a year-over-year basis, first quarter gross bookings of $53.8 billion grew 15%, revenue of $5.5 billion grew 16% and adjusted EBITDA of approximately $1.3 billion increased 19%. Finally, adjusted EPS of $1.14 grew 14% year-over-year. Ewout will provide more details on the impact of the conflict on our financial results as well as specific assumptions and implications for our second quarter and full year outlook.

While near-term dynamics create some volatility, we view our overall position in the Middle East as a long-term strength and believe we are well positioned for when normal travel demand results. Regardless of the current uncertainty, we remain focused on the long term and the factors within our control to drive value. This includes expanding our reach in key markets such as the U.S. and Asia, advancing our connected trip vision and continuing to innovate across our Gen AI capabilities, each of which I will speak to shortly. Our confidence in these initiatives and our future growth profile is reflected in a capital allocation strategy that we've employed for well over a decade including the record $3.6 billion in share repurchases we completed in the first quarter.

Since 2014, we have reduced our share count by over 40% even after accounting for the dilutive impact of stock-based compensation by opportunistically investing in this long-term vision through our share buyback program. No one is better positioned than we are to understand what our long-term value can and should be relative to market fluctuations on any given day or quarter. As I just mentioned, we have reduced our share count by over 40% in 12 years. Importantly, we have done so at the average price per share of $93 thereby generating significant incremental investment returns for our shareholders by betting on ourselves at the right times.

And while always preserving and exercising the flexibility to invest in both the organic and inorganic growth of our business. It is a strategy that we are very committed to. The U.S. is an area where we are increasingly seeing our intentional and targeted investments helped drive growth. While we are a global leader. As we have mentioned in the past, we believe we have room to grow in this market as a result of our continued disciplined execution, I am pleased to report if our U.S. room night growth accelerated for the fourth consecutive quarter to the low teens, driven primarily by strong domestic demand.

We're also encouraged by the continued momentum of our direct channel in the U.S., we saw double-digit growth at Booking.com, building a robust direct mix is not something that happens overnight. Growing our direct mix in the U.S. has been a multiyear effort built on disciplined investments in our product, brand and supply, which we believe is positioning us to drive continued progress over time.

Furthermore, we saw strength in the U.S. not only in the accommodations but across flights, cars and packages. This indicates that travelers are increasingly recognizing the full spectrum of our offerings as we continue to build out our connected trip vision. In Asia, we continue to see one of the most compelling structural growth opportunities in the global travel industry.

During the first quarter, the region performed well with room night growth in the high single digits, including low double-digit growth for travel within the region. What differentiates our position in Asia is our ability to operate effectively across a highly diverse and complex set of markets. Asia is not one unified region, but a collection of distinct countries and cultures each with its own consumer behaviors, supply dynamics and distribution channels.

Our approach starts with a global playbook informed by the REIT and capabilities of Booking.com, combined with Agoda's deeply localized expertise across the region. Building on that foundation, we have been investing in localization at the granular level, adapting our product, payments and go-to-market strategies to meet the specific needs of each market. This includes building strong relationships with local supply partners from traditional combinations like [indiscernible] in Japan, to a wide variety of independent properties across markets such as Indonesia, India and Vietnam, many of which sit outside major urban centers.

At the same time, our distribution strategy is designed to meet travelers where they are increasingly spending their time. In many of these markets, that means engaging through social and messaging platforms where we are seeing encouraging traction across channels such as Kakao Talk in Korea, [indiscernible] in Thailand and Taiwan and through WhatsApp in India. By combining a global playbook with strong local execution, we believe we will continue to be well positioned for the growth opportunity in Asia over time. Now onto the connected truck, which is about making travel easier by bringing more of the journey together in a way that provides more value, lower complexity and ensures better customer service.

We're seeing encouraging progress with more travelers choosing to book multiple parts of their trip with us. In the first quarter, connected transactions meaning trips that included bookings across more than 1 vertical grew in the high teens range and represented a low double-digit percentage of Booking.com's total transactions. This growth reinforces our belief that when we reduce friction and provide more value, travelers choose to do more of their business with us.

Additionally, we are able to drive more incremental value for our partners as travelers increasingly engage with multiple verticals across our platform and working with our partners our vision is to provide personalized benefits within the connected trip that provides more value to both the traveler and the partner. Our Genius loyalty program is a key component of this strategy. Unlike traditional programs, Genius is built around immediate relevant benefits such as tier discounts, free breakfast, room upgrades that apply at the point of booking.

We continue to see strong engagement from our higher-tier genius members who book and return more frequently than non genius travelers over the last 4 quarters, Level 2 and Level 3 genius members represented over 30% of our active base and accounted for a high 50% share of room nights up from the prior year.

Given the importance of loyalty and the success of the program to date, we see an opportunity to further strengthen Genius this year. Let me now turn to GenAI, which we continue to believe represents a significant opportunity to enhance both the traveler and partner experience. Our approach remains disciplined and focused on where AI can drive meaningful impact across our products and services, improving effectiveness for travelers and partners driving internal efficiencies and working closely with leading external partners to ensure we are well positioned in the event that current usage of frontier LLM for travel, discovery and planning becomes more closely tied to direct immediate booking execution.

Even more so, I am pleased to highlight some of the current progress we've made on AI initiatives across our brands today. At Priceline, Penny continues to evolve into a more interactive end-to-end AI-driven journey with increasingly advanced shopping and discovery capabilities. It enables conversational search and brings a multiproduct trip together in a single, integrated view, including a dynamic travel map. Penny is also becoming more personalized with the ability for travelers to build trips with an understanding of their preferences with recommendations that improve over time.

In very early testing from a small sample set, we are seeing a noticeable uplift from users who engage with Penny compared to non-Penny users. At Booking.com, we're introducing additional AI-driven capabilities to support travelers earlier in their journey, including enhanced natural language search and more dynamic inspiration-led discovery features. Smart filters have now been rolled out globally in accommodations. And we are beginning to extend and test these capabilities within the cars vertical, a key factor in the Booking.com approach is optimizing the user experience through experimentation and data analysis, a process that we are known for.

We are doing this now, bringing together these new AI capabilities in the upper funnel and doing so across verticals, we believe we are making meaningful progress in integrating these elements, and we expect to continue building on this foundation over the coming year.

As we advance these capabilities, AI is also enabling us to deliver greater value to our partners by improving personalization and conversion -- we can help drive incremental demand while also making partner to guests to be an occasion more efficient and intuitive streamlining operations. For example, at Booking.com, agentic service flows for complaints and cancellation capabilities are improving the post-booking experience, reducing customer service contacts and increasing self-service adoption helping partners operate more efficiently.

In OpenTable, we are building on the launch of AI concierge by expanding it beyond answering diner questions, into a broader discovery tool, starting with natural language search. We're also developing capabilities to better support restaurant partners through more streamlined operations an actionable revenue-focused insights, including voice-enabled reservation tools, and table turnover data that help bring more off-line tables, online and support higher utilization and revenue.

We continue to embed AI across our operations to drive efficiency from automating customer service interactions and improving self-service rates to enhancing internal workflows that accelerate product development and decision-making. For example, in this quarter in [indiscernible], we saw a double-digit year-over-year reduction in customer service costs per booking, driven by AI-assisted automation, helping us reduce costs and operate more effectively at scale.

We continue to believe AI-enabled productivity and efficiencies are an area of notable opportunity. Beyond our internal efforts, we're also partnering with leading AI organizations to remain at the forefront of this rapidly evolving landscape and to expand our sources of demand. As GenAI reshapes how travelers discover and plan trips, we are focused on meeting them where ever that journey begins.

Our relationships with companies such as OpenAI, Google, Anthropic and Amazon, combined with our disciplined approach positions us well to capture these emerging opportunities and drive long-term value for both travelers and partners.

Last, we believe the strength of our brands and the number of travelers who choose to come directly to our platform will remain an important differentiator as brand increasingly guides where travelers choose to engage. Our consistent ability to deliver value underpins this dynamic, and we'll continue to differentiate us over time while also helping ensure our supply partners especially our small and medium enterprise partners are discoverable no matter how people begin their traveler exploration and planning process.

In closing, and taking a broader view, we are reminded that over the long term, we benefit greatly from our large global travel platform, which has notable positions in Europe, the world's largest travel market and Asia, the world's fastest-growing travel market. Given this geographic footprint, our results naturally reflect the impact of the Middle East conflict. However, we believe our diversified global portfolio of leading brands and financial strength positions us well for the medium and long term.

Looking ahead, our focus remains clear. We are advancing the connected trip, accelerating innovation through AI and continuing to invest in the areas we believe will drive long-term growth. While we recognize that geopolitical and macroeconomic uncertainty can create near-term volatility, we have seen time and again that the underlying demand for travel does not go away. With our global business, deep supplier relationships and decades of experiencing, leveraging data and technology we believe that we are set up well to navigate these dynamics while continuing to execute our strategy and deliver attractive returns over time.

With that, I will turn the call over to Ewout to walk through our financial results in more detail.

Thank you, Glenn, and good afternoon, everyone. Before discussing our financial results, I want to acknowledge the ongoing conflict in the Middle East. Our thoughts are with our colleagues, partners, travelers and all who are affected and we are hopeful for a swift and peaceful resolution. I will now review our results for the first quarter and provide our current thinking for the second 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.

Now let's move to our first quarter results. In the first quarter, our business was impacted by the ongoing situation in the Middle East, which led to elevated cancellations and a moderation in new bookings in March. The impact of the conflict was also felt outside the Middle East region as we saw changes in broader travel patterns, particularly in transit corridors, such as the one between Europe and Asia. We estimate the situation in the Middle East impacted our room night growth by about 2 percentage points and that the impact on gross bookings was similar to room night growth with a slightly lower impact on revenue growth and a higher impact on adjusted EBITDA growth.

Excluding these impacts, our first quarter growth rates would have exceeded the high end of our guidance ranges across all key metrics. Our room nights in the first quarter grew 6% or about 8% excluding the impact of the situation in the Middle East. This compares to our room night growth guidance of 5% to 7%. Immediately following the onset of the conflict, we saw an increase in cancellation rates and lower travel demand, resulting in March room night growth of 1%. We estimate that the impact of the conflict on March room night growth was about 6 percentage points with about half the impact coming from reduced bookings the other half coming from increased cancellations, which have historically been the highest in the first month after the start of a conflict.

While room night growth was most impacted in the Middle East, we also saw an impact in other regions following the start of the conflict. Looking at our room night growth by Booker region in the first quarter, Europe was up mid-single digits, including the impact from the conflict on bookers traveling to the Middle East and Asia. Within Europe, intra-regional demand from European bookers was up high single digits consistent with the fourth quarter of 2025.

Asia was up high single digits, included the impact from the conflict on bookers traveling to the Middle East and to Europe. Within Asia, intra-regional demand from Asian bookers was up low double digits, similar to the fourth quarter of 2025. Rest of world, which includes the Middle East was down low single digits. Bookers in the Middle East, including Turkey and Egypt, represented approximately 4% of our global room nights booked in 2025.

If we include inbound travel to the Middle East, in addition to the bookers in the region, the Middle East represents approximately 7% of our 2025 global room nights. U.S. accelerated for the fourth consecutive quarter to low teens growth, driven primarily by domestic travel. We're encouraged by the acceleration we saw in our U.S. direct channel.

Our B2C direct mix remained resilient over the past 4 quarters, holding steady in the mid-60% range and consistent with prior year levels. We maintained this performance due to continued growth in direct bookers offset by the impact of the conflict as the Middle East has traditionally had above-average direct mix and by continued declines in SEO traffic, which is a small contributor to our overall direct channel.

We continue to see a higher direct booking rate in room nights received through our mobile apps as well as from travelers in our higher genius tiers. The mobile ethnic of our total room nights was in the high 50% range, and the mix of Booking.com room nights booked by travelers in the genius tiers of Levels 2 and 3 was in the high 50% range. Both of these were up from the mid-50% range a year ago.

Our alternative accommodation room nights at Booking.com were also impacted by the situation in the Middle East and growth was about in line with our total room night growth. The global mix of alternative accommodation room nights was about 38% of Booking.com's room nights in the first quarter, which was up about 1 percentage point from last year. We believe that we offer a compelling experience for travelers by seamlessly integrating alternative accommodations, independent properties, global change and our other travel verticals.

Our total merchant gross bookings increased 24% year-over-year in the first quarter. Merchant gross bookings represented about 72% of total gross bookings, and this mix increased 5 percentage points versus last year. Our merchant payments platform is a core enabler of the connected trip vision providing flexibility for both travelers and partners while adding incremental revenue and contribution margin dollars to our business.

In our other travel verticals, we delivered strong growth despite the impact of the Middle East conflict. During the first quarter, airline tickets increased 28% year-over-year and attraction tickets increased about 25%, both driven by continued growth at Booking.com and Agoda. Connected trip transactions increased a high teens percentage or about 3x faster than Booking.com's total transaction growth. Our data shows that travelers who book more than 1 travel vertical with us, come back to us more frequently.

First quarter total gross bookings increased 15% year-over-year. On a constant currency basis, gross bookings increased about 8%, benefiting from about 1% higher constant currency ADRs as well as higher bookings growth from flights and other travel verticals. The increase in constant currency accommodation ADRs was driven by higher ADRs in Europe and was higher than our expectations to be about in line with the prior year.

First quarter revenue grew 16% year-over-year or about 10% on a constant currency basis, benefiting from higher payment revenues. Revenue as a percentage of gross bookings was 10.3%, which was up about 10 basis points versus last year driven by differences in the estimated impact of the situation in the Middle East on revenue versus gross bookings because we recognize revenues at the time of travel. We expect the associated impact on revenue from the conflict will not be fully realized until future quarters.

Marketing expense, which is a highly variable expense line increased 16% year-over-year Marketing expense as a percentage of gross bookings was 3.8%, which was 4 basis points higher year-over-year, driven primarily by the situation in the Middle East and certain bookings sourced through paid channels were subsequently canceled. We estimate that excluding the impact of the conflict, we would have had marketing leverage year-over-year, helped by improved marketing efficiencies.

First quarter adjusted sales and other expenses as a percentage of gross bookings was 1.5% similar to last year, despite an increase in merchant mix as higher payment expenses were offset by increased efficiencies in customer service and a $17 million onetime benefit due to the repeal of Canadian digital service taxes in March.

Adjusted fixed operating expenses increased 14% year-over-year and we're a source of leverage as a percentage of revenue when normalizing for both FX and the $53 million in onetime benefits in the first quarter of 2025, constant currency adjusted fixed expenses grew in the low single digits. We remain firmly on track to deliver our previously stated goal of $500 million to $550 million of in-year savings from our transformation program for 2026.

During the first quarter, we incurred $25 million in transformation costs, which were almost entirely excluded from our adjusted results. Adjusted EBITDA of approximately $1.3 billion grew 19% year-over-year, which exceeded the high end of our guidance. Adjusted EPS of $1.14 per share was up 14% year-over-year, lower than the growth in adjusted EBITDA as a higher tax rate due to discrete items was partially offset by a 4% lower average share count. This adjusted EPS figure reflects the 25 for 1 stock split that took effect on April 2.

Now on to our cash and liquidity position. Our first quarter ending cash and investments balance of $16.5 billion was down versus our fourth quarter ending balance of $17.8 billion. This was primarily due to about $4 billion of total capital return, including $3.6 billion of share repurchases which was the highest amount of quarterly share repurchases in our company's history and a quarterly cash dividend of $343 million.

We also repurchased an additional $355 million in shares to satisfy amply withholding tax obligations. These uses of cash were offset by about $3.1 billion in free cash flow generated in the quarter, which benefited by about $1.9 billion from changes in working capital driven primarily by the seasonal increase in our deferred merchant bookings balance. We have ample liquidity and a strong free cash flow profile, and we plan to continue to return capital to our shareholders as well as maintain our disciplined focus on optimizing our capital structure.

Moving to our thoughts for the second quarter. For our second quarter guidance, we are assuming the direct and indirect impact from the conflict in the Middle East continues through the end of June. Specifically, our outlook accounts for continued fluctuations in travel demand across middle eastern inbound, outbound and intra-region routes as well as ongoing disruptions to major transit corridors, such as those between Europe and Asia.

Given the uncertain macro backdrop, we have begun executing targeted cost management actions, including strictly managing discretionary spend and recalibrating business as usual hiring. As we pull these levers, we remain focused on protecting our strategic investment spend. This disciplined approach ensures we protect our near-term profitability while continuing to fund the long-term innovations that drive our competitive positioning and the long-term value creation of the business.

Our guidance for the second quarter assumes recent FX rates for the remainder of the quarter, including the euro-U.S. dollar exchange rate at 1.16. We estimate changes in FX will positively impact our second quarter reported U.S. dollar growth rate by about 2 percentage points. We expect the impact of the situation in the Middle East will be higher in the second quarter than it was in the first quarter as the conflict spans the full quarter though this is partially offset by our expectation that March had the highest concentration of cancellations, which drove the first quarter marketing deleverage.

We currently expect second quarter room night growth to be between 2% and 4% and for gross bookings, revenue and adjusted EBITDA to each grow between 4% and 6%. Turning to the full year 2026. Our planning assumption is that the direct and indirect impact from the conflict in the Middle East continues through the end of June followed by a recovery in bookings in the second half of the year, reflecting the assumption that the direct and indirect impacts from the situation in the Middle East continues for 4 months or 1/3 of the year, and this is followed by a recovery period, we're lowering our guidance ranges at the midpoint.

The high end of the ranges for gross bookings and adjusted EPS remains in line with our prior expectations. Despite the variability of the current environment, our full year guidance reflects the resilience of our business model. On a reported basis, our expectation for the full year is as follows: gross bookings to be up high single digits to low double digits. Revenue to be up high single digits. Adjusted EBITDA to grow slightly faster than revenue and adjusted EBITDA margins to expand between 0 and 25 basis points year-over-year.

Adjusted EPS to be up low to mid-teens. To support these targets, we aim to grow revenue faster than both marketing and adjusted fixed operating expenses while maintaining sales and other expenses as a flat percentage of gross bookings year-over-year. Assuming recent FX rates remained steady for the remainder of the year, we estimate changes in FX will positively impact these full year reported growth rates by about 2 percentage points for gross bookings, about 1.5 percentage points for revenue and by about 1 percentage point for adjusted EBITDA and adjusted EPS.

We are mindful that the sustained disruption could introduce broader inflationary pressures, including fluctuations in jet fuel prices, airline capacity reductions as well as weigh on traveler sentiment more broadly. These dynamics can create headwinds across the travel value chain, and we are monitoring them closely. However, since these extended impacts on the broader economy are harder to estimate, we have not included them in our guidance assumptions.

Our second quarter and full year guidance are based on estimates and the information available to us at this time in an unusually unpredictable environment.

In conclusion, we continue to demonstrate solid performance despite a dynamic geopolitical environment. We remain focused on what we can control and are managing the current situation with rigorous financial discipline. And we continue to make strategic investments and technological progress to build a more frictionless and integrated offering for our travelers and partners particularly by leveraging the potential of generative AI-enabled capabilities.

While our 2026 outlook is impacted by the situation in the Middle East, we remain firmly committed to our long-term constant currency growth ambition of at least 8% gross bookings growth, 8% revenue growth and 15% adjusted EPS growth for future years. Thank you to my colleagues across the world for their dedication and hard work. With that, we'll now take your questions. Operator, will you please open the lines?

[Operator Instructions] And your first question comes from the line of Kevin Kopelman with TD Cowen.

