TCOM: One More Leg Down Before the Reg. Hammer Falls?

Under a cloud of regulatory scrutiny, $Trip.com(TCOM.US) finally released its long-delayed Q1 results on Jun 25. In short: the quarter was decent, with both revenue growth and profit slightly beating estimates. The regulatory probe has not been resolved and there is still no official response.Most notably, management unusually guided Q2 revenue growth to 3%–8%, with profitability set to be impacted as well, showing regulation is starting to bite. Details below:

1) Revenue growth slowed: Q1 net revenue came in at approx. RMB 16.2bn, up ~17% YoY, off last quarter’s peak but still ahead of the ~15% market estimate.By revenue stream, core hotel and transportation were broadly stable QoQ or slightly slower. Beats came from corporate travel and other revenue led by ads.

By region, pure overseas GMV rose 65% YoY, accelerating from 60% last quarter. Inbound travel orders grew 90% YoY off a high base.This shows overseas and inbound remain solid growth vectors. The QoQ slowdown in headline revenue likely came from domestic, where regulatory effects may have started to surface.

2) Hotel and air/rail steady but easing: Within the two pillars, hotel booking revenue grew ~17.5% YoY, slowing from last quarter’s peak but in line with guidance. Yet peers Atour and Huazhu reported QoQ improvement in hotel revenue and ADR in Q1, implying monetization at the company’s hotel business may have softened due to regulation.

Transportation revenue rose ~12% YoY, with QoQ growth broadly stable, suggesting the recent scrutiny on train-ticket bundling has not materially hit yet.

3) Corp. travel and ads still ahead: Corporate travel revenue was RMB 690mn, +20% YoY, the only segment to accelerate vs. last quarter (vs. 15%), handily beating the Street. Management attributed this to Chinese corporates expanding abroad, lifting overseas and cross-border T&E.

For other revenue led by ads, YoY grew 33%, a sharp decel. vs. 50%+ last quarter but still strong and 10ppt+ above expectations. As flagged last quarter, the decel. reflects the higher base from 2025 onward.

4) GPM decline widened: Q1 GPM was 79.5%, with the YoY contraction widening to 90bps. This likely reflects a higher mix of lower-margin overseas business, alongside pressure on domestic hotel/transport monetization and reduced ancillary sales in ticketing due to regulation.

5) Still investing in opex: Total opex rose ~18% YoY, moderating from 23% last quarter but still outpacing revenue growth, modestly diluting margins. The good news: actual spend was ~2% below market expectations.By line item, growth in all three opex buckets slowed QoQ. Marketing remained the fastest-growing at nearly 25%, as the firm invests for overseas expansion amid rising domestic competition.

R&D rose ~15% YoY (including AI-related development needs), while G&A grew less than 7% YoY, remaining the main area for cost discipline.

6) Profit beat, but less operating leverage: With a slight GPM decline and opex rising a touch faster than revenue, GAAP OPM narrowed 150bps YoY. OP was RMB 3.95bn, up ~11% YoY, lagging revenue growth.

Dolphin Research view:

1) As noted, Q1 was not dazzling but not weak either. Revenue growth slowed modestly and was within guidance, while OPM fell YoY given lower GPM and an investment phase in opex.Profit grew slower than revenue, a pattern seen for nearly a year, yet still came in better than the Street.

We believe the post-earnings pullback, similar to earlier declines, is mainly about regulatory uncertainty: after compliance adjustments, how will competitive position and profitability be affected? For a true inflection in the stock, this must be resolved with clarity.Even a negative outcome could at least clear the overhang.

2) On regulation, given the noticeably late Q1 print, the market clearly hoped results would signal closure. In reality, the company offered no concrete update on the timeline, potential remedies, or possible fines.Uncertainty still looms large.

3) On outlook, the 3%–8% revenue growth guide is the lowest since post-COVID in 2022. Management cited:

a) Oil prices lifted by Middle East tensions, pushing up airfares and softening air travel demand at home and abroad, also altering trip mix (likely fewer long-haul);

b) Weaker travel to the Middle East and related regions due to the conflict;

c) Tighter scrutiny of train-ticket add-ons such as 'speed-up packages' weighing on high-margin ancillary revenue;d) Operational adjustments to comply with regulatory requirements and new industry norms.

Dolphin Research believes oil and conflict are factors but largely short term, and the company’s overseas exposure is concentrated in East/Southeast Asia, with limited direct impact from the Middle East. The core issue is domestic regulatory pressure on hotel/transport and, more recently, train-ticketing.

4) While the company-specific outcome is pending, recent releases such as the 'Internet Platform Price Conduct Rules' and joint SAMR–Railway Administration meetings offer clues to potential impacts.

a) For the relatively straightforward train-ticket regulation, it mirrors prior curbs on default or induced insurance bundling for air tickets. The focus is to limit platforms from promoting or steering users to buy add-ons such as 'speed-up packages', 'standby assistance', 'online seat selection', and 'short-buy/long-ride' services.

