Booking Holdings Inc.

Previous wording

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, including Part I, Item 1A "Risk Factors," as well as our Unaudited Consolidated Financial Statements and accompanying notes and the Section entitled"Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. The information on our websites is not a part of this Quarterly Report and is not incorporated herein by reference.

Current wording

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, including Part I, Item 1A "Risk Factors," as well as our Unaudited Consolidated Financial Statements and accompanying notes and the Sections entitled "Risk Factors" and"Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. We use the Investor Relations page of our website (ir.bookingholdings.com) to disclose material information for purposes of the SEC's Regulation Fair Disclosure. We encourage our investors to monitor this website in addition to our other public announcements and SEC filings as information posted on that page could be deemed to be material information. The information on our websites is not a part of this Quarterly Report and is not incorporated herein by reference.

Previous wording

We evaluate certain operating and financial measures on both an as-reported and constant currency basis. We calculate constant currency based on the predominant transactional currency in each country, converting our current-year period results into currencies other than U.S. Dollars using the corresponding prior-year period monthly average exchange rates.

Current wording

We evaluate certain operating and financial measures on both an as-reported and constant currency basis. We calculate constant currency based on the predominant transactional currency in each country, converting our current-year period results in currencies other than U.S. Dollars using the corresponding prior-year period monthly average exchange rates.

Previous wording

Our mission is to make it easier for everyone to experience the world. We aim to provide consumers with a best-in-class experience offering the travel choices they want, with tailored planning, payment, language, and other options, seamlessly connecting them with our travel service provider partners. We offer these services through five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable. See Note 14 to our Unaudited Consolidated Financial Statements for segment reporting and geographic information.

Current wording

Our mission is to make it easier for everyone to experience the world. We aim to provide consumers with a best-in-class experience with tailored planning, payment, language, and other options, seamlessly connecting them with our travel service provider partners. We offer these services through five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable.

Previous wording

We derive substantially all of our revenues from enabling consumers to make travel service reservations. We also earn revenues from advertising services, restaurant reservation and management services, travel-related insurance offerings, and other services.

Current wording

We derive substantially all of our revenues from enabling consumers to make travel service reservations. We also earn revenues from payment facilitation, advertising, restaurant reservation and management services, travel-related insurance offerings, and other services.

Previous wording

Our global room nights in 2024 increased 9% year-over-year driven primarily by healthy travel demand in Europe and Asia. We saw the booking window expand in 2024 compared to 2023, which benefited year-over-year room night growth.

Current wording

Our global room nights in 2025 increased 8% year-over-year driven primarily by healthy travel demand in Europe and Asia. We saw the booking window expand in 2025 compared to 2024, which benefited year-over-year room night growth.

Previous wording

While the geopolitical and macroeconomic environment can impact global travel demand, we believe our diversified global portfolio of leading travel brands, flexible platforms, and strong financial position would help us to navigate a range of scenarios. We continue to take a long-term view, staying focused on delivering value to our travelers and partners, maintaining disciplined cost management, and making strategic investments as appropriate.

Current wording

While the geopolitical and macroeconomic environment can impact global travel demand, we believe our diversified global portfolio of leading travel brands, flexible platforms, and strong financial position helps us to navigate a range of scenarios. We continue to take a long-term view, staying focused on delivering value to our travelers and partners, maintaining disciplined cost management, and making strategic investments as appropriate.

Previous wording

The cancellation rate in the third quarter of 2025 was lower than the third quarter of 2024. Because we recognize revenues from bookings when the traveler checks in, our reported revenues are not at risk of being reversed due to cancellations. Increases in cancellation rates can negatively impact our marketing efficiency as a result of incurring performance marketing expenses at the time a booking is made even though that booking could be canceled in the future.

Current wording

The cancellation rate in the first quarter of 2026 was lower than the first quarter of 2025, although we experienced a year-over-year increase in cancellation rates during the month of March due to the conflict in the Middle East. Because we recognize revenues from bookings when the traveler checks in, our reported revenues are not at risk of being reversed due to cancellations. Late in the first quarter of 2026, the increase in cancellation rates negatively impacted our marketing efficiency since we incur performance marketing expenses at the time a booking is made even if that booking is canceled in the future.

Previous wording

In the third quarter of 2025, our global average daily rates ("ADRs") on a constant currency basis were approximately 1% higher than the prior year, driven primarily by higher ADRs in Europe. Our global ADRs were slightly negatively impacted by a higher mix of room nights in Asia, which is a lower ADR region. Excluding the changes in regional mix, our global ADRs on a constant currency basis were up approximately 1% year-over-year. The year-over-year increase in our global ADRs on a constant currency basis has resulted in constant currency accommodation gross bookings growing faster than room nights in the third quarter of 2025.

