Airbnb: 2Q25 Business Update
Core Slows (Again)
Welcome to Speedwell Memos. Our main website is SpeedwellResearch.com.
This is a business update on a company we have previously written an in-depth research report on. To read the full research report become a member today. Members get access all of our research reports and all prior updates (most of which are paywalled). You can see a list of all the companies we have written on here.
(Members can find an extended version of this post here and a PDF here)
2Q25 Update.
Airbnb reported 2Q25 results and the stock fell -8% the next day, citing hard comps in 3Q and 4Q.
Revenues grew+13% y/y in 2Q25. This was a slight acceleration from +11% y/y last quarter, driven by Gross Booking Value (GBV) improving 400bps to +11% y/y. However, adjusting for FX, GBV is +9% y/y, the same as last quarter.
More disappointing though was that Nights Booked growth decelerated to +7% y/y. This is down from +8% y/y last quarter and +12% y/y in 4Q, marking the second straight quarter this metric has slowed. (They include services booked in this metric too, but it is too small to matter for now).
While the quarter started with tariff uncertainty, Airbnb did see travel demand pick up from April to July. On last quarter’s call they emphasized that their global business and small amount of inbound U.S. travel meant that they shouldn’t really be impacted by global uncertainty. However, that didn’t seem to be the case. Competitor Bookings Holdings grew Room Nights +8% y/y, slightly higher than Airbnb despite having more than double Airbnb’s Nights booked at 309mn now. Furthermore, Booking’s Room Nights actually accelerated 100bps sequentially.
Chesky was not satisfied with their growth—something that is starting to become a regular comment over the past year (other than in 4Q24 when they reaccelerated growth).
Their expansion markets are growing at twice the rate of their core markets as they continue to push internationally in markets with lower adoption—a trend that has been going on for 6 consecutive quarters. As a reminder, Airbnb has identified the following countries as key “expansion markets”; Japan, Spain, Italy, Germany, Mexico, Brazil, China, India, and Korea. They also noted a positive response in Japan to a marketing campaign there. Japanese travelers booked more nights q/q, with a +15% y/y increase in first-time bookers.
Airbnb also landed 4 major partnerships in key expansion markets: a 3-year deal with Tour de France, music festival Lollapalooza, IOC for the upcoming 2026 Winter Olympics in Milan, and a 3-year deal with FIFA and the World Cup. These partnerships are a way for Airbnb to grow awareness, build trust with travelers and regulators, and grow supply during periods where markets are especially tight.
Despite noting strong momentum in the U.S., North America still remains Airbnb’s slowest-growing region. Management sees significant upside through three main levers: 1) improving affordability via total price transparency and pricing tools, 2) expanding payment options to attract a wider demographic, and 3) targeting underpenetrated segments such as the U.S. Hispanic population and Heartland states (i.e. Iowa, Nebraska, Ohio).
They are also talking again about hotels. They did an acquisition of HotelTonight in 2019, which focused on boutique hotels, it hasn’t been a notable part of their strategy. While the shift to hotels is framed as a way to increase options in supply-constrained markets, it is also possible they are realizing that it is a relatively easy to cross-sell hotel rooms the same way it was for Booking.com to add alternative accommodations.
Brian Chesky also noted on the call that their take-rate is more competitive versus alternatives, which combined with their highly trafficked website and strong brand would make it an easy sell to for hotels to go through on-boarding.
Besides international markets and hotels, they are still improving their core platform. Airbnb made targeted upgrades with the checkout flow, messaging, merchandising, and payment options. The company also expanded its AI-powered customer service agent in the U.S., reducing the share of guest and host inquiries requiring human intervention by 15%. These enhancements aim to boost conversion, streamline operations, and strengthen the overall value prop of the core stays business.
The other big shift (and differentiator) for Airbnb is the emphasis on discovery functionality versus more traditional search behavior. While most users know when and where they want to go when they look for a place to stay on Expedia or Booking, many users can be swayed where to go on Airbnb. We talked about this before, but with better AI recommendations it is becoming a bigger portion of Nights Booked.
Brian Chesky noted that they are seeing a growing number of bookings from their homepage (where there are recommendations). He compares this to Netflix or DoorDash where a user browses a feed of recommendations. This is an attractive behavior for Airbnb because not only is it a differentiator that can help a traveler find a place they love that they would of never thought of, but also because it helps them direct demand to areas where there is more supply.
