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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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.
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.
Overview
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.
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.
Trends
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.
In the third quarter of 2025, global room nights increased 8% year-over-year, in line with the 8% growth in the second quarter of 2025, and faster than the 7% growth in the first quarter of 2025. We saw healthy travel demand across all our major regions in the third quarter of 2025.
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.
Quarterly Room Nights and Change versus the prior year
Change vs. PY (1)
(1) Room night growth rates are rounded for presentation purposes.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Although we believe that providing an extensive collection of properties, excellent customer service, and an intuitive, easy-to-use platform are important factors influencing a consumer's decision to make a reservation, for many consumers the price of the travel service is the primary factor determining whether to book. Discounting and couponing (i.e., merchandising) occurs across the major regions in which we operate, particularly in Asia. In some cases, our competitors are willing to make little or no profit on a transaction or offer travel services at a loss in order to gain market share. As a result, it is important to offer travel services at a competitive price, whether through discounts, coupons, closed-user group rates or loyalty programs, increased flexibility in cancellation policies, or otherwise. Some of these initiatives, such as discounts, may result in lower ADRs and lower revenues as a percentage of gross bookings as they can reduce the daily room rate and are recognized as contra-revenue.
Over the long term, we intend to continue to invest in marketing and promotion, technology, and personnel, as well as exploring strategic alternatives such as acquisitions, within parameters consistent with efforts to improve long-term operating results. To create room for these investments, we intend to continue to look for ways to optimize our expenses.
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.
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.
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.
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.
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.
Critical Accounting Estimates
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.
Valuation of Goodwill and other Long-lived Assets
We review long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related asset group. In the accounting for business combinations, the excess of the consideration transferred over the net of the amounts allocated to the identifiable assets acquired and liabilities assumed is recognized as goodwill. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination. When the composition of one or more reporting units is changed, goodwill is reassigned to the affected reporting units using a relative fair value approach. A substantial portion of our intangible assets and goodwill relates to the acquisitions of OpenTable, KAYAK, and Getaroom.
We test goodwill for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We test goodwill at a reporting unit level and our annual goodwill impairment tests are performed as of September 30.
The estimation of the recoverable values of asset groups and the fair values of our reporting units reflects numerous assumptions that are subject to various risks and uncertainties, including key assumptions regarding each reporting unit's expected growth rates and operating margin and with respect to matters outside of our control, such as discount rates and market comparables. Generally, changes in the assumptions used for comparable company multiples would result in directionally similar changes in the fair value and changes in the assumptions used for discount rates would result in directionally opposite changes in the fair value. The estimation of fair value requires significant judgments and estimates and actual results could be materially different than the judgments and estimates used. Future events and changing market conditions may lead us to re-evaluate the assumptions used to estimate the fair values of our reporting units. Such changes may include travel service providers reducing or withdrawing from our services, generative AI better enabling or offering alternatives for travel service providers to reach consumers, or competitors affecting our ability to market to and reach consumers in a cost-efficient way.
Impairment of Goodwill and Intangible Assets
As of September 30, 2025, we performed our annual goodwill impairment test. Except for the KAYAK reporting unit, the fair values of our reporting units exceeded their respective carrying values.
For the KAYAK reporting unit's goodwill, we recognized an impairment charge of $180 million for the three and nine months ended September 30, 2025, resulting in an adjusted carrying value of $203 million at September 30, 2025. In addition, for the KAYAK asset group's intangible assets (trade names and supply and distribution agreements), we recognized an impairment charge of $277 million for the three and nine months ended September 30, 2025. The impairments were primarily driven by a reduction in the forecasted cash flows for KAYAK, reflecting its meta-search business being impacted by expected increases in customer acquisition costs.
The estimated fair value of KAYAK was determined using a combination of standard valuation techniques, including an income approach (discounted cash flow) and a market approach (applying comparable company multiples). The income approach estimates fair value utilizing long-term growth rates and discount rates applied to the cash flow projections. In the cash flow projections, we assume that KAYAK will experience a decline in profitability. An increase or decrease of one percentage point to the earnings before interest, taxes, depreciation and amortization ("EBITDA") growth rates used in the cash flow projections would result in an increase of approximately $45 million and a decrease of approximately $40 million, respectively, to the estimated fair value of KAYAK as of September 30, 2025. The discount rate is determined based on the reporting unit's estimated weighted-average cost of capital and adjusted to reflect the risks inherent in its cash flows, which require significant judgments. If the discount rate used in the income approach increases or decreases by 0.5%, the impact to the estimated fair value of KAYAK at September 30, 2025 ranges from a decrease of approximately $20 million to an increase of approximately $25 million. The market approach estimates value using prices and other relevant information generated by market transactions involving comparable publicly-traded companies, including the use of the EBITDA multiple. A change in the assumption used for the EBITDA multiple would result in a directionally similar change in the fair value.
