The detailed Robinhood earnings review is getting pushed to Saturday. I’ll publish that alongside a detailed Palo Alto earnings review (snapshot included below) and part 2 of the DraftKings review (call is tomorrow). I wanted to get Robinhood published tonight, but I just ran out of hours in the day. Peak earnings season. Apologies. Coming soon. On it. From what I’ve been able to read so far, things looked great for the brokerage disruptor.

Focus on annualized FCF here. Quarterly margins are wildly seasonal. For example, in Q4-23, a large tax withholding hit held back FCF margin significantly. Without this $1 billion item, the margin would have been 48% for the quarter. The same $1 billion charge also impacted GAAP net income. I decided to adjust the Q4-23 net income margin line for this charge but I left FCF unchanged. This is how they disclosed things last year, so I thought I’d keep things consistent.

Airbnb will invest an incremental $225 million in 2025 to “launch and scale new businesses later this year” (the Experiences business re-launch). A lot of that will be for marketing, with some budget for product teams. Most of the margin headwind will be felt during the first 3 quarters of the year.

“We are excited by the continued strong demand we are seeing in 2025.”

CFO Ellie Mertz

Airbnb trades for about 22× 2025 FCF and 35× 2025 EPS. FCF is expected to be flat Y/Y partially due to margin contraction (related to ramping investments). FCF growth is expected to accelerate to 11% in 2026. EPS is expected to grow by 9% this year and by 15% next year. Estimates should be mostly stable following this report. The Q1 revenue miss and 2025 margin guide could lead to modest downward pressure.

Product Optimizations & Perfecting the Core:

Over the last few years, Airbnb has obsessively focused on core product optimizations to juice traffic, engagement and other key performance indicators. Recent launches include a new welcome tour for people coming into Airbnb. It also debuted upgraded search, better maps and more payment optionality to make navigating the app more delightful and seamless. It debuted a new co-hosting tool to let property owners pair with professional hosts to take the headache out of operations. This type of listing is already generating 2x the earnings compared to all others on the platform; co-hosts will launch in 10 more countries this year. The product should be wonderful for raising availability rates within existing options and lowering friction for more supply growth. Demand always follows supply for Airbnb.

And finally, it fixated on removing decrepit and fraudulent listings from its supply base while debuting a guest favorites tab to steer consumers to better, more consistent options. That should drive more repeat usage from customers. Specifically, the company thinks all of this work raised its December NEB growth rate by a few full points. NEB growth was faster in December than any other month in 2024 and first time customer growth also accelerated nicely.

While these tweaks are all subtle in nature, they aggregate to form something quite meaningful – especially considering how massive ABNB’s book of business is. It’s now in the process of overhauling its checkout page to keep driving more progress. Inch by inch.

New Tech Stack:

The cadence of Airbnb’s optimization work over the last few years has greatly accelerated in recent quarters. That’s no coincidence. Over the last 6 years, it has worked hard to overhaul, upgrade and unify its technology stack. This included a large app refresh and completely rethinking the interface and the back-end architecture of the site. This is enabling them to move faster and add all of the updates we’ve already mentioned. For another example, it freed Airbnb to block predatory surcharges from hosts amid the LA wildfires. Its old makeup would not have allowed this to happen so quickly just 12 months ago. The new stack is already beginning to bear fruit with “improved usability,” which drives more rapid product improvement and a direct uplift to traffic. This is the foundation Airbnb felt it needed to support all of the product expansion it has planned in the coming years (much more later). It had to walk before it could run. And now? It has the plumbing in place to sprint.

“It's going to lead to fewer engineers being able to basically shift features faster.”

Co-Founder/CEO Brian Chesky

More on the Newer App:

The new app launch is working like a charm. NEB growth through that product rose 22% Y/Y and 60% of total bookings were on the app vs. 55% Y/Y. Conversion rates are convincingly higher via this app vs. its mobile site (understandably), so it wants to keep pushing this.

Teasing the May 2025 Experiences Relaunch:

Airbnb leadership is quite optimistic that the Experiences relaunch will be a hit success this time around. It learned a lot from the first attempt to inform this upcoming reintroduction. It worked harder to more slickly integrate the product into the rest of the app and to make options more visible. It established a more formal and aggressive marketing playbook as they’re now “proud of the product quality” and eager to spread the word.

“I want to be measured in my response because this is our second shot at it. I am extremely confident that this product is going to be incredibly, incredibly compelling though.”

Co-Founder/CEO Brian Chesky

If that’s what “measured” means for him… I wonder what “unleashed” sounds like. But I digress.

The Experiences offering will start with directly complementary offerings for its core travel business. From there, it has a vision to “make this the place to go for all travel and living needs.” It offered an Amazon comparison (I can feel the eye rolls) in terms of creating a super-app to fulfill all needs within a specific area.