Current wording

In the first quarter of 2026, our global average daily rates ("ADRs") on a constant currency basis were approximately 1% higher than the prior year primarily driven by higher ADRs in Europe. Our global ADRs were not materially impacted by changes in regional mix in the first quarter of 2026.

Previous wording

We focus on relentless innovation to grow our business by providing a best-in-class user experience with intuitive, easy-to-use online platforms that aim to exceed the expectations of consumers. We have a long-term strategy to create an ideal traveler experience, offering our customers relevant options and connections at the times and in the language they want them, making trips booked with us seamless, easy, and valuable. We refer to this as the "Connected Trip." The goal of our Connected Trip vision is to offer a differentiated and personalized online travel planning, booking, payment, and in-trip experience for each trip, enhanced by a robust loyalty program that provides value to travelers and partners across all trips. We believe these efforts will help improve traveler loyalty, frequency, and mix of direct bookings over time. We believe these improvements will benefit revenue growth and marketing efficiency in the future, however, to the extent our non-accommodation services have lower margins and increase as a percentage of our total business, our operating margins may be negatively affected.

Current wording

We focus on relentless innovation to grow our business by providing a best-in-class user experience with intuitive, easy-to-use platforms that aim to exceed the expectations of consumers. We are executing against our long-term strategy to create an ideal AI-powered traveler experience, offering our customers relevant options and suggestions at the times and in the language they want them, making trips booked with us seamless, easy, and valuable. We refer to this as the "Connected Trip." The goal of our Connected Trip vision is to offer a differentiated and personalized travel planning, booking, payment, and in-trip experience for each trip, enhanced by a robust loyalty program that provides value to travelers and partners across all trips. While we believe these efforts will help improve traveler loyalty, frequency, and mix of direct bookings over time, which will benefit revenue growth and marketing efficiency in the future, the expansion of our Connected Trip vision involves a higher proportion of non-accommodation services which have lower margins than our accommodation services. To the extent these non-accommodation services increase as a percentage of our total business, our overall operating margins may be negatively affected.

Previous wording

Our mobile app is an important platform for experiencing the Connected Trip since the app travels with the traveler. The mix of our room nights booked on a mobile app was a mid-fifties percentage over the trailing twelve months ended September 30, 2025, up from a low-fifties percentage over the trailing twelve months ended September 30, 2024. The significant majority of room nights booked on our mobile apps are direct, and we continue to see favorable repeat direct booking behavior from consumers in our mobile apps, which allow us more opportunities to engage directly with them. The revenues earned on a transaction on a mobile app may be less than a typical desktop transaction as we see different consumer purchasing patterns across devices. For example, accommodation reservations made on a mobile app typically are for shorter lengths of stay and have lower accommodation ADRs.

Current wording

Our mobile apps are an important platform for experiencing the Connected Trip since the app travels with the traveler. The mix of our room nights booked on our mobile apps over the trailing twelve months ended March 31, 2026, was a high-fifties percentage, up from a mid-fifties percentage over the trailing twelve months ended March 31, 2025. The significant majority of room nights booked on our mobile apps are direct, and we continue to see favorable repeat direct booking behavior from consumers in our mobile apps, which allow us more opportunities to engage directly with them. The revenues earned on a transaction on a mobile app may be less than a typical desktop transaction as we see different consumer purchasing patterns across devices. For example, accommodation reservations made on a mobile app typically are for shorter lengths of stay and have lower accommodation ADRs.

Previous wording

As part of our strategy to provide more payment options to consumers and travel service providers, increase the number and variety of our accommodations, and enable our long-term Connected Trip strategy, Booking.com increasingly processes transactions on a merchant basis, where it facilitates payments from travelers for the services provided. This allows Booking.com to process transactions for travel service providers and increasingly offer secure and flexible transaction terms to consumers, such as the form, currency, and timing of payment. The mix of our total gross bookings generated on a merchant basis was 72% in the third quarter of 2025, an increase from 65% in the third quarter of 2024. We believe that expanding these types of service offerings will benefit consumers and travel service providers, as well as our gross bookings, room night, and earnings growth rates. However, this results in additional expenses for personnel, payment processing, chargebacks (including those related to fraud), and other expenses related to these transactions, which are recorded in "Personnel" expenses and "Sales and other expenses" in our Unaudited Consolidated Statements of Operations, as well as associated incremental revenues (e.g., payment card rebates), which are recorded in "Merchant revenues." To the extent more of our business is generated on a merchant basis, we incur a greater level of these merchant-related expenses, which negatively impacts our operating margins despite increases in associated incremental revenues. Over the trailing twelve months ended September 30, 2025, the incremental revenues from facilitating payments were greater than the associated incremental variable expenses.

