Airbnb, Inc. (ABNB)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2024 refer to the year ended December 31, 2024, references to 2023 refer to the year ended December 31, 2023, and references to 2022 refer to the year ended December 31, 2022.

This section of this Annual Report on Form 10-K discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 16, 2024.

Glossary of Terms

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Overview

We are a community based on connection and belonging—a community that was born in 2007 when two hosts welcomed three guests to their San Francisco home, and has since grown to over 5 million hosts who have welcomed over 2 billion guest arrivals in almost every country and region across the globe. Every day, hosts offer unique stays and experiences that make it possible for guests to connect with communities in a more authentic way.

We have five stakeholders and we have designed our Company with all of them in mind. Along with employees and shareholders, we serve hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive.

2024 Financial Highlights

In 2024, revenue increased by 12% to $11.1 billion compared to 2023, primarily due to a 10% increase in Nights and Experiences Booked of 43.3 million combined with higher Average Daily Rate (“ADR”) driving a 12% increase in Gross Booking Value of $8.5 billion. The growth in GBV and revenue demonstrated continued strong travel demand.

In 2024, net income decreased by 45% to $2.6 billion, compared to the prior year, primarily due to the release of the majority of our valuation allowance on U.S. federal and state deferred tax assets of $2.9 billion in 2023, and the recognition of deferred tax expense related to the utilization of some of those assets in 2024 (see Note 14, Income Taxes, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details). This was partially offset due to a decrease in withholding taxes, associated fees, and penalties and interest expense due to a withholding tax settlement related to Italy of $770 million, $196 million and $64 million respectively.

Adjusted EBITDA1 increased 11% to $4.0 billion in 2024 demonstrating the continued strength of our business, growth in revenue and discipline in managing our cost structure.

Our net cash provided by operating activities was $4.5 billion in 2024, compared to $3.9 billion, in the prior year. We generated Free Cash Flow1 of $4.5 billion for the year ended December 31, 2024, compared to $3.8 billion, in the prior year.

During 2024, we repurchased an aggregate of 24.5 million shares of Class A common stock for $3.4 billion. As of December 31, 2024, we completed the repurchases under the August 2, 2022 share repurchase program and had $3.3 billion available for repurchase of Class A common stock under the May 9, 2023 share repurchase program.

Trends

Inflation and other macroeconomic pressures in the United States and the global economy, such as tariffs, foreign currency fluctuations, as well as wars and other geopolitical conflicts, have contributed to an increasingly complex business environment. As a result, our future operational results may be subject to volatility. Additionally, health-related events, political instability, acts of terrorism, and natural disasters, are examples of other events that could have a negative impact on the travel industry in the future.

Key Business Metrics and Non-GAAP Financial Measures

We track the following key business metrics and financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) (“non-GAAP financial measures”) to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results.

These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with U.S. GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided under the subsection titled “— Adjusted EBITDA Reconciliation” and “— Free Cash Flow Reconciliation” below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

Key Business Metrics

We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies that may calculate similarly titled metrics in a different way.

1 A reconciliation of non-GAAP financial information to the most comparable U.S. GAAP financial measures is provided under the subsection titled “Key Business Metrics and Non-GAAP Financial Measures— Adjusted EBITDA Reconciliation” and “— Free Cash Flow Reconciliation” below.

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The following table summarizes our key business metrics, for each period presented below (in millions, except percentages):

Nights and Experiences Booked

Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking was canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. Nights and Experiences Booked grows as we attract new customers to our platform and as repeat guests increase their activity on our platform. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.

The increase in our Nights and Experiences Booked was driven by strong growth across all regions.

Gross Booking Value

GBV represents the dollar value of bookings on our platform in a period and is inclusive of host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain customers and reflects growth in Nights and Experiences Booked.

The increase in our GBV was primarily due to an increase in Nights and Experiences Booked, combined with a modest increase in ADR. Similar to Nights and Experiences Booked, our GBV improvement was driven by growth in bookings in all regions.

Non-GAAP Financial Measures

Our non-GAAP financial measures include Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow Margin, which are described below. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures. Adjusted EBITDA and Adjusted EBITDA Margin have limitations as a financial measure, should be considered as supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP. Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA Margin alongside other financial performance measures, including net income and net income margin as well as our other U.S. GAAP results. Free Cash Flow and Free Cash Flow Margin have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of other U.S. GAAP financial measures, such as net cash provided by operating activities and net cash provided by operating activities margin. Free Cash Flow and Free Cash Flow Margin do not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

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The following table summarizes our non-GAAP financial measures, along with the most directly comparable U.S. GAAP measure, for each period presented below (in millions, except percentages):

Adjusted EBITDA Reconciliation

The following is a reconciliation of net income to Adjusted EBITDA (in millions, except percentages):

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The above items are excluded from our Adjusted EBITDA measure because they are non-cash in nature, or because the amount and timing of these items are unpredictable, not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful.

The increase in Adjusted EBITDA for the year ended December 31, 2024, compared to the prior year, was primarily driven by growth in revenue which was driven by the increase in the number of check-ins relating to Nights and Experiences Booked and a modest increase in ADR.