In addition to improving recommendations and customer service with AI, they want to put AI at the center of app. The goal is to make Airbnb an “AI-native” app. Thisis sort of reminiscent of when internet services had to replatform for the mobile area. Travel search and trip planning is coming next year, but they also want to better personalize all recommendations from stays to experiences. Exactly what being an AI-first application means in terms of new user behavior is vague though. However, their goals are clearer—they want to increase conversions and attach rates of experiences and services. By and large, “connected trips” have been unpopular as people like to book different parts of the trip at different times, usually starting with flights, then hotels, then much later activities. With each booking, the service has to “fight” to be top of mind again, which no OTA has done successfully.
This quarter Services was launched, and Experiences was relaunched. While guest ratings are high at 4.93 versus an average of 4.8 on their Stays offering, this is largely because they are individually vetting each offering. They noted that more than 60k people have applied to offer services or experiences since launch, which isn’t an especially high number. While every marketplace has to start somewhere, they currently offer 10 different services and many different experiences across the world, implying that most markets have few if no options for a particular offering. Of course it is still early innings, but getting this supply built out is key.
They noted that 10% of bookings came from locals, which as we mentioned before is really the holy grail of this endeavor. This is simply because someone may vacation for 2 weeks a year, but the other 50 they are local. If Airbnb has Services to cater to locals in their hometown, their TAM massively opens up. It is much too early to judge success or failure here, but it is fair to say that it is going to be a big lift for them to convert Airbnb traffic to Services. While they believe they can offer Services to travels and then try to build that habit from there, the low density of offerings and fact that most people aren’t going to think of Airbnb for, say a home chef, is going to be a challenge.
To help increase awareness they are turning to more marketing. They noted that this advertising will help not just services, but their core Airbnb Stays business as well. They also are now leaning more into social media as they observed consumer behavior has changed.
Lastly, they are looking more into a formal loyalty program. They have said this before but for some reason Brian Chesky has resist the idea of doing a traditional loyalty program because he felt they already had strong loyalty with 90% of traffic coming direct to their site. This somewhat misses the point though because no one is disputing that when someone thinks alternative accommodations, they think Airbnb. What a loyalty program could do is drive more instances of when someone books an Airbnb because they get points that get them discounts (it doesn’t necessarily impact the % of direct traffic, it changes the frequency). Nevertheless, Brian Chesky wants to create a more novel and differentiated program that serves the same purpose of a loyalty program.
Despite all these new efforts and business launches, they still expanded operating margins. EBIT margins grew +170bps y/y to 19.8% for the quarter driven by a reduction in G&A expenses. They continue to increase R&D though (+17.5% y/y) largely due to their Airbnb Experiences launch.
YTD free cash flow was $2bn and they are aggressively buyback stock. They repurchased $1bn shares in the quarter, leaving $1.5bn remaining under the prior authorization. Despite the remaining authorization, they announced a new program authorizing up to $6bn more for share repurchases.
We could see more free cash flow directed to acquisitions in the future though. After their tech platform rebuild, it makes it easier for them to launch new businesses and potentially acquire business as well. They indicated that M&A could be used to accelerate growth in complementary areas that fit their expanded vision for Airbnb.
Business Commentary.
Overall Airbnb had a meh quarter and investors are likely....
The rest of this update is only accessible to Speedwell Members.
If you are a Speedwell Member, click here to read the rest of this post.
If you want to become a Speedwell Member and get access to the rest of this update and our Extensive Airbnb Research Report, PLUS access to over a dozen other research reports, become a member below!
For further reading, check out our Airbnb Extensive Research Report.
The Synopsis Podcast.
Follow our Podcast below.
For those that are new to our podcast, we have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.
Become a Speedwell Research Member to receive our Airbnb report and all of our other research reports, business updates, and Plus members also receive Excels.
We have covered APi Global, Appfollio, Airbnb, Axon, Constellation Software, Copart, Coupang, CoStar Group, Dream Finders Homes, Etsy, Evolution, Floor & Decor, Meta, Perimeter Solutions, Porsche, RH, and Walker & Dunlop, with many more coming each year!
(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).
*At the time of this writing, one or more contributors to this report has a position in Airbnb. Furthermore, accounts one or more contributors advise on may also have a position in Airbnb. This may change without notice.