Booking's Solid Q3 Growth Masked by Regulatory and Valuation Headwinds

What happened

Booking Holdings reported record Q3 2025 revenue of $9.01 billion and strong EPS, driven by a strategic shift toward higher-margin merchant revenues. Room night growth exceeded expectations, reflecting robust global travel demand across Europe, Asia, and the U.S. Despite this operational strength, the stock has underperformed peers like Expedia and the S&P 500 year-to-date. The DeepValue master report confirms excellent fundamentals, including minimal leverage and robust cash flow, but highlights persistent regulatory pressures from EU DMA/DSA and digital services taxes. At a P/E of around 30x and intrinsic value near the current price, near-term upside appears balanced against these headwinds and mixed lodging outlooks.

Implication

Booking's operational momentum, with record revenue and a shift to merchant mix, supports near-term earnings growth and capital returns. However, regulatory compliance costs from EU gatekeeper status and digital taxes could compress margins, challenging the Transformation Program's efficiency gains. The stock's valuation at ~30x P/E leaves limited upside, requiring investors to monitor demand sustainability and monetization improvements closely. Persistent underperformance versus peers indicates market caution over long-term margin expansion amidst competitive and regulatory pressures. A HOLD stance remains prudent until clearer evidence emerges on regulatory outcomes or incremental margin improvements from cost-saving initiatives.

Thesis delta

The Seeking Alpha article reinforces the positive operational trends already documented in the DeepValue report, such as record Q3 revenue and merchant shift. However, it does not alter the fundamental HOLD thesis, as regulatory headwinds, valuation constraints, and mixed demand outlooks remain unchanged. No investment thesis shift is warranted based on this news, emphasizing the need for continued vigilance on watch items like Transformation Program execution and regulatory developments.