During 2023, we released $2.9 billion of our valuation allowance related to our U.S. federal and state deferred tax assets (see Note 14, Income Taxes, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for further details).

Free Cash Flow Reconciliation

The following is a reconciliation of net cash provided by operating activities to Free Cash Flow (in millions, except percentages):

Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our customers and amounts payable to our customers do not impact Free Cash Flow, except interest earned on these funds.

Geographic Mix

Our operations are global, and certain trends in our business, such as Nights and Experiences Booked, GBV, revenue, ADR, and Nights per Booking vary by geography. We measure Nights and Experiences Booked by region based on the location of the listing.

We saw a 2% increase in ADR in 2024 compared to the prior year, primarily due to higher ADR in EMEA, which increased by 5%.

Our total Company average nights per booking, excluding experiences, was 3.8 in 2024 compared to 3.9 in 2023. Average nights per booking in 2024 was 4.1 for North America, 3.8 for EMEA, 3.7 for Latin America, and 3.3 for Asia Pacific. We expect that our blended global average nights per booking will continue to fluctuate based on our geographic mix and changes in traveler behaviors.

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No single city represented more than 2% of our revenue before adjustments for incentives and refunds during the years ended December 31, 2023 and 2024, or more than 1% of our active listings as of December 31, 2023 and 2024.

Results of Operations

The following table sets forth our results of operations for the periods presented (in millions, except percentages):

(1)Includes stock-based compensation expense as follows (in millions, except percentages):

Comparison of the Years Ended December 31, 2023 and 2024

Revenue

Our revenue consists of service fees, net of incentives and refunds, charged to our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and host type. For experiences, we only earn a host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers. We experience a difference in timing between when a booking is made and when we recognize revenue, which occurs upon check-in. We record the service fees that we collect from customers prior to check-in on our balance sheet as unearned fees. Revenue is net of incentives and refunds provided to customers.

Revenue increased $1.2 billion, or 12%, in 2024 compared to 2023, primarily due to an increase in the number of check-ins relating to Nights and Experiences Booked and a modest increase in ADR driven by our North America and EMEA regions.

Cost of Revenue

Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology. Because we act as the merchant of record, we incur all payment processing costs associated with our bookings, and we have chargebacks, which arise from account takeovers and other fraudulent activities. Cost of revenue may vary as a percentage of revenue from year to year based on activity

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on our platform and may also vary from quarter to quarter as a percentage of revenue based on the seasonality of our business and the difference in the timing of when bookings are made and when we recognize revenue.

Cost of revenue increased $175 million, or 10%, in 2024 compared to 2023, primarily due to an increase in merchant fees of $173 million, due to an increase in GBV, the impact of certain one-time incentives in 2023, and an increase in cloud computing costs of $26 million, due to increased server and data storage usage. These increases were partially offset by a reduction in chargebacks of $34 million.

Operations and Support

Operations and support expense primarily consists of personnel-related expenses and third-party service provider fees associated with community support provided via phone, email, and chat to customers; customer relations costs, which include refunds and credits related to customer satisfaction and expenses associated with our host protection programs; and allocated costs for facilities and information technology.

Operations and support expense increased $96 million, or 8%, in 2024 compared to 2023, primarily due to a $38 million increase in payroll-related expenses, an increase in customer relations costs of $25 million, mainly due to higher nights booked, and an increase in insurance costs of $25 million, due to higher premiums as a result of higher nights booked.

Product Development

Product development expense primarily consists of personnel-related expenses and third-party service provider fees incurred in connection with the development of our platform, and allocated costs for facilities and information technology.

Product development expense increased $334 million, or 19%, in 2024, compared to 2023, primarily due to a $288 million increase in payroll-related expenses.

Sales and Marketing

Sales and marketing expense primarily consists of brand and performance marketing, personnel-related expenses, including those related to our field operations, policy and communications, portions of referral incentives and coupons, and allocated costs for facilities and information technology.

Sales and marketing expense increased $385 million, or 22%, in 2024, compared to 2023, primarily due to a $294 million increase in marketing activities associated with ongoing marketing campaigns and search engine marketing, a $58 million increase in payroll-related expenses, and a $26 million increase in consultant and other service provider costs.

General and Administrative

General and administrative expense primarily consists of personnel-related expenses for management and administrative functions, including finance and accounting, legal, and human resources. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, allocated costs for facilities and information technology, indirect taxes,

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including lodging tax reserves for which we may be held jointly liable with hosts for collecting and remitting such taxes, and bad debt expense.

General and administrative expense decreased $840 million, or 41%, in 2024, compared to 2023, primarily due to decreased non-income taxes and related fees and penalties, partially offset by an increase in payroll-related expenses. Non-income taxes and related fees and penalties decreased $656 million and $194 million, respectively, primarily due to a withholding tax settlement related to Italy, partially off-set by an increase in payroll-related expenses of $22 million.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers.

Interest income increased $97 million, or 13%, in 2024 compared to 2023, primarily due to higher cash and investment balances.