At September 30, 2025, the fair values of KAYAK's trade names and supply and distribution agreements were $103 million and $76 million, respectively, estimated using an income approach. The key unobservable inputs used for these intangible assets include royalty rates, distributor margins, and supplier attrition rates (in the range of 2% to 5%, as applicable) and the useful lives of the trade names (20 years). Significant changes in any of these inputs in isolation would result in significantly different fair value measurements. Generally, a change in the assumption used for the royalty rate, distributor margin, and expected useful life would result in a directionally similar change in the fair value and a change in the assumption used for the attrition rate would result in a directionally opposite change in the fair value.
See Note 8 to our Unaudited Consolidated Financial Statements for additional information.
Recent Accounting Pronouncements
See Note 1 to our Unaudited Consolidated Financial Statements, which is incorporated by reference into this Item 2, for details regarding recent accounting pronouncements.
Results of Operations
Three and Nine Months Ended September 30, 2025 compared to the Three and Nine Months Ended September 30, 2024
Operating and Statistical Metrics
Our financial results are driven by certain operating metrics that encompass the booking and other business activity generated by our travel and travel-related services. 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 Operating and Statistical Metrics, including room nights, rental car days, airline tickets, and merchant and agency gross bookings.
Room nights, rental car days, and airline tickets reserved through our services were as follows:
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Room nights | 323 | 299 | 8.2 | % | 951 | 883 | 7.7 | % | ||||||||||||||||||||||||||||||
| Rental car days | 23 | 23 | 2.1 | % | 70 | 66 | 6.2 | % | ||||||||||||||||||||||||||||||
| Airline tickets | 17 | 13 | 32.3 | % | 50 | 36 | 40.0 | % |
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.
Gross bookings resulting from reservations of room nights, rental car days, and airline tickets made through our merchant and agency categories were as follows (numbers may not total due to rounding):
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Merchant gross bookings | $ | 35,737 | $ | 28,362 | 26.0 | % | $ | 99,211 | $ | 79,952 | 24.1 | % | ||||||||||||||||||||||||||
| Agency gross bookings | 13,932 | 15,085 | (7.6) | % | 43,863 | 48,460 | (9.5) | % | ||||||||||||||||||||||||||||||
| Total gross bookings | $ | 49,668 | $ | 43,447 | 14.3 | % | $ | 143,074 | $ | 128,413 | 11.4 | % |
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.
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.
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.
Revenues
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.
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Merchant revenues | $ | 6,131 | $ | 4,972 | 23.3 | % | $ | 13,506 | $ | 10,806 | 25.0 | % | ||||||||||||||||||||||||||
| Agency revenues | 2,569 | 2,753 | (6.7) | % | 6,177 | 6,660 | (7.3) | % | ||||||||||||||||||||||||||||||
| Advertising and other revenues | 308 | 269 | 14.1 | % | 885 | 802 | 10.3 | % | ||||||||||||||||||||||||||||||
| Total revenues | $ | 9,008 | $ | 7,994 | 12.7 | % | $ | 20,568 | $ | 18,268 | 12.6 | % | ||||||||||||||||||||||||||
| % of Total gross bookings | 18.1 | % | 18.4 | % | 14.4 | % | 14.2 | % |
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.
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.
Operating Expenses
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.
Marketing Expenses
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Marketing expenses | $ | 2,340 | $ | 2,151 | 8.8 | % | $ | 6,256 | $ | 5,700 | 9.8 | % | ||||||||||||||||||||||||||
| % of Total gross bookings | 4.7 | % | 5.0 | % | 4.4 | % | 4.4 | % | ||||||||||||||||||||||||||||||
| % of Total revenues | 26.0 | % | 26.9 | % | 30.4 | % | 31.2 | % |
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.
Sales and Other Expenses
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Sales and other expenses | $ | 1,022 | $ | 872 | 17.2 | % | $ | 2,623 | $ | 2,370 | 10.7 | % | ||||||||||||||||||||||||||
| % of Total gross bookings | 2.1 | % | 2.0 | % | 1.8 | % | 1.8 | % | ||||||||||||||||||||||||||||||
| % of Total revenues | 11.4 | % | 10.9 | % | 12.8 | % | 13.0 | % |
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.
