AI agent wave reshapes the travel gateway: What are Booking's (BKNG.US) growth prospects? Goldman Sachs Group, Inc. takes a cautious stance, closely watching booking conversion.

Title context: AI agent wave reshapes the travel gateway: What are Booking's (BKNG.US) growth prospects? Goldman Sachs Group, Inc. takes a cautious stance, closely watching booking conversion. Text: After Booking Holdings (BKNG.US), the accommodation and travel booking service platform covering more than 220 countries and regions, released its earnings report on Wednesday morning Beijing time, a tracking research report on Booking published by Wall Street financial giant Goldman Sachs Group, Inc. showed that Booking has the foundation to convert AI agent user experience into broader travel and accommodation booking transactions, but the market still needs confirmation that these advantages can offset demand volatility and customer acquisition competition, and that AI agent-driven booking conversion and actual cash returns still require long-term observation. The Goldman Sachs Group, Inc. research report showed that the institution recognizes five operating themesthe growth trajectory of AI agent-driven travel products, growth in membership and non-hotel accommodation, cross-category transactions, efficiency gains in customer service and R&D, and growth investment in parallel with shareholder returns; however, Goldman Sachs Group, Inc. maintained its cautious "Neutral" stock rating and cut its 12-month target price to $175 from $180, corresponding to about 12.4% upside from the closing price on the earnings date. Based on a static estimate of about 743.7 million shares outstanding as of October 26, the target price corresponds to a market value of about $130.1 billion. Both bookings and profit beat expectations, and AI travel services show commercialization potential Booking's third-quarter operating performance was stronger than the stock price reaction: room nights booked reached 345 million, up 7% year over year, exceeding the 340 million market expectation listed in the Goldman Sachs Group, Inc. report; total gross bookings were $54.5 billion, up 10% year over year, about 3.4% above the $52.723 billion expectation. Goldman Sachs Group, Inc. said revenue needs to be examined on a split basis: the FTC matter caused a $900 million revenue reduction and a separate $100 million loss provision, bringing GAAP revenue down to $8.893 billion, down 1% year over year; excluding the revenue reduction, adjusted revenue was $9.793 billion, up 9% year over year, about 2.9% above the $9.519 billion market expectation. In addition, adjusted EBITDA was $4.607 billion, up 9% year over year, exceeding the $4.483 billion expectation; adjusted EPS was $4.66, up 17% year over year, above the $4.49 expectation. The company's adjusted EBITDA margin on a unified basis was 47.0%, roughly flat with the prior-year period, so the earnings beat was mainly reflected in business scale and earnings per share; merchant model revenue rose 14% to $6.998 billion, while agency model revenue fell 4% to $2.463 billion, also reflecting the continued shift in payment and transaction settlement models. At the same time, buybacks reduced average share count by about 7.5%, helping EPS growth outpace total profit growth. The incremental factor Goldman Sachs Group, Inc. values most focuses on the commercial value of AI applications, especially the growth trajectory of user engagement, booking conversion rates, and order values under AI drivers. Booking is accelerating the extension of its AI layout into actual booking and travel services: Booking.com's AI itinerary search, Agoda AI Assistant, Priceline Penny, as well as the newly launched Lola and proactive travel agent Vayo, jointly cover search, planning, booking, and follow-up services. Information disclosed on Booking's earnings call cited by Goldman Sachs Group, Inc. showed that in the third quarter, Booking.com's daily AI search visitors reached 10 times the second-quarter level; conversion rates for users of Penny and Agoda AI Assistant were about twice those of non-users, and the average order value for Agoda AI Assistant users was about 20% higher. These figures show positive performance among specific user groups and cannot yet be equated with a doubling of platform-wide conversion rates. Overall, users of some Booking AI tools showed higher booking conversion rates and order values, providing preliminary evidence that AI is driving business growth. Goldman Sachs Group, Inc. said the commercial mechanism behind the AI-driven growth outlook mainly lies in the fact that real-time room availability, pricing, payment, and after-sales capabilities can turn travel recommendations generated by large AI models into deliverable large incremental orders; the membership system helps the platform maintain user relationships. Genius Level 2 and Level 3 members account for more than 30% of active customers and contribute nearly 60% of room nights; Connected Trip cross-category transactions grew about 20% and account for a low-teens percentage of Booking.com transactions. Customer service automation, engineering efficiency, and lower model invocation costs provide another path to profit improvement, and the group's overall transformation plan still targets $650 million in annualized savings by 2027. However, marketing expenses still rose 11% in the quarter, mainly driven by expansion of the B2B affiliate business, and AI's improvement of the group's overall customer acquisition costs still needs to be delivered. How the $175 target will be realized: long-term cash flow provides support, while near-term growth compresses multiples Post-earnings stock price pressure is concentrated in forward demand and regulatory uncertainty. The company expects fourth-quarter room night growth of 1%3%, gross bookings growth of 2%4%, adjusted revenue growth of 0%2%, and adjusted EBITDA roughly flat year over year; the Middle East conflict, higher airfares, and localized unrest in some European cities affect international travel, and an approximately 2-percentage-point currency headwind further lowers USD-denominated growth. In addition, the FTC matter has not yet reached a settlement, and the recognized loss does not mean all regulatory risk has ended. Goldman Sachs Group, Inc. accordingly cut its fourth-quarter revenue forecast to $6.557 billion and lowered its adjusted EBITDA and EPS forecasts by about 9% each, to $2.194 billion and $2.11. However, Goldman Sachs Group, Inc.'s full-year 2026 adjusted EPS forecast remains $10.37, basically unchanged from the previous $10.36; its 2027 and 2028 adjusted EPS forecasts were also slightly raised to $12.50 and $14.26, respectively. Therefore, the report presents cooling near-term growth and multiple contraction, while the long-term earnings model has not been fully overturned. Management maintained its long-term targets of at least 8% growth in gross bookings and adjusted revenue and 15% growth in adjusted EPS at constant currency, but has not yet issued formal 2027 guidance. Cash flow determines whether this long-term narrative can provide valuation support. Third-quarter free cash flow was $1.069 billion, down 22% year over year, but free cash flow in the first three quarters still grew 2% to $7.820 billion; management explained that the quarter was affected by a seasonal decline in deferred merchant booking funds. Goldman Sachs Group, Inc. expects free cash flow of $9.509 billion, $11.756 billion, and $12.767 billion in 20262028, respectively, supporting continued investment and buybacks. The $175 target price uses two methods, each weighted 50%: a 10x enterprise value multiple applied to GAAP EBITDA for the next 12 months, down from 11x previously; and a 12.5x valuation applied to free cash flow after stock-based compensation over a longer horizon, down from 13x previously, then discounted back three years at a 12% discount rate. Goldman Sachs Group, Inc. also provided scenario valuations of a bear case of $95, a base case target price of $175, and a bull case target price of $265, showing that both demand growth and the multiple the market is willing to pay would significantly change the stock's upside. Goldman Sachs Group, Inc. said that for investors, what is truly worth tracking over the long term is whether accelerated penetration of frontier AI technology can expand share of direct transactions and travel spending, whether membership can increase repeat purchases, whether marketing investment can generate higher returns, and whether cash flow can continue to support capital returns. North American and European market share, competition between general-purpose AI platforms and vertical travel agents, and changes in consumer discretionary spending will jointly determine whether these operating improvements can be realized faster.