Airbnb's (NASDAQ:ABNB) Q3 Earnings Results: Revenue In Line With Expectations But Quarterly Guidance Underwhelms

Jabin Bastian /
2023/11/01 4:33 pm EDT

Online accommodations platform Airbnb (NASDAQ:ABNB) reported results in line with analysts' expectations in Q3 FY2023, with revenue up 17.8% year on year to $3.4 billion. However, next quarter's revenue guidance of $2.15 billion was less impressive, coming in 1.32% below analysts' estimates. Turning to EPS, Airbnb made a GAAP profit of $6.63 per share, improving from its profit of $1.79 per share in the same quarter last year.

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Airbnb (ABNB) Q3 FY2023 Highlights:

  • Revenue: $3.4 billion vs analyst estimates of $3.37 billion (0.84% beat)
  • EPS: $6.63 vs analyst estimates of $2.10 (216% beat but not comparable due to one-time tax benefit)
  • Revenue Guidance for Q4 2023 is $2.15 billion at the midpoint, below analyst estimates of $2.18 billion
  • Free Cash Flow of $1.31 billion, up 45.6% from the previous quarter
  • Gross Margin (GAAP): 86.5%, in line with the same quarter last year
  • Nights and Experiences Booked: 113.2 million, up 13.5 million year on year (slight miss)

Founded by Joe Gebbia and Brian Chesky by renting out a blowup bed on the floor of their San Francisco apartment, Airbnb (NASDAQ:ABNB) is the world’s largest online marketplace for lodging, primarily homestays.

Online Marketplace

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

Sales Growth

Airbnb's revenue growth over the last three years has been exceptional, averaging 55.3% annually. This quarter, Airbnb reported 17.8% year-on-year revenue growth, in line with analysts' expectations.

Airbnb Total Revenue

Guidance for the next quarter indicates Airbnb is expecting revenue to grow 13.1% year on year to $2.15 billion, slowing down from the 24.1% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results, analysts covering the company were projecting sales to grow 12.8% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Usage Growth

As an online marketplace, Airbnb generates revenue growth by increasing both the number of bookings on its platform and the average order size in dollars.

Over the last two years, Airbnb's nights booked, a key performance metric for the company, grew 28.8% annually to 113.2 million. This is among the fastest growth rates of any consumer internet company, indicating that users are excited about its offerings.

Airbnb Nights and Experiences Booked

In Q3, Airbnb added 13.5 million nights booked, translating into 13.5% year-on-year growth.

Key Takeaways from Airbnb's Q3 Results

Sporting a market capitalization of $75.5 billion, more than $11 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Airbnb is attractively positioned to invest in growth.

Nights and Experiences Booked (key measure of volumes) grew but missed expectations slightly. However, revenue beat by a bit. On the other hand, its revenue guidance for next quarter underwhelmed. Overall, the results could have been better. The company is down 3.4% on the results and currently trades at $115.24 per share.

Airbnb may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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The author has no position in any of the stocks mentioned in this report.