So I wanted to ask about the Middle East situation. First, could you just clarify for the second quarter how large do you expect the impact to be there kind of on a like-for-like versus that 200 basis points you saw in the first quarter? And then could you give more color into what you're seeing with those impacts? Are you seeing any cautiousness from your consumers outside of the region? Or is it more the actual disruptive effects like you talked about with the flight corridors and cancellations? .

Yes, sure, Kevin. This is Ewout. Let me give you a little bit more color on those aspects. What we are seeing in the Middle East and what we have assumed for the second quarter. So in terms of the headwind from a numbers perspective, approximately 3 points of headwind in the second quarter. So if you look at our, for example, our room nights from 2% to 4%. On a normalized basis, you have to put 3 points on top of that to look at what we would expect without the impact of the Middle East.

Specifically, what we haven't assumed in that number is the following: impact of Middle East inbound, outbound, intra-regional travel, the corridors between Europe and Asia and vice versa, and also that ADRs will be slightly down as a consequence of the situation in the Middle East. And we have assumed that this situation will continue from a direct and indirect impact perspective for 3 months. So for the full second quarter, of course, no one can exactly say how long it will last. So one may have a different assumption, shorter or longer Anyone can put whatever you want in your model. But this is what we have assumed in terms of this guidance that we see the impact for the full second quarter and then assume some kind of a recovery in the second half of this year.

I would like also to point out to the full year guidance because despite, I think, this impact in the second quarter, it's important to highlight that actually, I would say, our full year guidance remains still solid. And if you look at gross bookings and EPS were still actually from a range perspective, at the high end, still at the level of the original guidance for 2026.

I'm just going to follow up on that cautiousness question.

You got the first.

Glenn, I was just going to follow up on the cautiousness. -- if you were seeing any broader kind of cautiousness behavior among your consumers outside of the region.

Well, that actually fits very nicely, Kevin into what I was going to say. Here's the thing. The team has done an incredible great job of trying to come up with our best estimates of the future. And I just said it though, you can have a different view. Many people do, I'm sure. The thing we absolutely are very certain of is this will end. We don't know when, but it will. We do know travel will normalize.

Now how quickly that also an unknown thing. But we've seen a lot of these crisis before. And I've been here since all the way back since 9/11 when U.S. travel shut down. I was here for the financial crisis when travel is greatly impacted all economies were. Now I was here when we had short-term things like the Volcano Iceland, shut down European travel for 2 weeks and I was here for the pandemic, worst travel events since World War II. And of course, we were deeply impacted. When Russia invaded Ukraine. We had a big, big business in Russia and impacted the rest of Eastern Europe.

And of course, when the Israel Hamas event happened, that also impacted tremendously. So we have been around this type of crisis before and I just want to thank our team for how incredibly well. They work with our partners and our customers. Anybody who's been in Dubai, 2 in the morning, that airport knows the huge numbers that are flowing through there. That's a big transit point or many of the actual Middle Eastern airports are big transit points. Those people out of place, what we did to get that help people be put in the right place, a place to stay, getting them where they need to do -- it was incredible. So a big thank you to them.

Now your question is, what's the sentiment now? Well, of course, it depends on where you are. sentiment for a Saudi person is thinking about traveling or a person thinking about going to Saudi is quite different than the person in New York, who's being about taking the kid down to Disneyland, Very, very different. We don't know how it's going to end -- we don't know when it's going to end, but we do know it will end, and I think we all can pick our own guesses at what we think it will be. I wouldn't give anything more detail than that.

Your next question comes from the line of Justin Post with Bank of America.

I'll ask on Agentic, -- it seems like some of the big AI companies are kind of moving away from transactions and even moving traffic to apps or more focused on advertising. So just how do you think you're positioned competitively in these AI engines? And are you encouraged or concerned about the changes they're making.

We are incredibly excited about the same. [indiscernible] calls are our last call, where I mentioned the possibility or believe that some of these players would go towards our performance marketing platform that we thought would be very advantageous given the experiences we've been able to deal with at Google and how well that has helped create our company to where we are now, it's, we believe, a good thing. But it's not just the ones who are going to that kind of a platform. It's all the elements of AI that we believe are really helping us and really setting us us right for the future.

And we've talked about this before about how -- the first thing, of course, is how do we improve our own offerings to our customers using AI, using proprietary data, how we're increasing conversion using that. And our scale really helps us in this area. And it helps us do that personalization as we build out the connected trip. And using AI is going to make that even better, making it the place for people holey should go to us for the travel thing. Now Absolutely, some people are going to go to a large language model first behind, and we love the relationships. We were building and have built with all the frontier players, where we are involved with them talking how we can work together to create the best experience for both of us. And we've talked -- you've seen the announcement, maybe you saw the Claude Live advertisement recently where we were right up front there, really pleased on that.

And the other thing -- and this is just really good. It's going to increase, I believe the TAM for overall travel. No body knows what the right number is. Maybe it's 35%, maybe it's 45%, maybe it's going to hire people who don't buy their travel digitally, but that number is going to go up. And I believe using AI is going to make it easier for people to do that. That's another positive for us.

And of course, setting ourselves up includes making our internal operations more efficient and we're using AI throughout the organization up down all over, making things more efficient. And by doing so, then we have more resources to put into making a better experience for the travelers and our partners, which is also another area where we're addressing great advantages for both of us. So all in all, AI, I believe, is an absolute positive for us not a negative. I know some people may have misunderstood and thought it as a big threat. I see it much more as an opportunity.

Your next question comes from the line of Mark Mahaney with Evercore.

Okay. I'll ask 2 questions in both of them about the U.S., please. That low-teens growth you had in room nights in Q1 was the strongest maybe we've ever seen or it's been a while. And Glenn, you talked about like some cross success in cross-selling. Just maybe spend a little bit more time on that. Is that something that here -- and I know there's a lot of little things that go into it, but are there 1 or 2 major unlocks that really kind of helped move that growth rate to somewhat unprecedented levels.

And then just getting back on this cautiousness commentary, question I have, I think the question out there is, are you seeing softness in travel that's sort of more economically driven, i.e., with rising airfares in the U.S., rising gas prices, are you seeing softness that's not directly at all related to the Middle East, but just related to the fact that it's more expensive to fly from New York down to Disney?

Mark, I'll take the first 2, and I'll let Ewout talk a little bit about potential softness in the U.S. You've got some data, you can talk a little bit about that. I got to say it is just so exciting to see incredible hard work done by so many people here for so long to start seeing it result in really nice growth in the U.S. And Mark, you've heard me talk about -- the U.S. is an area we're going to invest in. We're spending time, money, people, and I've been saying it for some time. And for now 4 quarters in a row, we've been accelerating our growth rate now low teens. That's just wonderful. It's really nice to be say, this is what we're going to do. This is what we're doing and then see the results come out. So I am really pleased.

When you look at share I mean, obviously, if you look at any third party in terms of what was the total growth in the U.S. in terms of the accommodations area far, far, far below low teens. So we are taking share, which is great. And we're doing it because we're building a better product. We're making people aware of it. Doing all the things I said we were going to do. We're doing it, and it's helping achieve these kind of results. Now part of it is -- part of it is this idea of this cross-selling your, say, I say connected trip. It's really providing a better way for travelers to do their travel, and we're building that out and being able to offer flights in the States. We didn't use to do that with Booking.com, it will. Having that ground transportation, having attractions, look, those numbers are pretty good. Now these are not U.S. numbers. These are global numbers, but it's still great. 25% those attractions 28% for those slight growth numbers. These are really, really solid.

And then you throw on the idea as we continue to build out even more things. We're able to do more of the personalization -- that's the thing where I really -- my vision has always been treat the customer like they used to be traded when they used to go to the human travel agent back in the day, who knew so much about you and offered you up, what you really wanted we look at you the value that really matched up with what you could afford. That's the thing that we're really working on, and again, goes back to GenAI, having that kind of technological capability to really bring back to the customer what they want and need at the same time enabling those partners of ours to get them what they need, what their incremental demand needs are and be able to put together things orchestrate in the way that makes it so much better for them to -- this is just win, win, the third win being us, of course.

So I'm just so excited about that, and I see a lot more coming. Abo, you want to talk a little bit, though, of what we've seen in the States right now.

Yes. Mark. So what we are seeing in the U.S. travel market in general, a couple of points there. First of all, the high end is remaining strong, but that's what we already have seen over the last few quarters. Really encouraging to see that the lower-end segment is improving. And that has been quite weak, as you know, for the recent past. So what we're seeing there is the booking window is now stable. ADRs are flat, and that is really a change because they were down at the lower-end segment for many quarters in a row, but they are now flat. .

Although trips are still slightly shorter. So I don't think we're completely out of the woods yet, but really much more positive and optimistic than we have seen for a long period of time. In terms of the more recent signals, it's too early to draw any conclusions around it. Yes, we see some prices going up, for example, of airline ticket prices with some of the airlines reducing capacity, how much that ultimately will impact demand is still uncertain. So I can't give you a specific answer on it.

But lifting this up a little bit and just from a bigger picture, outside of those areas that we highlighted in terms of Middle East impact. Outside of those, actually, travel markets globally have remained very healthy. Intra European travel was up high single digits. Intra-Asia travel was up low double digits. And as we mentioned, our growth in the U.S. was up low teens. So there is very specific areas where we see this impact of the Middle East, but generally, we don't see customers globally being cautious. We actually see outside of those areas that are impacted, actually, travel demand continuing to do very well.

Your next question comes from the line of Ron Josey with Citi.

Glenn, maybe a bigger picture question just on AI strategy and the products. We hear a lot about clearly the benefits from Penny and I guess, the launch of AI search on booking for natural language search on hotels. Would love to take a step back and talk to us, do you see these experiences emerging? Do you take the benefits from Penny, put them in the booking Talk to us just about how you see AI tactically sort of improve the user experience across bookings set of brands?

Ron, and you did point out 2, 2 of numerous things we're doing to help the consumer using AI technology. And you mentioned Penny which I'm very excited about what is -- what they're doing there at price line, and you mentioned Booking. And you mentioned a little bit about some of the things that our natural language search and what we're doing there. But we have so many more things happening. Every single one of the brands, Agoda KAYAK, everybody is coming up with new things. Maybe you use the OpenTable concierge great thing, really helping diners and such.

Now the key thing is, though, we have people who are working on what is good for them right now, but they're always sharing what's working, what's not, what's getting you better conversion or not. And we also had mentioned last quarter, we mentioned we had some other things, some start-up type things going too that will come more to in the future when we're actually ready to do a real launch and give it the publicity that it should have. All these people working together in terms of learning, but also taking [indiscernible]. And the reason is because we're also early in this. And the technology is changing so fast, too. This is the best way to ensure that we have lots of our smartest people working on this as hard as I can and be able to come up, boil up one of the best ones. And then we will make sure to put a lot more resources efforts into those that are winning. That's the way we've always done it.

We've had multiple brands for a long time. Why did we call with that strategy? Because we saw there are different ways to do travel. So we had price line to start. And then we had active hotels, then we had bookings, the Agoda that we brought in meta with Kayak. These are all similar type results in terms of helping travel, but there are different ways to do it. And that's the same thing right now at the stage right now is using different teams, different ways and then consolidate it when we see the best one. That's the strategy.

Thanks, Glenn. And any insights on maybe early results on conversion rates? I know we've said cancellation rates have improved somewhat. So any insight there would be great.

Yes. I mean I mentioned in the script, a very small sample, but we're very pleased about it, that we're seeing actual lift in what Penny is doing a conversion. And look, -- the great thing again, this is no different than way back in the day, we were first or one of the first people came out with EV testing. And it's so wonderful that the scale we have that enables us to test right away what's working, what's not -- what's giving us better conversion, what to lose and don't do any more of that. That's again it's bad, you have when you're big, and you can afford the resources to put to it and you have enough people coming to visit that you can very quickly get a result. .

And Ron, if I may add to that. We're also looking at other metrics. So it's not only conversion. Although we see there, as Glenn was just saying, some very early positive signs. But again, the sample size is still very limited. We're also looking at faster search, sort a path between search and ultimately booking lower cancellation rates, positive customer satisfaction, more engagement. So many of those data points are all pointing in a positive direction. And more and more of those data points we are collecting.

So for example, we're very happy that for Penny, you now can really book through Penny directly that accommodation or flight. So we are getting now more of those data points as well. By the way, many of the AI travel planning tools that are out in the market are not possible to make that step. So in Penny now that's possible. So we're collecting more and more data. We're reusing that data. We're learning from the data. We're making it possible. We're sharing it across the whole firm all of these are very early stage, but definitely positive.

And you don't have to wait for the next call to see some of the progress. Just keep testing out all the different brands, do-it-yourself see the changes as they are rolled out, you'll have a real good sense of the progress we're making by just looking at the actual products.

Your final question comes from the line of Brian Nowak with Morgan Stanley.

Maybe 2. Glenn, on the public call on the main remarks, you talked about strengthening Genius this year. Can you just maybe talk us a little bit how you think about ways in which you want to strengthen the Genius program this year and maybe into '27. Then the second one, just to go back to your very last comment about rolling out more Agentic capabilities, making penny more widely available, expanding the booking agent -- what sort of is the main constraint to scaling that for you guys at this point? Is it compute capacity? Is it you need to sort of R&D testing time? Like what is sort of the biggest lift you have to clear internally to scale this out to make it a material driver of the business.

Yes. So on the first one on Genius, absolutely something we are working on now. I believe connected trip by itself is fantastic. Connected trip with Genius superpower. And we need to bring it together, and we're working on this, the best ways we're going to bring together Genius in a much better way down the road that will create even more loyalty. Make people enjoy and feel they got a better value -- better way to travel using us by putting it all together in a much more cohesive, really holistic way.

Now, you'd probably like me to give you the details right now, and you're probably not surprised we're not going to do that. But I assure you, when we are ready to roll that out, you will see it, you'll hear it, you will know it. That's on [indiscernible]. Regarding rolling out any of these things, whether it be Penny or any of the things, this is always a function of what do we think it is in terms of best-in-class ready to roll, wayrock out to as many people or do we want to still keep it somewhat limited testing it to improve it further, make sure it's all working the exact way it should be see what sort of problems or could be or not. It's definitely not a compute problem. It's not a sense of cost. It is purely one of the way we all do things.

We like to test things. We like to make sure it's working. We don't want to have customers who are unhappy. We want to make sure we're meeting any regulatory issues that we have to deal with. That's 1 thing I think a lot of people really just don't have a sense of -- there are a lot of rules about AI now, particularly in Europe, but all over -- and we have to meet now of the AI rules, but also the privacy rules. And then if you're doing payments, got to make sure that's sitting under there, too, lots of things. So we just want to make sure we do something right.

And Brian, if I may add to that. But of course, we are very focused on going as fast as we can because strategically think about it in the following way. For us, it's very important to protect customers that are coming direct to us. We want to make sure that they have an experience in our environment that is at least as good as they can get at a generic horizontal agent. Because in that case, they want to do that with us because they are with a brand they know, they trust, they have their loyalty program with. They know that you can flip it to a booking. If something happens, they can make the update, the changes, you can make the cancellation, you know who you can call, who you can contact. So we have that brand trust loyalty with the customer. So going as fast as we can so that they can have that experience, that full experience in our environment is going to be the most important thing to actually not protect the direct [indiscernible] further expand our channel in the future.

That concludes our question-and-answer session. I would now turn the call back over to Glenn Fogel for closing remarks.

Thank you. In closing, I want to thank our dedicated employees, stockholders and most importantly, our travelers and partners whose commitment and support were foundational in our strong execution and solid performance this quarter. While we remain mindful of the current macroeconomic and geopolitical environment, we have navigated similar periods before and remain confident in the enduring resilient demand for travel. We stay focused on what we can control and continue to execute against our long-term vision.

Thank you, and good night.

This concludes today's call. Thank you all for joining. You may now disconnect.

All right. Good afternoon, everyone. Welcome to our next fireside chat keynote here at the Morgan Stanley 2026 TMT Conference. We're thrilled to have Ewout Steenbergen with us from Booking. Good to see you as always.

Thanks, Brian. And we're on the roll, Singapore, London. So, we've been spanning the globe, which is very fitting with Booking Holdings.

So let me do the disclosures first, always the best part. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. Some of the statements made today by Booking Holdings may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Booking Holdings undertakes no obligation to update them. Please refer to Booking Holdings' Form 10-K for a discussion of the risk factors that may impact actual results.

Good to see you.

Yes. So we've been doing a lot of these discussions across a lot of continents. And I feel like the Agentic discussion sort of remains on front burner. But maybe before we get to all of that and how the world looks like in 10 years, just remind everybody of sort of how you're thinking about the multiyear growth framework for top line, margins and overall bottom line. How do you think about the next few years and the key drivers of each of those factors?

Yes. So we refer to this as the 8-8-15 framework. So we expect to grow our top line in terms of gross bookings and revenue by 8% from a medium-term perspective and then earnings per share by 15% from a medium-term perspective. So it's a very repeatable model, and I will later on explain why it's so repeatable, but those are the medium-term targets that we're aiming for.

So where were we last year? Of course, we had some benefit from FX. So let's take that out. On a constant currency basis, our results were 10-10-18. So clearly, we exceeded, in 2025, our overall medium-term targets by quite a strong margin. So 2025 was a really good year for the company. Of course, we're already the largest travel company in the world and to grow from that base at such a high level, we were very, very pleased about that.

We also gave guidance for 2026 that was actually above that framework, because the guidance we gave was 9-9-15. So we believe that this year, our top line metrics on a constant currency basis actually can grow 100 basis points faster. And then still, we will be able to end up with about 15% EPS growth.

Why can we grow the company in such a way and deliver those results? I think if you look at the algorithm, it's the following. In general, travel markets grow faster than GDP across the world. Why? Because people, at some point, get more income and what do they do with it after they, of course, taking care of their living necessities, they start to spend on other things, and they start to spend on travel, and they want to explore the world. So in general, travel growth a few points faster than GDP in general.

And we believe and we are having the conviction that we can grow faster than the market in general. So although we are already the largest player, we have a lot of idiosyncratic growth opportunities. Think about we are, at this moment, the largest -- already largest online travel platform in Asia outside of Mainland China. That's a huge growth market. We are very focused on investing in Asia and capture that growth opportunity.

We see ourselves still as a challenger in the U.S. Our market position is a little bit lower. We're very focused on growing the U.S., get to a fair market share in the U.S. Actually, in the second half of last year, we grew at a double-digit level in the U.S., much faster than the market in general. That's a growth driver. We're expanding in many different verticals where we are relatively smaller. Like in flights, we have grown in the 30% level last year; in attractions, around the 80% level and so on. So we have so many different growth opportunities there.

And then we're also reinvesting a big part of the savings from our transformation program in strategic initiatives, and that will help further drive top line growth in the future. So therefore, these levels of 9% of top line growth this year, we have some leverage from a fixed OpEx perspective, marketing perspective, gets our EBITDA at a low double-digit level. Then we run very large buyback programs and you get to the mid-teens from the EPS. Again, very repeatable model, and we like that, and that's where we're very much focused on from an execution perspective.

That's good color. I'm going to dig into a few of those areas. Maybe we'll span the globe a little bit. Maybe let's start with Asia. You mentioned sort of Asia being one of the investment areas. I think Glenn has talked about it being structurally faster growing. What has changed most about your Asia go-to-market strategy in the last year or so that sort of gives you confidence you're going to be able to drive durably faster growth throughout '26?

Yes. In Asia, we have a number of our brands active. So our main brand in Asia is Agoda. Agoda is originally founded in Asia, is headquartered in Singapore, as a big part of the operations in Bangkok, local management. And Agoda is very focused on localization. So Agoda makes sure that, for example, in Korea, it presents itself as a Korean company to Korean travel customers. It has Naver Maps. It has Kakao Pay. It has a UX that is very much focused on Korean users. We use brand advertising campaigns and celebrities that are local. So that's just an example.