Current wording

We continue to expand our merchant service offerings as part of a broader strategy to provide more payment options to travelers and travel service providers, increase the variety of our accommodations, and enable our long-term Connected Trip strategy. These merchant services allow us to facilitate payments from travelers and offer secure, flexible transaction terms, such as varied payment forms, currencies, and timing. The mix of our total gross bookings generated on a merchant basis across the Company was 72% in the first quarter of 2026, an increase from 67% in the first quarter of 2025 due to the ongoing shift from agency to merchant bookings at Booking.com. We believe that expanding these types of service offerings will benefit consumers and travel service providers, as well as our gross bookings, room night, and earnings growth rates. However, this results in additional expenses for personnel, payment processing, chargebacks (including those related to fraud), and other expenses related to these transactions, which are recorded in "Personnel" expenses and "Sales and other expenses" in our Unaudited Consolidated Statements of Operations, as well as associated incremental revenues (e.g., payment card rebates), which are recorded in "Merchant revenues." To the extent more of our business is generated on a merchant basis, we incur a greater level of these merchant-related expenses, which negatively impacts our operating margins despite increases in associated incremental revenues. Over the trailing twelve months ended March 31, 2026, the incremental revenues from facilitating payments were greater than the associated incremental variable expenses.

Previous wording

We have established widely-used and recognized brands through marketing and promotional campaigns. Our total performance and brand marketing expenses, which are substantially variable in nature, were $2.3 billion in the third quarter of 2025, up 9% versus the third quarter of 2024 as a result of the year-over-year growth in travel demand and increases in brand marketing investments. Our performance marketing expenses, which represent a substantial majority of our marketing expenses, are primarily related to the use of online search engines (primarily Google), affiliate marketing, meta search, and social media channels to generate bookings through our platforms. Our brand marketing expenses are primarily related to costs associated with producing and airing digital branding and television advertising.

Current wording

We have established widely-used and recognized brands through marketing and promotional campaigns. Our total performance and brand marketing expenses, which are substantially variable in nature, were $2.1 billion in the first quarter of 2026, up 16% versus the first quarter of 2025 as a result of the year-over-year growth in travel demand and due to changes in foreign currency exchange rates. Our performance marketing expenses, which represent a substantial majority of our marketing expenses, are primarily related to the use of online search engines (primarily Google), affiliate marketing, meta search, and social media channels to generate bookings through our platforms. Our brand marketing expenses are primarily related to costs associated with producing and airing digital branding and television advertising.

Previous wording

Marketing efficiency, expressed as marketing expenses as a percentage of gross bookings, and performance marketing returns on investment ("ROIs") are impacted by a number of factors that are in some cases outside of our control. Such factors include ADRs, costs per click, cancellation rates, foreign currency exchange rates, search engine bidding algorithms, channel mix, our ability to convert paid traffic to booking customers, and the timing and effectiveness of our brand marketing and social media marketing campaigns. In recent years, ROIs have generally been stable. However, ROIs could be negatively impacted by increased levels of competition and other factors. When evaluating our performance marketing spend, we typically consider several factors for each channel, such as the customer experience on the advertising platform, the incremental bookings we receive, and anticipated repeat rates. Marketing efficiency is also impacted by the extent to which consumers book directly with us. The mix of our total room nights booked by consumers coming directly to our platforms was a mid-fifties percentage over the trailing twelve months ended September 30, 2025 and was higher if we exclude the room nights booked through affiliate programs (i.e., business-to-business). The mix of total room nights booked by consumers coming directly to our platforms increased year-over-year, which benefited our marketing efficiency over the trailing twelve months ended September 30, 2025.

Current wording

Marketing efficiency, expressed as marketing expenses as a percentage of gross bookings, and performance marketing returns on investment ("ROIs") are impacted by a number of factors that are in some cases outside of our control. Such factors include ADRs, costs per click, cancellation rates, foreign currency exchange rates, search engine bidding algorithms, channel mix, our ability to convert paid traffic to booking customers, and the timing and effectiveness of our brand marketing and social media marketing campaigns. When evaluating performance marketing spend, we typically consider several factors for each channel, such as the customer experience on the advertising platform, the incremental bookings we receive, and anticipated repeat rates. The impact of cancellation rates on ROIs was evident in the first quarter of 2026, as a notable portion of our spend occurred prior to the onset of the conflict in the Middle East, which resulted in diminished returns on performance marketing expenses as many bookings sourced through paid channels were subsequently canceled due to the conflict.

Previous wording

Booking.com had approximately 4.4 million total properties on its website at September 30, 2025, representing an increase from approximately 3.9 million total properties at September 30, 2024. At September 30, 2025, the total properties on Booking.com's website consisted of approximately 3.9 million alternative accommodation properties (including homes, apartments, and other unique places to stay) and approximately 500,000 hotels, motels, and resorts.

Current wording

Booking.com had approximately 4.5 million total properties on its website at March 31, 2026, representing an increase from approximately 4.1 million total properties at March 31, 2025. At March 31, 2026, Booking.com's website had approximately 4.0 million alternative accommodation properties (including homes, apartments, and other unique places to stay) and 500,000 hotels, motels, and resorts.

