# How Booking Holdings makes money

CXProWealth Business Lens · Booking Holdings (BKNG) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-04 with the SEC (accession 0001075531-26-000037): https://www.sec.gov/Archives/edgar/data/1075531/000107553126000037/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $7.4B (+8.1% on the year)
- Operating income: $2.5B (operating margin 34.0%)
- Net income: $2.0B (net margin 26.5%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $3.6B (49.6% of revenue)
- Cash conversion (operating cash flow / net income): 1.91x
- Capital expenditure: 1.0% of revenue

## Where the money goes (Q2 FY2026)

- Merchant revenues → Total revenues: $5.1B
- Agency revenues → Total revenues: $1.9B
- Advertising and other revenues → Total revenues: $322.0M
- Total revenues → Total operating expenses: $4.9B
- Total operating expenses → Marketing expenses: $2.4B
- Total operating expenses → Sales and other expenses: $942.0M
- Total operating expenses → Personnel, including stock-based compensation of $140, $154, $281, and $296, respectively: $900.0M
- Total operating expenses → General and administrative: $217.0M
- Total operating expenses → Information technology: $263.0M
- Total operating expenses → Depreciation and amortization: $129.0M
- Total operating expenses → Transformation costs: $30.0M
- Total revenues → Operating income: $2.5B
- Operating income → Interest expense: $300.0M
- Operating income → Income before income taxes: $2.2B
- Interest and dividend income → Income before income taxes: $201.0M
- Other income (expense), net → Income before income taxes: $159.0M
- Income before income taxes → Income tax expense: $610.0M
- Income before income taxes → Net income: $2.0B

## Where the revenue comes from

### Products and services (UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS)

| Member | Value | Share |
|---|---:|---:|
| Merchant revenues | $5.1B | 69.7% |
| Agency revenues | $1.9B | 25.9% |
| Advertising and other revenues | $322.0M | 4.4% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q2 FY2026 | Of revenue |
|---|---:|---:|
| Total revenues | $7.4B | 100% |
|   Merchant revenues | $5.1B | 69.7% |
|   Agency revenues | $1.9B | 25.9% |
|   Advertising and other revenues | $322.0M | 4.4% |
| Marketing expenses | $2.4B | 32.2% |
| Sales and other expenses | $942.0M | 12.8% |
| Personnel, including stock-based compensation of $140, $154, $281, and $296, respectively | $900.0M | 12.2% |
| General and administrative | $217.0M | 3.0% |
| Information technology | $263.0M | 3.6% |
| Depreciation and amortization | $129.0M | 1.8% |
| Transformation costs | $30.0M | 0.4% |
| **Total operating expenses** | $4.9B | 66.0% |
| **Operating income** | $2.5B | 34.0% |
| Interest expense | ($300.0M) | 4.1% |
| Interest and dividend income | $201.0M | 2.7% |
| Other income (expense), net | $159.0M | 2.2% |
| **Income before income taxes** | $2.6B | 34.8% |
| Income tax expense | $610.0M | 8.3% |
| **Net income** | $2.0B | 26.5% |
| Net income applicable to common stockholders per basic common share (in dollars per share) | $3 | 0.0% |
| Weighted-average number of basic common shares outstanding (in shares) | 768,000,000 |  |
| Net income applicable to common stockholders per diluted common share (in dollars per share) | $3 | 0.0% |
| Weighted-average number of diluted common shares outstanding (in shares) | 770,000,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2008 | $1.9B | $289.5M | $182.2M | $315.6M | $18.3M | $297.2M |
| FY2009 | $2.3B | $470.8M | $489.5M | $509.7M | $15.1M | $494.6M |
| FY2010 | $3.1B | $786.8M | $528.1M | $777.3M | $22.6M | $754.7M |
| FY2011 | $4.4B | $1.4B | $1.1B | $1.3B | $46.8M | $1.3B |
| FY2012 | $5.3B | $1.8B | $1.4B | $1.8B | $55.2M | $1.7B |
| FY2013 | $6.8B | $2.4B | $1.9B | $2.3B | $84.4M | $2.2B |
| FY2014 | $8.4B | $3.1B | $2.4B | $2.9B | $131.5M | $2.8B |
| FY2015 | $9.2B | $3.3B | $2.6B | $3.2B | $173.9M | $3.0B |
| FY2016 | $10.7B | $2.9B | $2.1B | $4.0B | $220.0M | $3.8B |
| FY2017 | $12.7B | $4.5B | $2.3B | $4.7B | $288.0M | $4.4B |
| FY2018 | $14.5B | $5.3B | $4.0B | $5.3B | $442.0M | $4.9B |
| FY2019 | $15.1B | $5.3B | $4.9B | $4.9B | $368.0M | $4.5B |
| FY2020 | $6.8B | -$631.0M | $59.0M | $85.0M | $286.0M | -$201.0M |
| FY2021 | $11.0B | $2.5B | $1.2B | $2.8B | $304.0M | $2.5B |
| FY2022 | $17.1B | $5.1B | $3.1B | $6.6B | $368.0M | $6.2B |
| FY2023 | $21.4B | $5.8B | $4.3B | $7.3B | $345.0M | $7.0B |
| FY2024 | $23.7B | $7.6B | $5.9B | $8.3B | $429.0M | $7.9B |
| FY2025 | $26.9B | $8.8B | $5.4B | $9.4B | $322.0M | $9.1B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +13.4% (year before +11.1%): accelerating
- Operating income: +16.8% (year before +29.5%): slowing
- Net income: -8.1% (year before +37.1%): slowing
- Free cash flow: +15.1% (year before +12.8%): accelerating

