TCOM: After the regulatory crackdown, can it remain a lean, high-quality play? ---

On the U.S. after-market of Feb 26, under a regulatory overhang, $Trip.com(TCOM.US) reported Q4 FY2025 results. Overall, the print was decent, with revenue growth beating prior guidance and re-accelerating. However, operating expenses rose across the board and outpaced revenue, dragging GAAP operating profit below expectations; details follow.

1) Strong topline, accelerating growth: On revenue, Trip.com Group's total net revenue rose 21% YoY this quarter, a new high for the year. The growth rate accelerated notably vs. last quarter.

All business lines beat prior guidance and accelerated. Larger hotel & lodging and ticketing delivered steady results, slightly ahead of expectations. The real upside came from three smaller segments: corporate travel, packaged tours, and advertising & others.

Packaged tours and advertising grew over 20% YoY and 50% YoY, respectively, well above estimates. Management attributed this to solid outbound/Intl product sales and incremental ad revenue from overseas expansion.

2) Overseas remains a high-growth engine, nearing half of the group: Trip.com (pure overseas) bookings rose 60% YoY, matching last quarter. Even on a high base, growth stayed robust.

Intl biz (pure overseas + outbound) contributed about 40% of total revenue in 2025, up from 35% in 2024. Its strategic importance and pull on group growth continue to rise.

Pure overseas revenue is driven mainly by mature markets such as Hong Kong and Singapore. Growth is also rapid in emerging markets like South Korea, Malaysia, and Indonesia.

3) Domestic demand is stabilizing: Within the two pillar segments, hotel booking revenue grew about 21% YoY. Growth accelerated by over 3pct QoQ and topped the high end of prior guidance.

Domestic hotels, the major revenue contributor, saw double-digit YoY growth in room nights with stabilized and improving ASPs. This points to resilient domestic lodging demand.

Ticketing revenue grew 12.3% YoY with a slight QoQ pickup. On one hand, domestic transportation ticketing revenue is still declining YoY due to active cuts in ancillary fees, partly amid regulatory pressure. On the other hand, higher-ARPU Intl air tickets provided the lift.

4) GPM contraction narrowed: GPM was 79%, narrowing by 0.3pct YoY. The decline is still ongoing but the drop was the smallest in recent quarters.

Given prior GPM pressure mainly reflected mix shift toward lower-margin overseas, profitability improvement in overseas is easing the drag on group GPM. This mix headwind is gradually moderating.

5) Opex ramped meaningfully; profit underwhelmed: Total operating expenses rose 23% YoY, clearly faster than last quarter. Growth exceeded revenue growth.

Marketing expense grew over 30% YoY, mainly to support overseas expansion. Domestic competitive intensity may also be rising.

R&D and G&A growth also picked up vs. last quarter to roughly 16%–18%. This suggests a broad-based expansion phase in spending.

On a GAAP basis, with a slightly lower GPM and faster opex growth, GAAP OPM narrowed 1.6pct YoY to 16.5%, well below market expectations. GAAP operating profit therefore grew only about 10% YoY.

Adding back SBC, Non-GAAP operating profit was RMB 3.2bn, up 16% YoY and slightly ahead of estimates. SBC as a percentage of revenue rose to 4.3% from 3.6% a year ago.

Dolphin Research focuses primarily on GAAP metrics and does not endorse excluding SBC from costs. GAAP better reflects economic reality.

6) Major BOD changes: The company announced that co-founders and directors Fan Min and Ji Qi resigned from their roles at Trip.com Group. Two new independent directors, both with finance backgrounds, were appointed.

Management said the reshuffle aims to optimize BOD composition with more diversity and external experience. The governance refresh is intended to strengthen oversight.

Dolphin Research view:

1) For the quarter, results were a mixed bag. The positives: revenue beat across businesses, domestic lodging demand stayed firm, and high growth in overseas continued to power group expansion.

The downside was profit, hampered by sharply higher spending. While management cited overseas investment, we cannot rule out rising domestic customer acquisition spend amid JD, Fliggy, and Douyin eyeing the lodging vertical.

With Trip.com Group under investigation and sentiment fragile, a merely mixed print rather than an across-the-board beat may not be enough to reverse the current share price weakness. The overhangs may linger.

2) Outlook: per management’s small-group guidance (upper bound), next quarter revenue growth is expected at 17%. That would slow from this quarter, though guidance may be conservative.

Core hotel & lodging and ticketing are guided to grow roughly in line with this quarter. The main drag is advertising, where growth may slow from 50%+ to around 20% due to a high base.

Opex, especially marketing, is expected to stay elevated, potentially adding about 2pct to revenue ratio given overseas investment. As a result, Adj. profit may grow just above 10% YoY.

Net-net, similar to this quarter: solid growth with some base-effect moderation, but softer profitability. The mix remains growth-strong and profit-weak.

3) Biz trends: a) Domestic lodging demand is broadly steady, with hotel ASPs stabilizing and recovering. Lodging growth looks steady.

