Expedia’s SWOT analysis: travel giant navigates shifting market with AI and B2B focus

Expedia Group, Inc. (NASDAQ:EXPE), a leading online travel company with a market capitalization of $25.94 billion, has been navigating a complex landscape of opportunities and challenges as it seeks to maintain its position in the competitive travel industry. Recent financial results and strategic initiatives have painted a mixed picture for the company, with strong performance in some segments offset by concerns in others. According to InvestingPro analysis, the stock appears undervalued relative to its Fair Value, suggesting potential upside for investors. This comprehensive analysis examines Expedia’s current situation, future prospects, and the factors that could shape its trajectory in the coming years.

Recent Financial Performance

Expedia reported robust second-quarter results for 2025, surpassing consensus estimates on key metrics. Gross bookings reached $30.4 billion, representing a 5% year-over-year increase, while revenue climbed 6% to $3.8 billion. The company’s adjusted EBITDA of $908 million, with a margin of 24.0%, demonstrated an expansion from the previous year and exceeded analyst expectations. Notably, the company maintains impressive gross profit margins of 89.61%, among the highest in the industry. InvestingPro data reveals that 13 analysts have recently revised their earnings estimates upward for the upcoming period, reflecting growing confidence in Expedia’s performance.

A standout performer for Expedia has been its B2B segment, which has now achieved 16 consecutive quarters of double-digit growth. In the second quarter, B2B bookings surged by 17% year-over-year, driven by strength in Asia and increased adoption of the company’s Rapid API. This consistent growth in the B2B sector has become a crucial driver for Expedia’s overall performance.

The company’s advertising revenue has also shown significant promise, increasing by 19% year-over-year. This growth has been attributed to the introduction of new ad formats and improved automation in the advertising suite. As advertising now represents approximately 5% of Expedia’s total revenue, it has become an increasingly important contributor to the company’s financial results.

Strategic Initiatives and Growth Drivers

Expedia has been focusing on several key strategic initiatives to drive long-term growth and improve its competitive position. One of the most notable efforts has been the integration of artificial intelligence (AI) across its B2C applications. The company held its annual product event, Explore 2025, which highlighted these AI integrations and their potential to streamline travel research, planning, and booking processes for consumers.

The expansion of Expedia’s B2B offerings through new APIs is another area of focus. This initiative aims to drive growth beyond traditional air and accommodation bookings, potentially opening up new revenue streams and strengthening the company’s position in the B2B travel market.

Enhancements to Expedia’s advertising suite are expected to contribute to increased advertising revenue growth over time. The company has been investing in new ad types and tools for partners, which have shown early signs of success in driving engagement and conversion rates.

Expedia has also made adjustments to its OneKeyCash loyalty program, which now boasts over 100 million members. These changes, including reduced earnings for loyalty members on Vrbo bookings, are expected to support margin expansion by reducing merchandising levels. However, this strategy carries the risk of potentially affecting customer loyalty in the short term.

Competitive Landscape and Market Trends

The online travel industry remains highly competitive, with Expedia facing challenges from both established players and emerging competitors. The company’s B2C growth has been lagging behind some of its peers, particularly in the Hotels.com and Vrbo segments. This underperformance in the consumer-facing business has raised concerns among analysts about Expedia’s ability to maintain or grow its market share in key areas.

A significant challenge for Expedia has been the softness in the U.S. travel market, which has been impacting the company’s performance due to its substantial exposure to this region. International travel to the U.S. has seen notable declines on certain routes, adding to the pressure on Expedia’s domestic business.

Despite these challenges, the broader travel industry has shown resilience, with durable travel demand supporting growth across various segments. Expedia’s diverse portfolio of brands and its strong presence in both B2B and B2C markets have helped the company navigate these market fluctuations.

Analyst Outlook and Projections

Analysts have provided mixed assessments of Expedia’s prospects, reflecting the complex dynamics at play in the company’s business and the broader travel industry. Many analysts maintain neutral or "Equal Weight" ratings on Expedia stock, citing concerns about valuation and competitive pressures.

Some analysts have raised their price targets for Expedia based on recent performance and improved margin expectations. However, others have expressed caution about the company’s ability to sustain growth and expand margins in the face of ongoing challenges in the U.S. travel market and intensifying competition in the B2B segment.

Projections for Expedia’s future performance vary, with some analysts expecting modest bookings growth acceleration on an ex-FX basis. However, the path to margin expansion is generally viewed as challenging, despite stable trends in the B2B business. Management’s commitment to shareholder value is evident through aggressive share buybacks, and the company’s strong financial position is reflected in its cash reserves exceeding debt levels. Want deeper insights? InvestingPro subscribers have access to over 30 additional financial metrics and expert analysis that can help inform investment decisions.

Bear Case

How might continued softness in the U.S. travel market impact Expedia’s growth?

Expedia’s significant exposure to the U.S. travel market poses a substantial risk to its growth prospects. The company has already experienced headwinds due to decreased demand for travel within and into the United States. If this trend persists or worsens, it could have a cascading effect on Expedia’s financial performance.