But the same thing is what Agoda is doing in all the other markets. And therefore, it's very deeply ingrained in Asia. Booking.com is also active in Asia. It's much more the global optimized model that we're applying across the board, but it's very attractive for many categories of travelers, particularly travelers that are thinking about outbound travel. And Booking also is investing in Asia, sees also clear opportunities. So let me give you an example of that. Until recently, Booking.com didn't have a domestic payment option in India. So Booking was effectively only on the agency model. The agency model means you pay as traveler when you check in at the hotel. So now we have the merchant booking where we facilitate the payment in India. That is opening up really some growth opportunities for Booking in India. So Booking is also very focused on Asia.

We are already, as I said, a very large player. We are very focused on maintaining our market position in Asia. And then just by the growth of the market itself, that is expected certainly to grow at a very high pace, it's by far going to be the fastest-growing region in the world over the next decade, and we should be very well positioned.

Okay. Let's go around to the U.S. There's -- throughout our discussions, typically, the way to go is I say, the U.S. has been growing slower than it should. Why is it growing 1%, 2%, 3%. Now the tables have turned. You guys have been beating my numbers in the U.S., growing much faster. What has changed in the U.S.? And how should we think about the drivers of this durable outsized U.S. growth?

Yes. The market in the U.S. is still growing low single digits. So that's the market. For the last half year, we have been growing low double digits in the U.S. So there's a few reasons for that. One reason is we have seen some opportunities with respect to performance marketing. We're always looking at optimizing our bidding algorithms. We saw some opportunities to lean in where we saw attractive ROIs. And by really pushing there harder and spending more, we have been able to grow at attractive ROIs in the U.S. I would expect some of that to continue still for some part of this year.

The second reason is we have been growing well in B2B. So B2B is -- just to explain it quickly, this is not business travel. This is sometimes being confused. This is where you distribute through another partner. So this could be, for example, a credit card company where people want to use their points to book travel. And then you are the entity that is powering behind that to make that booking of points to ultimately booking of trips through points to make that possible. But it could be airlines that after you book a flight on the airline saying, "Hey, do you also need a rental car? Do you also need a hotel accommodation." So that is also B2B. We have done very well in the U.S. with B2B. So that has also been a growth driver.

Third reason, this is actually the one that makes me most excited, is we have seen growth in our direct channel. Direct channel means that customers, traveler customers coming directly to our web or to our app and book directly on our app, their travel. This is not something you just change overnight. This is something that comes through years of investments, investments in brands and familiarity. People come to us one time through a pay channel, they have a good experience. They come a second time to us through a pay channel. They have second time a great experience. They become a member of the Genius loyalty program. They book a third time. And then maybe the fourth time, they say, "You know what, let me go directly to the booking app and check it out and then they become a direct customer. That's, of course, really the ultimate point, and to see that going up in absolute terms in the U.S., the direct channel, I think, is really encouraging. And that's definitely something that is then, I think, positioning us very well for the foreseeable future.

When did that direct kicker start coming through? Was that a fourth quarter dynamic? Or was that sort of over the...

A little bit mid of 2025, that really started to change the trajectory.

Got it. Okay. Noticeably, within the U.S. driver, you really talk much about the alternative accommodation business. Maybe talk to us about sort of the U.S. alternative accommodation business at this point? How do you think about key areas of growth there to sort of continue to grow that business in the U.S.

And thank you for mentioning that, because alternative accommodations I think for us globally is a very important business. We're about 75% of the size of the largest player globally, but we're definitely smaller still in the U.S. We have, if you think about alternative accommodations, about 8.6 million property listings on our platform and it is year-over-year up by about 8%. But actually, the growth in the U.S. is faster. So in the U.S., we are relatively small in alternative accommodations. So we're seeing this really as an opportunity to further expand, and we're clearly investing in this.

It's going well, but I think we definitely would like to close the gap more. How do you do that? Investing in product. So for example, for the host, it's very important that they have direct communication options with travelers. It is in the way how we present the offerings. I think supply, adding more supply that people know that they can also come to our platform for alternative accommodations. So we are investing in all of that. So I think that's definitely going to continue to be in the future.

And on that point on supply investment, how do you think about the take rates and sort of the relative take rates that you offer to hosts who want to list on booking as opposed to the take rates that are lower on the 2 other alternatives in the U.S.

I think actually, that is all converging now, because people need to look through all the different elements. But the good thing is, with the fee transparency rules in the U.S., the optics of we might ask more commissions or our price is higher, it's very different if you look below the line, because in our case, we don't add an administration fee and a cleaning fee and a service fee and all of that. We always had an all-in price. That is basically in the U.S. now become the standard. So I think in terms of presentation of fees and commissions, it's much more aligned now between all market participants. So I think that was optically a negative for us, but I think that optic negative has now disappeared.

Okay. Maybe just to complete a little trip around the world. Let's talk about Europe. This is your biggest, most mature business. I mean it's still growing very healthy, especially given the size of the business. Can you give us some examples of where you still see opportunity to improve execution in Europe to keep that business growing even faster than the overall travel industry in Europe?

Well, we are growing faster than the travel industry in Europe. We were last year consistently every quarter at a high single-digit growth level. So I think that's really a great performance, particularly given the market position we're already in. I think what we are very focused on is -- and that's always important to explain that particularly to investors in the U.S. We have a market position in Europe where people really the go-to is going to the Booking app, planning their trips on the Booking app, having it all in one place on the Booking app. It's easy to find what you need. It's easy to adjust. It's easy to cancel. Your credit card is there. If you need to make an update or a change, you know that's taken care of for you. We have more and more options on our platform. So think about it in terms of alternative accommodations with us. You can get everything side-by-side on the platform.

Maybe you're looking for a hotel in a city, but we also show you an apartment option and people search for one and sometimes book the other. That's very natural. We have added a lot of flight options. So for example, Ryanair was added as supply last year on our platform. So the options get broader and broader. And because we are so much the go-to in the standard, I think people like it. We give them great service. We give them great value. They are part of the Genius program that get even better value from us. So I think that is ultimately the effect we're seeing in Europe.

In Europe. Okay. Great. What's your -- how do we think about the direct mix of the business in Europe versus the rest of the world? How big is that gap, wherever you'll say?

Yes, we're not really breaking that out. Obviously, the markets where we're stronger, that is also a bit better. But that sometimes it's underestimated what is the direct mix in other parts of the world. Even Agoda, for example, I think in general, has a good direct mix that is better than people think from the outside.

Interesting. Okay. Let's talk about marketing a little bit. You've been a very successful spender on Google Search for decades. And now I know over the last year or so, you've been talking more about spending on social, which is coordinated with spending on Facebook. So maybe talk to us about what has worked spending on social? And how do you think about the ROI on social and sort of continuing to spend on social in '26?

Yes. It's actually much more than Facebook/Meta. We have expanded, I think, a lot with other social media platforms. Yes, it started very much with Meta originally, and we set up a special environment where for us, it was important that we were able to measure incrementality. So we are a very scientific-driven organization. If we spend on performance marketing, we need to be convinced that it adds to the results, and ads means it needs to have proper ROI, but it also needs to be incremental. Because if this would have been a booking that anyhow would have booked with us, then spending on advertising there is not a great way to use our scarce resources. So that's why we ultimately have set up that environment where we can measure this. And once we're sure that it was incremental and the ROIs were really attractive, we're leaning into that.

In the meantime, we have expanded structures with other social media platforms. I'm not going to tell you the names because I don't want to make some others in the industry smarter than they are. But we are seeing also very good results with others. So we'll continue to spend. I've said after the third quarter that the spend on social media is a couple of hundred million a quarter. We said in the fourth quarter that it grew 13% year-over-year. So it's a meaningful number. But realistically, if you compare it to the total marketing spend for us as a company, total marketing last year was a little bit over $8 billion.

We also said that we have merchandising, which is discounting or the incentives. That shows up as a contra revenue. But for us, we see it in the same category. In the end, the dollars are fungible. Where do we get the highest return, where should we spend this? So that's another $2 billion or so. So we're speaking about ballpark $10 billion of marketing and merchandising spend. So we're always looking for where do we find the most optimal places where to spend. Social is an important part. It's great that we are diversifying. By the way, LLMs will be diversifiers in the future, but it is still a relatively smaller part compared to the rest of what we spend in marketing.

Okay. You brought up the LLMs. So let's talk about Agentic a little bit. Maybe -- I know you get asked this question a lot. I know I get asked this question a lot about the future of Agentic. I have changed my view, even I was wrong about sort of the way things have played out so far. What do you think is the most misunderstood aspect when investors or people ask you about Booking being disrupted by a horizontal agent?

I'm taking out my phone because I would like to read something. This is -- of course, we are in a situation with a huge conflict in the Middle East, in the Gulf region right now. And for us, the most important at this moment, we are looking after our travelers. We're taking care of them, the ones that are stranded there, the people that have trips planned to the Gulf region that we need to take care as well in terms of cancellations, refunds, rebookings. So this is a moment for us towards travelers and supply partners to really help them and really step in. And of course, we're doing that in the right way with force majeure and treating our travelers and supply our customers in the right way.

So I was thinking about this because there is this perception of, oh, some of those LLMs, if it is Gemini or ChatGPT or others, they are going to do all of that in the future. So yesterday, I asked one of those platforms, let me not mention which one, that I said, I have a flight planned to Dubai. And obviously, I can't fly there anymore, but hey, you platform, you recommended this flight to me. How are you going to help me to get a cancellation and a refund? And it gave me actually an answer that was quite unsatisfactory.

So I asked, I said, "Hey, but aren't you the agent to help me? And I got the following answer. It said, yes, that's a very fair question. Short answer, no. I'm not an airline agent. I can't directly cancel or refund flights to you. I don't have the ability to, and then it gave me a few elements. And then it said at the end, think of me as your travel strategy adviser, not the one pushing the button. So I thought this is so interesting. "I am the travel strategy adviser, not the one pushing the button." So when the moment is there that it really matters, the moment is there where a traveler needs support, they still need a party they know, they trust, that is fixing things for them. And that's the moment that they realize where they want to go back in the future.

So to your question, there's 2 things. One is disintermediation. So these LLMs that directly connect with the supply and the OTAs are not necessarily in between growth underestimation of the complexity that goes in between in terms of fulfillment, in terms of customer service, in terms of payments, in terms of dealing with tax matters there, with regulatory matters, with data privacy matters, to really help the supply partners being able in control and understand what they're doing, how they're showing up, the visibility, the global marketing we're getting. And the most important thing, as I just highlighted, I mean, we are there when people need our help and they can trust, and they know who to call. If things go wrong, they know who to call and who is there for them. So I think that is why I don't think disintermediation is really a risk at all.

I think the other part, I presume you want to go there, is direct and the impact on direct mix. I think that's probably a more realistic risk. But obviously, we are strategically very focused on that to mitigate that risk in the future.

How do you do that? What safeguards do you have in place with these early partnerships with any of the horizontal agents, we can name any of them if you want to, so that you have the data capture that you maintain merchant of record. How are you structuring these, so that you can continue to grow your direct and repeat business for second, third, fourth transactions?

Yes. Well, first of all, if we look at the numbers now, the traffic that comes through the LLMs to us is very small. And actually, it's not growing. I think that's for me a bit of the surprise. Over the last few months, it's more or less stable. Some months it's slightly higher, other months slightly lower, but there's not really an underlying trend. I think most people are using the LLMs to do research to get inspired, to maybe build an itinerary, but they're still doing research from many other places. And ultimately, they go to the place they know and trust for ultimately the booking. That could change over time. I'm not saying that, that is always going to be like that.

So what should we do? Because about 2/3 of B2C travelers are coming direct to us. 2/3 of traveler customers are coming direct to us. So for us, it's really important that they continue to come direct to us in the future and not start with an LLM. Ultimately, yes, it's going to be maybe a lead that is handed over to us, but the LLM becomes a paid channel, and therefore, our direct mix is coming down. We do that by developing agentic tools on our platforms that are as good as the agentic tools that people will find on horizontal agents.

And we're working on many different variants of that in different parts of the organization. All our brands are working on it. We have 2 start-ups within the organization that are focused on that. So to create an agentic experience top of funnel that is as good as you can find as a consumer on a model of a hyperscaler. But then in an environment you know you trust, but also an environment where it doesn't stop with the booking, because those horizontal agents then ultimately have to give it to someone else. You continue in our environment, and then we give you an agentic experience through the whole funnel, pre-trip, in-trip, post-trip. We can help you with preparation for your trip, your passport, your visa, your check-ins.

We can help you with things that are happening, changes in your program, fill in some gaps. We can make it very convenient, peace of mind if something needs to be adjusted, everything is being updated at the same time. We can make it personalized because we know what you like and what you usually like to do. We can put enhanced loyalty on top of that, and we're working on that as well. So we can create an agentic experience where everything is logically fitting together, everything is aligned to each other. And there are so many ways that, that can be done. For example, you travel with a child and automatically, the child seat is being added to the rental car and the child bed is automatically already being added to the hotel, and we know your child has an allergy, so the restaurant is already informed about it. I mean there's so many ways that you can build that peace of mind intelligence layer on top of it. So that is ultimately the experience we're working on over time. And I think that will be something that will make it very attractive for travelers to continue to come to our environment.

I would even go the other way around. I see this as a real opportunity for us as a company to grow even faster. This is not a threat. This is an opportunity, because this would mean that it is so much easier to put everything together in that environment with us, because if you do it in different places, now you have the hassle that everything needs to be updated. You need to contact so many different providers. If that's all in one environment and it's peace of mind, I think that's a really strong proposition.

You guys have a lot of leading travel data sets of millions or billions of daily searches and really the value of the outputs from these models and the agents is often the data. You should be positioned to do that. My question is, what is sort of the gating factor, the hurdle that's going to determine if that product comes out this year or next year?

Yes. So we are not really a company that is doing any flashy demos and videos of things that are coming. We are more a down to earth company, we say. You see it in our numbers, you see it in our results. And you see some of our agentic tools showing up. And once you see it and you see it on our platforms, then that will tell the story to you. So that's how we operate. That's philosophically who we are and what we do. You should expect some progress in these tools this year. So I think definitely, if we're here together next year, I think we have a different kind of conversation.

There are a couple of good examples we already have. So I think if you look at a tool that is called Penny on the Priceline platform, that's a really very advanced already travel tool, AI travel tool that we have. And Agoda is working on a variant of that. Booking.com is working on it. As I said, we have -- for example, also even OpenTable has already an AI concierge on top of it. So there's many of those agentic developments we are doing. So more to come, but I think definitely, when we're here in a year from now, I think you will be able to ask me more questions and I can point to more examples.

So to use it on stage, so I'll be able to pull my phone out, sounds like. That would be great. Okay. On GenAI and internal sources of efficiency, this is the other area where you've been pretty vocal about. So maybe there's a lot of focus on ROI of all these investments. Where are you seeing quantifiable savings from GPU-enabled products or GenAI in the P&L that we can look for in 2026?

Yes. I'm actually really proud already that in 2025, I can point to real concrete savings that have fallen through to the bottom line, and that is mostly from customer service. So if you think about customer service, last year, in absolute spend, it was slightly below 2024. And volumes were up about 10% year-over-year. So we have introduced a lot of agentic tools in customer service. What we're seeing is that the average handling time is coming down. We see the contact rate is also lower, contact rate in the sense of where a human agent needs to be involved. And the average cost per booking is down about 10%, as I just explained. And by the way, customer service is holding up very well. Customer satisfaction scores, I mean, is holding up very well, which is, of course, also really crucial with those numbers. And I think that's not done in customer service. I think we have more potential there in 2026.

Obviously, we're also looking at GenAI savings in other areas, a little bit too early to go in detail of that. But I think we're very focused. We're very disciplined. I think you have seen this in the overall transformation program. Already, at the end of last year -- well, in the third quarter, we increased the target by $100 million to a range of $500 million to $550 million. And at the end of the year, we already achieved that. So we will definitely be focused on what is next to come in that area.

Maybe remind everyone about the transformation math, because I think there's a lot of expectation that you will reinvest in GenAI, getting the agent out that I'm going to use on stage next year. There's obviously investment behind there. So just remind us how we think about the gross savings and the net savings after the reinvestment.

Yes. So in 2025, we, for the first time, introduced our investment program, or we call it reinvestment program, because it is self-funded in the end from the transformation program savings. So $170 million, and some of those initiatives for the first year, so they were in start-up phase, we have scaled this up in 2026 to a reinvestment program of $700 million. So definitely at a higher scale, higher level. But again, we think that's the right thing to do with a business that has EBITDA margins at a level of approximately 37%, fully loaded, including stock-based compensation and so on, around 37%.

Growing the company as fast as we can is the most value-enhancing way we can manage the company. So that's what we are focused on. And those reinvestments are going to help us. So that's why we're confident that those growth objectives for this year are at the 9% level instead of at the 8% level that we normally would say. The $700 million investments will lead to approximately $400 million additional revenues this year. So that helps with that 1% growth. So the net impact on the bottom line is approximately $300 million, but then we have about $250 million additional in-year savings from the transformation program. So basically, we self-fund this and we can become a faster-growing company. So I think it's a very positive, very motivating overall way how we run the company at this moment.

Before I open it up to the audience for Q&A, if anyone has a question, raise your hand. I want to ask you about AI hype. I'm sure you've been investing in a lot of different types of generative AI tools internally. Can you give us some examples of things that have actually proven to be more challenging than you thought or areas that are just overhyped externally?

We have a lot of discussion with our CTOs, because we probably see all these companies announcing of 30%, 50 more percent of code is written by GenAI, which is probably true. But there is, of course, also very much a nuance to it, because the nuance is that doesn't mean that every developer is 50% more productive, because there's many other parts of the whole development stage that goes into it as well. So it isn't that, that is all more productive.

And then the other thing is we, in that area, deliberately want to use that additional capacity and velocity to do more development in the future. So that is one area, for example, where I think some of the numbers are overhyped and the reality is actually slightly different. it's still an opportunity. And of course, we're going after that. But I think the optics of those numbers are sometimes, I think, a little bit too much.

We have one question here. Bob?

This is an inventory question. And I ask this question as a Genius Level 3 user of Booking, by the way.

Thank you so much.

So you seem to have locked up an enormous amount of inventory, but here's the Google question. Google feels like it's this terrifying threat. They put this advert out just before Thanksgiving last year. Turkey wants to go away from the United States. And I think it got a lot of attention. How does Google take that inventory directly? Can they take that inventory directly that would either undercut you, because they're offering something else to the person with the inventory, the hotel with the inventory? Can you just help me understand why you can continue to lock somebody like Google out?

Yes. So a couple of important data points around this. We have 4.4 million properties that we connect to today. And we need to have real-time data with those properties. We need to know real-time availability. You don't want to say, I book this hotel room in this property and once you press book it, it's not there, it's not available. So this is something that we have built over the years.

Close to 90% of the room nights that are booked on our platforms are coming from independent hotels, alternative accommodations and smaller chains. So we said the top 10 chains in the world is about low double-digit level of room nights. So the vast majority is independent hotels, alternative accommodations and the smaller chains. Often to investors in the U.S., I need to explain that because they think that the U.S. hotel market that, that is the standard in the world, because it's all about the big chains. Actually, the U.S. is more the exception than the rule around the world.

I think what we do for those properties is a lot of that supplier value add that I explained before. So there is a lot that goes in the mix. It is not just a communication between us and the property in terms of data, intelligence, the whole fulfillment, the customer service. We process payments in over 100 different payment forms across the world in more than 50 different currencies. We help them to be in control on the data, how they show up, when they show up, what kind of promotions they do. There's a lot that goes in the mix there with it.

