Airbnb, Inc. (NASDAQ:ABNB) reported its second-quarter financial results after the closing bell on Wednesday.
Below are the transcripts from the Q2 earnings call.
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OPERATOR
Good afternoon and thank you for joining Airbnb’s earnings conference call for the second quarter of 2025. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb’s website. Following this, I will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.
Angela Yang (Director of Investor Relations)
Good afternoon and welcome to Airbnb’s second quarter of 2025 earnings call. Thank you for joining us today. On the call today we have Airbnb’s co founder and CEO Brian Chesky and our Chief Financial Officer Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for second quarter of 2025. These items were also posted on the investor Relations section of Airbnb’s website. During the call, we’ll make brief opening remarks and then spend the remainder of time on Q and A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward looking statements on the call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also during this call, we will discuss some non GAAP financial measures. We provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our investor relations website. These non GAAP measures are not intended to be a substitute for our GAAP results. With that, I’ll pass the call to Brian.
Brian Chesky (Co-founder and CEO)
All right, thanks, Angela. And good afternoon, everyone. Thanks for joining. Airbnb had a strong Q2. We exceeded expectations across key metrics, including bookings, revenue and margins. And while the quarter started with some global economic uncertainty, travel demand picked up a nice booked and Airbnb accelerated from April to July. We also made meaningful progress across our three strategic priorities. First, we continue to perfect our core service. In Q2, we made improvements to checkout, messaging, merchandising and more flexible payment options, all of which helped us increase revenue. We also expanded our new AI customer service agent in the US reducing the percentage of hosting guests who need to contact a human agent by 15%. Second, we accelerated growth in global markets. Nice booked on an origin basis in our expansion markets have now grown at twice the rate of our core markets for six consecutive quarters. And what this shows is that we’re achieving product market fit, increasing brand awareness and driving traffic in key countries outside the United States. So take Japan for example. Late last year we launched a brand campaign to raise awareness among Japanese travelers. You might want to take a trip within Japan and the early results are really encouraging. In Q2, Japanese travelers booked more nights on Airbnb than they did in Q1, driven by more domestic travel and a 15% year over year increase in first time bookers. We also announced several major partnerships to help accelerate growth in key markets, including a three year partnership with the Tour de France, a global live partnership, music partnership with Lollapalooza, and our continued partnership to IOC for the upcoming Winter Olympics in Milan. And we just announced a three year partnership with FIFA and the World cup, which is the largest event in the world. Large events have been a part of Airbnb’s story from the very beginning. They help us build brand awareness and grow supply in key markets. And while many of these partnerships are high profile, the events themselves are often very local and that’s what makes them so powerful. They highlight our ability to disperse, travel beyond popular city centers and help strengthen relationships with local governments and communities. Finally, our third strategic priority is expand our business beyond stays. And in Q2 we did that in a big way. As part of our 2025 summer release in May, we launched Airbnb Services and completely reimagined Airbnb experiences. We also introduced an all new app making it easier to book homes, services and experiences all in one place. Now, this is our biggest launch to date and it generated more than 13,000 press stories and nearly 660 million social media impressions. After the launch, I traveled around the world to amplify the news in key markets and over the next three weeks I visited six countries and met with over 600 members of the press, policymakers, Airbnb partners and Airbnb hosts. And so far the response to our summer release has been great guest aids, easier to discover, new list offerings on our homepage and finds they’re looking for. And when they book a service experience, the feedback has been incredibly positive. The average guest rating for a service and experience since launch is 4.93 stars out of 5 stars. Now, for context, this outperforms the already impressive 4.8 average rating for homes during the same period, and we’re also seeing strong interest from potential hosts. Since launch, over 60,000 people have submitted applications to host a service or experience. We are really excited by the momentum. It’s still early, but we believe that service experiences can become sizable businesses for Airbnb. Now with that, I’ll turn it over to Ellie for a financial update.