The U.S. market is crucial for several of Expedia’s brands, particularly Vrbo, which is highly exposed to domestic travel trends. A prolonged downturn in U.S. travel could lead to reduced bookings, lower revenue, and potentially erode market share as travelers may opt for alternative accommodations or competitors’ offerings.

Furthermore, the impact on Expedia’s B2C segment could be particularly pronounced. With B2C growth already lagging behind peers, a soft U.S. market could exacerbate this underperformance and put additional pressure on the company’s overall growth trajectory. This could necessitate increased marketing spend to maintain market share, potentially impacting profitability and margin expansion goals.

Could rising competition in the B2B segment erode Expedia’s market share?

While Expedia’s B2B segment has been a bright spot in recent quarters, showing consistent double-digit growth, the intensifying competition in this space presents a significant risk. As more players recognize the potential of the B2B travel market, Expedia may face challenges in maintaining its growth rate and market position.

Increased competition could lead to pricing pressures, potentially reducing the high gross margins (around 97%) that Expedia currently enjoys in its B2B business. Competitors may offer more attractive terms to partners, forcing Expedia to either match these offers or risk losing market share.

Additionally, as the B2B market becomes more crowded, differentiation becomes crucial. Expedia will need to continuously innovate and enhance its offerings to stay ahead. This could require significant investments in technology and product development, which may impact short-term profitability even if they are necessary for long-term competitiveness.

Bull Case

How could Expedia’s AI integrations and product improvements drive increased conversion and revenue?

Expedia’s focus on integrating AI across its B2C applications presents a significant opportunity for growth and improved user experience. These AI-driven enhancements have the potential to streamline the travel planning and booking process, making it more intuitive and personalized for users.

By leveraging AI to better understand user preferences and behavior, Expedia could significantly improve its recommendation algorithms. This could lead to higher conversion rates as users are presented with more relevant and appealing travel options. Improved conversions would directly translate to increased bookings and revenue.

Furthermore, AI integrations could enhance Expedia’s ability to upsell and cross-sell additional services, such as car rentals, activities, or travel insurance. By intelligently presenting these options at the right time in the customer journey, Expedia could increase the average value per booking.

The company has already reported encouraging early data points on the impact of these product improvements. If these trends continue and accelerate, Expedia could see a substantial boost in user engagement, repeat bookings, and overall revenue growth across its portfolio of brands.

What is the growth potential for Expedia’s advertising business?

Expedia’s advertising business has shown impressive growth, with revenue increasing by 19% year-over-year in the most recent quarter. This segment now represents approximately 5% of the company’s total revenue, indicating significant room for expansion.

The growth potential for Expedia’s advertising business is substantial for several reasons. First, the company’s vast user base and rich data on travel preferences provide a valuable platform for targeted advertising. As Expedia continues to refine its ad formats and targeting capabilities, it could attract more advertisers looking to reach travel-minded consumers.

Second, the shift towards digital advertising in the travel industry plays to Expedia’s strengths. As more travel-related businesses allocate larger portions of their marketing budgets to online channels, Expedia is well-positioned to capture this growing market.

Lastly, Expedia’s investments in new ad types and automation tools for partners could drive further growth. These enhancements could make it easier for advertisers to create and manage campaigns, potentially increasing ad spend on Expedia’s platforms.

If Expedia can continue to innovate in this space and leverage its unique position in the travel ecosystem, the advertising business could become a major driver of revenue growth and profitability in the coming years.

SWOT Analysis

Strengths

• Consistent double-digit growth in B2B segment
• Strong performance in advertising revenue
• Diverse portfolio of well-known travel brands
• Large and growing loyalty program membership

Weaknesses

• B2C growth lagging behind peers
• Heavy exposure to the U.S. travel market
• Challenges in maintaining market share in some segments
• Lower EBITDA margins compared to some competitors

Opportunities

• AI integration across B2C applications
• Expansion of B2B offerings through new APIs
• Growth potential in advertising business
• International market expansion, particularly in Asia

Threats

• Softness in the U.S. travel market
• Intensifying competition in both B2B and B2C segments
• Potential economic downturns affecting travel demand
• Regulatory changes impacting the online travel industry

Analyst Targets

• JMP Securities - Market Perform rating, no specific price target (August 12, 2025)
• Barclays - Equal Weight rating, $197 price target (August 8, 2025)
• Cantor Fitzgerald - Neutral rating, $170 price target (May 15, 2025)
• RBC Capital Markets - Sector Perform rating, $180 price target (May 9, 2025)
• Wells Fargo - Equal Weight rating, $199 price target (February 7, 2025)

This analysis is based on information available up to August 14, 2025, and reflects the complex landscape Expedia navigates as it seeks to leverage its strengths, address challenges, and capitalize on emerging opportunities in the ever-evolving travel industry. The stock has demonstrated impressive momentum, delivering a 63.24% return over the past year and currently trading near its 52-week high of $213. For comprehensive valuation analysis, real-time metrics, and expert insights, explore Expedia’s full potential with InvestingPro’s detailed research report, available as part of our coverage of 1,400+ top US stocks.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on EXPE. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore EXPE’s full potential at InvestingPro.

Should you invest in EXPE right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if EXPE is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate EXPE further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if EXPE appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.