Google, I don't think it's so much different than in the past. They are a very good partner for us. We are a very good partner for them. We are, I think, one of their largest customers in the sense of how much we spend with them. It's great for them. They have really been able their advertising model to really optimize it. it's good for us. It's good for the consumer. I think all 3 have really done very well over the last decade in that environment. So we very much believe that, that will continue in the future.

They have, by the way, said publicly that they're not planning to be an OTA. They don't want to be a merchant on record. So they will continue to be a lead generator for us. And we like that. We have fantastic algorithms to do the right bidding on their platforms and get the traffic to us. And therefore, we can continue to be, I think, very good partners together. So no, I'm not concerned about this. I mean you could say, if Google wanted to do it, they could have done this already many years ago. But in the end, we found a very good way that was beneficial for everyone.

Great. All right. We have one more before we get the hook.

How do you respond to the risk that over time, the horizontal agents, while they may source the inventory that you've aggregated over time, the consumer stays on the agent and it's harder and harder to get the direct traffic and maybe that direct mix, as Brian highlighted in his recent note, that, that starts to plateau or maybe come down?

Yes. I think that's very similar to what Brian already asked. So I actually don't see this as a threat. I see this as an opportunity. We have been talking for a decade about what we call the Connected Trip. GenAI agentic experience of Connected Trip is one and the same. This is the same thing. We can now make that possible to create that Connected Trip experience for a traveler. We can naturally put all those pieces together.

We can help them to get inspired to make it very personalized. We can make sure that there is a logical connection to it. We can say, "Hey, next week, you have your trip, but it's bad weather on Thursday, we should probably change the itinerary and make sure that you don't have the outside tour on Thursday, and we do that on another day, press here. We can do the integration with OpenTable and say, "Hey, you have no restaurant reservation we see that evening. Press here." So we can make it proactive, we can make it personalized. I think this will be an experience that is something that doesn't exist today, that is further enhanced with loyalty benefits that we're going to provide to travelers. So if you add that up, I think that is such a great experience.

Yes, we are working very closely with the LLM providers, with the hyperscalers. We're a launch partner with OpenAI. We have a very close relationship with Google. We are also working together with Microsoft and Amazon and many others. We see them as ultimately enhancements and diversification of paid channels. But we believe we can develop an experience for travelers that come direct to us, that they will continue to come direct to us, even more of them come direct to us and even do more of their trip with us in the future.

All right. Great. Well, we are against the hook. Thank you, as always. We're anxious to see the business continue to change and the direct business keeps growing in the next 12 months. Thank you. Thank you so much.

Thank you.

Ladies and gentlemen, welcome to Booking Holdings' Fourth Quarter and Full Year 2025 Conference Call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. .

Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical facts are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements in Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission.

Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of Booking Holdings' earnings press release is available in the -- for Investors section of Booking Holdings' website, www.bookingholdings.com.

Booking Holdings intends to use the Investor Relations page of its website, ir.bookingholdings.com to disclose material information for purposes of the SEC's Regulation Fair Disclosure. Booking Holdings encourages investors to monitor this website in addition to other public announcements and SEC filings as information posted on that page could be deemed to be material information. And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Please go ahead, gentlemen.

Good afternoon, and thank you for joining us for Booking Holdings' fourth quarter conference call. 2025 was another year of strong execution for us. Despite volatility in the broader global markets, the underlying fundamentals of our business are solid. Travel demand remains resilient, and we continue to benefit from our existing global platform, which has positioned us well to serve travelers across geographies, trip types, and customer segments, while also developing innovative AI-powered capabilities to serve travelers and partners even better in the future. .

Throughout the year, we need meaningful progress on the priorities that matter the most for long-term value creation. This month marks the completion of my 26th year at the company and I remain as optimistic as ever about our opportunities ahead. It's an extraordinary time to be in the travel industry with generative AI accelerating the pace of innovation and evolving how we deliver our mission, which is to make it easier for everyone to experience the world.

With years of experience applying AI from early statistical machine learning models to state-of-the-art generative AI systems, coupled with a deep understanding of traveler intent through our data, we're beginning to deploy these capabilities to drive even more value, personalization and ease of use for both travelers and partners. I'm excited to share some highlights on this front as well as progress on our strategic priorities, but first, let me briefly cover our financial highlights from the last quarter and the full year.

Our fourth quarter room nights reached $285 million, a 9% year-over-year increase. This exceeded the high end of our expectations driven by healthy demand across all of our major regions. The better-than-expected room night growth helped drive fourth quarter gross bookings and revenue both up 16%. Adjusted EBITDA reached $2.2 billion, up 19% from the prior year quarter. Finally, adjusted earnings per share grew 17% year-over-year.

Consistent with our prior earnings guidance, I want to note that FX benefited our fourth quarter growth rates by approximately 500 basis points. For the full year, top line growth metrics were strong with room nights of more than 1.2 billion, an 8% increase year-over-year, and gross bookings and revenue growth up 12% and 13%, respectively.

We achieved these top line results while growing our bottom line even faster with adjusted EBITDA of over $9.9 billion, increasing 20% year-over-year and adjusted margins reaching 36.9% or up 193 basis points versus the prior year. One enabler of this margin expansion was our transformation program, which we launched in November 2024.

And as of year-end, has already enabled approximately $550 million in annual run rate savings, which was the high end of our prior guidance. Finally, adjusted earnings per share was up 22% year-over-year, helped by the 4% reduction in our full year average share count versus last year. I would note that FX benefited our full year growth rates by approximately 200 basis points for gross bookings, 300 basis points for revenue and 400 basis points for adjusted EBITDA and EPS.

That means our full year 2025 constant currency growth rates exceeded our long-term ambition of growing gross bookings and revenue by at least 8% and adjusted earnings per share by at least 15%. As we look ahead to 2026, the pace of change across both travel and technology continues to accelerate. Our focus remains on consistently delivering greater value for our travelers and partners and enabling it through differentiated innovative solutions across our platforms.

With meaningful margin expansion achieved over the past 2 years and with savings from our transformation program, we are strategically investing further to support sustained growth and long-term value creation. Assuming 2026 travel industry growth is in line with recent years, we are targeting full year constant currency top line growth of approximately 100 basis points ahead of our long-term growth algorithm, while keeping bottom line performance firmly in line with that framework. Ewout will give further details on our full year outlook. Beyond the financial results, we continue to make steady progress on the initiatives that support our long-term strategy.

We're advancing our connected vision, executing our growth strategies in Asia and the U.S. and continuing to build out AI capabilities that create more value for both travelers and partners. Taken together, these efforts are focused on improving how travelers plan, book and manage their trips while also strengthening the tools and services we provide to our partners.

We continue to make measurable progress on our connected trip strategy with the goal of making the planning, booking and travel experience, more personalized, seamless and enjoyable. For the full year, connected trip transactions grew in the high 20% range and represented a low double-digit percentage of Booking.com's total transactions.

As a reminder, our connected transaction is when customers choose to book more than 1 vertical with us for the same trip. Flights remains an important component of many connected trips. For the full year, travelers booked 68 million airline tickets across our platforms, up 37% year-over-year and represented a gross bookings of $16.8 billion.

We continue to see flights bring us new customers, meaning travelers who have not booked any service with us in the past while also helping existing customers plan more of their trips with us, meaning multiple services across the journey. And we continue to advance the underlying capabilities that enable the connected trip at scale, including payments and customer service.

We also remain focused on our Genius loyalty program, which is available in more than 200 countries and territories and spans a broad range of supply, primarily independent properties and increasingly alternative accommodations and other verticals. The benefits of Genius are straightforward, rewarding our most loyal travelers with meaningful value while delivering more incremental bookings for our partners.

Genius is built around immediate, relevant benefits such as tier discounts and perks like free breakfast or room upgrades. Genius members book more frequently, book further in advance and return more consistently than non-Genius travelers. In 2025, Level 2 and 3 Genius travelers represented over 30% of our active base and accounted for a high 50% share of room nights, up from the previous year.

Given the importance of loyalty and the success of Genius so far, we see additional opportunities to further strengthen the Genius offering in 2026. Now let me talk a bit about Asia. Asia continues to be one of the most attractive growth opportunities. Travel demand in the region remains structurally strong, supported by rising incomes and increasing cross-border travel. Our position in Asia benefits from the complementary strengths of Agoda and Booking.com. Agoda's strong local presence and consumer trust across Asia, combined with Booking.com's global reach and brand recognition allows us to serve both local outbound and inbound travelers. For full year 2025, we saw low double-digit room night growth in Asia by staying focused on disciplined execution and balancing growth with profitability. We continued to invest in product improvements that support traveler value and work closely with partners to enhance payments and servicing capabilities that reduce friction and improve the end-to-end experience.

Asia remains one of our highest focus areas and our ambition there continues to be to grow faster than the market over time. Let me spend a moment on our supplier value proposition because it's foundational to how our 2-sided marketplace works, a competitive strength as the Agentic AI accelerates the pace of change and a key driver of our long-term growth.

To provide context on our partner base, independent partners drive the vast majority of our room nights with the top 10 global chains representing only a low double-digit percentage of Booking.com's total room nights. Independent partners choose to work with us, not just for the demand we deliver but for the broader set of technological capabilities we provide, capabilities that would be complex or expensive to replicate on their own from global brand and performance marketing expertise and data-driven insights to integrated technology solutions across payments, advertising and multilingual 24/7 customer service among others, we help partners operate effectively and more efficiently in an increasingly complex digital environment.

At the same time, we recognized effective partnerships require much more than technology alone it is technology, local expertise and working together. That is why we have dedicated partner services teams on the ground across the world. For example, we learned with our partners the importance of local payments and why we've invested in the ability to process over 100 payment methods and over 50 currencies, an important solution for partners that don't accept alternative payment methods and for travelers who want to use their customary payment method.

It is just one small example of how we are continuously improving our supplier value proposition. Now let me spend some more time on generative AI, which presents a major opportunity to further improve both the traveler and partner experience. Since inception, we have been an early adopter of technology and have been deploying AI at scale for more than a decade.

Our approach to GenAI mirrors what has been our long-established approach to leveraging all artificial intelligent technologies. We focus on where AI can deliver tangible, measurable outcome for our customers, partners and our business by continuing to improve our existing products and continuously testing so we can learn quickly and help shape what's next in travel.

In 2025, we focused on rolling out Agentic capabilities across our brands that enhance the full traveler journey, helping customers discover and plan trips through natural language search, make more important booking decisions with smart filters and summaries and get better, faster support before and during their trip through interactive AI agents. Once established our core accommodations business, we then extended these capabilities into other verticals and added voice functionality.

Based on the learnings in 2026, we will focus on further connecting these Agentic capabilities to offering more unified and personalized experience, deploying the technology in the places where it can have meaningful impact for customers and partners in addition to continuing to collaborate with leading AI companies such as OpenAI, Google, Microsoft, Amazon and others.

As general-purpose LLMs increasingly creates new top of funnel entry points for travel and generative AI drives increased global online participation and spend, our proactive engagement with major technology and AI players is positioning us to meet whatever level of demand ultimately migrates from traditional search firms to horizontal LLMs. In everything we do, we leverage our global breadth, proprietary data, keep supplier integrations, decades of travel industry experience and talented teams to accelerate the realization of AI's value across our business and for our customers.

Ultimately, our goal is to leverage AI to make it easier for everyone to experience the world, and we are encouraged by the progress we're making and the opportunities ahead. In conclusion, as I look back over 2025, I am proud of all the hard work and excellent execution by our teams as they continue to advance our strategic initiatives while delivering strong financial results. These are exciting times in our industry, and I am confident in our position and in the investments we are making to support long-term value creation and deliver an even stronger offering for both travelers and partners.

I will now turn the call over to Ewout.

Thank you, Glenn, and good afternoon, everyone. I'm pleased to report that we finished 2025 with a strong fourth quarter and to share our current outlook for the first quarter and full year of 2026. 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.

Now let's turn to our fourth quarter performance. We finished off a year of steady improvement with our room night growth accelerating each quarter throughout 2025. Our room nights in the fourth quarter grew 9%, exceeding the high end of our guidance range by 3 percentage points as we saw benefits from our continued investments into Asia and the U.S. and the booking window was more extended than expected.

On a regional basis, Asia and the U.S. each delivered low double-digit growth, and Europe and the rest of world were up high single digits. We're pleased to see an acceleration in U.S. room night growth over a strong prior year comparison. Growth in the U.S. was helped by continued, targeted investments, including in brands and our traditional performance marketing channels and by continued momentum in our B2B business.

We're also encouraged by the continued growth in our direct channel in the U.S. The booking window in the U.S. remained steady in the fourth quarter, though we continue to see slightly lower ADRs and a slightly shorter length of stay versus the prior year, which may indicate that some consumer segments are continuing to be thoughtful on their discretionary spending.

Gross bookings increased 16% year-over-year or about 11% on a constant currency basis. The constant currency growth rate was approximately 2 percentage points higher than room night growth due to about 1 percentage point from higher bookings growth from flights and other travel verticals as well as an increase in constant currency accommodation ADRs of about 1%. The increase in gross bookings exceeded the high end of our guidance by about 3 percentage points, driven primarily by the room night outperformance.

Fourth quarter revenue grew 16% year-over-year, which exceeded the high end of our guidance by about 4 percentage points, slightly higher than the outperformance on gross bookings due to higher-than-expected payments revenue. Constant currency revenue growth was about 11%. Marketing expense as a percentage of gross bookings was 24 basis points higher year-over-year.

In the quarter, we saw opportunities to achieve incremental demand at attractive ROIs in traditional performance marketing channels in addition to higher brand marketing expenses versus a comparatively lower level of spend a year ago. We also continue to make disciplined investments in social media channels at attractive ROIs.

We remain focused on our efforts to strengthen our direct relationship with our travelers while maintaining the flexibility to invest in customer acquisition when and where there are attractive opportunities to do so. In the fourth quarter, sales and other expenses was a source of year-over-year leverage driven by increased efficiencies in customer service, partially offset by an increasing merchant mix, resulting in higher payment expenses.

Adjusted fixed operating expenses increased 10% year-over-year or low single digits after normalizing for changes in FX and a $44 million accrual for an indirect tax matter. Adjusted EBITDA of approximately $2.2 billion grew 19% year-over-year, which was about 5 percentage points faster than the high end of our guidance due primarily to the stronger-than-expected revenue growth. Constant currency adjusted EBITDA growth was about 14%. Adjusted EPS of $48.80 per share was up 17% year-over-year, lower than the growth in adjusted EBITDA as a higher tax rate in the quarter was partially offset by a 3% lower average share count.

The higher tax rate was mostly due to the timing of certain adjustments in the quarter. Please note, our full year tax rate was slightly below last year. During the fourth quarter, we realized approximately $130 million of in-quarter savings from the transformation program, primarily in sales and other expenses and in personnel expenses. We incurred $30 million in transformation costs, which were excluded from our adjusted results.

Turning now to our full year 2025 results. We are pleased to report that our 2025 room nights grew 8% year-over-year. On a regional basis, we saw high single-digit room night growth from Europe and Rest of World. Asia was up low double digits and the U.S. was up mid-single digits. We saw a strong acceleration in U.S. room net growth in the second half of 2025 as growth improved from low single digits in the first half of the year to low double digits in the fourth quarter.

Similar to 2024, bookers from Europe represented about half of the room nights booked in 2025. Bookers from Asia were about 1/4 and U.S. bookers were a low double-digit percentage. Our 2025 B2C direct mix was in the mid-60% range, similar to last year. The mobile ad mix of our room nights was in the mid-50% range in 2025, which was up from the low 50% range in 2024.

The significant majority of bookings received from our mobile apps come through the direct channel. Our Genius loyalty program is a cornerstone of our value proposition. We're seeing strong engagement as travelers benefit from compelling rewards and partners gain access to our most loyal customer segments.

The mix of Booking.com, room nights booked by travelers in the higher genius tiers of Levels 2 and 3 was in the high 50% range in 2025 and this mix increased from the mid-50% range in 2024. These Genius Level 2 and 3 travelers have a meaningfully higher direct booking rate than our other travelers. We continue to make progress across our key growth areas such as alternative accommodations, payments, flights and attractions, which help drive engagement with our platforms.

For our alternative accommodations at Booking.com, our full year room night growth was about 10%, including about 9% in the fourth quarter. The global mix of alternative accommodation room nights was about 36% for the full year, which was up 1 percentage point from last year. We believe travelers value the optionality to choose between alternative accommodations, independent hotels and chain hotels in one integrated accommodation offering.

As Glenn noted, almost 90% of Booking.com's room nights are associated with independent hotels alternative accommodations and smaller chains. In 2025, we generated $130 billion in merchant gross bookings, a 25% increase year-over-year. merchant gross bookings represented about 70% of total gross bookings, an increase from about 63% in 2024. Our merchant payments platform is a core enabler of the connected trip vision as we provide flexibility for both travelers and partners while also generating incremental revenue and contribution margin dollars for our business.

In 2025, approximately 68 million airline tickets were booked across our platforms, representing an increase of 37% year-over-year driven by the continued growth of our flight offerings at Booking.com and Agoda. Attraction tickets booked on our platforms grew nearly 80% year-over-year from a relatively smaller base. These strong growth rates reflect continued progress on our connected trip vision, and our data shows that travelers who book more than 1 travel vertical with us, come back more frequently to us.

As Glenn noted, we delivered top and bottom line results ahead of our long-term growth algorithm in 2025, reflecting the resilience of our business model. Our total gross bookings and revenue increased 12% and 13%, respectively, and both growth metrics grew about 10% on a constant currency basis. Revenue as a percentage of gross bookings was 14.5% in 2025, which was up slightly versus 14.3% in 2024 due primarily to a benefit from higher payment revenues.

Our underlying accommodation take rates continue to be stable. Marketing as a percentage of gross bookings in 2025 was 4.4% similar to 2024 as growth in our direct channel was offset by our decision to invest in traditional performance marketing and social media channels at attractive ROIs.

On a combined basis, marketing and merchandising as a percentage of gross bookings was 5.5% similar to 2024. Sales and other expenses as a percentage of revenue was a source of leverage in 2025 due to efficiencies in customer service, which more than offset higher payment costs. We are encouraged by the tangible results we're seeing from our accelerated integration of generative AI within our customer service operations.

It's remarkable to see a year-over-year decrease in customer service costs even as we delivered double-digit growth on gross bookings and revenue. Our 2025 adjusted fixed operating expenses were up 7% versus 2024 and up about 4% on a constant currency basis, which was 6 percentage points lower than revenue. This was a substantial source of operating leverage, a direct result of the disciplined actions we executed throughout the year to keep our cost base lean as we continue to scale.

We delivered approximately $250 million of in-year savings in 2025 through our transformation program, primarily in sales and other expenses and in personnel expenses and well ahead of our commitment of $150 million of in-year savings at the start of the year. Through our transformation program and broader operational efficiencies, we created capacity to reinvest about $170 million above our baseline investments into key strategic priorities such as GenAI, the connected trip, fintech, advertising, OpenTable's international expansion and growing in Asia and the U.S. to strengthen our long-term earnings profile.

These reinvestments benefited our 2025 gross bookings and revenue growth, particularly in the back half of the year. We remain disciplined in our approach to reallocating our resources ensuring that our reinvestments are aligned with our strategic priorities and deliver measurable returns for our shareholders, and we expect these to help deliver incremental top line growth in 2026.

Our full year adjusted EBITDA was over $9.9 billion, which was up 20% year-over-year and up about 15% on a constant currency basis. Adjusted EBITDA margin of 36.9% was 193 basis points higher year-over-year underscoring our ability to deliver profitable growth and margin expansion while simultaneously funding the strategic investments that support future growth.