Other Expense, Net

Other expense, net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, unrealized gains and losses on derivatives, the change in fair value of investments and financial instruments, including our share of income or loss from our equity method investments, and interest expense, which consists primarily of interest associated with various indirect tax reserves, amortization of debt issuance and debt discount costs.

The change in other expense, net of $177 million in 2024 compared to 2023 was primarily due to increased foreign exchange gains of $77 million and a decrease in interest expense of $58 million related to interest on withholding taxes recorded in 2023, partially offset by an impairment charge of $45 million on an investment in a privately-held company in 2024.

Provision for (benefit from) Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. We expect our effective tax rate in the future to depend upon the proportion between the following items and income before income taxes: U.S. tax benefits from foreign-derived intangible income, U.S. tax on foreign income net of allowable credits, tax effects from share-based compensation, research tax credits, tax effects from capital losses not expected to be utilized, restructurings, settlement of tax contingency items, tax effects of changes in our business, and the effects of changes in tax law.

The provision for income taxes during 2024 was driven by current tax on U.S. and foreign earnings and deferred tax expense resulting from prior year’s valuation allowance release on our U.S. federal and state deferred tax assets and the utilization of some of those assets in 2024. The income tax benefit for 2023, was primarily due to the release of $2.9 billion of our valuation allowance related to certain of our U.S. federal and state deferred tax assets, as a discrete tax benefit.

In 2021, the Organization for Economic Co-operation and Development (“OECD”) established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution to global taxation, focusing on global profit allocation, known to as Pillar One and a 15% global minimum effective tax rate, known as Pillar Two. In December of 2022, the EU member states agreed to implement the OECD’s global minimum tax rate of 15%. The OECD issued Pillar Two model rules and continues to release guidance on these rules. The inclusive framework calls for tax law changes by participating countries to take effect in 2024 and 2025. Various countries have enacted or have announced plans to enact new tax laws to implement the global minimum tax. We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and concluded there was no material impact to our tax provision for 2024. We will continue to evaluate the impact of these tax law changes on future reporting periods.

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Liquidity and Capital Resources

Sources and Conditions of Liquidity

As of December 31, 2024, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $10.6 billion. As of December 31, 2024, cash and cash equivalents totaled $6.9 billion, which included $2.6 billion held by our foreign subsidiaries. Cash and cash equivalents consist of checking and interest-bearing accounts and highly-liquid securities with an original maturity of 90 days or less. As of December 31, 2024, short-term investments totaled $3.7 billion. Short-term investments primarily consist of highly-liquid investment grade corporate debt securities, time deposits, commercial paper, certificates of deposit, U.S. government and government agency debt securities (“government bonds”), and mortgage-backed and asset-backed securities. These amounts do not include funds of $5.9 billion as of December 31, 2024, that we held for bookings in advance of guests completing check-ins that we record separately on our consolidated balance sheet in funds receivable and amounts held on behalf of customers with a corresponding liability in funds payable and amounts payable to customers.

Our cash and cash equivalents are generally held at large global systemically important banks (or G-SIBs), which are subject to high capital requirements and are required to regularly perform stringent stress tests related to their ability to absorb capital losses. Our cash, cash equivalents, and short-term investments held outside of the United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of such funds may result in additional tax liabilities. We believe that our existing cash, cash equivalents, and short-term investments balances in the United States are sufficient to fund our working capital needs in the United States.

We have access to $1.0 billion of commitments and a $200 million sub-limit for the issuance of letters of credit under the 2022 Credit Facility. As of December 31, 2024, no amounts were drawn under the 2022 Credit Facility and outstanding letters of credit totaled $19 million. See Note 10, Debt, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for a description of the 2022 Credit Facility.

Material Cash Requirements

As of December 31, 2024, we had outstanding $2.0 billion in aggregate principal amount of indebtedness of our 0% convertible senior notes due on March 15, 2026. On March 3, 2021, in connection with the pricing of the 2026 Notes, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers and other financial institutions (the "option counterparties") at a cost of approximately $100 million. The cap price of the Capped Calls was $360.80 per share of Class A common stock, which represented a premium of 100% over the last reported sale price of the Class A common stock of $180.40 per share on March 3, 2021, subject to certain customary adjustments under the terms of the Capped Call Transactions.

As of December 31, 2024, our total minimum lease payments were $299 million, of which $83 million is due in the succeeding 12 months. We have a commercial agreement with a data hosting services provider to spend or incur an aggregate of at least $672 million for vendor services through 2027. See Note 9, Leases, Note 10, Debt, and Note 13, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for further information regarding these commitments.

During 2024, we repurchased an aggregate of 24.5 million shares of Class A common stock for $3.4 billion through two share repurchase programs. As of December 31, 2024, we had $3.3 billion available to repurchase shares of Class A common stock under our share repurchase program.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in millions):

Net Cash Provided by Operating Activities

Net cash provided by operating activities in 2024 was $4.5 billion, which was primarily due to income from operations of $2.6 billion and interest income of $818 million, adjusted for non-cash items including stock-based compensation expense of $1.4 billion.

