Expedia Group (EXPE) shares plunged more than 8% Friday following the company's first-quarter earnings report and a grim outlook for the rest of the year.
The results weren’t a disaster, but they confirmed what many investors already suspected: U.S. consumers are pulling back, and the risk of a recession is rising. For a service-driven economy - where roughly 72% of GDP depends on consumer spending - this is a red flag for the broader market.
Expedia’s Q1 numbers were mixed.
Earnings per share came in slightly above expectations, thanks in part to strength in its high-margin B2B and advertising segments. Total revenue grew by just 3%, missing Wall Street estimates and highlighting sluggish consumer demand, especially in the company’s core U.S. travel markets.
Expedia is the third major travel company to flash a yellow light for the summer travel season.
Airbnb and Booking Holdings both posted cautious results in the past two weeks, and now Expedia is confirming the slowdown.
Expedia’s B2B business - primarily partner bookings through other platforms - continued to outperform. Gross bookings rose 14% year-over-year in this segment, driven by strong demand in Asia-Pacific.
B2B room night growth hit 6%, and the segment contributed $8.8 billion in gross bookings. It’s a bright spot for Expedia.
But the consumer-facing side of the business is under pressure.
Total gross bookings rose just 4%, and growth in the U.S. lagged significantly behind international markets. This is especially troubling since the U.S. market remains Expedia’s largest and most profitable region.
VRBO, once seen as Expedia’s answer to Airbnb, delivered in-line growth with the U.S. market in Q1. That’s an improvement from prior quarters, which were weighed down by a complex re-platforming effort completed in late 2023. Now that VRBO is integrated into Expedia’s unified tech stack, product improvements and supply expansion are starting to gain traction.
Still, VRBO remains at a competitive disadvantage. Airbnb has a stronger brand, better international penetration, and a more nimble user base. Higher-priced vacation rentals like those found on VRBO are also more exposed to macroeconomic uncertainty. That makes this part of the business especially vulnerable heading into a potentially soft summer travel season.
One area where Expedia did deliver strong performance was advertising. Revenue from this segment jumped 20% year-over-year. The revenue increase was driven by Expedia Group Media Solutions and trivago’s hotel referral engine.
With more advertisers targeting travel-savvy audiences - and new AI-powered tools helping boost engagement - this segment is becoming a margin producer.
Adjusted EBITDA margin expanded by 105 basis points to 9.9%, and the company expects more gains in Q2.
Management is guiding for an additional 75-100 bps of margin expansion next quarter, which could help offset some of the revenue pressure.
But as travel demand softens, even the best-margin businesses can struggle to maintain momentum.
From a technical perspective, the stock looks fragile. Expedia is now trading below its 50-day moving average - a bearish signal that first appeared in March and has persisted since. More importantly, the stock is hovering just above its $150 support level, which coincides with its 20-month moving average.
In addition, shares of Expedia are preparing to form a "Death Cross" pattern. The Death Cross is a technical formation that occurs when a stock's 50-day moving average crosses below its 200-day. The pattern represents building negative momentum that will pressure prices for the next 3-6 months.
If EXPE closes below that threshold, it would officially trigger a long-term bear market signal. That would open the door for further downside, especially if consumer sentiment continues to deteriorate and the macro picture worsens this summer.
Expedia’s weak guidance didn’t just disappoint investors - it confirmed broader fears about the health of the U.S. consumer. While the company still has strengths in B2B travel and advertising, those are unlikely to carry the stock if consumer demand falters further.
Shares of Expedia (EXPE) are preparing to move into a long-term bear market with a price target of $110.