## Operating figures stated in the filing

- Gross bookings on a merchant basis: 73.0% (as of 2026-06-30). "The mix of our total gross bookings generated on a merchant basis across the Company was 73% in the second quarter of 2026, an increase from 69% in the second quarter of 2025 due to the ongoing shift from agency to merchant bookings at Booking.com." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Gross bookings on a merchant basis: 69.0% (as of 2025-06-30). "The mix of our total gross bookings generated on a merchant basis across the Company was 73% in the second quarter of 2026, an increase from 69% in the second quarter of 2025 due to the ongoing shift from agency to merchant bookings at Booking.com." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Booking.com total properties: 4,700,000 properties (as of 2026-06-30). "Booking.com had approximately 4.7 million total properties on its website at June 30, 2026, representing an increase from approximately 4.3 million total properties at June 30, 2025." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Booking.com total properties: 4,300,000 properties (as of 2025-06-30). "Booking.com had approximately 4.7 million total properties on its website at June 30, 2026, representing an increase from approximately 4.3 million total properties at June 30, 2025." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Booking.com room nights in alternative accommodations: 37.0% (as of 2026-06-30). "The mix of Booking.com's room nights booked for alternative accommodation properties in the second quarter of 2026 was approximately 37%, in line with the second quarter of 2025, reflecting, in part, lower alternative accommodation room night growth in the Middle East." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)
- Employees: 25,550 employees (as of 2026-06-30). "Employee headcount increased 3% year-over-year to approximately 25,550 as of June 30, 2026." (Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Merchant revenue now carries the growth as agency shrinks

Merchant revenues rose 15.0% while agency revenues fell 6.9%, lifting merchant to 69.7% of revenue as Booking.com takes travelers' payments itself.