Net Cash Used in Investing Activities

Net cash used in investing activities in 2024 was $616 million, which was primarily due to purchases of short-term investments, partially offset by proceeds resulting from sales and maturities of short-term investments.

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Net Cash Used in Financing Activities

Net cash used in financing activities in 2024 was $3.6 billion, primarily due to share repurchases of $3.4 billion, and an increase in taxes paid related to net share settlement of equity awards of $630 million, partially offset by the increase in funds payable and amounts payable to customers of $320 million.

Effect of Exchange Rates

During 2024, we recorded a reduction of $237 million in cash, cash equivalents, and restricted cash, primarily due to the strengthening of the U.S. dollar. The impact of exchange rate changes on cash balances can serve as a natural hedge for the effect of exchange rates on our liabilities to our hosts and guests. The effect of exchange rate changes on cash, cash equivalents, and restricted cash on our consolidated statements of cash flows relates to certain of our assets, principally cash balances held on behalf of customers, that are denominated in currencies other than the functional currency of certain of our subsidiaries.

We assess our liquidity in terms of our ability to generate cash to fund our short and long-term cash requirements. As such, we believe that the cash flows generated from operating activities will meet our anticipated cash requirements in the short-term. In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include share repurchases, introduction of new products and offerings, timing and extent of spending to support our efforts to develop our platform, debt repayments, and expansion of sales and marketing activities. Our future capital requirements, however, will depend on many factors, including, but not limited to our growth, headcount, and ability to attract and retain customers on our platform. Additionally, we may in the future raise additional capital or incur additional indebtedness to continue to fund our strategic initiatives. On a long-term basis, we would rely on either our access to the capital markets or our credit facility for any long-term funding not provided by operating cash flows and cash on hand. In the event that additional financing is required from outside sources, we may seek to raise additional funds at any time through equity, equity-linked arrangements, and/or debt, which may not be available on favorable terms, or at all. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be materially adversely affected. Our liquidity is subject to various risks including the risks identified in the section titled “Risk Factors” in Item IA of Part I of this Annual Report on Form 10-K and the market risks identified in the section titled "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A of Part II of this Annual Report on Form 10-K.

Indemnification Agreements

In the ordinary course of business, we include limited indemnification provisions under certain agreements with parties with whom we have commercial relations of varying scope and terms. See Note 13, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K further information regarding our indemnification agreements.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions.

We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any of our estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K. We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Lodging Tax Obligations and Other Non-Income Tax Matters

In jurisdictions where we do not collect and remit lodging taxes, the responsibility for collecting and remitting these taxes, if applicable, generally rests with hosts. Airbnb is also subject to other non-income taxes primarily arising from transactions with our customers such as transactional taxes (sales, value-added, business, digital service, and similar taxes) where there may be significant uncertainty as to how the taxes apply to our platform, as well as uncertainty on the applicability of withholding taxes on certain payments made to hosts. We estimate liabilities for a certain number of jurisdictions with respect to federal, state, city, and local taxes related to lodging and other non-income taxes where we believe it is probable that Airbnb could be held liable, or, in the case of lodging taxes, jointly and severally liable with hosts for collecting and remitting such taxes, and the related amounts can be reasonably estimated. Changes to these liabilities are recorded in general and administrative expense in our consolidated statements of operations.

Evaluating potential outcomes for lodging and other non-income taxes is inherently uncertain and requires us to utilize various judgments, assumptions, and estimates in determining our liability reserves. A variety of factors could affect our potential obligation for collecting and remitting such taxes, which include, but are not limited to, whether we determine, or any tax authority asserts, that we have a responsibility to collect lodging or other non-income and related taxes on either historic or future transactions; the introduction of new ordinances and taxes which subject our operations to such taxes; or the ultimate resolution of any historic claims that may be settled. Accordingly, the ultimate resolution of lodging and other non-income taxes may be greater or less than reserve amounts we have established. See Note 13,

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Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions. We account for income taxes using the asset and liability method. We account for uncertainty in tax positions by recognizing a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination. Evaluating our uncertain tax positions, determining our provision for (benefit from) income taxes, and evaluating the impact of tax law changes, are inherently uncertain and require making judgments, assumptions, and estimates.

In assessing the need for a valuation allowance, we consider both positive and negative evidence regarding the realizability of deferred tax assets across our operating jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. Our actual and forecasted income (loss) before provision is subject to change due to economic, political and other conditions and significant judgment is required in determining our ability to recognize our net deferred tax assets.

As of December 31, 2024, we have determined that it is more likely than not that our U.S. federal and state deferred tax assets are realizable, except for California research and development credits, capital loss carryovers, and certain losses subject to dual consolidated loss rules. We maintain a valuation allowance for California research and development credits due to uncertainty about their realizability, as they have not met the “more likely than not” criteria. Changes in valuation allowance during interim periods are reflected in the annual effective tax rate, with any releases based on future taxable income recorded as discrete tax benefits. In 2023, we released $2.9 billion of our valuation allowance and will continue to review the need for such allowances quarterly.