Our full year adjusted EPS was over $228 per share and grew 22% year-over-year and about 18% on a constant currency basis aided by a 4% lower average share count. As we have said before, we believe stock-based compensation is a real operating cost. And as a result, we consistently reflected in all of our profit metrics, and we strongly believe there should be an industry standard in reporting.

Now on to our cash and liquidity position. Our fourth quarter ending cash and investments balance of $17.8 billion was up versus our third quarter ending balance of $17.2 billion due to about $1.7 billion of debt raised in November and about $1.4 billion in free cash flow generated in the quarter, partially offset by about $2.4 billion of capital return, including share repurchases and dividends, which was the highest amount of capital return in a quarter since 2023.

For the full year, we generated about $9.1 billion in free cash flow, 15% more than in 2024. We believe we have set a solid framework to compound shareholder value by prioritizing organic reinvestments in the business combined with attractive capital returns. For the full year, we returned a total of $8.2 billion to our shareholders. This included $5.9 billion in share repurchases and $1.2 billion through our quarterly cash dividend program, alongside $1.1 billion utilized to settle the conversion premium on our convertible notes at maturity and avoid dilution from settlement in stock.

Since restarting our repurchase program in early 2022, following the pandemic-related pause, we have returned over 100% of free cash flow to shareholders, repurchasing $29 billion in stock and driving a 22% reduction in share count, net of the dilutive effect of stock-based compensation. Going forward, we plan to continue to return capital to our shareholders as well as maintain our disciplined focus on optimizing our capital structure, built on a foundation of investment-grade credit ratings and around 2x growth leverage through the cycle, and we are pleased to announce that our Board of Directors approved a 9.4% increase to our quarterly cash dividend per share to $10.50 per share.

This reflects our confidence in our long-term earnings trajectory and our commitment to leverage our financial strength to deliver sustained capital returns to our shareholders, all supported by our strong free cash flow generation. We're also pleased to announce that our Board of Directors has approved a 25:1 stock split. This split will take effect on April 2, and we will begin trading on a post-split basis starting April 6.

Moving to our thoughts for the full year 2026, we intend to build upon what we accomplished in 2025, a year in which we reinvested in our strategic priorities and expanded adjusted EBITDA margins. We exited 2025 having enabled approximately $550 million in annual run rate savings through our transformation program, meeting the high end of our previous guidance.

We expect to deliver these run rate savings by the end of 2026. We estimate the aggregate transformation cost will be less than 1x the ultimate annual run rate savings. In 2026, we will maintain this disciplined model driving further operational efficiencies, including through the transformation program to free up capacity for continued reinvestments in our strategic priorities. We expect the transformation program to deliver in-year savings of $500 million to $550 million in 2026 or more than $250 million higher than in 2025.

Beyond the transformation program, we aim to drive additional efficiencies in our ongoing operations through both marketing and fixed operating expense leverage. With the capacity created by these savings and efficiencies, we are reinvesting about $700 million above our baseline investments in 2026 into areas such as progressing our Gen AI capabilities, advancing our connected trip vision, growing in Asia and the U.S., growing our advertising business, OpenTable's international expansion and expanding our fintech and loyalty offerings.

We expect these initiatives to contribute approximately $400 million in incremental revenue in 2026, resulting in a net impact of about $300 million to adjusted EBITDA for the year. We expect the reinvestments in 2025 and 2026 will help us to deliver constant currency gross bookings and revenue growth that is about 100 basis points faster than our long-term growth ambition of 8% while expanding adjusted EBITDA margins by approximately 50 basis points. This framework supports a constant currency adjusted EPS growth trajectory in line with our long-term growth ambition of 15%.

Our guidance for 2026 assumes recent FX rates for the remainder of the year, including the euro-U.S. dollar at 1.17. We estimate changes in FX will positively impact our full year reported growth rate by about 2.5 percentage points for gross bookings, about 2 percentage points for revenue and by about 1.5 percentage points for adjusted EBITDA and adjusted EPS.

On a reported basis, for the full year, we expect gross bookings to be up low double digits, revenue to be up low double digits, adjusted EBITDA to grow faster than revenue and adjusted EBITDA margins to expand year-over-year by about 50 basis points, revenue to grow faster than both marketing and adjusted fixed operating expenses, sales and other expenses as a percentage of gross bookings to be flat year-over-year and adjusted EPS to be up mid-teens.

Zooming in on the first quarter of 2026, we are encouraged by the positive momentum we have seen so far in the new year. We currently expect first quarter room night growth to be between 5% and 7%, we estimate the changes in FX will positively impact our first quarter reported growth rates by about 7 percentage points for gross bookings and revenue and by about 8 percentage points for adjusted EBITDA. We expect first quarter gross bookings to increase between 14% and 16%, including more than 1 percentage point of positive impact from higher flight tickets and other verticals growth.

We expect constant currency accommodation ADRs to be about in line with last year. We expect first quarter revenue growth to be between 14% and 16%, similar to growth bookings as higher payment revenues are offset by increasing flights mix. We expect first quarter adjusted EBITDA growth to be between 10% and 14%. First quarter adjusted EBITDA growth expectations would be about 20% at the high end of the range after normalizing for the $53 million in onetime benefits that we noted during last year's first quarter earnings call.

In conclusion, I'm proud of how our teams executed in a dynamic environment, delivering strong results, expanding margins and strategically investing in growth opportunities. Entering the year ahead, we do so with unwavering confidence and focus on growth and innovation, particularly by leveraging the immense potential of generative AI-enabled capabilities.

Our vision is to continue to unlock increasing value for our travelers and partners, drive durable growth and attractive returns for our shareholders and remain well positioned for the opportunities ahead. I would like to thank all of my colleagues across the company for their dedication and extraordinary work throughout the year.

With that, we will now take your questions.

[Operator Instructions] And our first question comes from the line of Mark Mahaney with Evercore.

Okay. I think the most impressive number I heard there was '26. I think, Glenn, that may make you the longest-lasting executive in tech land. The question I wanted to ask had to do with the marketing spend deleverage in the December quarter. Could you just talk about that a little bit more? Was there something that you saw in particular that made you want to lean in. And it sounds like you're going to continue to lean in, into marketing spend in '26. But just any more color on that? It seems like a little bit of a change for you.

Mark, it's Glenn. And thank you. I think it's making me older and I'd like to be noticed that. But okay. Yes, look, we -- here's one of the things that we always think, and you know this market, you've been following us for a very long time, you know we like to be tactical. We like to take advantage when we see opportunities that old saying about strike while the iron is hot. I mean that goes back to 1300, Chaucer first came up with it. I mean that's really important.

So we see time where we can put money to work that's going to help build the value of this franchise over the long term, we're going to do it, and I'm not going to worry about the fact that, oh, it looks like a little deleverage here. That's not the way to look at it. You know I always talk about it, look for the long term, and that's what we're doing here.

It's especially nice. You can do it if you're saving money in other places. That's the part I really like is, yes, okay. So maybe we deleverage a little bit in marketing. That's helped build the business, and we have the money because we've leveraged elsewhere, and I'll let Ewout talk because he's always looking at these numbers very carefully.

Mark. A couple of additional points. First, I think it's important to look at the marketing deleverage in the context of a quarter where we delivered 19% EBITDA growth and expanded EBITDA margins by 80 basis points. Besides the reason that Glenn just highlighted, the opportunities we saw in performance marketing, leaning in there with attractive ROIs. There are 2 other reasons. The other reason -- the first other reason is we saw also continued expansion in our social media investments.

Some great opportunities there, leaning in some other social media platforms than we were using in the past. So overall, 13% growth in terms of investments in social media and marketing. And the third reason is we also had higher brand marketing spend in the fourth quarter. That can always a little bit be lumpy in 2024. It was mostly centered in the summer around UEFA European soccer championship. In 2025, it was more back-ended in the year in terms of brand marketing spend.

But overall, this helped us to accelerate our room night growth to 9% in the fourth quarter. And also please note that for 2026, what we have said is that we aim to achieve marketing leverage again, unless, of course, we find those really great opportunistic moments that we can lean in again in this year.

And our next question comes from the line of Lee Horowitz with Deutsche Bank.

I guess as you roll out agentic capabilities across your properties in the coming months and years, where do you see the greatest economic uplift for booking from these technologies in terms of how you expect them to change consumer behavior? And relatedly, what should we expect in terms of, say, the product cadence you intend to deliver in terms of getting these agentic experiences into the hands of the consumer in 2026.

Lee, so a lot of talk about agentic -- travel agentic commerce, you can't almost have a conversation without using the word agentic. So you know we've been building for a long time. And let me move this is a bigger picture because I've been talking about this, God, before the people talk about all sorts of neural networks and large language models, I've been talking about trying to create that personal travel agent digitally using technology to replace what was that human travel agent, where we'd be able to personalize and using all we know all the data and be able to come up with a better solution for the travelers and also a better way that our partners could then lean in, be able to get more business by offering the right thing, the right offer to the people at the right time.

And that's what we're building and have been building for some time in all different ways. And look, you've seen the growth we had in our connected trip. Ewout talked about that, and we're going to continue on that. We're keen to build out all sorts of new ways to do agentic, different parts of the systems where agentic capabilities are being brought in. But I'm not going to talk specifically to which areas or what the rollout times are.

I'll just say I love what we're doing. We're spending an awful lot of energy effort and money into these different parts of our business, and I'm looking very forward to what we'll be bringing through the year, and you'll be seeing it. But we're not going to actually give away the playbook right now. Ewout, do you want to add anything specific that Lee wants?

Yes, Lee, a couple of metrics that we're looking at very specifically in terms of impact. I have to say in advance, these numbers are still relatively small, but I think it is already quite encouraging what we're seeing with respect to agentic tools that we are implementing within our current product within our current FX to UX, I mean, today, more engagement from our traveler customers faster search, better conversion, lower cancellation rates and positive customer satisfaction. So those are a couple of things we're seeing. Again, the numbers are relatively small but certainly encouraging.

You didn't mention though you love to talk about the customer service. I mean you did say it in your script, but you could say it again because it is wonderful about lower cost...

Yes. And this is, of course, very much around efficiencies and opportunities around efficiencies. I think our colleague CFO said during our call last quarter, I've forgotten who it was. GenAI is everywhere except for in the P&L. I'm very proud that we can point to a line item in the P&L, where we actually do have meaningful results on the efficiency basis because.

As we said during the call, our absolute number in terms of customer service costs are down, and our bookings are up approximately 10%. So we have about a 10% decline in customer service cost per booking, and that has a real impact in our S&O, our sales and other line, where we have seen now more leverage in the recent past. So pretty proud about what the teams have accomplished in that area and more to come.

And our next question comes from the line of Eric Sheridan with Goldman Sachs.

thanks for all the detailed prepared remarks. I want to come back to the comments you made about the Genius program. Can you talk to us a little bit about what signal you're getting as the scale of Genius program continues to build? And how do you think about that as an area for incremental investments in the business to continue to gain operating momentum around the Genius program when you think about your priorities for the next 12 to 18 months?

Yes. I'll -- Eric, I think that Genius is a wonderful program, but it's not nearly what it can be and will be in the future. Look, we know how important loyalty is, particularly nowadays, the way we see the world changing, and we want to increase that loyalty. We absolutely want to do things that are more than just the way it's been done. And look, I'm thrilled, it produces a tremendous amount of value. We've got -- Ewout talked the numbers, our Level 2 and 3 Genius members and are coming back. And it's nice to see that we've been expanding it from just accommodations and going out to the other verticals, offering more things, but I think it can be a lot more, and it's going to be. But I don't think we're going to disclose today what it's going to be, but I will say, we're working hard because we know how important it is.

And Eric, just to point out one additional data point. So we have seen the contribution of Genius Levels 2 and 3 customers, so the overall room nights going up year-over-year. So we're now at a high 50% level. And that is, of course, a number that is highly correlated with travelers that come direct to us, the frequency that are coming to us, the number of verticals that are booking with us.

So all of these things are interrelated. And I think what is really important is we will continue over the next period to make it really attractive for customers to continue to come direct to us in the future. We're going to build a lot of agentic tools at the top of the funnel, so people that can come to us in our platform that they like, their trust, they have their loyalty with. They know if something goes wrong, we will fix it for them. They can now connect it to other parts of the verticals so that we make it really attractive for those customers to come to us even more often direct in the future.

And our next question comes from the line of Alex Brignall with Rothschild & Company.

I had 1 on -- you've obviously been ahead of many in terms of being early partners with some of the agentic businesses. I wonder if you could give us an update on how their plans are evolving, what behavior you're seeing strategies that they are adopting in terms of how they sell traffic or anything they're attempting to do potentially, if you could talk about their views on being the merchant of record, that would be hugely helpful.

Alex, so you're correct. We've been very early working with all of the large language model players and lots of different ways we've been working. And we said in the last call, and I will say it again, it's very early. There's not a lot to show right now. So no real information to give in that area. And your question you're asking us, what can we tell you about what their paths are going forward or not?

And of course, we don't sit in their boardrooms, nor do we -- nor do they share their strategies with us in great detail. However, I can say this though. And this is important because I think there's a lot of discussions about are the OTAs going to be disadvantaged in the future by large language models entering the space, et cetera. And you brought up the right question about being a merchant of record. That's really hard. That requires a lot of things. So we -- Ewout talked about the supplier proposition and the incredible things that we do to make sure that we are able to help our partners succeed.

Ewout mentioned about how and I've mentioned too about almost 90% of our accommodation business is coming from either independent hotels or homes, alternative accommodations, small brands, those are not sophisticated players at all. You got to establish connectivity with them to get that availability, get that pricing, get that inventory, be able to keep it up because it's always changing.

Now we have over 4 million properties that we have to deal with all the time, and we have to keep that concept all the time. So that's really complex and hard to do, but we do it. And then we have thousands -- we have several thousand people who are our partner services people. So part of them are just keeping the technology up so we can get all of that information, we have it live and bring it -- look we're dealing daily with these property managers to make sure that we're helping them succeed in their business. It's not as though you just put it up and all of a sudden, it works harder. No, and we're bringing new ideas, new rates coming up with being part of Genius or we say, "Gee, we have some geography [indiscernible] that is a constant thing that we're going back and forth that whether it's one-to-one conversations or we're doing it other types of communications that is helping their business be successful.

The idea that the large language players are going to be doing that I don't know about that. And then you get into the area of [ payments ]. You want to be merchant of record. Payments, Ewout talked how important that is. Well that's really complex. And we have over 100 different payment methods, 50 -- more than 50 currencies. Now why is that because the supplier has no idea how to take these strange payments that the customer wants to give.

They want their payments to come to them in a certain way. By the way, the traveler wants to pay in a certain way. That's another issue of complexity that I don't think, my opinion, I don't think the large language models [ are going to enter that ] whole space and all that issue. And then, by the way, just you know, I mean, regulations on the payments here is tremendous. In fact, there's regulation's the whole thing.

You want to be involved in the travel business and you want to be dealing with merchant of record, you want to be dealing with combined. In Europe, I mean just the combination of abbreviations, you've got to deal with DSA, DNA, DFA, EU, AIA, P2B DAC7, I can go on and on that's just EU, that's just EU and then of course, the national regulation, we're dealing with over 200 countries you've got to deal with.

So do we think that the large language models are going to be entering - want to enter down the funnel down to where we are? I don't think so. And then even if that did happen, if they were thinking about going in there, the question is what does the customer want to be there? Ewout was just talking about that loyalty issue, talking about Genius, talking about how many of you come to us direct also. Those people come to us because they actually find value using us.

Look, we've been competing, so to speak, with a top of the [ funnel ] player who is very big, very long time, and people go there, but yet, then they come to us direct many of them. Why? Because we are offering them something of value. That's what I believe is going to continue. And by the way, it's been very successful for that large person at the top of the funnel, Google, we've both done very well. They've made very good money setting up an auction format for taking advertising. And we have been more than happy to pay a lot of money as have competitors of us. It's worked out really well for them.

It's worked out really well for us. And by the way, some of these other large language models when I looked at this, they may say, that's the right way to do it. Not go down the funnel, don't become merchant of record, take it high above, don't deal with the mess of the day to day, in and out that we have to deal with all the time, successful for us, successful for them. I think that's the way it's probably going to go in the end. But that's my opinion.

And our next question comes from the line of Lloyd Walmsley with Mizuho.

Two, if I can. First, sort of following up a little bit on the last question. Are you still seeing growth in paid search, traditional paid search channels? And then second one would just be looking at some of the reinvestment, I think you said $700 million and you guys gave a helpful color on some of the product areas where you're investing.

But is a lot of that show up in marketing spend? Does it show up in supply acquisition people to build out experiences? Or like where -- if you can elaborate a bit on where some of that spend is hitting, that would be helpful.

So in terms of search, search is good. We're doing good business. Today. And I'm sure you've heard Google talk about it. This is a good place for us to continue to grow our business. In regard to the second question, I don't know how much more Ewout want to share here.

Yes. Let me give a couple of additional points and color, Lloyd. So if we think about the investment areas, there are a couple of those. They are in the category of core OTA. So as we already have said, last year, we're investing in advertising and social media. From a geographical perspective, the U.S. in Asia, we spoke already about loyalty and connected trip.

So all of these will continue in some new areas in those categories, but we believe those would be very attractive. Also in generative AI, several different developments, an expansion of our total addressable market in new verticals, like attractions and expanding the OpenTable dining network internationally. And then fintech. Fintech is becoming a really large business for us. It's already a significant P&L driver. And there, we continue with localization of our fintech offerings, as we already discussed before. scaling our FX products.

So those are a number of areas where we are investing. But please keep in mind that those expenses then go into 2 lines: fixed OpEx and sales and other. But we will have also the revenues that are offsetting. So we said the net impact on the EBITDA line is about $300 million. But we also said that the transformation program is delivering additional in-year savings in 2026 of $250 million. So it's largely self-funded through our initiatives. So therefore, we can still expand our EBITDA margins by approximately 50 basis points and grow the top line 100 basis points faster than our overall algorithm.

So we are very excited about these opportunities. We have a great track of record in delivering in the execution of growth initiatives. So if you think about the past, if this company puts resources behind certain areas, it will deliver flights payments, attractions and so on. So this is going to help to drive a much faster growth trajectory for the company in the future. So super excited about that.

And our next question comes from the line of Trevor Young with Barclays.

In your alternative accommodation business continuing to slow a little bit there, albeit with very tough compares I appreciate you don't guide granularly, but how should we think about growth from here? Should this return to double-digit growth territory on a room night basis if you expect stronger top line for total overall company? And is there anything in particular you need to do to reaccelerate that growth? I don't recall hearing alts being called out as kind of one of the investment areas of this year.

Trevor, we're not going to give a number going forward. And I think Ewout as always said out, this is a number. It's a little bit of noise, you get noise in there. But we believe the alternative accommodation area is a very important area for us in the future. And the fact that Ewout didn't call it [indiscernible] investor thing, we're always investing in there and trying to build it out, and I've talked about this guy -- good thing you asked the question because it would be a shame in a quarter, if I didn't talk about, it's a great product. We're growing it. It's nice, but we got more to be done.

And we got more to be done there and improving the product. And certainly, there are areas where we are still nowhere near where I'd like to be in terms of inventory. But we are building it. So I hope nobody takes something from this call and thinks, "Oh, they're not -- it's not as important." No, it is important and it's something that we are going to continue to be working hard on.