Merchant revenues were $5,127M against $4,457M a year earlier, 69.7% of total revenues of $7,352M against 65.6%. Agency revenues were $1,903M against $2,044M, 25.9% of revenue against 30.1%. The filing attributes both moves to "the ongoing shift from agency to merchant bookings at Booking.com", and puts merchant gross bookings at 73% of the total against 69% a year earlier. _(from the filing)_
The shift brings costs as well as revenue. The filing records payment processing, chargebacks, fraud and related staff in sales and other expenses and in personnel, and card rebates in merchant revenues. It says that over the trailing twelve months the incremental revenues from facilitating payments were greater than the associated incremental variable expenses. Sales and other expenses rose 4.8% in the quarter, against merchant revenue growth of 15.0%. _(from the filing)_
Analysis: part of the agency decline is a relabelling rather than lost business, because the same Booking.com stays move from one revenue line to the other. Total revenue growth of 8.1% is the better gauge of volume. The mix change matters for margins, and for the cash the company holds before the trip takes place. _(analysis)_

### Buying traffic costs almost as much as operating profit

Marketing expenses of $2,371M equal 94.8% of operating income of $2,500M, so the cost of paid traffic is the biggest lever on profit.

Marketing expenses were $2,371M, 32.2% of total revenues against 31.5% a year earlier, and 48.9% of total operating expenses of $4,852M. They grew 10.8% while revenue grew 8.1%. The filing calls them "substantially variable in nature" and says performance marketing, the substantial majority, runs mainly through search engines, "primarily Google", affiliates, meta search and social media. _(from the filing)_
The filing attributes the higher share of gross bookings spent on marketing to declines in unpaid search traffic, changes in paid traffic mix, and investment in paid channels where returns remained attractive. Bookings by consumers coming directly to the platforms were a mid-fifties percentage of room nights over the trailing twelve months, the same as a year earlier. _(from the filing)_
Analysis: a year earlier marketing was 95.1% of operating income, so the ratio barely moved; operating income kept pace because personnel and depreciation grew more slowly than revenue. Revenue that moves from paid to direct channels reaches operating income with little cost in between, which is why the app and loyalty matter to the profit line, not only to the brand. _(analysis)_

### Net income doubled, mostly below the operating line

Operating income rose 11.1% but net income rose 117.9%, as other expense of $962M a year earlier became other income of $159M.

Income before income taxes was $2,560M, 102.4% of operating income of $2,500M. A year earlier it was $1,104M, only 49.1% of operating income of $2,250M. The difference sits mainly in other income (expense), net: $159M against a loss of $962M, which the filing ties to foreign currency remeasurement of Euro-denominated debt. Interest expense also fell to $300M from $418M, as the prior year carried debt discount amortization on convertible notes that have since matured. _(from the filing)_
Tax took a larger share: $610M on $2,560M of pre-tax income, a rate of 23.8%, against $209M on $1,104M, or 18.9%. The filing cites higher unrecognized tax benefits, a valuation allowance on the carryforward of U.S. federal interest expense, and higher discrete tax expenses. Diluted earnings per share were $2.53 against $1.10, on 770M diluted shares against 815M. _(from the filing)_
Analysis: the year-earlier quarter was depressed by currency moves on the Euro debt and this quarter was lifted by them, so the net income growth rate overstates the change in the business. Operating income growth of 11.1% is the cleaner read of the travel business, and currency gains on the debt can reverse in a later quarter. _(analysis)_

### A flat payroll widened the operating margin

Personnel costs rose 0.5% while revenue rose 8.1%, lifting operating margin to 34.0% from 33.1% even as marketing and technology took larger shares.

Personnel was $900M against $896M, 12.2% of revenue against 13.2%. Depreciation and amortization fell to $129M from $158M, which the filing ties to lower amortization of intangible assets and internally developed software, and transformation costs fell to $30M from $38M. Operating income rose 11.1% to $2,500M on revenue up 8.1%. _(from the filing)_
Two costs moved the other way. Marketing rose to 32.2% of revenue from 31.5%, and information technology rose 20.1% to $263M, 3.6% of revenue against 3.2%, which the filing attributes to cloud computing costs and software license fees. The filing links its cost discipline to the Transformation Program, a set of organizational changes aimed at operating expense efficiency. _(from the filing)_
The quarter flatters the comparison more than the half year does. The filing says personnel grew faster over six months because the first quarter of the prior year included a reduction in the accrual for the Netherlands pension fund matter, and that the quarter's personnel line also benefited from lower stock-based compensation. _(from the filing)_
Analysis: when most costs move with bookings, margin can only widen in the layer that does not. Part of that layer is shifting from people to cloud and software, so personnel and information technology read together are a better measure of the fixed base than either line alone. _(analysis)_