While we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for (benefit from) income taxes and the effective tax rate in the period in which such determination is made.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2023 refer to the year ended December 31, 2023, references to 2022 refer to the year ended December 31, 2022, and references to 2021 refer to the year ended December 31, 2021.

This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022, filed on February 17, 2023.

Overview

We are a community based on connection and belonging—a community that was born in 2007 when two Hosts welcomed three guests to their San Francisco home, and has since grown to over 5 million Hosts who have welcomed over 1.5 billion guest arrivals in almost every country and region across the globe. Every day, Hosts offer unique stays and experiences that make it possible for guests to connect with communities in a more authentic way.

We have five stakeholders and we have designed our Company with all of them in mind. Along with employees and shareholders, we serve Hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive.

2023 Financial Highlights

In 2023, revenue increased by 18% to $9.9 billion compared to 2022, primarily due to a 14% increase in Nights and Experiences Booked of 54.5 million combined with higher average daily rates driving a 16% increase in Gross Booking Value of $10.0 billion. The growth in revenue demonstrated continued strong travel demand. On a constant-currency basis, revenue increased 17% in 2023 compared to 2022.

Net income in 2023 increased by 153% to $4.8 billion, compared to the prior year, driven by our revenue growth, increased interest income, discipline in managing our cost structure, and the release of a portion of our valuation allowance on deferred tax assets of $2.9 billion (see Note 14, Income Taxes, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details). The increase in net income was partially offset by an increase in business and operational taxes of $991 million, the majority of which was non-recurring.

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Adjusted EBITDA1 increased 26% to $3.7 billion in 2023 demonstrating the continued strength of our business, a modest increase in ADR, and discipline in managing our cost structure.

Our net cash provided by operating activities was $3.9 billion in 2023, compared to $3.4 billion, in the prior year. We generated Free Cash Flow1 of $3.8 billion for the year ended December 31, 2023, compared to $3.4 billion, in the prior year. The increase was primarily driven by growth in revenue, unearned fees and net income.

During 2023, we repurchased an aggregate of 17.9 million shares of Class A common stock for $2.3 billion, through two share repurchase programs. As of December 31, 2023, we had $750 million available to repurchase shares of Class A common stock under our share repurchase program.

Trends

The COVID-19 pandemic, and measures to contain the virus, including government travel restrictions and quarantine orders, had an unprecedented impact on the global travel industry and materially and adversely affected our business, results of operations, and financial condition. In May 2023, the World Health Organization formally declared an end to the COVID-19 global health emergency. While countries around the world are generally open for international travel, it remains difficult to predict with any certainty the impact any future new strains or variants of the virus may have on the travel industry and, in particular, our business.

More recently, inflation and other macroeconomic pressures in the United States and the global economy, such as rising interest rates, and foreign currency fluctuations, as well as evolving geopolitical conflicts, have contributed to an increasingly complex business environment. As a result, our future operational results may be subject to volatility. Additionally, further health-related events, political instability, geopolitical conflicts, acts of terrorism, significant fluctuations in currency values, sustained levels of increased inflation, sovereign debt issues, and natural disasters, are examples of other events that could have a negative impact on the travel industry in the future.

Despite these factors, we have witnessed a healthy recovery of travel demand, following the COVID-19 pandemic.

Key Business Metrics and Non-GAAP Financial Measures

We track the following key business metrics and financial measures to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. The financial measures are not calculated and presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) (“non-GAAP financial measures”). We believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results.

These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with U.S. GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided under the subsection titled “— Adjusted EBITDA” and “— Free Cash Flow” below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

Key Business Metrics

We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies that may calculate similarly titled metrics in a different way.

The following table summarizes our key business metrics, for each period presented below (in millions):

Nights and Experiences Booked

Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking was canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. Nights and Experiences Booked grows as we attract new customers to our

1 A reconciliation of non-GAAP financial information to the most comparable U.S. GAAP financial measures is provided under the subsection titled “Key Business Metrics and Non-GAAP Financial Measures— Adjusted EBITDA” and “— Free Cash Flow” below.

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platform and as repeat guests increase their activity on our platform. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.

In 2023, we had 448.2 million Nights and Experiences Booked, a 14% increase from 393.7 million in 2022. The increase in our Nights and Experiences Booked was driven by strong growth across all regions.

Gross Booking Value

GBV represents the dollar value of bookings on our platform in a period and is inclusive of Host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain customers and reflects growth in Nights and Experiences Booked.

In 2023, our GBV was $73.3 billion, a 16% increase from $63.2 billion in 2022. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked, combined with a modest increase in ADR. Similar to Nights and Experiences Booked, our GBV improvement was driven by growth in bookings in all regions.