And Trevor, just to add some numbers to what Glenn just said to underscore that alternative accommodations still really will have a large potential for us in the future. So what we have seen is healthy growth of alternative accommodation supply. So this is year-over-year up approximately 8%. We're now at 8.6 million listings. In the U.S., it's actually growing faster. That's a great area where we have still a lot of potential in terms of alternative accommodations. So this has been input in terms of our 2026 guidance for overall faster top line growth metrics for this year. So definitely, you should interpret here that we are quite optimistic about the outlook for alternative accommodations.

And that concludes our question-and-answer session. I will now turn the call back over to Mr. Glenn Fogel for closing remarks. .

I want to thank our dedicated employees, our stockholders and most importantly, our customers, travelers and partners whose commitment and support were foundational to our strong performance in 2025. Thank you, and good night.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

All right. Good morning, everyone. Welcome to the 2025 Nasdaq Morgan Stanley London TMT Conference. We're thrilled today to have Ewout Steenbergen with us, the CFO of Booking Holdings. Good to see you.

Thank you so much, Brian.

Let me do the disclosures first and then we will talk through everything going on in travel, in bookings specifically, and we probably will talk about Agentic, I would imagine. Let's start with the disclosures. Please note that all important disclosures, including personal Holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures.

Some of the statements made today by Booking Holdings may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today and Booking Holdings undertakes no obligation to update them. Please refer to Booking Holdings' Form 10-K for a discussion of the risk factors that may impact actual results. Good to see you.

We got the legal thing out of way.

We're all good. We're all covered there.

So let's sort of start with a reflection of your time at the company and what has changed. So next, we're coming up about 2 years, about about 1.5 years right now, call it, 2 years in about next year. I want to kind of start with what, in your mind, the biggest misperception or misunderstanding about Booking Holdings is now that you've had 1.5 years kind of under the tent having a lot of meetings with investors, analysts, like what part is most misunderstood in your view?

Good morning. By the way, everyone, actually see such a large crowd here in the room. If I think about the last 1.5 years with the company, I think there's a couple of areas that I believe are a bit underappreciated still within the company. I think one element is clearly around the network effect. The number of customers that come to us come direct to us, like our platform, see the value, go more frequently to us. It is more loyal customers. So it's usually Genius levels 2 and 3, they come more frequently, they book more Connected Trips with us. They move higher up in the loyalty program and come back over time. So there is that element that is self stimulating, because if you think about it, we're growing faster in flight tickets than any airline. We're growing faster in rental car days than any rental car company. We are growing faster in Attractions than specialized companies in those areas. We're growing fast our Connected Trip transactions and so on. So we are growing all of these things faster than the stand-alone category players.

And so there is something there that these metrics are not just a coincidence. They are not stand-alone. They're all interrelated with each other. So I think that is one element where I think it's still sometimes not really understood how strong that particular element is within the company today. The second one I would like to mention is Asia. I think we have a really strong position in Asia. We are the largest technology travel platform outside of Mainland China by really a length. We have a really good team over there, very entrepreneurial, growing very fast. So that is really helping future growth in the company. So those are the two I would like to point out.

Great. Okay. That's a good starting point. I think one of the things that you've done a really good job at the last 1.5 years has sort of been laying out the company's multiyear growth framework. How you think about driving 8% growth, the 8% growth leading really healthy double-digit bottom line growth? Maybe just sort of remind everyone sort of what that framework is numerically? And as you kind of think about puts and takes of sources of upside to growth or potential risks to those growth frameworks? How do you think about both of those?

So the framework or the algorithm we call 8%, 8%, 15%. So the 8% and the 8% stands for the growth in gross bookings and revenues. And then the 15% is the number that stands for the EPS growth in the future. So, these are the metrics that we're focused on achieving. And we're confident that we will continue to achieve those metrics at those levels over the next few years. By the way, this year, on a constant currency basis, we will be exceeding the 8%, 8% and the 15% according to our latest guidance.

So maybe I should first focus on the top line metrics. So, why are we confident that we can hit the 8% for the top line metrics. There's a few things that go there in the mix. So if you think about travel, usually, what is happening with travel, it's grown faster than GDP, because you start with GDP, but then people get more income over time and then when they have more discretionary income, what do they want to do, fund things in life, travel and explore the world. So you see that also in upcoming economies where there's much more travel than people did before.

So that is why there is growth, growth above GDP. There's still a shift from off-line to online, then we are growing in a lot of new verticals outside of accommodations, and we're growing that very fast. By the way, I should also have mentioned before, alternative accommodations, of course, that we are growing faster than the expert in that area, but growing in flights and attractions and rental cars and payments and all of these areas will help to drive additional growth. But then there are 2 new elements that I would like to mention as well.

One is, you've heard us speaking this year about our investment program. And we're spending $170 million in new growth initiatives. So that is going to help with future top line growth over the next few years. And then, of course, generative AI. Generative AI is also a real commercial benefit for us, a commercial opportunity. So we also believe that will help with also further growth of the 8% top line metrics.

I'm pretty sure you have some follow-up question on that.

You know all our Gen AI questions. Maybe let me start with the $170 million because I think it's interesting to sort of lay out these multiyear frameworks for consumer cyclically exposed companies, but 8%, 8%, 15% is pretty formulaic and actually helpful for investors. So maybe sort of walk us through over the course of the year. How does the budgeting work? Do you start the year saying we're going to spend more on Asia? We're going to spend this amount of alternatives? We're going to invest in this type of growth? How does the actual sort of like blocking attack of the annual budgeting process work just to ensure you're meeting or exceeding your targets?

Thank you for asking that question because I'm very passionate about that. And I have a very strong philosophy and the company has a very strong philosophy around it. And the philosophy is that or elements there. On the one side, you have to be extremely disciplined from a planning perspective in terms of driving leverage in terms of driving efficiencies because organizations always naturally would like to grow and expand, but you need to have a kind of a healthy tension on an organization to say each and every year, we would like to see the top line growing faster by a few points, than our expense lines, variable and fixed expense lines and large organizations can do that, and particularly in an industry where scale matters, we can do that.

The next incremental traveler that comes to us the incremental margins by definition should be higher. We don't have another time the fixed cost infrastructure. So growth should always add incremental margin opportunity but you have to enforce that with healthy pressure during a planning cycle in order to get those outcomes.

But then the other side is that creates room to invest. You want to be very explicit around where you want to invest because the areas where you find the efficiencies are not by definition, the best areas where you can also do those reinvestments. And for the last 2 years now, we have a mechanism where we say, okay, what are the best growth opportunities within the company and make very explicit resource allocation decisions because you want the big opportunities to get significant dollars behind it in order to get good outcomes. You don't want to just spend average dollars at the mediocre levels in many different places because then you also probably get mediocre kind of results. So we're very explicit on where we will put those dollars behind for that reinvestments of the resources that we are freeing up.

And what are the areas you sort of talked about the $170 million investment fund, what are some of the areas that we should think that make up the biggest chunks of that $170 million, how are you allocating the capital?

Yes. There are a couple of areas. There is an area around expanding some of our verticals. So investing in the Attractions business investing in our Advertising business as examples. And you have already seen some growth in these areas this year. It's investing in expanding networks that we're having. An example of that is expanding the international network of OpenTable. By the way, OpenTable is doing really well and is seeing some very healthy growth. So we're very happy about the energy that we're seeing there in that business, expanding internationally.

So we're investing in product and tech in supply in many other areas in Asia because we really want to make sure that we keep that very strong position in Asia and benefit from the future growth that will come out of that region. So that is one area. And then, of course, generative AI is also an important area where we are investing really in several areas in product, in terms of AI Trip Planning, so -- and I can speak later on more about that. but we're testing and learning a lot of different tools within our products in Gen AI in order to know what really has traction in the future.

I don't think you mentioned alternatives in that at all. Can you sort of walk us through the areas you're investing on in alternatives? And how do you think about growing more supply and alternatives in the U.S.?

Yes. So Alternative Accommodations, it isn't a specific new investment category. But of course, we have strategically been very focused on that over the last few years. We have now outgrown the largest player, they are for 17 out of the last 18 quarters. I think we should stop maybe talking about quarters and just talk about year. So let's say, 4.5 years. We're about 70-plus percent of their size, so have become a really meaningful player in this space.

How do we do that for a couple of reasons. One is expanding supply. So we're still expanding supply. We started with really the professionally managed properties than the semi professionally managed properties, but then we're going more and more down to the individual properties. So there's still opportunity supply, and that will deliver then ultimately growth. Last quarter, we had supply growth of 10% year-over-year. So that's still meaningful, and that's a good indicator, I think, of what is more to come.

I think our proposition that we present traditional hotels, motels in next 2 Alternative Accommodations during search processes is really helpful for customers. So we see that they like that, compare it. And sometimes they come in with the intent of buying one type of property and they ultimately book another type of property. So I think that proposition really works. And just generally, there is a real demand for Alternative Accommodations. There's a lot of travelers like that type of property.

So all of that combined we believe that Alternative Accommodations for the near future will continue to outgrow our Traditional Accommodations. And that's a good thing because economically, we're really agnostic. So we like that it is growing, and it gives us, I think, a great value proposition to our travelers.

Is the U.S. sort of getting even more growth out of the U.S. and Alternatives? Is that really important to sort of maintain that outsized growth in the portfolio? How important is the U.S. kind of driving that growth from here?

Yes. We see the U.S. as the opportunity because we are already very large in Europe and in Asia. But in the U.S., our position is still relatively modest. So modest for us is always a positive because that means outside potential to do more. We see the traction really coming in the U.S. We outgrew the U.S. in general from a room night perspective in the third quarter by quite a wide margin. Alternative Accommodations was a part of that.

So we think there's really a positive traction in the U.S. And maybe if I may say one thing to that because that was probably from all the results we published in the third quarter. And generally, I think you have seen very, very good performance in the third quarter. There was one data point that for me was really outstanding and the most -- maybe the most important and that related to the U.S. not specifically only to Alternative Accommodations, but in general, and that was the growth of our direct channel in the U.S.

Because direct channel, you can't just grow overnight. You can't grow it from one quarter to the other. That is the result of a very long period of investments in brands product, in awareness, familiarity, people come to us, one time through a pay channel, second time through a paid channel. They like us, they have a good experience. And then at some point, they come direct to us, open up the app and do the direct booking. So that we saw an inflection point in the U.S. I think it was for me really encouraging because that is really a very, very healthy indicator for the future.

Okay. It's been 15 minutes. Now we can talk about Gen AI. So about 20 to 25 years ago, the hotels had their online businesses and online travel agencies came to them and said, we're going to drive incremental growth. We're going to make your online business better. It will all be incremental. It's going to drive faster, you got better unit economics, et cetera. And you and your competitors build incredible businesses. And I think to some extent the hotels need you more than ever, my view.

Now we have these new players, these agents sort of trying to build new places in the ecosystem, OpenAI is building out an agenetic product, I think you're a partner with them. Gemini is going to try to build new products. My worry is, is there a risk that this is sort of -- there's an analogy to what went on with the OTAs years ago where these agents could wedge themselves in between the consumer and the OTA? You still have a lot of value with your supply, but the extent to which you become more reliant on this new paid channel and the agent impacts the unit economics. What is your response to that? And how do you think about sort of preventing that disruption risk?

So I'm always thinking about this topic more from an offensive perspective than a defensive perspective. Let me explain the reasons why we think this is an opportunity. The first is, we believe this will create an expansion of the total addressable market. There will be a faster shift from off-line to online travel. There's about still 30% or more than 30% of the market is still offline. So this will be an acceleration.

Moreover, there's probably going to be a real benefit of keeping your travel within one Agentic experience environment. So this gives us an opportunity to really create also more of a share of wallet, a bigger experience of connecting the dots of travel. So that is one, it will help with expanding the total addressable market.

The second is we think actually, if you look at our channels, and by the way, we have always had a big mix of channels. And in the future, there will be, again, a huge mix of channels. Sometimes this discussion is too binary from my perspective, as if the world only moves to one model. That's not going to happen. There will be many different customers with many different preferences.

In the pay channels, I think this is going to be a huge benefit for us, because the reality is we have had one very large dominant player in traditional search over the last decade. And most likely, there are going to be 4, 5, 6 different winners from a large language model perspective, more diversification. And where do we have, as a company, a real specialism is running very large optimization models, more traditional AI, machine learning, where all the time can optimize our performance marketing spend across all these different channels, where do we get the highest incremental return. And I think that's where you see our ROIs in marketing going up period after period.

So applying those models, those algorithms and optimizing across more channels in the future is going to be a positive from our perspective. And the third is, what we are doing is going to create an experience for customers that coming direct to us, that is even better than what they're getting today. Why are customers coming direct to us? I was alluding to it a few minutes ago is because they know our platform, they like it, they have the loyalty, they get some loyalty benefits and then they come more frequently back and book across more verticals.

Now we can create Agentic experience in addition to that. The same as horizontal agents can do, we can do it as a vertical agent. We can inspire people about where to travel. We can build an itinerary. But then where these models are stopping and become more a [indiscernible] Generator in the future or handing it over because all of them have said, we don't want to be a merchant on record. We don't want to be an OTA. If someone comes to our environment, the Agentic experience continues. We will give Agentic experience pre-booking because things happen, maybe your flight gets delayed and we automatically update your hotel, your rental car, your restaurant reservation, your attraction.

Then we give you an Agentic experience in trip. Hey, you are in London, you have an outside tour organized on Thursday and you have the [indiscernible] Organized on Wednesday, but you know what, Thursday, it looks like it's really bad weather, shouldn't we flip your itinerary around? Hey, we see that you don't have a restaurant reservation this evening. We know you like sushi place. We can get you in through a great sushi restaurant this evening at 7:00, click here and so on.

So that's an experience and then the post-trip experience. That is something that is so much better even than today so much piece of mind plus we will add some additional benefits from a loyalty perspective. So we think we will have a proposition in the future for travelers to continue to come direct to us.

That third part, I think, is probably the most important part of the defense and the counterargument to the disruption concern because to the extent to which you could make a better on-platform experience, in-app experience, you can actually drive more direct traffic, higher conversion rates, bigger recurring user base. What are one or two products you've sort of tested on that front so far? Anything you can share on sort of signal you're getting? And how do we think about the pipeline there?

Yes. We're testing many different products. We're testing top of the funnel, AI, trip planning tools. We have with Priceline, a tool called Penny, which is more focused on voice. We have, with Booking.com, the AI planner tool, which is more a stand-alone tool. We have some tools and other businesses that are in product in U.S. So there's many different versions there, and we do that deliberately to test and learn which ones have the best traction.

And then we have deeper in products kind of tools like natural language boxes that, for example, we call Smart Search, you type in, hey, I want to have a hotel with a great bar and a good gym and it needs to be in the city center and I like it to be more boutique kind of hotel. You don't need to take all the boxes in terms of filters, and that's just the automatic selection by itself. So those are in product tools that we are having.

What are some of the early indicators that we are seeing in terms of outcomes? People that are using those tools, usually the conversion levels seem to be a bit better. And also the speed to booking is a bit faster. And the second, what we are seeing is that people that use those tools, the cancellation rates are a bit lower. Again, these are early indicators. So of course, we need to ultimately see over larger volumes but is encouraging early indicators.

Why is that happening? Because people can find better directly what they are looking for. And therefore, I think they are more confidence to do the booking quicker and have a better conversion. But also in the past, maybe people find some accommodation, they do a booking, but they're not 100% convinced. And then they continue to search for something else. If they find something better, they can cancel for free the first booking they made. If they find immediately what they're looking for, they're not so much focused on doing that second step.

Cancellation rates are actually really important because all of the growth rates we report are on a net basis. So even a slight improvement of cancellation, slight reduction, meaning improvement of cancellation, increases the net growth of the company as well.

That's really helpful. That will be important signal.

I can also also speak about customer service, by the way. We have a great benefit, that's maybe less of a -- really a commercial benefit. But indirectly, it is of course.

Yes, it matters. I mean I think -- well, maybe let's talk about that. Let's sort of talk about some of the cost savings or the sources of efficiency you sort of see looking ahead to kind of maybe bend the cost curve using Gen AI or any types of tools. What are you doing now? And how do you think about potential savings on that?

Yes. So in customer service, we are really encouraged because we have been leaning a lot into Gen AI tools with our software partners in that area. I know many companies talk a lot about Gen AI, but then if you ask where does it show up in the P&L, it's very hard to point at it. I think for us, this is one area where we have meaningful benefits in the P&L this year.

So what is happening based on those Gen AI tools in customer service, we see that the contact rate has come down a lot. So contact rate means where travelers still need to speak to a human agent. The resolution time has really become much faster. And that means, therefore, that the average cost per booking is coming down very rapidly. So just to give you an indication, customer service cost in the third quarter were in absolute dollar terms, slightly down year-over-year over high single digits, booking unit growth. So that's a meaningful benefit. But the best part is that then also our customer satisfaction scores have gone up, which also intuitively makes sense. If you don't need to wait long in line, speak to a human agent and maybe cannot immediately answer your question, these things get resolved very quickly, and it isn't Gen AI human-like kind of experience.

Obviously, that's really a nice outcome. So that is one. But in general, also, as you know, Brian, we are running these large transformation program. The outcomes are now exceeding our original expectations. So we have increased the target to $500 million to $550 million. So we're also very pleased with the progress we're making in general about the transformation.

Got it. Okay. I want to talk you about marketing efficiency and kind of marketing channels. You mentioned before how there historically has been one big channel, Google, I'll call it again, respent a lot. But then I think in the last, let's call it, 3 to 4 quarters, you talked more about Social and sort of Social being a pretty rapidly channel with heavy -- pretty healthy ROIs. Talk to us about what's changed in social? And sort of how do you think about social being a bigger part of the overall marketing mix as you go into '26?

Yes. And this is another great example, my point earlier that there's always a mix of channels, new channels open up, and that's a great development for us as a company. So last year, we were able to crack a little bit of code with Social, because what is very important for Social, but in general, for every performance marketing channel that we are using is we need to -- based on the very scientific approach that we're having as a company, we need to be able to measure incrementality. We need to be able to measure results and returns, but also being able to measure it in a way that we know it's incremental. Meaning you don't want to just throw a lot of money at advertising in social media and hope that something good will come out of it. You need to measure the actual return but you also need to be able to measure that, that customer would not have booked anyhow with us because then we are spending money on advertising that is unnecessary.

So what happened last year, particularly with Meta, we're able to create a special environment where we had data that measurement was possible. And that gave us the confidence to say, "Okay, we know these incremental returns are real and starting to lean into that. We are, in the meantime, continuing to expand with other social media channels. I'm not going to mention certain names because I don't want to make others smarter than they are. Some channels are really leaning in, making those go investments, some others still to follow. But this is an opportunity where we can continue to expand.

By the way, it's not only to expand with others. Also, you want to push the curve out with the existing channels. The more positive signals you get, the more demand you can create, the more you can push your ROI curves out. So we're, of course, doing that with the existing channels as well. So those are the elements that go into the mix there. But again, we're following a very scientific process, and therefore, we really like this as an opportunity.

I think that stands out on the characteristics of the incremental users, your incremental travelers are capturing social. Is there a different demographic? Is it younger? Is it older? Is it a certain geo? Anything you kind of share on what the -- what those incremental users look like that may be different than your current users?

Yes. It's definitely a younger audience. We haven't disclosed a lot. So I'm a little careful there to say too much around it. But what I can say is the general philosophy we have with social. But by the way, with all paid channels is the following. We like those channels because they are a source of new customers for us. And then over time, these customers come back a second time, third time, and then at some point, we have an opportunity to make them more direct customers, make them more loyal customers and bringing them more actively into our ecosystem.

So, we will always continue to find new pay channels, expensive channels because we like that mechanism of we need to find new customers, younger customers, demographics we haven't tapped upon before. And then over time, they become more loyal customers and coming back more frequently.