Personnel
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Personnel | $ | 945 | $ | 868 | 9.0 | % | $ | 2,534 | $ | 2,501 | 1.3 | % | ||||||||||||||||||||||||||
| % of Total revenues | 10.5 | % | 10.9 | % | 12.3 | % | 13.7 | % |
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.
General and Administrative
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| General and administrative | $ | 254 | $ | 575 | (55.9) | % | $ | 595 | $ | 873 | (31.9) | % | ||||||||||||||||||||||||||
| % of Total revenues | 2.8 | % | 7.2 | % | 2.9 | % | 4.8 | % |
General and administrative expenses decreased year-over-year for the three and nine months ended September 30, 2025 due to the impact of the $365 million accrual in the third quarter of 2024 related to the proposed settlement of certain Italian indirect tax matters, partially offset by a $45 million expense in the third quarter of 2025 related to the resolution of another indirect tax matter. In addition, the year-over-year decrease in general and administrative expenses in the nine months ended September 30, 2025, was impacted by a $78 million reduction in the second quarter of 2024 in the accrual related to the fine imposed by the Spanish competition authority. The year-over-year decrease in our general and administrative expenses for the three and nine months was partially offset by changes in foreign currency exchange rates.
Information Technology
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Information technology | $ | 242 | $ | 194 | 24.9 | % | $ | 661 | $ | 564 | 17.2 | % | ||||||||||||||||||||||||||
| % of Total revenues | 2.7 | % | 2.4 | % | 3.2 | % | 3.1 | % |
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.
Depreciation and Amortization
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 160 | $ | 155 | 2.9 | % | $ | 472 | $ | 434 | 8.7 | % | ||||||||||||||||||||||||||
| % of Total revenues | 1.8 | % | 1.9 | % | 2.3 | % | 2.4 | % |
Depreciation and amortization expenses increased year-over-year for the three and nine months ended September 30, 2025 due primarily to increased amortization expense related to internally-developed software as well as depreciation of computer equipment.
Impairment
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Impairment | $ | 457 | $ | — | * | $ | 457 | $ | — | * | ||||||||||||||||||||||||||||
- Not meaningful
See Note 8 to our Unaudited Consolidated Financial Statements for additional information.
Transformation Costs
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Transformation costs | $ | 105 | $ | — | * | $ | 175 | $ | — | * | ||||||||||||||||||||||||||||
- Not meaningful
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.
Interest Expense and Interest and Dividend Income
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Interest expense | $ | (301) | $ | (305) | (1.5) | % | $ | (1,368) | $ | (788) | 73.6 | % | ||||||||||||||||||||||||||
| Interest and dividend income | 248 | 327 | (24.1) | % | 723 | 863 | (16.2) | % | ||||||||||||||||||||||||||||||
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.
Other Income (Expense), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Other income (expense), net | $ | 39 | $ | (332) | $ | (1,181) | $ | (173) |
See Note 15 to our Unaudited Consolidated Financial Statements for additional information.
Income Taxes
| Three Months Ended September 30, | Increase (Decrease) | Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 721 | $ | 352 | 105.2 | % | $ | 993 | $ | 914 | 8.7 | % | ||||||||||||||||||||||||||
| % of Income before income taxes | 20.8 | % | 12.3 | % | 20.0 | % | 16.0 | % |
See Note 11 to our Unaudited Consolidated Financial Statements for additional information.
Liquidity and Capital Resources
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.
Cash, cash equivalents, and investments
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.
Deferred merchant bookings
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.
Debt
Our revolving credit facility extends a revolving line of credit up to $2 billion to us. As of September 30, 2025, we are in compliance with the maximum leverage ratio covenant under the facility, which is a condition to our ability to borrow.
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.
See Note 9 to our Unaudited Consolidated Financial Statements for additional information.
Share repurchases and dividends
In the first quarter of 2025, our Board of Directors (the "Board") authorized a program to repurchase up to $20 billion of our common stock. At September 30, 2025, we had a total remaining authorization of $23.9 billion related to share repurchase programs authorized by the Board.
In October 2025, the Board declared a cash dividend of $9.60 per share of common stock, payable on December 31, 2025 to stockholders of record as of the close of business on December 5, 2025.
See Note 10 to our Unaudited Consolidated Financial Statements for additional information.
Commitments, contingencies, and other
At September 30, 2025, we had, in the aggregate, $1.1 billion of non-cancellable purchase obligations individually greater than $10 million, of which $310 million is payable within the next twelve months. Such purchase obligations relate to agreements to purchase goods and services that are enforceable and legally binding and that specify significant terms, including the quantities to be purchased, price provisions, and the approximate timing of the transaction. At September 30, 2025, we had lease obligations of $762 million, of which $129 million is payable within the next twelve months.