Ellie Mertz (Chief Financial Officer)
Thanks, Brian and good afternoon everyone. I’ll start with a review of our Q2 financial results and then I’ll walk through our outlook for Q3. As Brian mentioned, Q2 marked another strong quarter for us. We had 134 million nights and seats booked up 7% year over year. We also saw an acceleration in year-over-year nights and seats booked with growth rates for May and June both outpacing Q1. Looking at the growth rates by region, Latin America grew in the high teens, Asia Pacific grew in the mid teens, EMEA in the middle single digits and North America in the low single digits. It is worth highlighting that nights and seats booked is a new metric that now includes the number of nights booked for stays as well as the total number of seats booked for both services and experiences. Now turning to our Q2 financials, revenue for the quarter was 3.1 billion, up 13% year over year. In terms of profitability, we generated 1 billion of adjusted EBITDA, representing a 34% margin, up from 32.5% last year. And finally, net income of 642 million and EPS of $1.03 grew 16% and 20% respectively. Next, I’ll turn to our balance sheet and cash flow. We continue to generate significant cash in Q2, delivering 1 billion of free cash flow. Over the past 12 months, we’ve generated 4.3 billion, representing a free cash flow margin of 37%. At the end of Q2, we had 11.4 billion of corporate cash and investments, as well as 11.1 billion of funds held on behalf of Guest. Our strong balance sheet allowed us to repurchase 1 billion of our common stock during the quarter, and we ended Q2 with 1.5 billion remaining on our repurchase authorization. And today we’re announcing a new share repurchase program with authorization to purchase up to an additional 6 billion of our class A common stock. Now, since introducing our share repurchase program in 2022, we’ve reduced our fully diluted share count by 8%. Now let me shift to our Q3 and full year 2025 outlook. As we look to Q3, we’re encouraged by current demand trends, specifically the acceleration of nights booked from April through July. We’ve seen this momentum globally, with especially strong growth in the U.S. that said we do expect year-over-year comparisons to get tougher toward the end of the quarter and that this dynamic will continue into Q4, putting pressure on growth rates later in the year. Specifically for Q3, we expect to generate 4.02 billion to 4.1 billion, representing year-over-year growth of 8 to 10%. This includes minimal impact for foreign exchange. After factoring in our hedges, we expect nights and seats booked to grow at a similar rate to Q2 2025 and for ADR to increase modestly year over year, primarily driven by FX. On profitability, we expect adjusted EBITDA in Q3 to exceed 2 billion, and we anticipate that the adjusted EBITDA margin will be lower than in Q3 2024, primarily due to investments in new growth and policy initiatives. And we expect a similar year-over-year decline of adjusted EBITDA margin in Q4 2025 due to growth investments and a tougher year-over-year. Top line comparison for the full year we continue to expect an adjusted EBITDA margin of at least 34.5%. This includes approximately $200 million of investment towards new businesses in 2025. While we don’t expect meaningful revenue from our new businesses in the near term, we expect or, excuse me, we believe the opportunity is significant and are building with a multi-year view to wrap up. Our Q2 results reflect strong execution across our strategic priorities, perfecting the core, accelerating growth in global markets and expanding beyond the core. We are acting with urgency and focus to drive growth of our core business and to scale services and experiences. And with our strong financial position, we are well equipped to invest in the future in order to create long-term value for our investors. With that, I will open it up to Q and A.
OPERATOR
We will now begin the question-and-answer session. If you’d like to ask a question, press star, then the number one on your telephone keypad. We ask that you please limit your questions to one. Our first question will come from the line of Mark Mahaney with Evercore isi. Please go ahead.
Mark Mahaney (Equity Analyst at Evercore ISI)
Okay, thanks. I think I’ll just like to ask about Airbnb experiences and Brian, what have you seen so far? What do you think would be success in terms of, I don’t know, an attachment rate? Like what’s the. What. What do you other.
Brian Chesky (Co-founder and CEO)
Are there proxies or bogeys out there that you’ve seen other companies or in other industries with kind of the attach rate to a core offering that you think, yeah, that’s where Airbnb should be? It seems to me like it’s a natural, you know, cross sell or you add on. But what’s the goal and how long do you think it’ll take to get there? Thank you very much. Hey, Mark, maybe I’ll just zoom out and just talk about experience and what we’ve seen so far. We’re very, very impressed and satisfied. First of all, the awareness of Airbnb experiences. The biggest problem we’ve had historically, even with the attachment rates, people didn’t know even had Airbnb experiences. The Launch generated over 13,000 articles, 660 million social media impressions. We’ve also seen increased visibility of our product through our newly redesigned homepage. And guests really love Airbnb experiences. We talked about, obviously, that they’re significantly rated more highly than homes on Airbnb. There’s a few things, I mean, attach rate we’re absolutely looking at. We don’t have any numbers to share as far as what we see for potential attach rate, but we think that attach rate can be significantly higher for the completed reimagine of the experiences, than the prior iteration of the product. And the way we’re going to do that is, number one, we need to make sure that we have resonant supply supply that people really, really like. So we’re making sure that we have great listings. This includes Airbnb originals that are the very best experience on Airbnb. The next thing we want to do is make sure we have significantly greater entry points for the product. So we’ve really integrated experiences into the core flow. And the third thing is we’re raising awareness about Airbnb experiences and we think this not only sells experiences, but sells more bookings. A couple other things I’ll just share about airbnb experiences. You know, we’ve had a huge amount of people wanting to list experiences on Airbnb, submit applications, and the other thing, I’ll just point out Airbnb originals. 40% of bookings for Airbnb Originals are from locals or people in the kind of local area where the booking occurs. So what we’re seeing with Airbnb experiences is even though they’re designed for travelers, we also do extend expect to start to see more local demand. So I think what we’re going to see is over the next year, you’re going to see us really focusing on honing in on the tax rate in key cities. Right now, one of the things we’re really focused on is Paris. It’s a really popular corridor for the United States, and we’re really trying to see what we can do on a tax rate in Paris and few other cities like that. Once we get that attach rate up, that will give us a better indication of what’s possible globally. But I’m very, very bullish. I think a large percentage of travelers Airbnb would love to use Airbnb experiences. Thank you, Brian.
