Airbnb warned of risks of slowing bookings growth. Shares collapsed by 6%

Accommodation booking service Airbnb gave a more optimistic than expected outlook for the third quarter, citing strong demand for summer travel. However, the company warned that the pace of growth in bookings could slow near the end of the year. Afterward, Airbnb shares plunged nearly 6 percent in extended trading.

In a letter to shareholders published on Aug. 6, Airbnb said the rate of growth in its bookings metric - by number of nights and accommodations - will be "relatively stable" in the third, current quarter after climbing 7.4% in the second quarter. That's roughly in line with Wall Street expectations: the consensus forecast for bookings, according to data from Bloomberg, was 7%.

However, the short-term rental service warned that it expects "more challenging comparisons" to last year at the end of this quarter and next, which "could put pressure on growth rates for the rest of the year." That's because Airbnb's results were unexpectedly strong in the second half of 2024 as travelers began booking trips they had previously put off, Bloomberg writes. This year, the booking service is not sure that it will be able to repeat this abnormally high result.

Airbnb expects revenue for the current quarter to be in the range of $4.02 billion to $4.1 billion: the mean of that forecast was above analysts' consensus. "We are optimistic about the third quarter," Airbnb said in the letter. - In July, we saw an acceleration in bookings growth, particularly in North America."

But the company warned that profitability will shrink in the third quarter as U.S. President Donald Trump's duties on countries such as Switzerland and India take effect. On July 29, rival Booking Holdings also warned that increasing economic uncertainty could hurt travel demand.

Investors reacted to Airbnb's cautious outlook with a selloff: the stock dropped 5.94% to $122.7 in extended trading after the report. Airbnb shares ended the afternoon session up 0.4%, closing at $130.5.

Airbnb  announced a new share buyback program worth up to $6 billion thanks to strong second quarter financial results. In the reporting period, Airbnb generated $1 billion in free cash flow, exceeding analysts' expectations, Bloomberg writes.

Revenue in the second quarter rose 13% from a year ago to $3.1 billion. Analysts polled by LSEG had expected revenue of $3.04 billion, wrote CNBC. Net income rose 16% to $642 million, or $1.03 per share, versus Wall Street expectations of $599.3 million, or $0.93 per share.

Total bookings (Gross Booking Value) totaled $23.5 billion, also above StreetAccount's estimate of $22.66 billion, CNBC notes.

Airbnb has clarified the amount of investment in new business areas, promising to invest $200 million. This amount corresponds to the lower end of the range, which the company announced to investors in February. As the booking service itself notes, the impact of these investments on the operating margin will be most noticeable in the second half of this year.

Airbnb CEO Brian Chesky launched new product lines in May in an effort to drive revenue. The service began offering travelers and locals the ability to book dry cleaning services, hairdressers or take cooking lessons from celebrity chefs. Airbnb CFO Ellie Merz said the company does not expect "significant revenue from new ventures in the near term," but the services will eventually become "key drivers of sustainable long-term growth," writes Financial Times

Airbnb stock is down 0.7% since the beginning of the year, and has appreciated 15.5% over the past 12 months. According to data from MarketWatch, of the 47 analysts tracking the home-booking service's quotes, most recommend holding the stock in their portfolios: 26 rate the stock a Hold. 14 analysts advise buying the company's securities (Buy and Overweight), while seven advise selling (Underweight and Sell). The Wall Street consensus price target is $138.7 per share of Airbnb stock, up 6.3% from the close of Wednesday's main trading session.

This article was AI-translated and verified by a human editor