All right. And we have time for one more question. Just -- I want you to remind everybody on sort of the philosophy around capital allocation and share count shrink and sort of like stock-based comp is going to know this is sort of a debate in the sector. Just how important is sort of delivering durable share count shrink to shareholders for Booking Holdings?

Yes. If you go back to that 8%, 8%, 15%, there's a few things you can read in that implicitly. So first of all, to go from 8% top line growth to 15% or -- yes, 15% mid-teens EPS growth, there's 2 things that are happening there. One, there needs to be continued efficiencies because you need to get EBITDA to low double-digit levels and then have a buyback program in order to get your EPS to the mid-teens level. So those are implicitly built in. We are, of course, doing very well from free cash flow generation.

We have very good strong cash balances today. We are actively returning capital to shareholders. We do that through dividends and buybacks. The buybacks, there is a structural element to Intuit, a systematic element in it. And then there is also a little bit of a tactical element to it. So we scale up and down by quarter based on the 10b5-1 grid and there is price sensitivity in that grid.

So you saw that levels were slowing down a little bit or a $700 million in the third quarter. But then when there is a dislocation of the share price, according to the grid that we put in place, there is really quite a large increase in the daily buyback volume. So one can assume that, that is happening now at this moment in the fourth quarter.

All right. Thank you very much. I appreciate your time as always. Thank you.

Thank you.

Welcome to Booking Holdings Third Quarter 202 Conference Call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guaranteed of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements in Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission.

Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of Booking Holdings' earnings press release is available in the -- for Investors section of Booking Holdings' website, www.bookingholdings.com. And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Please go ahead, gentlemen.

Thank you, and welcome to our third quarter conference call. I'm joined this afternoon by Ewout, our CFO. I'm pleased to report another strong quarter that underscores the power of our platform, the discipline of our execution and the momentum we're building for the future. Our room nights, gross bookings and revenue all exceeded our prior expectations. Beyond the financial results, I am very encouraged by the progress we've made on our strategic priorities. We are at a moment where advances in AI are just beginning to create new waves that people plan and experience travel. With our history of innovation, scale and data that helps us understand what customers want and when they want it, we are well positioned to harness these developments to drive more value for both our travelers and partners. I'll share specific examples from the quarter shortly. But before diving into those, let's review our third quarter financial highlights. We delivered double-digit gross bookings and revenue growth, reflecting robust demand across our globally diversified business.

Our third quarter room nights reached $323 million, an 8% year-over-year increase. This exceeded the high end of our prior expectations, driven by healthy demand across all of our major regions. Of particular note was the U.S., where growth accelerated to high single digits, supported primarily by stronger outbound travel and momentum in our B2B business. The better-than-expected room night growth helped drive third quarter gross bookings up 14% and revenue up 13%. Adjusted EBITDA reached $4.2 billion, up 15% from the prior year quarter. All 3 metrics were above the high end of our prior guidance ranges. Finally, adjusted earnings per share in the quarter grew 19% year-over-year.

Consistent with our prior earnings guidance, I want to note that FX benefited our growth rates by approximately 400 to 500 basis points. As we enter the fourth quarter, we continue to observe stable levels of global leisure travel demand. Ewout will provide more detailed financial insights shortly, including our outlook for this quarter and for the full year. Beyond the headline numbers, I'm excited about the meaningful progress we're making on key initiatives. We're advancing our connected trip vision, strengthening our loyalty programs and building AI capabilities that create more value for both travelers and suppliers. Asia and alternative accommodations continue to remain growth drivers. Together, these efforts are reshaping how people plan, book and experience travel and how we are unlocking greater value for our partners. Let me start with the connected trip. We continue to advance on our long-term vision to make the planning, booking and traveling journey simpler, more personalized and with less friction while providing new opportunities for our partners through data-driven insights.

Today at Booking.com, travelers can already book accommodations, flights, rental cars, prebooked rides and attractions on our platforms, and we continue to invest to expand these verticals and to deliver a more seamless experience. For example, we enhanced our home screen to adapt dynamically to each traveler's most recent search, making it easier to move across verticals and transition smoothly from planning into booking. And we continue to broaden our flight supply, most recently adding new partnerships with Ryanair in Europe and Southwest in the U.S., giving travelers even more choice. These efforts are resonating. Connected trip transactions, meaning a trip that includes more than one travel vertical, grew mid-20% year-over-year in the third quarter and now represent a low double-digit percentage of Booking.com's total transactions.

Our other verticals also continue to deliver strong growth with flight tickets up 32% year-over-year and attractions up close to 90%, albeit from a relatively smaller base. Most importantly, travelers who choose to book multi-vertical trips with us also choose to come back to us for future bookings more often, which reinforces the long-term value proposition of the connected trip vision.

Now I'd like to spend some time on Booking.com's Genius loyalty program, which plays an ever more important role in attracting and engaging travelers and stands out as one of our core differentiators. The purpose of Genius is straightforward, reward our most loyal customers with extra value while delivering real benefits for our partners. Genius members book more often convert at higher rates, book further in advance, cancel less and choose to come back more consistently than non-Genius customers. In fact, in the third quarter, travelers in Genius Levels 2 and 3 made up over 30% of our active base and accounted for a mid-50% range of our room nights over the last 4 quarters, increasing from last year's levels.

Today, Genius is available in over 200 countries and territories. The program spans our range of supply from large global hotel chains to independent properties and increasingly alternative accommodations and our other verticals. What sets Genius apart is that travelers get immediate tangible benefits such as tier discounts or perks like free breakfast or room upgrades. We're continuing to invest to make these benefits more personalized, data-driven and relevant to each traveler's journey.

On the partner side, we carefully designed Genius so that it provides incremental value rather than simply shifting existing demand. Our data shows that Genius members submit reviews more often, driving higher property visibility and increasing occupancy rates for participating properties, particularly during off-peak periods. That helps partners optimize their revenue management. At the end of the third quarter, over 850,000 partners had chosen to participate in Genius.

Looking ahead, we see several opportunities to continue strengthening our Genius offering. We're already expanding our offering across verticals and exploring ways to provide additional benefits. Loyalty programs remain a core pillar across our brands, not just at Booking.com. Most recently, OpenTable enhanced its program, which is now called OpenTable Regulars. The updated program offers new ways for diners to redeem points on experiences and introduces a new loyalty tier that provides enhanced benefits such as one named Priority Notify Me, which will alert diners to last-minute tables earlier than others with additional benefit launches planned over coming quarters. For restaurants, it helps encourage more repeat visits from high-value guests. Let me now turn to Gen AI, which we continue to believe represents a major opportunity to enhance the traveler and partner experience. While there is certainly a lot of excitement in the industry, our approach has been disciplined and focused on where AI can make a real difference for our customers, our partners and our business.

On the customer side, we saw encouraging developments this past quarter. At Agoda, for example, we launched an AI-powered chatbot that provides travelers with prompt hotel-specific answers. By cutting through complexity and delivering precise information quickly, it helps travelers make timely and more confident booking decisions, reducing uncertainty and improving the overall experience. Another example is Kayak's AI mode, a natural language search experience that combines Kayak and large language model data to deliver smarter contextual results right from the homepage. And at Booking.com, we've begun integrating new features into our app to assist travelers earlier in their planning process. These include natural language search capabilities that offer more inspiration such as destination highlights. As we further develop our hygentic capabilities, combine them with our data-driven insights on when to offer relevant suggestions and advance our connected trip vision, we believe travelers will increasingly recognize the value proposition of our platform.

We also see important opportunities for AI to create more benefits for our partners. By driving better personalization and conversion, AI helps generate incremental demand across our verticals. Just as importantly, we are applying AI to make partner-to-guest communication faster, more streamlined and more intuitive. A core strength of our business has always been the unique value we bring to our supply partners and AI is enhancing these capabilities. As an example, Booking.com continued to add to its robust suite of Gen AI tools for partners, including Smart Messenger and AutoRly. SmartMessenger uses intelligent response generation and automated workflows to bring together relevant partner, property and reservation information, knowing when and what to suggest to support accommodation partners in their communications to guests.

AutoRly takes this further, allowing partners to set custom apply topics that deliver instant personalized responses to both common and unique guest questions. Early results have shown an increase in partner satisfaction compared with our prior messaging tools, underscoring how AI can provide tangible differentiated value to our partners. Beyond our internal efforts, we're also building relationships with leading AI organizations, reflecting our ambition to remain at the forefront of this rapidly developing field and to broaden our potential sources of customer traffic. We recognize that Gen AI is transforming how travelers research and find inspiration for their trips, and we are committed to continue to expand, evolve and meet them wherever they choose to search. Most recently, we were one of the first wave of apps available in OpenAI's ChatGPT App Store after being one of the launch partners for their operator platform earlier this year. Our strong relationship with companies such as OpenAI, Google, Amazon and Salesforce, combined with our disciplined approach, give us confidence that Gen AI will be an important driver of the long-term value for our travelers as well as our partners.

On alternative accommodations, we are continuing to strengthen our offering. In the most recent quarter, listings grew to over 8.6 million, up approximately 10% year-over-year with double-digit room night growth. Travelers value choice and the breadth of supply across hotels, homes and unique properties differentiates us as a platform. Alternative accommodations remain a long-term growth opportunity. Customer demand for alternative accommodations is healthy across every region and our ability to combine that breadth of supply with our marketing reach and payments capabilities makes us well positioned in this segment. Finally, I want to touch on Asia, which remains a driver of growth for us and is one of our most exciting long-term opportunities. It is the fastest-growing major travel market in the world with industry growth expected to remain in the high single digits over the next several years, and our ambition is to grow even faster than the market.

Our offering in the region is built on the complementary strengths of Agoda and Booking.com. Agoda is a strong local player with consumer trust across Asia, while Booking.com brings global reach and brand recognition. Together, they create a combination that allows us to serve both local and outbound travelers across the region. As we look forward, we know we are operating in a period of rapid change, driven by geopolitical developments, macroeconomic uncertainty and accelerating technological innovation. What gives us confidence and makes me optimistic about the future is the strength of our value proposition through the connected trip, our Genius loyalty program and our relationships and innovations in Gen AI, we are building products that engage travelers, generate incremental demand and value for our partners and create differentiators. With that, I'll turn it over to Ewout to walk through the financial results in more detail. Ewout?

Thank you, Glenn, and good afternoon, everyone. I'm pleased to walk you through our results for the third quarter and share our current outlook for the fourth 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. Now let's turn to our third quarter performance. Our room nights in the third quarter grew 8%, a positive result versus a strong prior year comparison and exceeded the high end of our guidance by nearly 3 percentage points. This outperformance was helped by an expansion of the booking window beyond our prior expectation and what we experienced in the second quarter, resulting in more room nights being pulled forward into the third quarter. We saw broad-based strength in room night growth across all major regions, and each region exceeded our expectations.

Europe and the U.S. were up high single digits and Asia and Rest of World each delivered low double-digit growth. Our globally diversified portfolio proved its value once again as we continue to see robust growth in certain travel corridors, including Canada to Mexico and Europe to Asia, which effectively offset softer demand in certain inbound corridors to the U.S. Notably, our U.S. Booker room night growth accelerated meaningfully from the second quarter, driven by solid improvements in domestic and outbound growth, and we believe our growth once again outpaced the broader U.S. accommodations industry in a meaningful way. We're also encouraged by the growth in our direct channel in the U.S. We saw the booking window in the U.S. normalize in the third quarter, which is also an encouraging improvement from the second quarter.

That said, in the U.S., we continue to see slightly lower ADRs and a shorter length of stay versus the prior year, which may indicate that some U.S. consumers are continuing to be thoughtful on their discretionary spending. More broadly, global ADRs on a constant currency basis were up about 1% year-over-year, which was an improvement from the second quarter, and the global average length of stay remained similar to last year. While we are pleased with our third quarter results, we remain focused on accelerating our long-term earnings potential and are energized by the progress we are making across many key strategic initiatives. We continue to strengthen our direct relationship with our travelers and see tangible progress with increases in our direct mix, mobile app mix and loyalty mix.

Over the last 4 quarters, our B2C direct mix was in the mid-60% range, which was up versus the low 60% range 1 year ago. The mobile app mix of our room nights was in the mid-50% range over the last 4 quarters, which was up from the low 50% range 1 year ago. We find that a significant majority of bookings received from our mobile apps come through the direct channel. We continue to drive engagement in our Genius loyalty program that delivers value to both our travelers and partners. The mix of Booking.com room nights booked by travelers in the higher genius tiers of Levels 2 and 3 was in the mid-50% range over the last 4 quarters, and this mix increased year-over-year.

These Genius Level 2 and 3 travelers have a meaningfully higher direct booking rate than our other travelers, which demonstrates the strength of the program's value proposition. We also see continued momentum in diversifying and expanding our business into growth areas such as alternative accommodations, payments, flights and attractions. For our alternative accommodations at Booking.com, our room night growth was about 10% and growth outpaced our overall business in each of our major regions.

The global mix of alternative accommodation room nights was 36%, which was up 1 percentage point from the third quarter of 2024. Our total merchant gross bookings increased 26% year-over-year in the third quarter. Over the last 4 quarters, merchant gross bookings surpassed $123 billion in total transaction value, representing about 68% of total gross bookings, an increase from about 61% 1 year ago. Our merchant payments business is foundational to the connected trip, offers more flexibility for our travelers and partners and generates incremental revenue and contribution margin dollars for our business. We marked another quarter of solid growth in our other travel verticals, reaffirming our strategic focus on building on our connected trip vision.

During the third quarter, over 17 million airline tickets were booked across our platforms, representing an increase of 32% year-over-year, driven by the continued growth of our flight offerings at Booking.com and Agoda. We also delivered another quarter of meaningful expansion of our attractions vertical with tickets booked on our platforms growing nearly 90% year-over-year from a relatively smaller base. As Glenn mentioned before, we're seeing healthy growth in connected trip transactions, and our data shows that travelers who book more than one travel vertical with us more frequently choose to book directly with us in the future.

The progress across all these initiatives is interrelated, and the combined effect is helping us expand the number of customers who choose to come to us directly and book with higher frequency. Before turning back to our third quarter results, it's important to note that the third quarter has historically been our seasonally highest absolute quarter in terms of revenue and earnings. Gross bookings of $50 billion increased 14% year-over-year or about 10% on a constant currency basis. The constant currency growth rate was approximately 2 percentage points higher than room night growth due to about 1 percentage point from higher bookings growth from flights and other travel verticals as well as an increase in constant currency accommodation ADRs of about 1%. The increase in gross bookings exceeded the high end of our guidance by about 4 percentage points, driven by the room night outperformance as well as about 2% higher accommodation ADRs versus our expectations. The impact from changes in FX was about in line with our expectations.

Third quarter revenue of $9 billion grew 13% year-over-year, which exceeded the high end of our guidance by about 4 percentage points, in line with the outperformance on gross bookings. Constant currency revenue growth was about 8%. Revenue as a percentage of gross bookings of 18.1% was lower by about 30 basis points year-over-year due to an increased mix of flight bookings as well as increased merchandising contra revenue, some of which was tied to bookings made in prior quarters. This was partially offset by higher revenues from payments. Marketing expense, which is a highly variable expense line, increased 9% year-over-year. Marketing expense as a percentage of gross bookings was a source of leverage, driven by changes in traffic mix and lower brand marketing expenses as a percentage of total gross bookings.

We continue to make disciplined investments in social media channels at attractive ROIs. On a combined basis, marketing and merchandising as a percentage of gross bookings also had leverage in the quarter. As expected, third quarter sales and other expenses as a percentage of gross bookings was slightly higher compared to a year ago, driven by an increasing merchant mix resulting in higher payments expenses, partially offset by increased efficiencies in customer service. Adjusted fixed operating expenses increased 10% year-over-year or mid-single digits after normalizing for changes in FX. The year-over-year increase was also impacted by increased cloud costs.

We continue to drive efficiencies in our fixed expenses through our ongoing cost optimization initiatives, while at the same time, reinvesting into the business to effectively drive long-term growth. Adjusted EBITDA of approximately $4.2 billion grew 15% year-over-year, which was about 6 percentage points faster than the high end of our guidance due primarily to stronger revenue growth. Adjusted EPS of $99.50 per share was up 19% year-over-year, faster than the growth in adjusted EBITDA, helped by the benefit of a 4% lower average share count. During the third quarter, we realized approximately $70 million of in-quarter savings from the transformation program, primarily in sales and other expenses and in personnel expenses. We also took further actions during the quarter to advance certain efficiency initiatives into the implementation phase.

And as a result, we now estimate in-year savings for 2025 will exceed $225 million, and we have enabled approximately $450 million in annual run rate savings, surpassing our prior expectations. For the full program, we now expect to deliver about $500 million to $550 million in run rate savings, and we estimate the aggregate transformation costs will be approximately 1x the run rate savings. In the third quarter, we incurred $105 million in transformation costs, which were excluded from our adjusted results. As a reminder, we're reinvesting approximately $170 million above our baseline investments in 2025 to support our strategic priorities for long-term value creation.

This reinvestment is funded by the savings generated from the transformation program, combined with additional operational efficiencies in our ongoing operations. Now turning to our cash and liquidity position. Our third quarter ending cash and investments balance was $17.2 billion compared to our second quarter ending balance of $18.2 billion due to a reduction of $2.4 billion from deferred merchant bookings and other current liabilities. We generated $1.4 billion in free cash flow, offset by capital return activities, including about $700 million in share repurchases and about $300 million in dividends.

Additionally, we paid $1.5 billion to redeem high coupon debt that was originally due in 2030. As we look ahead to the fourth quarter, while there remains some uncertainty in the macroeconomic and geopolitical backdrop, we're pleased to see continued momentum with steady travel demand trends in our business so far in the fourth quarter. As always, we will continue to closely monitor the travel environment for any changes. Our guidance for the fourth quarter assumes recent FX rates for the remainder of the quarter, including the euro-U.S. dollar at $1.17. We estimate changes in FX will positively impact our fourth quarter U.S. dollar reported growth rates by about 5 percentage points. We currently expect fourth quarter room night growth to be between 4% and 6%. We expect growth to moderate from the third quarter as we expect the booking window to be less expended in the fourth quarter. We currently expect fourth quarter gross bookings to increase between 11% and 13%, including about 2 percentage points of positive impact from higher flight ticket growth. We expect constant currency accommodation ADRs to be about in line with last year. We currently expect fourth quarter revenue growth to be between 10% and 12%, lower than the increase in gross bookings due to a higher mix of flight bookings. We currently expect fourth quarter adjusted EBITDA to be between $2 billion and $2.1 billion or about 14% growth at the high end. We currently expect fourth quarter adjusted EBITDA margins to be slightly higher than last year, driven by leverage on adjusted fixed operating expenses.

Turning to the full year 2025. With a strong third quarter on the books, steady trends to date, along with improved visibility for the fourth quarter, we're increasing our full year guidance. Assuming recent FX rates will remain steady for the remainder of the year, we estimate changes in FX will positively impact our full year reported growth rates by about 3 percentage points for gross bookings and revenue and by about 4 percentage points for adjusted EBITDA and adjusted EPS. On a constant currency basis, our latest expectations are above our long-term growth ambition of at least 8% gross bookings and revenue growth and 15% adjusted EPS growth. On a reported basis, for the full year, we now expect room nights to be up about 7%, gross bookings to be up about 11% to 12% revenue to be up about 12%, adjusted EBITDA to be up about 17% to 18% adjusted EBITDA margins to expand year-over-year by about 180 basis points higher than our prior expectation of about 125 basis points, revenue to grow faster than both marketing and adjusted fixed operating expenses, sales and other expenses to grow similar to revenue and adjusted EPS to be up slightly more than 20%.

