Booking Holdings
BKNG · NasdaqMerchant 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.
Q2 FY2026, the quarter to Jun 30, 2026 · 10-Q filed Aug 4, 2026
- Operating margin
- 34.0%
- Net income
- $2.0B
- Free cash flow, quarter
- $3.6B
Largest source of revenue: Merchant revenues, 69.7% of the total.
Where Booking Holdings's money goes
- 01
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.
Why it matters
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.1
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%.1
AnalysisAnalysis: 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.
- 02
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.
Why it matters
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.1
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.1
AnalysisAnalysis: 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.
- 03
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.
Why it matters
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.1
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.1
AnalysisAnalysis: 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.
- 04
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.
Why it matters
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%.1
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.1
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.1
AnalysisAnalysis: 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.
Sources
- 1.Booking Holdings 10-Q for the period to 2026-06-30 (the filing), Aug 4, 2026, read Nov 2, 2026
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Growth, profit and margin
Revenue went from $1.9B in FY2008 to $26.9B in FY2025, the operating margin from 15.4% to 32.8%, over 17 years.
- Revenue$26.9B
- Operating income$8.8B
- Operating margin32.8%
- Period
- Q2 FY2026
- Revenue
- $7.4B
- Operating income
- $2.5B
- Operating margin
- 34.0%
- Net income
- $2.0B
- Free cash flow
- $3.6B
Does the profit turn into cash?
Q2 FY2026: free cash flow of $3.6B against net income of $2.0B in the quarter.
- Operating cash flow$9.4B
- Capital expenditure$322.0M
- Free cash flow$9.1B
- Net income$5.4B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
Revenue streams
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS. The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Not reported, or not derivable
- gross margin: the company reports expenses by nature: no cost of revenue or gross profit line exists
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Merchant revenues | $5.1B | 69.7% |
| Agency revenues | $1.9B | 25.9% |
| Advertising and other revenues | $322.0M | 4.4% |
Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-08-04
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by nature: what they are (food, labor, occupancy, personnel, marketing), not what they were for, so there is no cost-of-revenue line and no gross profit.
| Cost line | Q2 FY2026 | Of revenue | Source |
|---|---|---|---|
| Total operating expenses | $4.9B | 66.0% | Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-08-04 |
| Operating income | $2.5B | 34.0% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-04 |
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
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.
View source
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.
View source
Employee headcount increased 3% year-over-year to approximately 25,550 as of June 30, 2026.
View source
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.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement23 lines, as presented in the 10-Q
Cash flow statement3 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
| Line | Q2 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Operating activities: | ||||
| Net income | $1.95B | $895.0M | +118% | Source10-Q, us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic, as reported in the 10-Q filed 2026-08-04 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Unrealized foreign currency transaction (gains) losses related to Euro-denominated debt (shown as a deduction) | ($195.0M) | -$961.0M | Source10-Q, bkng:ForeignCurrencyTransactionGainLossbeforetaxassociatedwiththeremeasurementofnonfunctionalcurrencydebt, as reported in the 10-Q filed 2026-08-04 | |
| Statement of Cash Flows | ||||
| Total cash and cash equivalents and restricted cash and cash equivalents, end of period | $17.51B | $17.64B | -0.7% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-04 |
Balance sheet28 lines, as presented in the 10-Q
About this data
- Source
- Booking Holdings 10-Q, accession 0001075531-26-000037, filed Aug 4, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds Booking Holdings's model up, and what could bend it
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.
The detail
Revenue is recognized when the traveler checks in. On merchant bookings the company collects the traveler's payment in advance and holds it as deferred merchant bookings, comprised principally of amounts payable to travel service providers. The filing says these balances rose during the half year, primarily due to higher business volumes.1
The timing shows across the quarters. In Q1 FY2026 operating cash flow was $3,215M against net income of $1,083M, 2.97 times. In Q3 FY2025, the largest revenue quarter shown at $9,008M, operating cash flow was $1,435M, 52.2% of net income of $2,748M. Interest and dividend income was $201M in the quarter against $234M, a decline the filing attributes to lower interest rates.1
AnalysisAnalysis: as the merchant share of gross bookings rises, more of the year's cash arrives before the travel it pays for, and it earns interest while held. The balances are mostly refundable on cancellation, so the float would shrink if travel demand did.