Previous wording

The mix of Booking.com's room nights booked for alternative accommodation properties in the third quarter of 2025 was approximately 36%, up versus approximately 35% in the third quarter of 2024. We have observed a longer-term trend of an increasing mix of room nights booked for alternative accommodation properties as consumer demand for these types of properties has grown, and as we have increased the number and variety of these properties on Booking.com. We may experience lower profit margins due to additional costs from offering alternative accommodations, such as increased customer service or certain partner related costs. As our alternative accommodation business grows, these different characteristics may negatively impact our profit margins.

Current wording

The mix of Booking.com's room nights booked for alternative accommodation properties in the first quarter of 2026 was approximately 38%, up versus approximately 37% in the first quarter of 2025. We have observed a longer-term trend of an increasing mix of room nights booked for alternative accommodation properties as consumer demand for these types of properties has grown, and as we have increased the number and variety of these properties on Booking.com. We may experience lower profit margins due to additional costs from offering alternative accommodations, such as increased customer service or certain partner related costs. As our alternative accommodation business grows, these different characteristics may negatively impact our profit margins. A larger proportion of Booking.com's alternative accommodation room nights are located in Europe compared to our total company room night mix; consequently, our alternative accommodations business is more exposed to the regional impacts of the conflict in the Middle East than our total business.

Previous wording

In the fourth quarter of 2024, we began the implementation of the organizational changes that are expected to improve operating expense efficiency, increase organizational agility, free up resources that can be reinvested into further improving our offering to travelers and partners, and better position our business for the long term (the "Transformation Program"). The Transformation Program resulted in approximately $120 million in savings in the first nine months of 2025. Given the stronger-than-expected early results of the Transformation Program, we are raising our expectation for the ultimate annual run-rate savings to a range of $500 to $550 million from our previous guidance of $400 to $450 million, as compared to our 2024 expense base. We expect to deliver these run-rate savings by the end of 2027, with about half of the savings expected to be achieved after 2025. We expect that the restructuring costs and accelerated investments related to the Transformation Program will be incurred by the end of 2027 and are estimated to be, in the aggregate, approximately one times the expected annual run-rate savings.

Current wording

In the fourth quarter of 2024, we began the implementation of organizational changes to improve operating expense efficiency, increase organizational agility, free up resources that can be reinvested into further improving our offering to travelers and partners, and better position our business for the long term (the "Transformation Program"). The Transformation Program resulted in approximately $250 million in savings in 2025 and, as of the end of 2025, enabled approximately $550 million in annual run-rate savings. We expect to realize these run-rate savings by the end of 2026. We expect that the restructuring costs and accelerated investments related to the Transformation Program will largely be incurred by the end of 2026 and are estimated to be, in the aggregate, less than one times the expected annual run-rate savings.

Previous wording

Many taxing authorities seek to increase tax revenues and have targeted large multinational technology companies. Many jurisdictions, particularly in the EU, have implemented or are considering the adoption of a digital services tax or similar tax that imposes a tax on revenues earned from digital advertisements or the use of online platforms, even when there is no physical presence in the jurisdiction. Rates for these taxes range from 1.5% to 10% of revenues deemed generated in the jurisdiction. We record the applicable digital services taxes in "Sales and other expenses" in the Unaudited Consolidated Statements of Operations. The recent One Big Beautiful Bill Act (the "BBB Act") changes certain international, foreign tax credit, and domestic tax provisions in the United States effective in 2025 and 2026. While the BBB Act did not result in a significant impact to our income tax expense or effective tax rate for the three and nine months ended September 30, 2025, we are evaluating the impact of the BBB Act and it could have a negative impact on our results of operations and cash flows as it relates to provisions that are not yet effective. See Part I, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Many taxing authorities seek to increase tax revenues and have targeted large multinational technology companies. Many jurisdictions, particularly in the EU, have implemented or are considering the adoption of a digital services tax or similar tax that imposes a tax on revenues earned from digital advertisements or the use of online platforms, even when there is no physical presence in the jurisdiction. Rates for these taxes range from 1.5% to 10% of revenues deemed generated in the jurisdiction. We record the applicable digital services taxes in "Sales and other expenses" in the Unaudited Consolidated Statements of Operations. The recent One Big Beautiful Bill Act (the "BBB Act") changes certain international, foreign tax credit, and domestic tax provisions in the U.S. effective in 2025 and 2026. Certain provisions of the BBB Act that are effective in 2026 and impact our effective tax rate include U.S. interest expense limitation rules and utilization of additional foreign tax credits in calculating U.S. federal tax related to our international earnings. The impact of the BBB Act could have a negative impact on our results of operations and cash flows. See Part I, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities" in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Increased regulatory focus on large technology companies could result in increased compliance costs or otherwise adversely affect our business. For example, the European Commission designated the Company as a gatekeeper under the Digital Markets Act in 2024 and Booking.com as a "Very Large Online Platform" under the Digital Services Act in 2023. As a result of these designations, we are subject to additional rules and regulations that may not be applicable to our competitors. See Part I, Item 1A, Risk Factors - "Our business is subject to various competition, consumer protection, and online commerce laws and regulations around the world, and as the size of our business grows, scrutiny of our business by legislators and regulators in these areas may intensify" in our Annual Report on Form 10-K for the year ended December 31, 2024 and Note 13 to our Unaudited Consolidated Financial Statements.