In conclusion, we're energized and highly motivated by the clear momentum in the business. Our continued progress reinforces our confidence that our loyal customers and global supply, along with our technology and data, all powered by our people, are industry-defining assets that will fuel our long-term success. Thank you to all of my colleagues across the company for their shared commitment and extraordinary work. With that, we'll now take your questions. Operator, will you please open the lines?

[Operator Instructions] And our first question comes from the line of Kevin Kopelman with TD Cowen.

I was hoping to dig in on your U.S. acceleration in Q3. Could you talk about your B2B initiatives in the U.S. that you mentioned and maybe globally? And then it sounds like B2C also accelerated in the U.S. So any additional color on what you saw as the key drivers there would be great.

So obviously, we are very pleased about our U.S. acceleration. I haven't look at the numbers. So I guess this is 3 quarters in a row that we have some acceleration, which is always good to see. And it is both B2B and B2C. And we are pleased about what we're doing in the B2B region. We haven't talked about it a lot in the past. We're not there beating our breath about how great our B2B is, but it's pretty darn good. And we've been winning some contracts. We don't make big announcements about them, but they are good, and we continue to advance. So we're very pleased with where we are. There's nothing really specific to talk about right now. We have talked a little bit about bringing together, become more efficient. We have many different B2B units around the world because we have the different brands have different B2B units. And we're going to create things that are more efficient, really bring the best of all breeds together. So we really have something that's even better for our partners and our travelers. In regards to the B2C area, also good numbers there. We're really pleased to see what we're doing, but this has been a very long-term process that we've been talking about for many, many years about how improving the product will improve the results, and that's what we've been doing. There's nothing that's miracle. There's no magic bullet happening, et cetera. It's bringing the brand together. It's doing the product better. I mean, just to give some examples, I hope people watching the baseball have seen some of our branding there. I certainly have gotten some calls from people. And that's the thing, make people aware that we have a great product and then execute and do what's necessary. If anything goes wrong, provide that great customer service that really brings people back because they love using it. I don't know, if you got anything more to add to that?

Yes. Let me add a few other data points there, Glenn. Kevin, clearly, we saw healthy growth domestically in terms of travel as well as outbound saw some healthy growth. So both were doing well from a U.S. perspective. Another important thing that I would like to point out, and I think we're really positive and really excited about this. This is the growth of our direct channel in the U.S. So what we're seeing is clearly a payoff of our brand awareness that is getting stronger in the U.S., more familiarity and therefore, more customers coming now direct to us in the U.S. So that is really something that has seen quite a step-up in the third quarter, and we see that as a really positive trend. And ultimately, that is all the result of all the investments we have been making over the last number of quarters and years, investments in product, investments in supply, in marketing and in brand. So overall, indeed, thank you for pointing it out. We're very happy where the U.S. is this quarter.

And our next question comes from the line of Doug Anmuth with JPMorgan.

I know you were early in the test program with OpenAI as well. But can you talk about your thought process heading into the app integration and what you're seeing in the early days? And just how should we think about economic impact if bookings were to shift from direct traffic or from Google?

Doug, that's a question that I would have expected. Of course, you sort of -- you gave the answer there about how early it is. So it's a little difficult to talk about anything besides to say it's early. We're very happy to be in the first wave of apps with OpenAI. I think that says something about us and the value we bring to partners that they would do it with us to get it going. It's one of those areas that, obviously, we want to explore every area where a traveler may want to begin their discovery, their inspiration, et cetera, and then be able to provide that traveler with what they need in terms of actually executing what they want to accomplish in their travel needs. Your question is really what will the future be if more and more people start at OpenAI. That obviously is the old -- I think it used to be called a $64,000 question. I think it's probably much bigger nowadays. It's something that a lot of people don't know. But what I am very confident of is that even though people may change over time how they want to start their travel inspiration discovery, I believe that we will always be there in the area to provide what is really necessary, which is going beyond that and executing and doing the actual transaction fulfillment. They're working to make sure they're getting the best value, the area of making sure you're doing the right types of payments, the area making sure you're following all the regulations, very complex. It's one of those things where people sometimes are a little naive about how incredibly complex this travel business is. And it's not so easy. You just throw something, oh, it's easy to just put up a name and somebody is going to be able to book across and disintermediate somewhere. That's not the way the world works. And if it did work that way, we wouldn't disappearing a long time ago. Google would have taken this thing over a long time ago. Look, we're very proud of where we are right now, but we're even more proud of how we are building out even more value. And that goes into things like the connected trip being able to bring together all the different verticals in a way that the traveler really sees the reason they want to come to us because they really are getting more benefit from using us. And of course, the other side, being able to use our connected trip in a way that the partner is able to be able to get more incremental demand. And it's using science. It's using data. It's using our proprietary knowledge that we have that we don't share with people. Those are some of the things that we have that we believe are key that will keep us at the forefront of the travel industry. And I don't know, Ewout, anything you want to add?

Yes. Maybe a couple of points, Doug. Just you also asked about the economics and some of the data. So first of all, what we are seeing in terms of traditional search that we still see volume growth. So travel clicks that are coming to us from traditional search are still going up year-over-year. That, of course, might change over time, but I think that is an important data point. The other is the number of leads that we are receiving from large language models relatively small, but it is growing. And probably over time, these 2 worlds might become more hybrid because we are seeing, of course, more AI being built into browsers at this point in time. What are we measuring in terms of impact? Ultimately, faster search, better conversion, lower cancellation rates and higher customer satisfaction. Very early signals we're having around it, but overall, very encouraged we are with what we are seeing at this moment.

And our next question comes from the line of Lee Horowitz with Deutsche Bank.

Maybe sticking with the topic. There's obviously a lot of noise in the market around some of your hotel partners looking to partner directly with some of the generative search players in order to perhaps increasingly bypass platforms like yourselves. I guess how do you contextualize this particular risk? And what tools do you think you have at your disposal to maybe mitigate this kind of disruption?

So for a very long time, Lee, as you know, hotels have found it a way that they can be shown for, let's say, Google. And some people will go to Google and will go directly to a hotel. When that happens, we would love for people to come to us first, and we continue to try and create something that is a better reason for them to come to us or they just want to go directly to one of our hotel partners. That will probably happen in an LLM world, too. Some people will do that, too. I wouldn't be surprised. But this idea that, that is going to cause this giant shift, I just think that, that's not the way the world is going to work. And again, proof is that it hasn't happened in the old day of Google. And so far, we're seeing that I don't think it's going to happen in an LLM model. One of the things again comes into what do we bring to the table? Why do customers still continue to come to us and they come to us direct. That's a point Ewout made about that mid-60% number of people to us direct in the B2C area, and it continues to grow. It continues to increase. Why is that happening? It's happening because we do a lot of things for the customer that they feel is the best way for them to execute their travel needs. And really a lot of it comes down to trust is giving more value is making sure that they get the best way to do it. And of course, having our Genius program, which Ewout also talked about. And think about that, more than 30% of our active customers in Genius Levels 2 and 3, mid-50% of the room nights at Booking.com. This is a program that really gives incredible value, which is why somebody instead of going direct, they come to us. And as we continue to build that out and are able to provide the exact perfect, perfect offer to that traveler, working with the partner to make sure it's going to be incremental to them. That's a win-win-win, win for the traveler, win for the partner, win for us. Now think about trying to do that in open AI or any of the large language models, that isn't happening. So obviously, I don't disagree. Some people are going to go to a large language model. They'll see a hotel go directly there, sure. But I think that is an overblown threat at this time.

And our next question comes from the line of Mark Mahaney with Evercore ISI.

I wanted to ask 2 topics, please. First is social media. I think you mentioned kind of leaning into social media marketing. And I think you've been talking about this for a year, maybe 2. Could you spend a little bit more time on that? Is that now become a material, let's say, a double-digit percent of your performance marketing coming from there? Do you find that the returns have been continually improving? And then Asia, you ripped on Asia in the opening comments. So could you peel that back a little bit? Are there particular parts within Asia that have really started to perform better for you? You've been -- I know that the region as a whole has got the world's highest travel growth rates. But do you feel like with the good and booking that you've been particularly able to penetrate certain markets better than others?

Mark, this is Ewout. First, on the social media, we continue to experiment and invest and with the social media channels, whilst we also continue to stay very disciplined with respect to ROIs, which is really important because these channels, the ROIs can really fluctuate a lot. So we are very much focused on really being able to measure incremental ROIs in a very clear way. We see different stages of where the social media channels are. Some are more leaning in than others. So changes will happen there over time with all the different channels. I prefer not to go too much in detail which ones are really better working for us than others because, obviously, I don't want to make others smarter than they are at this point in time. But what we like is really diversifying our multiple social media platforms because expanding our performance marketing channels overall is a positive. In terms of spend, you should think about that it is a couple of hundreds of millions, which is meaningful, of course, a total number. But if you look at the total marketing spend for us, it's, of course, still a smaller percentage of the overall spend. In terms of Asia, very clearly, we are very happy with the growth we're seeing in Asia. We have 2 strong brands, 2 different strategies. Agoda is very much focused on localization, and they really present themselves as a Korean company in Korea and a Japanese company in Japan. Booking has farmer the global reach, the global model, the global optimization that they bring to the region. We're making a lot of investments in terms of our product, in terms of our marketing, in terms of our supply. And overall, we are happy with the growth we are seeing, and we're really -- despite, of course, always healthy competition we're having in Asia, we're really holding up very well in that overall environment. Asia is, of course, from a medium- and long-term perspective, the most important market. That is where we will see over the next few decades, the largest growth in the world because the GDP growth is going to be the highest there. There will be very large parts of the population that will start to travel and travel more in the future. So the fact that we are already the market leader outside of Mainland China and being able to be focused to hold that position is going to be positioning us very well for the next couple of years.

And our next question comes from the line of Ronald Josey with Citi.

I have 2, please. Glenn, as entry points to the web and booking evolve here given just newer tools and OpenAI being one of them, just talk to us how maybe this evolves or changes your strategy to attract the, call it, 30%, 35% or so traffic that's not direct. So a question about how the front end is changing and sort of thoughts there. And then on the product side, look, seeing tons of innovation with AI Trip Planner, Penny, Hotel search, AI mode, concierge. I think you talked about the homepage is unique now per user. Talk to us about the impact this might be having on either cancellation rates, conversion rates, things along those lines.

Ron, I'll let Ewout talk your second question. Your first question, you want to hear -- and make sure I understand your question right. You want to hear more about how are we going to deal with trying to get that last 35% to come direct. Is that kind of the question? Maybe give me a little more sense of what asking.

That's exactly right. I guess I'm wondering how much -- how more important brands are going forward as OpenAI goes to this app strategy and as users front end of the web evolves.

Yes. So that is a good question. And of course, as we all know, you don't want to go to 100% direct because you may be missing out on a lot of customers who may come from a different channel. There is there's some type of optimization that we should be doing. But obviously, right now, we still enjoy getting a higher direct coming to us. And how do you do that? Again, it goes back to the simple things as all people who deal with retail type services should is giving more value to that customer. And it's not just having a better travel service, as I said earlier, is you got to make people aware of it. And I know I just got some interesting advertising brand data recently. And in certain areas of the world, U.S., for example, our brand awareness is still not where I'd want it to be. And as I've talked many times in the past on these calls about how certainly in the homes area in the U.S., we are not where I'd like to be in terms of brand awareness. So it's not only improving the product, it's also making people aware of it. That is something that is not something that is impossible. It's actually very possible. It just requires us to continue to do what we've been doing, which is why we've been grinding it out and increasing, albeit not as fast as I'd like, but it hasn't happened. That's increasing the service and putting more brand power behind this. There's nothing really secret about it. There's nothing unique about this. It is just continue to do the work, so to speak. And we've been doing it for -- I've been here now 25 years, and that's how we've gone from a nothing company to now many, many hundreds of millions of outisfed customers. That's basically all we can really say without giving away, here's what we're going to do next quarter, and that's another -- I don't want to tell my competitors what that's going to be. But we're going to keep on doing it, and I am pleased with the progress we've made. Ewout, do you want to give on a second question?

Sure. Ron, we're seeing a couple of things. First, conversion. Definitely, with all the new tools that we're having, we're seeing that people have an opportunity to find easier what they are looking for, can be more targeted, have a faster path to ultimately get to a booking, and that is helping conversion levels. Then also what we are seeing at the same time is that cancellation rates are a bit lower. Every period, if you look at it, it's slightly lower than in the comparable period 1 year ago. And that is also a positive. And we believe that this is not a coincidence. This is also because people can find exactly what they are looking for. So they don't need to continue to search and ultimately cancel one booking and book somewhere else or book something else with us. So they are satisfied with what they have booked. So cancellation rates slowly coming down, also clearly a huge economic effect. And then if something goes wrong, what we're also seeing is that customer service is seeing a huge benefit in what we can deliver, reduced contact rates, faster handling time and higher customer satisfaction. I think it's actually remarkable. If you look at our results this quarter, our customer service costs are down year-over-year, are down year-over-year in absolute terms despite volume growth of close to 10%. So the average cost per booking is coming down very rapidly and the satisfaction scores are going up. So all of these things are interrelated. It's interrelated with all the elements that Glenn said, people come more direct to us, are booking more often with us, are booking more across multiple verticals, are canceling less, are having higher satisfaction and like to come back and book more direct. So all of these things are interrelated and really strengthening each other.

And our next question comes from the line of Justin Post with Bank of America.

Great. A couple. First, I'd like to dive into the U.S. It really seems like the OTA industry is maybe taking some share here. Just wondering if it's the loyalty program, leisure growing faster than business. What's helping the industry take share and you specifically take some share? And then on the algorithm, just wondering, there's a lot of stuff going on with connected trip, obviously, payments and more air. Just could you help us think about how both bookings could grow relative to nights and also how you're thinking about revenue take rates over the next couple of years?

Sure, Justin. I'll talk about the first, and I'll let Ewout talk what kind of specifics he wants to give about the numbers regarding Connected Trip et cetera, the questions you asked. So on the U.S., we talked a little bit about this already, how pleased we are with those numbers. And I did mention brand is obviously important, improving the service and the product, that's important. You asked about consumer versus business. Obviously, we get both, but we do tilt much more to consumer. So clearly, we are doing well in that area. Now as you know, there's a lot of debate about what's going on in the U.S. economy right now. People -- some people saying, well, we have a 2-speed economy where the higher ends of the economic strata are doing very well, and they're spending a lot of money and areas in the bottom part of the economic strata are suffering a little bit more, not being able to purchase as many services perhaps they wanted to, et cetera. It's interesting because we play the entire gamut of the economy. We are able to sell at the top, we sell more economy products and services, too. So clearly, for us, we are able to benefit whether it's a strong economy or not a strong economy, we're doing well. Look, I can't say anything that is more specific than the fact that we continue to execute well, making sure the service is good, make sure all the things that we talked about are working well, making sure we're getting that brand in front of people, making sure if anything goes wrong, we fix it. That's how we do a good job. And it -- as itself and I use that word flywheel. More people become aware of it. They've had a good experience. They come back. Yes, the awareness is not where I'd like it to be, but it is improving. This is the way we do it. And we -- I've been talking about this with you, Justin, we talked about this for many, many years. I said I want to be bigger in the U.S. and that we grow it and here's how we're going to do it, and we're doing it. It's blocking and tackling day by day, improving it. No, as I said already once, I said there are no silver bullets in this business. It's just continue to execute day after day after day. you talk about numbers you trip stuff.

Justin, when we speak about connected trip, I would like to make a distinction between what we're seeing now and then really where we're heading to in the future. So what are we seeing now? We're seeing a lot of our other verticals growing in a very healthy way, flights, 32%, attraction, 90%. We see our payment-related bookings going up in the mid-20%. We see our connected trip transactions, so where someone books more than one vertical for the same trip going up mid-20s. Of course, the direct element is a part of that. So all of these metrics look really in the direction that customers like to really bring those elements together because it's peace of mind, it's all one platform, and we deliver a lot of value for them as a consequence. But if we think about generative AI, this is really the opportunity for us. We can make the real connected trip come to life over the next couple of years. And what I mean with that is building an intelligence layer that all these elements of the trip naturally fit together, are interrelated, all personalized based on what we know and what you like to do and how you like to travel and where you like to dine. If something happens, everything can automatically be updated. It means that people will be more frequently using our app. We can become more proactive in what we offer to you and more and more value can be created as a consequence. So actually, that is our big opportunity around generative AI. And I think the value we can generate in that way is really going to be even more than what we are seeing today. So that's where I am personally really excited about.

Maybe one quick follow-up. Do you think the gap between bookings growth and room night growth can grow?

Yes. There's, of course, always a few things that go in the mix, take FX aside, what are ADRs doing? That is, of course, one element there. It's the growth in other verticals that is going in there. But generally, we would say, yes, because if we take room nights plus ADRs plus other verticals, we would like to, of course, to see that total gross bookings will grow faster than room nights on average over time.

And our next question comes from the line of Trevor Young with Barclays.

Glenn, maybe a bigger picture one for you. From a competitive standpoint, do you foresee competitive intensity picking up over the next 2 to 3 years? It seems as though a major Asia player has aspirations in Europe, while an accommodation competitor is making a big push into traditional hotels and adjacencies. Meanwhile, consumers will have a new channel via AI tools to make travel all that much more accessible. And if you do see competitive intensity picking up, how are you evolving your strategy to better position booking for that environment?

Yes. It's a good question, Trevor. But I have to say that this business, this industry, and I say to the regulators all the time in Europe, has always been one of the most competitive of any industry that I've ever experienced. And sure, there are new things to look at now, and there were old competitors in the past, and they're no longer there. I remember once upon a time, every talk about, what about TripAdvisor? Well, where is TripAdvisor now? No offense to them, but they're not the threat that they were at one point or what's going to happen with Meta. And I can go through over different things that we have had to face incredible competition time after time after time. So sure, there's a lot of competition right now. And I know you're alluding to Trip.com, [indiscernible] in China. Yes, a very good competitor. And sure, now we have AI as a competitive threat, but also in that one, a little different, that gives us incredible benefits to incredible power because of the incredible scale we have and the incredible engineering talent, et cetera, in AI, there's actually a competitive advantage, I would say, in a net-net situation. But in the long run, I believe it's the same way it's always been. We just have to keep on grinding out better things for our services. Look, there's a time there was no such thing as mobile. Mobile comes in, we had to immediately create a great mobile site for our customers, which we did. Well, now we have AI and lots of great things working us can make it even better. One of the really good things about being the scale that we are and the data we have, that proprietary data that we have and the incredible number of customers and partners and all these new things we've already begun to do in all the different verticals. And in addition, things that we don't talk about a lot, things like insurance, for example, we don't talk about that a lot or things we're doing in terms of providing advertising opportunities for our partners. We'll talk about that one, too. There are so many things that we are just beginning to really put together. And putting it all together, us, as I said before, the data, the science, being able to build these things in a way that's much better that smaller players cannot possibly do. That's an advantage we have. So I see actually -- yes, it's extremely competitive, but I said this -- I don't know which quarter recently I said about. I find this is the most exciting time for us ever. I actually see us in a much better position than we were years ago, decades ago. I see this as an opportunity for us to create, as Ewout was just talking about, bringing it all together in a way that we could really accelerate the growth factor here if we do it right over and you pointed out a 5-year type horizon. That's what we want to do. And I believe we can do it, and it's up to us to make sure it does happen.

And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the conference back over to Mr. Glenn Fogel for closing remarks.

Thank you, and I'm glad to end it on that. I think of the future. It's so great. So I want to express my gratitude to our partners, our customers, our dedicated employees and our stockholders. We truly appreciate your support as we continue advancing our long-term vision. Thank you, and good night.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.