### Competitive edge

- **Travelers pay before Booking pays its partners** Operating cash flow of $3,719M was 1.91 times net income, because merchant customers pay at booking while revenue waits for check-in.
- **4.7 million properties, almost no capital spending** Capital spending was 1.0% of revenue and free cash flow 49.6%, because supply grows by signing partners rather than building or buying property.

### What to watch

- **Unpaid search is falling and paid traffic fills the gap** The filing expects SEO traffic to decline, which may raise paid marketing; marketing already grew 10.8% against revenue growth of 8.1%.
- **Regulators are probing parity, rankings and commissions** Rulings under appeal in Spain and Switzerland, open probes in Greece and Hungary, and FTC staff action reach parity, rankings, commissions and fees.
- **Geopolitics still reaches demand through flights and long-haul trips** The filing says the Middle East conflict kept weighing on long-haul travel; in FY2020 revenue fell to $6,796M from $15,066M.

## Investor view

**Booking is becoming the merchant of record: merchant revenues rose 15.0% while agency revenues fell**

### How it makes money

Booking Holdings earns a share of the travel it sells through Booking.com, Priceline, Agoda, KAYAK and OpenTable. In the quarter, merchant revenues, where the company facilitates the traveler's payment, were $5,127M of $7,352M in total revenues, or 69.7%. Agency revenues were $1,903M, or 25.9%. Advertising and other revenues, which grew on OpenTable and on advertising at Booking.com, were $322M, or 4.4%. _(from the filing)_
The largest cost is buying traffic. Marketing expenses were $2,371M, 32.2% of revenue, and the filing calls them "substantially variable in nature", spent mostly on search engines, "primarily Google", affiliates, meta search and social media. Sales and other expenses, also largely variable, were $942M, or 12.8% of revenue. Personnel was $900M, or 12.2%. _(from the filing)_
Very little of the money goes into physical assets. Capital spending was 1.0% of revenue in the quarter, and free cash flow was $3,643M, or 49.6% of revenue. Operating income was $2,500M, an operating margin of 34.0%. _(from the filing)_
Revenue is booked when the traveler checks in, not when the trip is reserved. The filing notes that as a result "our reported revenues are not at risk of being reversed due to cancellations". Cash moves on a different clock: in Q1 FY2026 operating cash flow was $3,215M against net income of $1,083M, while Q3 FY2025, the busiest travel quarter in the history shown, brought $9,008M of revenue but $1,435M of operating cash flow. _(from the filing)_

### What shifted

The revenue mix moved toward merchant. Merchant revenues rose 15.0% to $5,127M from $4,457M, while agency revenues fell 6.9% to $1,903M from $2,044M. Merchant's share of revenue rose 4.2 points to 69.7%. The filing gives the cause as "the ongoing shift from agency to merchant bookings at Booking.com", and merchant gross bookings were 73% of the total against 69% a year earlier. _(from the filing)_
Operating income grew faster than revenue: up 11.1% to $2,500M against revenue up 8.1%, lifting the operating margin to 34.0% from 33.1%. The gain came from the fixed layer: personnel was $900M against $896M, its share of revenue down 0.94 points, and depreciation and amortization fell to $129M from $158M. Marketing pulled the other way, its share of revenue up 0.78 points, and information technology rose 20.1% to $263M, which the filing ties to cloud computing costs and software license fees. _(from the filing)_
Net income more than doubled, to $1,950M from $895M, mostly below the operating line. Other income (expense), net was $159M against a loss of $962M a year earlier, a swing the filing attributes largely to foreign currency remeasurement of Euro-denominated debt. Interest expense fell 28.2% to $300M from $418M, as the prior year carried debt discount amortization on convertible notes that have since matured. _(from the filing)_
Tax took a larger share. Income tax expense was $610M on $2,560M of pre-tax income, an effective rate of 23.8%, against $209M on $1,104M, or 18.9%, a year earlier. The filing cites higher unrecognized tax benefits, a valuation allowance on the carryforward of U.S. federal interest expense, and higher discrete tax expenses. Diluted earnings per share were $2.53 against $1.10, on 770M diluted shares against 815M, after continued repurchases. _(from the filing)_