At September 30, 2025, we had a remaining transition tax liability of $257 million as a result of the U.S. Tax Cuts and Jobs Act (the "Tax Act"), which is included in "Accrued expenses and other current liabilities" in the Unaudited Consolidated Balance Sheet. Due to the 2024 U.S. Tax Court decision in Varian Medical Systems, Inc. vs. Commissioner, a portion of our total transition tax liability may be refunded. In accordance with the Tax Act, generally, future repatriation of our international cash will not be subject to a U.S. federal income tax liability as a dividend, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by us.
See Note 13 to our Unaudited Consolidated Financial Statements for information related to the standby letters of credit and bank guarantees issued on our behalf.
See Note 13 to our Unaudited Consolidated Financial Statements and Part I, Item IA, 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 for information related to certain regulatory matters and our other contingent liabilities.
See Note 13 to our Unaudited Consolidated Financial Statements and Part I, Item IA, 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 for information related to certain tax assessments and other tax matters.
See "Trends" above for information on the Transformation Program, including the estimated annual run-rate savings and restructuring costs and accelerated investments required for the program.
Cash Flow Analysis
See our Unaudited Consolidated Statements of Cash Flows for additional information related to our cash flows.
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2025 | 2024 | ||||||||||||
| Net cash provided by operating activities | $ | 7,919 | $ | 7,602 | ||||||||||
| Net cash (used in) provided by investing activities | (242) | 204 | ||||||||||||
| Net cash used in financing activities | (8,248) | (4,347) |
Net cash provided by operating activities for the nine months ended September 30, 2025 resulted from net income of $4.0 billion, a favorable net impact from adjustments for non-cash and other items of $3.0 billion, and a favorable net change in working capital and other assets and liabilities of $984 million. Non-cash and other items were principally associated with unrealized foreign currency transaction losses related to Euro-denominated debt, deferred income taxes, depreciation and amortization, impairment, stock-based compensation expense, adjustments related to the convertible senior notes, and provision for expected credit losses and chargebacks. For the nine months ended September 30, 2025, deferred merchant bookings and other current liabilities increased by $1.4 billion and accounts receivable increased by $828 million, primarily due to higher business volumes. Merchant revenues increased while agency revenues decreased year-over year for the nine months ended September 30, 2025 due to the ongoing shift from agency revenues to merchant revenues at Booking.com.
Net cash provided by operating activities for the nine months ended September 30, 2024 resulted from net income of $4.8 billion, a favorable net impact from adjustments for non-cash and other items of $1.3 billion, and a favorable net change in working capital and other assets and liabilities of $1.5 billion. Non-cash and other items were principally associated with depreciation and amortization, stock-based compensation expense, provision for expected credit losses and chargebacks, operating lease amortization, and unrealized foreign currency transaction losses related to Euro-denominated debt. For the nine months ended September 30, 2024, deferred merchant bookings and other current liabilities increased by $2.3 billion and accounts receivable increased by $651 million, primarily due to higher business volumes.
Net cash used in investing activities for the nine months ended September 30, 2025 resulted principally from payments for property and equipment. Net cash provided by investing activities for the nine months ended September 30, 2024 resulted principally from the maturity of certain investments of $590 million, partially offset with payments for property and equipment of $353 million.
Net cash used in financing activities for the nine months ended September 30, 2025 resulted principally from payments of $5.0 billion on the maturity and redemption of debt, including the conversion premium on the convertible senior notes, the repurchase of common stock of $4.3 billion, and dividend payments of $941 million, partially offset by the proceeds from the issuance of long-term debt of $2.0 billion. Net cash used in financing activities for the nine months ended September 30, 2024 resulted principally from the repurchase of common stock of $5.3 billion, payment on the maturity of debt of $1.1 billion, and dividend payments of $885 million, partially offset with the proceeds from the issuance of long-term debt of $3.0 billion.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 2, and the documents incorporated by reference contain forward-looking statements. These statements reflect our views regarding current expectations and projections about future events and conditions and are based on currently available information. They are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict including the Risk Factors identified in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024; therefore, our actual results could differ materially from those expressed or described in the forward-looking statements.
Expressions of future goals and expectations and similar expressions, including "may," "will," "should," "could," "aims," "seeks," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential," "targets," and "continue," reflecting something other than historical fact are intended to identify forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the reports and documents we file or furnish from time to time with the Securities and Exchange Commission, particularly our Annual Report on Form 10-K for the year ended December 31, 2024, our subsequent Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K.
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