It reminded us that most of its volume is for long-term stays, and these consumers certainly could enjoy many, many more product offerings from Airbnb. Delivering these offerings can work wonders in driving app usage frequency and revenue per listing. He spoke about this Experiences push as a series of several businesses the company plans to launch over the coming years:

“I think that each business could take three to five years to scale. A great business could get to $1,000,000,000 of revenue, it doesn't mean all of them will. And you should be able to expect one or a couple of businesses to launch every single year for the next five years.”

Co-Founder/CEO Brian Chesky

“I would love for people to use Airbnb once or twice a week instead of per year.”

Co-Founder/CEO Brian Chesky

Expanding the Geographic Core – Hello Japan:

Airbnb continues to extend its geographic focus beyond its core markets. The cohort of newer markets has been consistently outgrowing its 5 main countries of operation; during Q4 specifically, growth rates in expansion markets were 2x the rest of the business. Brazil and Korea have long been the two most exciting growth countries for Airbnb, and now Japan is clearly joining the fold. 

Airbnb has localized its Japanese product, in terms of payments, app interface, more relevant suggestions and more reviews from local travelers to build trust. That’s especially important in Japan, as domestic weekend travel is an especially popular use case there. Airbnb’s app needed to feel less foreign and more familiar. Now it does. It reignited go-to-market efforts there this quarter with a new marketing campaign. It doesn’t expect traction to come in Japan as rapidly as it did in Brazil (success story for Airbnb), as brand awareness is lower. Still, it’s very confident in this market’s potential.

Demand by Geography:

In North America, NEB growth was roughly 5% and accelerated compared to low-single-digit growth last quarter. Average Daily Rate (ADR) rose 3% due to a mix shift to entire home stays and away from products like Airbnb rooms. ABNB also saw mix shift from long-term to short-term stays, which also elevates ADR.

In Europe, The Middle East and Africa (EMEA) NEB growth was a little over 10% Y/Y. All facets of this market accelerated Q/Q: domestic, cross-border, urban, non-urban and every single age cohort. ADR rose 6% Y/Y due to mix shift.

In Latin America, NEB growth was a little over 20% Y/Y vs. 15% last quarter, with domestic continuing to be the standout (30% Y/Y growth). FX headwinds led to a 5% decline in ADR (+4% Y/Y FXN). During Q3 and Q4, it jump-started new Latin American marketing campaigns to grow its brand awareness. This led to first-time booker growth accelerating by a full 15 points vs. last quarter. Airbnb has gotten very, very good at running its marketing playbook across the globe. Surgical. Whether that’s North America, Europe, Southeast Asia or Latin America… where it spends, it grows. The company added Pix as a payment method in Brazil (nationalized payment system) which led to even more acceleration in first-time booker growth in that country specifically.

In Asia Pacific, NEB growth was also just above 20% Y/Y vs. 19% last quarter. Domestic growth was great, but cross-border is still a much larger business there (+27% Y/Y). ADR rose 1% Y/Y (2% FXN). The recovery in China “continues to be gradual,” but it did enjoy some modest progress this quarter with 25% Y/Y NEB growth.

AI:

Airbnb is focused on customer service as its first AI initiative. From there it’s “going to take the AI customer service agent and bring it to search and eventually make it a living travel concierge.” DeepSeek probably accelerated this process a bit, if anything. It doesn’t think AI is ready to greatly enhance its product engineering efficiency, but does think that will eventually come.

I remain in wait-and-see mode on this name. I am open to owning this again at some point, but I’m not ready to today. It’s hard to overstate how important the May relaunch of Experiences is for this business. If it goes well, that greatly extends the growth runway and dissipates slowdown concerns for its core operations. It becomes a cash machine where maintaining 10%+ revenue growth for a long time is much more realistic. There are many reasons to believe things will go better this time around, but they still need to prove it.

Airbnb has built an incredible business with one single product. To go from incredible to iconic, it really does need to find a few more growth outlets. If this delivers those outlets, I think there’s a lot to like here. It’s a market share king in a giant industry with peak regulatory concerns seemingly behind it (for now at least). Its margin profile is extremely healthy regardless of more investments and its founder is a star. Again… there’s a lot going for Airbnb, but I want to see how this specifically goes. Time to prove it.

The earnings call is tomorrow morning. Here’s coverage of the rest of the materials (letter, presentation, presser).

As I’ve spoken about in detail for the last couple of months, Q4 was the worst quarter for sports book outcome luck in decades. When hold rates (take rates) decline, results directly suffer. Everyone was impacted. For context, the gap between DKNG’s actual hold rate and its “structural” hold rate (means expected hold rate based on bets placed) was a negative 110 bps in 2024. The gap in 2023 was negative 60 bps, with a positive gap in 2021 and 2022. That’s why DKNG’s guidance was so far above and beyond consensus estimates. Everyone in the world knew they’d miss and numbers were already revised accordingly. And this is why we track state-level data.