Current wording

Increased regulatory focus on large technology companies could result in increased compliance costs or otherwise adversely affect our business. For example, we are subject to rules and regulations that may not apply to our competitors because the European Commission designated the Company as a "gatekeeper" and Booking.com as a "Very Large Online Platform" under the Digital Markets Act and the Digital Services Act, respectively. See Part I, Item 1A, Risk Factors - "Our business is subject to various competition, consumer protection, and online commerce laws and regulations around the world, and as the size of our business grows, scrutiny of our business in these areas may intensify" in our Annual Report on Form 10-K for the year ended December 31, 2025 and Note 13 to our Unaudited Consolidated Financial Statements.

Previous wording

Our businesses outside of the U.S. represent a substantial majority of our financial results, but because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates (principally related to Euros and British Pounds Sterling). See Note 14 to our Unaudited Consolidated Financial Statements for information related to revenues by geographic area. As a result of these movements, the absolute amounts of and percentage changes in our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses, and net income as expressed in U.S. Dollars are affected. Our total revenues increased by approximately 13% in the third quarter of 2025 as compared to the third quarter of 2024, including a benefit of about 4% from changes in foreign currency exchange rates. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations.

Current wording

Our businesses outside of the U.S. represent a substantial majority of our financial results, but because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates (principally related to Euros and British Pounds Sterling). As a result of these movements, the absolute amounts of and percentage changes in our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses, and net income as expressed in U.S. Dollars are affected. Our total revenues increased by approximately 16% in the first quarter of 2026 as compared to the first quarter of 2025, including a benefit of about 6% from changes in foreign currency exchange rates. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations.

Previous wording

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations. In addition, we designate certain portions of the aggregate principal value of our Euro-denominated debt as a hedge of the foreign currency exposure of the net investment in certain Euro functional currency subsidiaries. Foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recognized in "Other income (expense), net" in the Unaudited Consolidated Statements of Operations. Such foreign currency transaction gains or losses are dependent on the amount of net assets of the Euro functional currency subsidiaries, the amount of the Euro-denominated debt that is designated as a hedge, and fluctuations in foreign currency exchange rates. See Notes 6, 9, and 15 to our Unaudited Consolidated Financial Statements and Part I, Item 1A, Risk Factors - "We are exposed to fluctuations in foreign currency exchange rates" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations. In addition, we may designate certain portions of the aggregate principal value of our Euro-denominated debt as a hedge of the foreign currency exposure of the net investment in certain Euro functional currency subsidiaries. See Notes 6, 9, 12, and 15 to our Unaudited Consolidated Financial Statements and Part I, Item 1A, Risk Factors - "We are exposed to fluctuations in foreign currency exchange rates" in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain of our accounting estimates are important to our financial position and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We use our judgment to determine the appropriate assumptions to be used in the determination of certain estimates and we evaluate our estimates on an ongoing basis. Estimates are based on historical experience, terms of existing contracts, our observance of trends in the travel industry, and on other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. For a discussion of our critical accounting estimates for the valuation of investments in private entities, income taxes, and contingencies, see the "Critical Accounting Estimates" section of Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Certain of our accounting estimates are important to our financial position and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We use our judgment to determine the appropriate assumptions to be used in the determination of certain estimates and we evaluate our estimates on an ongoing basis. Estimates are based on historical experience, terms of existing contracts, our observance of trends in the travel industry, and on other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. For a discussion of our critical accounting estimates for the valuation of goodwill and other long-lived assets, income taxes, and contingencies, see the "Critical Accounting Estimates" section of Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Three and Nine Months Ended September 30, 2025 compared to the Three and Nine Months Ended September 30, 2024

Current wording

Three Months Ended March 31, 2026 compared to the Three Months Ended March 31, 2025

Previous wording

Room nights reserved through our services increased year-over-year for the three and nine months ended September 30, 2025 driven primarily by increased travel demand in Europe and Asia. Rental car days reserved through our services increased year-over-year for the three and nine months ended September 30, 2025 driven primarily by growth in rental car days reserved on Booking.com. Airline tickets reserved through our services increased year-over-year for the three and nine months ended September 30, 2025 driven primarily by the expansion of flight offerings at Booking.com and Agoda.