Non-GAAP Financial Measures

Our non-GAAP financial measures include Adjusted EBITDA, Free Cash Flow, and revenue growth rates in constant currency, which are described below. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

The following table summarizes our non-GAAP financial measures, along with the most directly comparable U.S. GAAP measure, for each period presented below (in millions):

Adjusted EBITDA

We define Adjusted EBITDA as net income or loss adjusted for (i) provision for (benefit from) income taxes; (ii) other income (expense), net, interest expense, and interest income; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements; (vi) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes, and the applicability of withholding taxes on payments made to such Hosts; and (vii) restructuring charges. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of payments of these items is unpredictable, not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP. These limitations include the following:

•Adjusted EBITDA does not reflect interest income, interest expense, and other income (expense), net, which include unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments;

•Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;

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•Adjusted EBITDA excludes acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements. The contingent consideration, which was in the form of equity, was valued as of the acquisition date and is marked-to-market at each reporting period based on factors including our stock price;

•Adjusted EBITDA does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes and reserves, and the applicability of withholding taxes on payments made to such Hosts; and

•Adjusted EBITDA does not reflect restructuring charges, which include impairment of operating lease right-of-use assets and leasehold improvements.

Because of these limitations, you should consider Adjusted EBITDA and Adjusted EBITDA Margin alongside other financial performance measures, including net income (loss) and our other U.S. GAAP results.

Adjusted EBITDA Reconciliation

The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP measure, net income (in millions, except percentages):

The increases in Adjusted EBITDA and Adjusted EBITDA Margin for the year ended December 31, 2023, compared to the prior year, were primarily driven by the continued strength of our business, a modest increase in ADR, and discipline in managing our cost structure.

During 2023, we released $2.9 billion of our valuation allowance related to our U.S. deferred tax assets and is included in provision for (benefit from) income taxes (see Note 14, Income Taxes, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for further details).

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities less purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after purchases of property and equipment, that can be used for strategic initiatives, including continuous investment in our business, growth through acquisitions, and strengthening our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our customers and amounts payable to our customers do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our other U.S. GAAP financial measures, such as net cash provided by operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure. Free Cash Flow Margin is defined as Free Cash Flow divided by revenue.

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Free Cash Flow Reconciliation

The following is a reconciliation of Free Cash Flow to the most comparable U.S. GAAP cash flow measure, net cash provided by operating activities (in millions, except percentages):

The increase in Free Cash Flow for the year ended December 31, 2023, compared to the prior year, was primarily driven by increased income from operations and interest income driven by increased interest rates on higher cash balances.

Constant Currency

In addition to revenue growth rates derived from revenue presented in accordance with U.S. GAAP, we disclose below the percentage change in our current period revenue from the corresponding prior period by comparing the change in revenue using constant currencies. We present constant currency revenue growth rate information to provide a framework for assessing how our underlying revenue performed excluding the effect of changes in exchange rates. We use the percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of revenue on a constant currency basis in addition to the U.S. GAAP presentation helps improve the ability to understand our performance because it excludes the effects of foreign currency volatility that are not indicative of our core operating results. We calculate the percentage change in constant currency by determining the change in the current period revenue over the prior comparable period where current period foreign currency revenue is translated using the exchange rates of the comparative period.

Geographic Mix

Our operations are global, and certain trends in our business, such as Nights and Experiences Booked, GBV, revenue, GBV per Night and Experience Booked, and Nights per Booking vary by geography. We measure Nights and Experiences Booked by region based on the location of the listing.

We saw a 2% increase in GBV per Night and Experience Booked in 2023 compared to the prior year, primarily due to higher GBV per Night and Experience Booked in EMEA, which increased from $127.99 to $140.40.

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Our total Company average nights per booking, excluding experiences, decreased 4% in 2023 compared to the prior year, primarily due to our geographic mix and changes in traveler behaviors. Specifically, average nights per booking in 2023 was 4.1 for North America, 3.9 for EMEA, 3.9 for Latin America, and 3.3 for Asia Pacific, with a total average of 3.9 nights. We expect that our blended global average nights per booking will continue to fluctuate based on our geographic mix and changes in traveler behaviors.

Results of Operations

The following table sets forth our results of operations for the periods presented (in millions, except percentages):

(1)Includes stock-based compensation expense as follows (in millions):

Comparison of the Years Ended December 31, 2022 and 2023

Revenue

Our revenue consists of service fees, net of incentives and refunds, charged to our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and Host type. For experiences, we only earn a Host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities. We experience a difference in timing between when a booking is made and when we recognize revenue, which occurs upon check-in. We record the service fees that we collect from customers prior to check-in on our balance sheet as unearned fees. Revenue is net of incentives and refunds provided to customers.

Revenue increased $1.5 billion, or 18%, in 2023 compared to 2022, primarily due to a 14% increase in Nights and Experiences Booked combined with higher ADRs. On a constant-currency basis, revenue increased 17% compared to 2022, due to a weakened U.S. dollar against the Euro and British Pound.

Cost of Revenue

Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology. Because we act as the

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merchant of record, we incur all payment processing costs associated with our bookings, and we have chargebacks, which arise from account takeovers and other fraudulent activities. Cost of revenue may vary as a percentage of revenue from year to year based on activity on our platform and may also vary from quarter to quarter as a percentage of revenue based on the seasonality of our business and the difference in the timing of when bookings are made and when we recognize revenue.

