TCOM (Trans): Antitrust in Force, Intl Expansion Takes the Lead

Dolphin Research recap of$TRIP.COM-S(09961.HK) FY26 Q2 earnings call Trans

I. Key takeaways

1. Antitrust penalty: accounting treatment and adjusted metrics

In Q2, the company booked an administrative penalty from the State Administration for Market Regulation of RMB 5.18bn as expense and recorded a one-off revenue reduction of RMB 122mn, both non-recurring and not reflective of underlying operations.

Excluding the revenue offset, lodging revenue grew 8% YoY vs. 6% on a reported basis. Adj. EBITDA, adj. G&A and non-GAAP EPS all exclude the penalty impact.

2. Quarter highlights

a) Total: net revenue of RMB 15.7bn (+6% YoY); adj. EBITDA of RMB 4.6bn vs. RMB 4.9bn a year ago; non-GAAP diluted EPS/ADS of RMB 7.27 (US$1.07) vs. RMB 7.20 a year ago.

b) By segment: lodging RMB 6.6bn (+6% YoY; +8% ex-revenue offset); transportation RMB 5.4bn (-1% YoY); packaged tours RMB 1.2bn (+8% YoY); corporate travel RMB 771mn (+11% YoY).

c) Opex: adj. R&D up 7% YoY and adj. G&A (ex-penalty) up 8% YoY, both driven by personnel costs; adj. S&M up 15% YoY to support global expansion.

d) Cash: as of Jun 30, cash & equivalents, restricted cash, ST investments, HTM time deposits and wealth mgmt products totaled RMB 100.5bn (US$14.8bn).

3. No quantitative guidance

Management did not provide Q3 or full-year revenue/profit guidance, nor new dividend or buyback plans, noting it will maintain execution discipline and invest strategically.

They expect domestic trends to be volatile during the rectification period. Over the medium to long term, globalization will drive growth, with intl revenue mix and contribution to incremental growth rising.

II. Details from the call

2.1 Management remarks

1. Inbound travel

a) One of the fastest-growing businesses this quarter, with revenue up high double digits YoY. APAC remains the core source market, led by Korea and Southeast Asia for frequency; Europe and the U.S. showed strong seasonal growth in key holiday periods.

b) Source-market behavior is shifting: extending from coastal east to central and western regions; moving from sightseeing check-ins to immersive experiences centered on local cuisine, traditional culture and intangible heritage. Family travel concentrates around public and school holidays.

c) Events such as the Canton Fair and the company’s Envision Global Partner Conference are gateways for business-to-leisure trips. The company will invest in the inbound ecosystem, boost intl exposure and multi-language service, aiming to serve 200mn inbound visitors over the next five years.

2. Intl OTA platform (Trip.com)

Revenue grew over 50% YoY this quarter (see Q&A for operating details). The mix is skewing toward premium and personalization: in 1H26, first/business-class bookings rose over 70% YoY, and tailor-made trips curated 1:1 by travel experts grew 600%.

3. Outbound travel

Demand remains resilient but travelers are more selective, with a greater tilt to short-haul and visa-free destinations, and they flex destinations and itineraries with airfare swings. Management views fuel and fare headwinds as cyclical, not structural, expecting demand to return to its prior trajectory as cost pressure eases.

4. Domestic travel and spring-break pilot

a) Demand was strong across Qingming, Labor Day and Dragon Boat Festival, while the spring-break initiative continued to roll out. In pilot cities, family-trip bookings and spending each rose over 300% YoY, about 5x the growth of non-family travelers; overall bookings in pilot cities grew nearly 150% and spending nearly 200%.

b) Low-density, non-traditional destinations grew faster than famous attractions. Short-haul, urban strolling, rural leisure and study tours gained traction, and travelers are shifting from single-point sightseeing to bundles of 'travel + dining/lodging/transport/culture'.

5. Events & entertainment

a) GMV in events/entertainment rose over 80% YoY this quarter. Unlike traditional attractions, concerts and sports have fixed dates and strong fan pull, acting as powerful catalysts for intercity travel.

b) In 1H26, 7 out of every 10 tickets on the platform were associated with intercity travel, and over one-third of travelers stayed an extra night for the show. Hotel bookings in host cities multiplied during event periods, with entertainment-related spending in Xuzhou, Chengdu and Jinzhou up over 200% YoY.

6. Rectification and partner ecosystem

a) In Jul, the company received the SAMR penalty decision and moved forward with rectification. Key actions include ending the Level-1 distribution program, migrating partners to a new multi-tier framework, and terminating Level-2 distribution to normalize pricing and return commercial autonomy to partners.

b) Supporting moves: simplify platform rules and promo workflows to reduce operational complexity, and invest in data, tech and intl marketing to help partners reach new users.