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.
The detail
Booking.com listed approximately 4.7 million total properties at the end of the quarter, against approximately 4.3 million a year earlier. Capital spending was $76M against revenue of $7,352M, or 1.0%, and free cash flow was $3,643M. For FY2025, capital spending was $322M on revenue of $26,917M, 1.2%, and free cash flow was $9,087M, 33.8% of revenue.1
AnalysisAnalysis: a quarterly free cash flow margin near half of revenue is seasonal, because cash from bookings arrives ahead of summer travel; the full-year 33.8% is the steadier measure. The advantage holds as long as partners keep listing, which depends on the demand Booking sends them.
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%.
The detail
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." It says performance marketing returns depend on costs per click, search engine bidding algorithms, channel mix and conversion of paid traffic, factors in some cases outside the company's control.1
Marketing's share of revenue rose 0.78 points to 32.2%. The filing says marketing as a percentage of gross bookings was slightly higher, driven primarily by declines in SEO, changes in paid traffic mix and investment in paid channels at attractive returns.1
AnalysisAnalysis: the counterweight is the app, where the filing says the significant majority of room nights are direct. How AI assistants change where travelers start a trip does not yet show in these numbers.
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.
The detail
Spain's competition authority fined Booking.com and restricted its parity provisions and hotel ranking criteria; Booking.com has appealed and the decision is suspended, though the company has recorded a liability. The Swiss Price Surveillance Office ordered a cut in average hotel commissions in Switzerland, also suspended pending appeal. Greece and Hungary have opened investigations into Booking.com practices.1
After the quarter, FTC staff told Priceline they intend to recommend a complaint over disclosures, fees, customer support and billing. The European Commission designated the company a "gatekeeper" under the Digital Markets Act. During the quarter Booking.com notified data protection authorities that unauthorized third parties had accessed some guests' booking information.1
Private claims follow the public cases. German hotels have filed parity claims, two Dutch foundations filed claims on behalf of European hotels and consumers, and associations in Spain, France and the United Kingdom may bring class actions over historical parity provisions.1
AnalysisAnalysis: none of these cases has yet changed the commission economics in the reported figures. The Swiss order, if upheld, applies to one country's hotels; the larger exposure would be rulings that limit parity or ranking practices across Europe.
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.
The detail
The filing says direct effects of the Middle East conflict on travel within the region largely normalized during June, but elevated flight prices, reduced capacity on some international routes and weaker long-haul demand remained. Domestic and short-haul regional travel, including within Europe, stayed relatively healthy and partly offset the decline.1
Cancellations reach costs before revenue. Revenue booked at check-in is not reversed by a cancellation, but performance marketing is paid when the booking is made. The filing says some marketing in the first quarter yielded diminished or negligible returns as bookings sourced through paid channels were later cancelled.1
The history shows the size of a broad shock. In FY2020 revenue fell to $6,796M from $15,066M and operating income was -$631M. By FY2022 revenue was $17,090M with operating income of $5,102M, and FY2025 operating income was $8,825M on revenue of $26,917M.1
AnalysisAnalysis: because the largest costs are variable, the business shrank and recovered with demand rather than carrying idle assets. That limits the damage of a shock to costs, not to revenue, which still depends on people choosing to travel.
Sources
- 1.Booking Holdings 10-Q for the period to 2026-06-30 (the filing), Aug 4, 2026, read Nov 2, 2026
Booking Holdings, further in
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What could change the outlook
What Booking Holdings's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What the merchant shift is worth after its costs
Where payment revenue, processing costs and customer cash meet, and which lines in each quarter show whether the shift is still adding to margin.
- How exposed is the profit line to the price of a click?
What falling unpaid search, app adoption and direct bookings mean for marketing's claim on operating income, and the signals that would show that balance moving.
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Have a question about Booking Holdings?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How does Booking's shift from agency to merchant bookings change its costs, not only its revenues?
- What would a further fall in unpaid search traffic mean for Booking Holdings' marketing costs and operating income?
- How much of Booking Holdings' jump in net income came from currency moves on its Euro-denominated debt?
Business Lens describes Booking Holdings from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.