Trip.com Holdings (HK:9961) saw its Hong Kong-listed shares decline on Thursday after the travel platform published fourth-quarter results that combined clear top-line and bottom-line strength with a notable contraction in profitability margins.
Shares fell 3.4% to HK$400 in Hong Kong trading, versus a 0.9% drop in the Hang Seng index.
The firm reported net profit attributable of 4.28 billion yuan ($614 million) for the quarter, roughly double the 2.16 billion yuan recorded in the same period a year earlier. Revenue rose to 6.29 billion yuan from 5.18 billion yuan a year ago.
Despite those gains, Trip.com’s adjusted EBITDA margin narrowed sharply, sliding to 22% from 35% in the prior quarter. The company noted that the December quarter is historically a lower-margin period for its business, but also disclosed that its core earnings margin declined versus the previous year, falling from 23% to the current level.
Company commentary and disclosed initiatives attribute the margin pressure in part to investment activity. Trip.com is increasing spend to develop its international operations and is also stepping up activity in domestic markets to capture rising inbound travel into China. Those moves, while targeted at future growth, coincided with the quarter’s reduced margin profile.
Brokerage coverage reflected a mixed response. Mizuho reduced its price target on Trip.com’s American depositary receipts to $79 from $82, citing an environment of lower overall industry valuations driven by persistent risks related to artificial intelligence. The firm nonetheless retained an Outperform rating, describing the company’s fourth-quarter results as strong and pointing to expanding inbound travel to China as a material growth opportunity. Mizuho also argued that Trip.com’s position within a fragmented domestic travel market leaves it relatively less exposed to potential disruptions from AI developments.
Regulatory risk remains an outstanding concern. Trip.com disclosed that it is subject to an ongoing investigation under China’s anti-monopoly laws and provided few additional details. The company stated it is fully cooperating with the State Administration for Market Regulation as the probe continues.
Key financials at a glance:
- Net profit attributable: 4.28 billion yuan (up from 2.16 billion yuan a year earlier)
- Revenue: 6.29 billion yuan (up from 5.18 billion yuan a year earlier)
- Adjusted EBITDA margin: 22% (down from 35% in the prior quarter)
- Core earnings margin: down from 23% year-on-year
Trip.com said it is moving to capture demand tied to increasing inbound travel to China while also building its international footprint, actions that have coincided with the latest quarter’s margin deterioration. The combination of heavier investment and an unresolved regulatory inquiry frames the near-term outlook for the company’s profitability and investor sentiment.