7. AI progress

AI-assisted orders via TripGenie grew approx. 400% YoY, with nearly 60% of interactions now tied to bookings across hotels, flights and attractions. The company launched fully AI-driven search in Q2.

2.2 Q&A

Q: Post-antitrust resolution, how will strategic priorities change?

A: No new strategic pivot; rectification is framed as a chance to reinforce the G2 strategy. Management fully accepts the regulatory decision, and the rectification aligns with its premium and globalization strategy.

On premium, it will enhance value delivery to hotel partners for more sustainable relationships, and invest in tech and merchant tools to improve transparency, operating efficiency and customer service, shifting competition from price-led to broader value dimensions. On globalization, it will keep inbound and intl expansion as long-term growth engines.

Q: How is the new hotel partnership framework designed, and how might rectification affect competitiveness?

A: A multidimensional, dynamically weighted ranking replaces the prior mechanism; no quantified impact disclosed. The updated hotel recommendation/ranking incorporates customer feedback, service quality, information completeness, product competitiveness and historical conversion, with dynamic weights.

The aim is to better match diverse customer needs with high-quality supply, while giving hotels a more flexible, market-driven partnership environment. Management did not directly quantify the impact on competitiveness.

Q: Can you quantify the penalty’s financial impact and its near- and long-term effects on operations and financials?

A: One-off expense of RMB 5.18bn and revenue reduction of RMB 122mn; near-term domestic volatility. Both items are non-recurring and not indicative of Q2 operating performance.

Near term, as partners transition to the new model and market practices adjust, domestic performance will be somewhat volatile. Over a longer horizon, growth will be driven by business fundamentals and the G2 strategy, especially intl expansion, with intl mix and contribution to incremental growth rising.

Q: With more platforms offering agentic travel search/booking, how do you view and respond to this trend?

A: AI changes the interface, not the underlying fulfillment needs of travel. The company is responding across four journey stages. Inspiration: travelers often start with broad, unstructured needs, and AI agents will become a more important discovery channel, so the company is expanding partnerships with leading AI platforms and exploring emerging AI discovery channels.

Search: once intent is clear, the key is timely, complete and accurate info with executable advice. Proprietary data spans not only hotels and flights but also inventory, pricing, availability and policies needed to complete bookings. Externally, it is building GEO and AEO and exploring agent-to-agent cooperation to capture AI traffic; internally, it blends LLMs with its travel data and industry know-how.

Transaction and fulfillment: the focus is a frictionless loop of real-time inventory, pricing, payment and confirmation. Rebooking, refunds, trip disruptions and on-the-ground support still rely on human service and operational execution.

Q: What is the financial impact of AI investments? Should investors expect material incremental CapEx?

A: AI-related CapEx will rise near term, focused on application development and post-training, and remains manageable. The company is not training large foundation models from scratch, keeping incremental spend disciplined and controllable.

Long term, the goal is to translate investment into systemwide efficiency gains: as AI scales across the full user journey, automation and personalization lift operating efficiency, and better matching and targeting drive higher conversion and stronger marketing ROI. These benefits should gradually offset incremental AI costs and improve unit economics.

Q: What trends are you seeing across travel sub-sectors? How is user behavior changing, and how are you responding?

A: Short term, three headwinds: long-haul capacity cuts, higher energy prices, and heavy summer rains; long-term resilience boils down to the ‘three Ps’. The Middle East conflict led airlines to cut long-haul routes; energy prices raised travel costs; and summer downpours pressured transportation.

Longer term, customer resilience is strong. The first P is premium: high-end travelers are most resilient with fast-growing global travel, aligning with the company’s premium-service edge.

The second P is purposeful: e.g., study tours and culture/history themes, where the company is ramping resources. The third P is pro-leisure (bleisure), seen in the ‘Thursday effect’—business trips Mon–Thu, with Fri plus the weekend for nearby leisure; the company serves both needs.

Q: Any additional highlights in intl, and what will Trip.com focus on over the next few quarters?

A: Revenue up over 50% YoY, mobile mix hit a record above 70%, and margins improved meaningfully. By product: air faced capacity constraints and higher fares, partially offset by higher ASPs; lodging remained strong; attractions tickets and packages have delivered outsized growth since last year’s launch, reflecting healthy short-haul demand and progress in cross-sell.

By region: APAC remains the largest growth contributor, while Europe/U.S. are smaller but growing faster. By channel: mobile surpassed 70% of mix, supported by smoother booking flows and stronger organic traffic; GEO and AI agent traffic is growing fast but still small in scale.

Margin gains came from better marketing efficiency, scale benefits and improved air economics. The focus ahead is to expand local supply and build brand awareness in APAC and other intl markets, while maintaining ROI-driven marketing discipline.

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