Current wording

For the three months ended March 31, 2026, room nights reserved through our services increased year-over-year, driven primarily by increased travel demand in Europe, Asia, and the U.S., partially offset by negative growth in Rest of World, which includes the Middle East. We estimate room night growth was negatively impacted by approximately 2 percentage points due to the conflict in the Middle East. Rental car days reserved through our services decreased year-over-year for the period due to higher average daily car rental prices and a negative impact from the conflict in the Middle East. Airline tickets reserved through our services increased year-over-year for the period driven by the expansion of flight offerings at Booking.com and Agoda, partially offset by a negative impact from the conflict in the Middle East.

Previous wording

The year-over-year increase in merchant gross bookings during the three and nine months ended September 30, 2025 was due primarily to growth in gross bookings from accommodation reservation services and flight reservation services at Booking.com and Agoda. Merchant gross bookings also increased year-over-year and agency gross bookings decreased year-over-year for the three and nine months ended September 30, 2025 due to the ongoing shift from agency to merchant bookings at Booking.com.

Current wording

For the three months ended March 31, 2026, the year-over-year increase in merchant gross bookings was due primarily to growth in accommodation reservation services and flight reservation services at Booking.com and Agoda. Merchant gross bookings also increased year-over-year and agency gross bookings decreased year-over-year for the period due to the ongoing shift from agency to merchant bookings at Booking.com.

Previous wording

The year-over-year increase in total gross bookings for the three and nine months ended September 30, 2025 was due primarily to the increase in room nights, a positive impact of foreign exchange rate fluctuations, a positive impact from growth in flight gross bookings, and an increase in constant currency accommodation ADRs.

Current wording

The year-over-year increase in total gross bookings for the three months ended March 31, 2026 was due to a 7% positive impact from changes in foreign currency exchange rates, 6% increase in room nights, 1% higher constant currency ADRs, and a positive impact from the growth in flight gross bookings. We estimate that the conflict in the Middle East impacted gross bookings growth in line with the impact observed in room night growth.

Previous wording

Flight gross bookings increased 30% and 31% year-over-year for the three and nine months ended September 30, 2025, respectively, due to airline ticket growth, partially offset by lower average airline ticket prices. Rental car gross bookings increased 10% and 9% year-over-year for the three and nine months ended September 30, 2025, respectively, due to rental car days growth and higher average daily car rental prices.

Current wording

Flight gross bookings increased 25% year-over-year for the three months ended March 31, 2026 due to airline tickets growth, partially offset by lower average airline ticket prices. Rental car gross bookings increased 7% year-over-year for the period due to higher average daily car rental prices, partially offset by a decrease in rental car days growth.

Previous wording

See "Results of Operations" in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information on our revenues, including merchant, agency, and advertising and other revenues. Substantially all of our revenues are generated by providing online travel reservation services, which facilitate online travel purchases by travelers from travel service providers.

Current wording

See Note 2 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information on our revenues, including merchant, agency, and advertising and other revenues. Substantially all of our revenues are generated by providing online travel reservation services, which facilitate online travel purchases by travelers from travel service providers.

Previous wording

The year-over-year increase in merchant revenues during the three and nine months ended September 30, 2025 was due primarily to growth in revenues from accommodation reservation services at Booking.com. Merchant revenues also increased year-over-year while agency revenues decreased year-over-year for the three and nine months ended September 30, 2025 due to the ongoing shift from agency to merchant revenues at Booking.com. Advertising and other revenues increased year-over-year for the three and nine months ended September 30, 2025 due to growth at OpenTable and growth in advertising revenues at Booking.com.

Current wording

For the three months ended March 31, 2026, the year-over-year increase in merchant revenues was due primarily to growth in revenues from accommodation reservation services at Booking.com. Merchant revenues also increased year-over-year for the period, while agency revenues decreased, due to the ongoing shift from agency to merchant revenues at Booking.com. Advertising and other revenues increased year-over-year for the period due to growth at OpenTable and growth in advertising revenues at Booking.com. The year-over-year increase in total revenues for the period included a 6% benefit from changes in foreign currency exchange rates.

Previous wording

Total revenues as a percentage of gross bookings decreased year-over-year for the three months ended September 30, 2025 due to an increase in the mix of flight gross bookings, which have lower revenues as a percentage of gross bookings, and an increase in merchandising, partially offset by an increase in revenues related to facilitating payments. Total revenues as a percentage of gross bookings increased year-over-year for the nine months ended September 30, 2025 due to an increase in revenues related to facilitating payments, as well as a positive impact from differences in the timing of booking versus travel, partly offset by an increase in the mix of flight gross bookings.

