Episode Details

Expedia Group, Inc. (EXPE) Q2 2026 — Gross bookings $33,928M UP 12%. Revenue $4,315M UP 14%. Adjusted EBITDA $1,119M UP 23% with 196bps of margin expansion. Adjusted EPS $5.76 vs the $5.22 bar - the sixth straight beat - and FY2026 guidance raised to $16.05-$16.22B. But B2B grew revenue 23% and added only $38M of profit. Expedia beat on every line and raised full-year guidance. But the story everyone tells about it is wrong. B2B - the segment called the growth engine - grew revenue 23% and added $38M of adjusted EBITDA. B2C, the consumer brands everyone calls melting, grew 8% and added $161M. Of the $211M of new profit, 76% came from the slow half. B2B converted 13 cents of each new revenue dollar; B2C converted 81. THE CALL: ACCUMULATE (3/5, A CHEAP BUSINESS AT AN EXPENSIVE MOMENT) — base-case value ~$362.0 vs ~$319.66 today. KEY METRICS: - CALL: ACCUMULATE 3/5, fair value ~$362 vs the $319.66 pre-print close (+13%), ABOVE the $312 average of the six targets refreshed after the print (BofA $331, UBS $322, Argus $315, Jefferies $310, Morgan Stanley $300, Baird $294). Base $362 (2026 owner cash flow $2,300M growing 6.5% then 4.0%, 9.5% discount, 2.5% terminal); bull $510; bear $243. Run it backwards and tonight's price needs only 4.4% growth. - THE GROWTH ENGINE IS NOT WHERE THE PROFIT CAME FROM. Adjusted EBITDA went $908M to $1,119M - $211M of new profit. B2C contributed $161M (76%) on 8% revenue growth; B2B contributed $38M (18%) on 23% revenue growth. Incremental margins: B2C 81%, B2B 13%. B2C margin +380bps to 33.2%; B2B margin MINUS 258bps to 24.8%. B2B direct selling and marketing rose 22% to $915M - 61% of B2B's own revenue, paid to the partners that bring the volume. - THE RAISE STILL GUIDES H2 TO HALF OF H1. First-half revenue grew 14.3%. The raised FY midpoint of $16.135B implies second-half revenue of $8,394M against $7,959M - about +5.5%, with Q4 near +4%. Gross bookings the same: H1 +12.3%, implied H2 +5.1%. But the Q2 guide given on May 7 was +9-11% revenue and +7-9% bookings, and Expedia printed +14% and +12%, with 196bps of margin expansion against a 50-100bps guide. Six straight EPS beats. The guide is the sandbag. - THE HEADLINE FREE CASH FLOW IS CUSTOMER MONEY. First-half free cash flow $5,026M against first-half net income of $872M - because deferred merchant bookings rose $4,998M, 92% of operating cash flow. That is travel paid for and not yet taken, and it unwinds in H2. Screeners show a ~15% FCF yield; charge the $412M of stock comp against $2,391M of TTM adjusted earnings and owner earnings are $2,061M - a 5.4% yield. Meanwhile a NEW $5B authorisation in Q1, $700M repurchased in Q1, then $200M in Q2 at about $227. - A QUARTER OF THE 36% EPS GROWTH IS NOT OPERATIONS. Adjusted earnings $706M vs $546M, up 29.3%. Adjusted EPS $5.76 vs $4.24, up 35.8%. At last year's 128.9M adjusted share count the same $706M is $5.48 - so $0.28 of the $1.52, about 18%, is the buyback. Another ~$0.11 is the adjusted tax-rate assumption falling from 21.5% to 20.0%. And GAAP EPS of $7.16 is ABOVE adjusted because of a $280M mark on minority equity investments, $2.29 a share. - VALUATION: 16.9x TTM adjusted EPS of $18.94, 15.4x our 2026 estimate, 18.6x charging stock comp in full, and 9.3x EV to TTM adjusted EBITDA of $3,958M - against Booking Holdings at 15.1x and Airbnb at 28.7x. Net cash of $1.67B. Revenue margin 12.7%, UP 27bps. Room nights 111.5M +6%, ADR $220.60 +5%, but booked air tickets FELL 5%. trivago revenue $145M, +48%. What to watch: UP: B2B adjusted EBITDA margin back above 27%, a Q3 that beats the $4.75B top of the guide, or quarterly buybacks back above $700M. BEAR: revenue margin back below 12.4%, B2C direct marketing growing faster than B2C revenue, or Q4 guided under $3.65B. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.