Is Airbnb Stock a Buy After Q3 Earnings Miss?
Airbnb Inc. (NASDAQ: ABNB) stock was down a fraction in early morning trading on Nov. 7, the day after the company delivered third-quarter earnings. Those results fell into the “better than feared” category, but came at a time of broad market weakness.
Revenue for the quarter came in at $4.1 billion, a fraction above estimates of $4.08 billion and about 10% higher on a year-over-year (YOY) basis.
This growth was driven by a surge in first-time bookers—over 20% in Japan and 50% in India.
Additionally, Airbnb reported an 8.8% increase in total nights and experiences booked, reaching $133.6 million in bookings volume.
Earnings per share, however, were $2.21, 10 cents below estimates of $2.31 but still reflecting a 4% YOY increase.
The company attributed some of that miss to one-time expenses associated with the timing of the “One Big Beautiful Bill” that passed through Congress in July.
Despite the earnings miss, the company maintained impressive profitability metrics. Airbnb reported a 34% net income margin and a 33% free cash flow margin. Bullish investors will say that metrics like this merit a premium valuation. However, those metrics have been in place for several quarters, and they haven’t meaningfully lifted the ABNB stock price, which has delivered a negative total return of 13.44% since its initial public offering in 2020.
New Features Aim to Attract Travelers, But Hotel Competition Looms
To increase its appeal, Airbnb rolled out a “Reserve Now, Pay Later” option in select markets. That's an obvious attraction for consumers who may be hesitant to book due to the upfront cost, as are the company’s plans for easier cancellation policies.
Airbnb also spent considerable time discussing how it’s using artificial intelligence (AI) to improve the user experience on its app, as well as making investments in areas like international markets, experiences, and services. But by its own admission, these growth opportunities may take years to materialize into viable businesses.
That's where the uncertainty comes in. Getting people to engage more with the app doesn't necessarily translate to more stays at Airbnb properties. Compounding the uncertainty is the potential for increased cancellations due to the “Reserve Now, Pay Later” feature, as bookings may not materialize within the same quarter.
The report also comes as the federal government cuts back the amount of air traffic due to the government shutdown. The timing of these cutbacks, just three weeks before the Thanksgiving holiday, which is a key revenue period, shouldn’t be lost on investors.
Although it's likely that the shutdown will be resolved, the timing poses risks to fourth-quarter bookings and investor confidence.
Premium Valuation Meets Lingering Headwinds
ABNB stock has a premium valuation that bulls will say is warranted based on the company’s AI-forward strategy and the potential for international growth. However, the general trend for the stock since its initial public offering (IPO) in 2020 has been lower, with a decline of 8% in 2025.
The consensus price target for ABNB stock is $141.70, and there’s nothing in the report that suggests a significant increase in that target.
At 17%, that gain would be solid, but it presents investors with a conundrum.
Airbnb isn’t a failing company. The YOY revenue and earnings growth are a testament to the company’s ability to adapt to changing economic conditions. But at its core, this is a consumer discretionary stock that's being treated like a technology stock by many investors.
For now, Airbnb is executing, but not accelerating—and that leaves ABNB stock in a holding pattern.
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