DraftKings met revenue estimates and missed its guidance by 9%. Average revenue per user (ARPU) declines were driven by its Jackpocket acquisition. Lower actual hold rate also impacted things (bad luck). Note that 36% Y/Y monthly unique payer (MUP) growth was 16% Y/Y excluding the Jackpocket acquisition.

“While revenue rose 30% in 2024, adjusted OpEx rose only modestly… We expect this to continue.”

Co-Founder/CEO Jason Robbins

Quarter-to-date, outcome luck has flipped from absolutely horrendous to quite good. Its actual hold rate was 11% in January and is 13% so far in February. That compares to a 9.4% actual hold rate in 2024. DraftKings has not included year-to-date outperformance stemming from this good luck in its 2025 guidance. Smart. It also has not yet included Missouri (2% of the U.S. population and about 4% of the legal population) in its guidance.

Starting in 2025, DKNG will move to disclosing net revenue margin guidance instead of hold rate. They’re similar metrics, but not identical. Hold rate deducts payouts from handle and divides by handle. Net revenue margin deducts all direct expenses from handle (not just payouts) and then divides by handle. This is not a change to avoid sharing worsening hold rate expectations. It reiterated an 11% expected hold rate for 2025.

It will also begin disclosing sports gambling and iGaming net revenue separately every quarter. Love this.

Thriving:

DraftKings continues to find rapid growth and strong market share despite more promotional reinvestment cuts and other customer acquisition controls. Promotional reinvestment specifically fell 2 points as a % of revenue in 2024, while margins exploded higher despite Illinois doubling its tax rate. It has even more improvement to enjoy here in 2025, as it plans to continue successful customer acquisition while further “optimizing reinvestment.” Hello (more) operating leverage.

“Looking ahead, we expect tailwinds to persist as states mature and we continue to improve and optimize our platform.”

Founder/CEO Jason Robbins

Live Betting:

A priority in 2025 will be to continue growing its lead in live betting. The company bought Simplebet (live betting odds), Sports IQ Analytics (analytics to perfect promotions, marketing, odds etc.) and Mustard Golf to do this. It now thinks it has the assets in place to really flex its muscles here. That will entail more investments in the space, but DKNG still expects that to be EBITDA neutral in 2025 before contributing the profit thereafter. Pretty good ROI… I guess.

Jackpocket Cross-Selling & Growth Levers:

Jackpocket has quickly proven itself as an “efficient customer acquisition channel for the DraftKings ecosystem.” It’s also doing very well on its own, as it reached the top 5 for entertainment apps in December when the Mega Millions jackpot crossed $1 billion. DKNG will focus on Jackpocket state expansion and deepening that product offering with scratcher games this year.

Aside from Jackpocket, DKNG is rethinking how high its structural hold rate can go. If the ceiling is higher, the room for revenue growth is larger too. Aside from this, it’s cautiously optimistic in more legalization this year as focus returns to budgets following a heated election cycle. And? It “hasn’t even begun to expand outside of North America, which could be a longer-term opportunity.” This company is not starved for growth outlets in the least.

Customer Acquisition Trends:

Why did DraftKings raise its revenue target while reiterating its EBITDA target? Good question. The answer, I think, is actually good news. It’s because the environment for customer acquisition remains fantastic and its ability to secure those customers remains “better than expected.” As it told us last quarter, if the environment stayed as robust as it was, it would keep investing. That means lower near-term EBITDA and a larger, more profitable company in the future. It’s a tradeoff I support.

The Tyson-Paul fight was its best day ever for customer acquisition outside of the Super Bowl. Speaking of which, DKNG topped app store charts on Super Bowl Sunday and collected a record $436 million in bets for the event. What’s even more encouraging is that the bet mix shifted to same-game parlays, with volume for those bets rising 40% Y/Y. This is one of the highest hold rate bet types that DKNG provides. For the NFL season overall, parlay mix as a % of bets rose by a full 6 points. This is the single most important thing DKNG can do to close the hold rate lead FanDuel currently enjoys over it. Closing that lead will mean revenue growth materially leads volume growth for DKNG in the coming years.

“Today, I am more confident than ever in our growth trajectory and ability to capitalize on the substantial opportunity ahead of us.”

Co-Founder/CEO Jason Robbins

What I’m reading in this report is quite positive. Still, I’d like to wait to write this section until I read the earnings transcript and cover it on Saturday. I really think it will be a uniformly positive take, but I need to digest everything first. Their call is at 8:30 tomorrow morning.