Ticketing volume growth should roughly track the market, but domestic pure ticketing monetization is limited. High-margin add-ons like insurance bundles and priority services must stay muted given the current public climate, so revenue may remain negative YoY.

b) Overseas: Trip.com is expected to sustain 60% order growth, lifting overseas hotel, packaged tour, and air revenues. Overseas should remain the key growth pillar.

On profitability, Trip.com’s loss ratio improved to low double-digits % by 2H25. With scale, losses should keep narrowing, with breakeven in sight, albeit with no firm timeline.

4) Beyond earnings, the key near-term question is regulatory impact. The magnitude of any future fine may not be the main determinant for fundamentals.

More important is whether it impairs Trip.com’s domestic competitive edge and monetization headroom. There is no official disclosure on case specifics, and management did not comment on the call.

Per media reports, the focus includes an ‘auto repricing’ tool that effectively requires hotels to offer the lowest price on the platform. It also allegedly restricts certain designated hotels from joining rival platforms, a typical 'pick one of two' practice, both potentially anti-monopoly issues.

Given lodging, especially upscale, is a more limited and rivalrous supply than general merchandise, Trip.com’s moat may be stronger than perceived. Based on prior antitrust cases with Alibaba and Meituan, regulation alone likely will not dent market share, but it could cap domestic take-rate upside.

Apart from that key risk, potential domestic competition escalation and possible AI Agent disruption to OTAs also add uncertainty. The market currently dislikes uncertainty, as seen in debates about AI replacing SaaS or autonomous driving replacing ride-hailing.

5) Valuation: on current guidance, we estimate GAAP OP to grow ~10% in 2026 (conservative). We do not add back SBC and assume higher interest income largely offsets tax expense, implying minimal net tax.

Post-selloff, Trip.com Group trades at ~13x, near trough. As uncertainties around regulation, competition, and AI begin to resolve, this could be a worthwhile setup.

Detailed takeaways:

I. Core remains solid; smaller segments surprised

Total net revenue was about RMB 15.4bn (ex-business taxes), with YoY growth accelerating to 21%, the highest this year. Momentum stayed strong.

Hotels and ticketing, the bulk, grew steadily, accelerated vs. last quarter, and modestly beat guidance. The upside to revenue came mainly from three smaller segments: corporate travel, packaged tours, and advertising & others.

Actual growth far outpaced guidance, with packaged tours and advertising up 20%+ and 50%+ YoY. The call cited outbound Intl vacation packages and incremental overseas ad revenue.

1) Core steady with slight acceleration

By revenue type, hotel booking revenue grew about 21% YoY, accelerating by over 3pct QoQ. That exceeded the prior guidance range high end of 18%–19%.

Beyond the rising base, ASPs for domestic and overseas hotels still trend down, which also weighs on lodging revenue growth. This remains a headwind to topline in the segment.

Ticketing revenue grew 12.3% YoY with continued slight QoQ acceleration. As last year’s active unwind of bundled add-ons fades, ticketing revenue growth is gradually normalizing. Stronger growth in higher-ARPU Intl air tickets also helped.

2) Advertising and corporate travel outperformed

For the three smaller, better-than-expected segments: 1) Corporate travel revenue was RMB 810mn, up 15% YoY, matching last quarter’s growth. That was well above the conservative prior guide of ~4%.

Management cited improved penetration of enterprise travel services as the driver. The segment continues to gain share within corporate accounts.

2) Packaged tour revenue was RMB 1.06bn, up 21% YoY, a major beat and a sharp acceleration from prior single-digit growth. Outbound Intl vacation products and domestic senior travel contributed.

3) Other revenue, mainly advertising, rose 54% YoY with strong outperformance. It benefited from outbound and pure overseas incremental ad demand.

II. Opex rose sharply; softer profit — overseas expansion or competition?

Profitability: GPM was 79%, narrowing 0.3pct YoY, the smallest decline in recent quarters. As overseas profitability improves, the mix drag on group GPM is easing.

Opex: total operating expenses rose 23% YoY, a clear acceleration vs. last quarter and ahead of revenue growth. The spending ramp was broad-based.

Marketing grew 30%+ YoY, mainly for overseas expansion, though domestic pressure from JD, Fliggy, and Douyin may also be a factor. R&D and G&A growth likewise picked up to roughly 16%–18%.

This points to an active investment phase for the company. Spending is expanding across functions.

On GAAP, with a still-soft GPM and notably higher opex, GAAP OPM narrowed 1.6pct YoY to 16.5%, well below market expectations. GAAP operating profit rose only about 10% YoY.

On Non-GAAP, operating profit was RMB 3.2bn, up 16% YoY, slightly above expectations. The delta mainly reflects higher SBC this quarter vs. a year ago.

We primarily reference GAAP performance, as we do not exclude SBC from costs. GAAP offers a more conservative gauge of profitability.