Cost of revenue increased $204 million, or 14%, in 2023 compared to 2022, primarily due to an increase in merchant fees and chargebacks of $163 million and $10 million, respectively, due to an increase in pay-in volumes, and an increase in cloud computing costs of $31 million due to increased server and data storage usage.

Operations and Support

Operations and support expense primarily consists of personnel-related expenses and third-party service provider fees associated with community support provided via phone, email, and chat to customers; customer relations costs, which include refunds and credits related to customer satisfaction and expenses associated with our Host protection programs; and allocated costs for facilities and information technology.

Operations and support expense increased $145 million, or 14%, in 2023 compared to 2022, primarily due to a $105 million increase in third-party community support personnel and customer relations costs, a $25 million increase in payroll-related expenses primarily due to growth in headcount and increased compensation costs, and a $16 million increase in insurance costs due to higher Host Liability Insurance premiums resulting from higher overall nights.

Product Development

Product development expense primarily consists of personnel-related expenses and third-party service provider fees incurred in connection with the development of our platform, and allocated costs for facilities and information technology.

Product development expense increased $220 million, or 15%, in 2023, compared to 2022, primarily due to a $217 million increase in payroll-related expenses due to growth in headcount and increased compensation costs.

Sales and Marketing

Sales and marketing expense primarily consists of brand and performance marketing, personnel-related expenses, including those related to our field operations, policy and communications, portions of referral incentives and coupons, and allocated costs for facilities and information technology.

Sales and marketing expense increased $247 million, or 16%, in 2023, compared to 2022, primarily due to a $177 million increase in marketing activities associated with our marketing campaigns and launches and our search engine marketing and advertising spend, and a $54 million increase in payroll-related expenses due to growth in headcount and increased compensation costs.

General and Administrative

General and administrative expense primarily consists of personnel-related expenses for management and administrative functions, including finance and accounting, legal, and human resources. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, allocated costs for facilities and information technology, indirect taxes,

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including lodging tax reserves for which we may be held jointly liable with Hosts for collecting and remitting such taxes, and bad debt expense.

General and administrative expense increased $1.1 billion, or 113%, in 2023, compared to 2022, primarily due to an increase of $991 million related to business and operational taxes, the majority of which is non-recurring, and a $93 million increase in payroll related expenses partially offset by a reduction in insurance expense of $18 million driven by reduced directors and officers insurance premiums.

Restructuring Charges

In the second quarter of 2022, we shifted to a remote work model, allowing our employees to work from anywhere in the country. The shift to a remote work model was in direct response to the change in how employees work due to the impact of COVID-19. As a result, we recorded restructuring charges of $89 million during 2022, which included $81 million relating to an impairment of both domestic and international operating lease right-of-use assets, and $8 million of related leasehold improvements. There were no restructuring charges in 2023.

Interest Income and Expense

Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers. Interest expense consists primarily of interest associated with various indirect tax reserves, amortization of debt issuance and debt discount costs.

Interest income increased $535 million, or 288%, in 2023 compared to 2022, primarily due to higher cash and investment balances and higher interest rates. Our investment portfolio was largely invested in money market funds and short-term, high-quality bonds.

Interest expense increased $59 million or 246%, in 2023 compared to 2022, primarily due to non-recurring interest paid relating to withholding tax payments on behalf of Hosts.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, unrealized gains and losses on derivatives, the change in fair value of investments and financial instruments, including our share of income or loss from our equity method investments.

Other income (expense), net decreased $79 million in 2023 compared to 2022, primarily due to foreign exchange losses.

Provision for Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, acquisitions, investments, tax audit developments, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains and losses, changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss.

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For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

* Not meaningful

The income tax benefit in 2023, was primarily due to the release of $2.9 billion of our valuation allowance related to our U.S. deferred tax assets (see Note 14, Income Taxes, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details).

Liquidity and Capital Resources

Sources and Conditions of Liquidity

As of December 31, 2023, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $10.1 billion. As of December 31, 2023, cash and cash equivalents totaled $6.9 billion, which included $1.9 billion held by our foreign subsidiaries. Cash and cash equivalents consist of checking and interest-bearing accounts and highly-liquid securities with an original maturity of 90 days or less. As of December 31, 2023, short-term investments totaled $3.2 billion. Short-term investments primarily consist of highly-liquid investment grade corporate debt securities, time deposits, commercial paper, certificates of deposit, U.S. government and government agency debt securities (“government bonds”), and mortgage-backed and asset-backed securities. These amounts do not include funds of $5.9 billion as of December 31, 2023, that we held for bookings in advance of guests completing check-ins that we record separately on our consolidated balance sheet in funds receivable and amounts held on behalf of customers with a corresponding liability in funds payable and amounts payable to customers.

Our cash and cash equivalents are generally held at large global systemically important banks (or G-SIBs), which are subject to high capital requirements and are required to regularly perform stringent stress tests related to their ability to absorb capital losses. Our cash, cash equivalents, and short-term investments held outside of the United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of such funds may result in additional tax liabilities. We believe that our existing cash, cash equivalents, and short-term investments balances in the United States are sufficient to fund our working capital needs in the United States.

