Despite Earnings Miss, Airbnb Posts a Small Revenue Beat

Airbnb’s third-quarter earnings report presented a mixed picture, with slight misses on profit expectations but some positive indicators on growth and future potential. The company reported earnings per share of $2.13, narrowly missing analyst projections of $2.14. Revenue, however, came in at $3.73 billion, slightly above the anticipated $3.72 billion. This marked a year-over-year revenue increase of 10% from $3.4 billion, highlighting steady demand and growth in the short-term rental market. Following this news, Airbnb’s stock dropped approximately 3% in after-hours trading, reflecting investor caution amid softer earnings despite the revenue beat.

Net income for the quarter was $1.37 billion, down significantly from $4.37 billion a year prior, although the previous year’s income had been significantly bolstered by a one-time $2.8 billion tax benefit. Without this tax gain, the year-over-year comparison paints a more stable picture of Airbnb’s earnings growth.

Looking ahead, Airbnb provided fourth-quarter guidance for revenue between $2.39 billion and $2.44 billion, aligning closely with analysts’ consensus estimate of $2.42 billion. This forecast suggests moderate growth as Airbnb continues to face macroeconomic pressures, particularly in the travel industry.

In a letter to shareholders, Airbnb shared ambitious plans for global expansion, emphasizing its focus on entering under-penetrated markets. According to the report, nights booked in Airbnb’s expansion markets grew at twice the rate of its core regions during the third quarter, underscoring the untapped potential in these areas. Beyond just increasing accommodations, the company signaled broader ambitions with plans to diversify its offerings, suggesting an evolving strategic direction that could see Airbnb moving into new business areas beyond its traditional short-term rental services. These initiatives will likely be detailed further in 2024, with the company positioning itself for a “next chapter” in growth and innovation.

Airbnb’s third-quarter adjusted EBITDA stood at $2 billion, marking a 7% increase from the prior year and surpassing the $1.86 billion that analysts had projected. This increase in adjusted EBITDA indicates improved operating efficiency, as Airbnb’s earnings before interest, taxes, depreciation, and amortization grew faster than overall revenue. Gross booking value (GBV) for the quarter reached $20.1 billion, slightly exceeding the $19.9 billion forecast by analysts. GBV, a key performance metric for Airbnb, reflects the total value of bookings made on the platform, including host earnings, service fees, cleaning fees, and taxes.

The company also saw growth in the number of nights and experiences booked, with a total of 123 million, an 8% year-over-year increase that outpaced analyst expectations of 121.4 million. This growth points to sustained demand across all regions and a recovery from previous pandemic-related disruptions, with users returning to the platform for both travel accommodations and experiential offerings.

Airbnb’s global footprint grew significantly, with hosting increases seen in all regions and types of markets. The company reached over 8 million active listings, underscoring its success in scaling supply to meet demand. To further improve user experience, Airbnb has worked to enhance the quality of listings by removing over 300,000 listings that didn’t meet its standards since last year. This pruning of listings is part of Airbnb’s strategy to maintain a high standard of service and ensure guests have positive experiences on the platform. Additionally, the average daily rate (ADR) increased by 1% from the previous year to $164, suggesting that Airbnb has managed to maintain pricing power amid inflationary pressures and higher travel demand.

In a climate where consumers are becoming increasingly selective about travel accommodations, Airbnb’s emphasis on quality control and market expansion positions it well against competitors. The investor call scheduled for later in the day at 4:30 p.m. ET will likely shed more light on Airbnb’s upcoming initiatives and how the company intends to balance its ambitious growth strategy with financial discipline.

Overall, while Airbnb’s third-quarter results were mixed, the company’s focus on expanding into new markets and improving listing quality reflect a long-term growth vision. With its eyes on broader business avenues beyond accommodations and continued enhancements to its platform, Airbnb aims to solidify its position as a leader in the travel and experiences industry.