OPERATOR
Our next question comes from the line of Richard Clark with Bernstein. Please go ahead.
Richard Clark (Equity Analyst at Bernstein)
Hi, good afternoon. Thanks for taking my question. Just want to unpack maybe a little bit of the guidance. What is the size of the headwind you’re expecting in Q3 maybe from the events the Paris Olympics and you talked about that may continue to Q4. So should we expect Q4 to be slower than Q3? And maybe in addition to that, you’ve called out 3 of your growth markets are now alive and kicking, sort of Brazil, Japan and Germany. Any, any thoughts what you think the sort of right midterm growth rate is now for Airbnb given this sort of success in these new, newer geographies?
Ellie Mertz (Chief Financial Officer)
Sure. Richard. Let me, let me talk a little bit about the Trends for both Q3 and Q4 and then we can turn to global markets. Just to remind you the comps that we’re referring to from last year, you’ll probably recall that at this time last year we and others were seeing quite depressed bookings in July. And so right now we’re kind of comping a softer period from 2024. But over the course of Q3 last year we saw a nice acceleration and exited Q3 at a much stronger rate than we entered. And so that’s the pattern that we are comping directly right now. It was a couple points acceleration over the course of the quarter. What I’ll also call your attention to is the acceleration that we saw beyond Q3 through the end of Q4. So for our business last year in Q3 we grew approximately 8% in terms of nights booked. That accelerated over 4 points to over 12% in Q4. And so that’s the acceleration that we’re referring to in terms of the difficult year-over-year comparison. So when we look at kind of the history of our data and seasonality on the platform, what we’re seeing right now is that 2023 is a bit more of a normalized comp for 25. And so when we look at that year over two year comp, specifically to 23, what it implies is that the hard comp that we will face on a year over year basis in Q4 could result in a bit of decel from Q3 to Q4 on a year over year basis. And we just wanted to highlight that heading into the back half of the year. Your second question was around expansion markets. You know, obviously we called out the real success we’re having in Brazil, in Japan, in Germany, you know, other places that I would call out that we didn’t know in the letter. India is doing quite well. Rest of Latin America also doing quite well. What we’ve called out for some time with regard to our expansion market strategy is that the composition of our business historically has been so concentrated in the core markets that it will take a period of aggregated business mix shift for the elevated level of growth in the expansion markets to be a meaningful contributor to the overall consolidated totals. I think the good news is that the success that we have had in these expansion markets has already started to move the needle in terms of diversifying our global business away from North America. I would say just if you look on a year over year basis, the acceleration or the strength of growth that we’ve seen in Latin America has allowed Latin America to take about 200 basis points of business share within Airbnb from North America and therefore contribute more meaningfully to growth. So, you know, the intent of our strategy is to continue to invest in these markets, continue to gain market share in them, and as they grow as a percent of our overall business, the contribution to growth will commensurately grow as well.
OPERATOR
Our next question will come from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan (Equity Analyst at Goldman Sachs)
Thanks so much for taking the questions I’m curious about from a marketing perspective as you continue to sort of reposition or position Airbnb as a brand globally and move into these areas, such as services and experiences and new growth markets. What are some of the key learnings about the intensity of marketing spend that’s needed to put these dynamics into the market and grow and scale them? And how might sort of the channels of those marketing investments continue to evolve? When you think about looking out just beyond 2025 and more of a medium to longer term view about how you bring the platform closer to consumers.
Brian Chesky (Co-founder and CEO)
Thanks so much. Yeah, Eric, I can start. We think that probably going forward, the best way to market services and experiences is to actually market the entire offering of Airbnb. So immediately upon the launch, we did launch some Airbnb experiences, specific ads, but this fall we’re going to be launching ads that market home services and experiences, the bundled offering. And we think this is a really, really key principle that only Airbnb offers all this in one app. And so we don’t think that the marketing tendency per se has to increase because we think we can get a lot more for our dollar by marketing all of our offerings. And it makes more sense. Right? Airbnb and Ascent is these aren’t disparate offerings. If you book a home, you’re very likely to want a service or experience. So we can market all three. The second thing is channel. So that’s just the strategy. We think that the channels for services, experiences and homes is increasing in the shift of social. Now, why is this going to be the case? Well, one of the things we’re noticing obviously in the whole world seeing is that a lot of travel is switching from desktop to mobile and from Google search to social media. And so increasingly people are spending time on social media. And social media is gradually taking over as the number one place for travel search from Google. And travel is becoming more of an inspiration base than a high intent search based destination platform. So, you know, Airbnb we think is really primed for social media. You know, we are probably the most relevant brand for young American travelers. That is the kind of heart and soul of kind of the social media audience. And I think that, you know, you’re going to see a lot more social media native advertising. So we’re shifting a lot of our advertising from TV to, to social. And we are in. The great thing about social is we can target, we know a lot more about the customers. We know if they’re Airbnb customers, we can actually, when they watch an ad, we can link it to inventory and get them to go directly to the app. …