Because pure OTA resale of train tickets generates little to no net revenue or profit while incurring operating costs, it is effectively a traffic-only business. These add-ons are the key way OTAs monetize train-ticketing.Restricting them likely hits profitability meaningfully, pushing the business back to a 'traffic at a loss' model.

b) The 'Internet Platform Price Conduct Rules' relevant to the company include prohibitions on: forcing merchants to auto-match prices or offer lowest-on-the-internet pricing; undermining merchants’ pricing autonomy; applying discriminatory pricing to different consumers; and bundling/inducing purchases of insurance, refund services, or other platform services.These rules precisely target issues such as demanding lowest-net pricing via special contracts or traffic throttling, dynamic pricing to extract higher consumer surplus, and bundling add-ons across hotel and ticketing to boost take rate.

In short, we do not expect a major hit to competitive moats or share. The main impact is the cap on incremental/ancillary monetization per transaction, which has been a key profit driver.As such, with Q2 revenue guided to 3%–8%, profitability could fare worse and warrants close watch.

5) Valuation: assuming zero OP growth in 2026, with post-earnings market cap under RMB 200bn and OP around RMB 16bn, implied multiple is ~12.5x, which is inexpensive vs. the company’s historical range and nearing worst-in-class e-com multiples.On one hand, the competitive setup here is stronger than e-com peers, revenue growth is higher, and overseas profit has yet to inflect. Valuation arguably should not compress to single-digit PE.

On the other hand, as discussed, regulatory headwinds could weigh more on near- to mid-term profit, even excluding one-off fines. A negative OP print cannot be ruled out.Before the probe is settled, another leg down driven by profit cuts is possible.

Below are the details:

I. Revenue growth eased; regulatory effects still unclear

Q1 net revenue was approx. RMB 16.2bn, +~17% YoY, slower than last quarter’s peak but above guidance and the ~15% Street. Impact from regulation was not yet obvious in Q1.By stream, hotel and transportation were broadly stable or slightly slower vs. last quarter, while beats mainly came from corporate travel and other (ads-led).

By region, pure overseas GMV grew 65% YoY, up from 60% last quarter. Inbound travel orders still rose 90% YoY despite a high base.These two newer growth vectors remain solid.

1) Core segments steady but easing

This quarter, hotel booking revenue grew ~17.5% YoY, slowing from last quarter’s peak and broadly in line with guidance and the Street. However, Atour and Huazhu reported QoQ improvement in Q1 hotel revenue and ADR, while the company moved the other way.Dolphin Research suspects a decline in hotel monetization under regulatory pressure.

Transportation revenue rose ~12% YoY, broadly stable QoQ and slightly above expectations. The Q1 crackdown on train-ticket bundling has not yet shown a clear impact.

2) Ads and corporate travel beat

Across three smaller but better-than-expected lines:Packaged tours grew in line, with revenue of RMB 1.13bn, +~19% YoY, a modest QoQ decel. but broadly as expected.

Corporate travel revenue was RMB 690mn, +20% YoY, and the only segment to accelerate vs. last quarter (15%), well above the Street. Management cited Chinese corporates going overseas, lifting international T&E.For other revenue led by ads, YoY grew 33%, a notable QoQ decel. but still >10ppt ahead of expectations. As guided previously, the decel. reflects the high base from 2025 onward.

II. GPM down; opex elevated; margin under pressure

On profitability, Q1 GPM was 79.5%, with YoY decline widening to 90bps. Mix shift toward lower-margin overseas and domestic regulatory effects likely both contributed.

On costs, total opex rose ~18% YoY, easing from 23% last quarter but still a touch above revenue growth, slightly dilutive to margins. Actual spend was ~2% below the Street.By line, all three opex buckets decelerated QoQ. Marketing rose nearly 25%, reflecting overseas buildout and rising domestic competition.

R&D was up ~15% YoY, reasonable given AI-related development. G&A remained the main cost-control lever, up less than 7% YoY.

With GPM slightly lower and opex growing a bit faster than revenue, GAAP OPM narrowed 150bps YoY. OP was RMB 3.95bn, +~11% YoY.On a non-GAAP basis (ex-SBC), OP was RMB 4.6bn, +~15% YoY, a faster clip.

Both profit metrics grew slower than revenue, reflecting pressure from regulation externally and investment internally. There is mild 'more revenue, less profit' dynamic.Still, both GAAP and non-GAAP OP beat expectations.

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Dolphin Research prior reviews on Trip.com:

Nov 18, 2025 Trans: Trip.com (Trans): Q4 peak-season marketing to stay elevated

Nov 18, 2025 earnings review: Trip.com: Waiting for overseas profit unlock

Aug 28, 2025 Trans: Trip.com (Trans): Announces $5bn open-ended buyback

Aug 28, 2025 earnings review: Unfazed by JD’s entry, Trip.com remains a top student

May 20, 2025 earnings review: Trip.com: More revenue, less profit — even the A-student hits a snag?

May 20, 2025 Trans: Trip.com (Trans): Stable hotel demand; marketing to step up

Feb 25, 2025 earnings review: Trip.com: Can inbound travel save the day amid heavy spend?

Feb 25, 2025 Trans: Trip.com (Trans): Huge intl runway; no 2025 profit cap

Risk disclosure and disclaimer: Dolphin Research disclaimer and general disclosure