Current wording

Total revenues as a percentage of gross bookings increased year-over-year for the three months ended March 31, 2026 due to an increase in revenues related to facilitating payments, as well as a positive impact from the timing of booking versus travel. This was partly offset by an increase in the mix of flight gross bookings, which have lower revenues as a percentage of gross bookings. While the conflict in the Middle East negatively impacted our revenues during the first quarter, it had a more pronounced downward impact on our gross bookings. Because we recognize revenues at the time of travel, the associated impact on revenues from the reduction in new booking activity and the increase in cancellations will not be fully realized until future quarters. We estimate that the conflict in the Middle East impacted revenue growth slightly lower than the impact observed in room night growth.

Previous wording

See Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information about the components of our operating expenses and the related accounting policies. The year-over-year growth in our total operating expenses for the three and nine months ended September 30, 2025 was increased by changes in foreign currency exchange rates.

Current wording

See Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information about the components of our operating expenses and the related accounting policies. The year-over-year growth in our total operating expenses for the three months ended March 31, 2026 was increased in part by changes in foreign currency exchange rates.

Previous wording

Our marketing expenses, which are substantially variable in nature, increased year-over-year for the three and nine months ended September 30, 2025, to help drive additional gross bookings and revenues. Marketing expenses as a percentage of total gross bookings in the three months ended September 30, 2025 were lower than in the three months ended September 30, 2024 due to changes in traffic mix and lower brand marketing expenses as a percentage of total gross bookings.

Current wording

Our marketing expenses, which are substantially variable in nature, increased year-over-year for the three months ended March 31, 2026, to help drive additional gross bookings and revenues, and were increased by changes in foreign currency exchange rates. Marketing expenses as a percentage of total gross bookings in the three months ended March 31, 2026 were slightly higher than the three months ended March 31, 2025, driven primarily by the impact of the conflict in the Middle East. Due to the conflict, certain performance marketing expenses yielded diminished or negligible returns as bookings sourced through paid channels were subsequently canceled resulting in lower average ROIs. Excluding the impact of the Middle East conflict, we achieved modest marketing leverage in the quarter, supported by the growth in our direct channel, which was partially offset by declines in SEO, which remains a small component of our overall distribution mix.

Previous wording

Sales and other expenses, which are substantially variable in nature, increased year-over-year for the three and nine months ended September 30, 2025 due primarily to an increase in merchant transaction costs of $158 million and $294 million, respectively, related to the ongoing shift from agency to merchant transactions at Booking.com. Sales and other expenses as a percentage of total revenues increased year-over-year for the three months ended September 30, 2025 due to increased merchant transactions, which grew faster than revenue, partially offset by efficiencies in third-party customer service costs. Sales and other expenses as a percentage of total revenues decreased year-over-year for the nine months ended September 30, 2025 due to efficiencies in third-party customer service costs, lower digital services taxes and other similar taxes, as well as lower provisions for expected credit losses, partially offset by the impact of increased merchant transactions, which grew faster than total revenue.

Current wording

Sales and other expenses, which are substantially variable in nature, increased year-over-year for the three months ended March 31, 2026 due primarily to an increase in merchant transaction costs of $112 million related to the ongoing shift from agency to merchant transactions at Booking.com, as well as due to changes in foreign currency exchange rates. Sales and other expenses as a percentage of total revenues decreased year-over-year for the period primarily due to a benefit of $31 million resulting from the repeal in March 2026 of Canadian digital services taxes related to prior years, as well as efficiencies in third-party customer service costs, partially offset by the impact of increased merchant transactions costs, which grew faster than total revenue.

Previous wording

Personnel expenses increased year-over-year for the three and nine months ended September 30, 2025 primarily due to increases in salary expenses and bonus expense accruals, both of which were increased by changes in foreign currency exchange rates. The year-over-year increase in personnel expenses for the nine months ended September 30, 2025 was partially offset by a $170 million reduction during the three months ended March 31, 2025 in the accrual related to the Netherlands pension fund matter. Employee headcount of approximately 24,800 as of September 30, 2025 increased by 2% year-over-year.

Current wording

Personnel expenses increased year-over-year for the three months ended March 31, 2026 primarily due to the impact of a $170 million reduction during the three months ended March 31, 2025 in the accrual related to the Netherlands pension fund matter. Salary expenses increased year-over-year for the three months ended March 31, 2026 due to changes in foreign currency exchange rates. Employee headcount increased 2% year-over-year to approximately 24,900 as of March 31, 2026.

Previous wording

Information technology expenses increased year-over-year for the three months ended September 30, 2025 due primarily to an increase in expenses related to cloud computing costs and an increase in software license and system maintenance fees. Information technology expenses increased year-over-year for the nine months ended September 30, 2025 due primarily to an increase in expenses related to cloud computing costs.

Current wording

Information technology expenses increased year-over-year for the three months ended March 31, 2026 due primarily to an increase in cloud computing costs and software license and system maintenance fees, as well as changes in foreign currency exchange rates.

Previous wording

See "Trends" above for additional information on the Transformation Program. For the three and nine months ended September 30, 2025, Program related costs primarily consist of employee termination benefits and professional fees. See Note 17 to our Unaudited Consolidated Financial Statements.