### Risks in the filing

Travel demand moves with geopolitics. The filing says the conflict in the Middle East kept affecting demand through the quarter: direct effects in the region largely normalized by June, but higher flight prices, reduced capacity on some international routes and weaker long-haul demand remained. Cancellations also hurt marketing efficiency, because performance marketing is paid when a booking is made even if it is later cancelled. _(from the filing)_
Distribution depends on platforms the company does not control. Performance marketing runs mainly through search engines, primarily Google, and its returns depend on costs per click, bidding algorithms and channel mix. The filing states "we expect SEO traffic to decline in the short to medium term, which may lead to increased spend in paid marketing channels." _(from the filing)_
Regulators and courts are active across Europe and the U.S. The European Commission designated the company a "gatekeeper" and Booking.com a "Very Large Online Platform". Spain's competition authority fined Booking.com and restricted parity and ranking practices, under appeal; a Swiss order to cut hotel commissions is also under appeal; Greece and Hungary have open investigations; FTC staff intend to recommend a complaint against Priceline; parity-related class actions are under way or threatened; and Booking.com reported unauthorized access to some guests' booking information. _(from the filing)_
Tax and currency add exposure. The filing names digital services taxes on platform revenue, U.S. tax changes under the BBB Act, and audits and disputes over income, value-added and travel transaction taxes. Most results come from outside the U.S., principally in Euros and British Pounds Sterling, and the company carries Euro-denominated debt whose remeasurement runs through other income. _(from the filing)_
Three of these risks are already visible in this quarter's numbers rather than only in the risk language: the effective tax rate rose, marketing took a larger share of revenue as unpaid search weakened, and the swing in other income came from currency moves on the company's Euro debt. The regulatory cases have not yet changed the commission economics in the reported figures. _(analysis)_

## Founder view: mechanisms

### Travelers pay first, revenue comes later

On a merchant booking, Booking takes the traveler's money around the time of the reservation and pays the property after the stay. Revenue is recognized at check-in. In between, customers are financing the company: cash arrives in the booking season, ahead of the travel season, and sits on the balance sheet earning interest until it is passed on. This is why the merchant shift matters beyond the extra payment revenue it brings. _(analysis)_

### Paid search as a variable cost of each sale

Booking buys a large share of its traffic one click at a time and treats that spend as a cost of each booking, not as a fixed budget. It keeps spending in a channel while the expected value of the booking, including repeat trips, beats the cost of the click, and tries to turn each paid customer into a direct one through the app and loyalty. _(analysis)_

### Inventory the company never owns

Booking sells rooms, homes, cars and flights owned by others. Supply grows by signing partners, not by building, so capital goes into software and marketing rather than property. The cost base flexes with bookings, which lets the business shrink and recover with demand instead of carrying idle assets. _(analysis)_

### Hold the fixed layer flat while volume grows

When most costs move with bookings, margin can only widen in the layer that does not: staff, administration, depreciation. Booking's Transformation Program targets that layer. Variable costs keep pace with revenue, so holding the fixed costs still lets each extra dollar of revenue carry more profit. _(analysis)_

## Member research

Signed-in members read, on the page: what Booking Holdings's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Booking Holdings 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/1075531/000107553126000037/ (2026-08-04)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02