Current wording

See "Trends" above and Note 17 to our Unaudited Consolidated Financial Statements for additional information on the Transformation Program. Transformation costs decreased year-over-year for the three months ended March 31, 2026 due primarily to lower professional fees.

Previous wording

Interest expense decreased year-over-year for the three months ended September 30, 2025 primarily due to lower interest costs associated with cash management activities, the redemption of senior notes in August 2025, and the maturity of senior notes in September 2024, partially offset by the issuance of senior notes in May 2025 and November 2024. Interest expense increased year-over-year for the nine months ended September 30, 2025 primarily due to the amortization of debt discount related to the convertible senior notes (see Note 9 to our Unaudited Consolidated Financial Statements) and the issuance of senior notes in November 2024. Interest and dividend income decreased year-over-year for the three and nine months ended September 30, 2025 primarily due to lower interest rates, partially offset by higher money market fund investment balances.

Current wording

Interest expense decreased year-over-year for the three months ended March 31, 2026 primarily due to the amortization in 2025 of debt discount related to the convertible senior notes that matured in May 2025 (see Note 9 to our Unaudited Consolidated Financial Statements). Interest and dividend income decreased year-over-year for the three months ended March 31, 2026 primarily due to lower interest rates.

Previous wording

Our primary source of funds for operations is the cash flow that we generate from operations. We use our cash for a variety of needs, including ongoing investments in our business, share repurchases, dividends, repayment of debt, and capital expenditures. Our continued access to sources of liquidity depends on multiple factors. See Part I, Item 1A, Risk Factors - "Our liquidity, credit ratings, and ongoing access to capital could be materially and negatively affected by global financial conditions and events" in our Annual Report on Form 10-K for the year ended December 31, 2024. Our financial results and prospects are almost entirely dependent on facilitating the sale of travel-related services. Marketing expenses, sales and other expenses, and personnel expenses are our most significant operating expenses. See our Unaudited Consolidated Statements of Operations and "Trends" and "Results of Operations" above for additional information. We believe that our existing cash balances, liquid resources, and access to capital markets will be sufficient to fund our operating activities and other obligations in the short term and into the foreseeable future.

Current wording

Our primary source of funds for operations is the cash flow that we generate from operations. We use our cash for a variety of needs, including ongoing investments in our business, share repurchases, dividends, repayment of debt, and capital expenditures. Our continued access to sources of liquidity depends on multiple factors. See Part I, Item 1A, Risk Factors - "Our liquidity, credit ratings, and ongoing access to capital could be materially and negatively affected by global financial conditions and events" in our Annual Report on Form 10-K for the year ended December 31, 2025. Our financial results and prospects are almost entirely dependent on facilitating the sale of travel-related services. Marketing expenses, personnel expenses, and sales and other expenses are our most significant operating expenses. See our Unaudited Consolidated Statements of Operations and "Trends" and "Results of Operations" above for additional information. We believe that our existing cash balances, liquid resources, and access to capital markets will be sufficient to fund our operating activities and other obligations in the short term and into the foreseeable future.

Previous wording

At September 30, 2025, we had $17.2 billion in cash, cash equivalents, and investments, of which approximately $11.1 billion is held by our international subsidiaries. Cash, cash equivalents, and long-term investments held by our international subsidiaries are denominated primarily in Euros, U.S. Dollars, and British Pounds Sterling. Our investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. See Notes 5 and 6 to our Unaudited Consolidated Financial Statements.

Current wording

At March 31, 2026, we had $16.5 billion in cash, cash equivalents, and investments, of which approximately $12.1 billion is held by our international subsidiaries. Cash, cash equivalents, and long-term investments held by our international subsidiaries are denominated primarily in Euros, U.S. Dollars, and British Pounds Sterling. Our investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. See Notes 5 and 6 to our Unaudited Consolidated Financial Statements.

Previous wording

Deferred merchant bookings of $6.3 billion at September 30, 2025 includes cash payments received from travelers in advance of us completing our performance obligations and are comprised principally of amounts estimated to be payable to travel service providers as well as our estimated future revenue for our commission or margin and fees. The amounts are mostly subject to refunds for cancellations.

Current wording

Deferred merchant bookings of $8.2 billion at March 31, 2026 includes cash payments received from travelers in advance of us completing our performance obligations and are comprised principally of amounts estimated to be payable to travel service providers as well as our estimated future revenue for our commission or margin and fees. The amounts are mostly subject to refunds for cancellations.

Previous wording

Our outstanding senior notes at September 30, 2025 had cumulative interest to maturity (based on coupon interest rates) of $5.5 billion, with $621 million payable within the next twelve months.

Current wording

Our outstanding senior notes at March 31, 2026 had cumulative interest to maturity (based on coupon interest rates) of $5.4 billion, with $650 million payable within the next twelve months.