We have access to $1.0 billion of commitments and a $200 million sub-limit for the issuance of letters of credit under the 2022 Credit Facility. As of December 31, 2023, no amounts were drawn under the 2022 Credit Facility and outstanding letters of credit totaled $29 million. See Note 10, Debt, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for a description of the 2022 Credit Facility entered into on October 31, 2022.

Material Cash Requirements

As of December 31, 2023, we had outstanding $2.0 billion in aggregate principal amount of indebtedness of our 0% convertible senior notes due in 2026. On March 3, 2021, in connection with the pricing of the 2026 Notes, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers and other financial institutions (the "option counterparties") at a cost of approximately $100 million. The cap price of the Capped Calls was $360.80 per share of Class A common stock, which represented a premium of 100% over the last reported sale price of the Class A common stock of $180.40 per share on March 3, 2021, subject to certain customary adjustments under the terms of the Capped Call Transactions.

As of December 31, 2023, our total minimum lease payments were $313 million, of which $81 million is due in the succeeding 12 months. We have a commercial agreement with a data hosting services provider to spend or incur an aggregate of at least $842 million for vendor services through 2027. See Note 9, Leases, Note 10, Debt, and Note 13, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for further information regarding these commitments.

During 2023, we repurchased an aggregate of 17.9 million shares of Class A common stock for $2.3 billion through two share repurchase programs. As of December 31, 2023, we had $750 million available to repurchase shares of Class A common stock under our share repurchase program. In February 2024, our board of directors approved an additional share repurchase program to purchase up to $6.0 billion of our Class A common stock.

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Cash Flows

The following table summarizes our cash flows for the periods indicated (in millions):

Net Cash Provided by Operating Activities

Net cash provided by operating activities in 2023 was $3.9 billion, which was primarily due to income from operations of $1.5 billion and interest income of $721 million from our investment portfolio, adjusted for non-cash items including stock-based compensation expense of $1.1 billion.

Net cash provided by operating activities in 2022 was $3.4 billion, which was primarily due to income from operations of $1.8 billion, adjusted for non-cash items, primarily consisting of $930 million of stock-based compensation expense, impairment of long-lived assets of $91 million, and $62 million of foreign exchange losses due to the strengthening of the U.S. dollar against the Euro and British Pound.

Net Cash Used in Investing Activities

Net cash used in investing activities in 2023 was $1.0 billion, which was primarily due to purchases of short-term investments, partially offset by proceeds resulting from sales and maturities of short-term investments.

Net cash used in investing activities in 2022 was $28 million, which was primarily due to purchases of short-term investments and property and equipment of $4.1 billion and $25 million, respectively, partially offset by proceeds from sales and maturities of short-term investments of $4.1 billion.

Net Cash Used in Financing Activities

Net cash used in financing activities in 2023 was $2.4 billion, primarily due to share repurchases of $2.3 billion, and an increase in taxes paid related to net share settlement of equity awards of $1.2 billion, primarily driven from the taxes paid related to the cashless exercise of stock options, partially offset by the decrease in funds payable and amounts payable to customers of $936 million.

Net cash used in financing activities in 2022 was $689 million, primarily due to share repurchases of $1.5 billion under our share repurchase programs, and an increase in the taxes paid related to net share settlement of equity awards of $607 million, partially offset by an increase in funds payable and amounts payable to customers of $1.3 billion resulting from significantly higher bookings.

Effect of Exchange Rates

The effect of exchange rate changes on cash, cash equivalents, and restricted cash on our consolidated statements of cash flows relates to certain of our assets, principally cash balances held on behalf of customers, that are denominated in currencies other than the functional currency of certain of our subsidiaries. During 2022, we recorded a reduction of $337 million in cash, cash equivalents, and restricted cash, primarily due to the strengthening of the U.S. dollar. During 2023, we recorded an increase of $152 million in cash, cash equivalents, and restricted cash, primarily due to the weakening of the U.S. dollar. The impact of exchange rate changes on cash balances can serve as a natural hedge for the effect of exchange rates on our liabilities to our Hosts and guests.

We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we believe that the cash flows generated from operating activities will meet our anticipated cash requirements in the short-term. In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include share repurchases, introduction of new products and offerings, timing and extent of spending to support our efforts to develop our platform, debt repayments, and expansion of sales and marketing activities. Our future capital requirements, however, will depend on many factors, including, but not limited to our growth, headcount, and ability to attract and retain customers on our platform. Additionally, we may in the future raise additional capital or incur additional indebtedness to continue to fund our strategic initiatives. On a long-term basis, we would rely on either our access to the capital markets or our credit facility for any long-term funding not provided by operating cash flows and cash on hand. In the event that additional financing is required from outside sources, we may seek to raise additional funds at any time through equity, equity-linked arrangements, and/or debt, which may not be available on favorable terms, or at all. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be materially adversely affected. Our liquidity is subject to various risks including the risks identified in the section titled “Risk Factors” in Item IA of Part I of this Annual Report on Form 10-K and the market risks identified in the section titled "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A of Part II of this Annual Report on Form 10-K.

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Indemnification Agreements

In the ordinary course of business, we include limited indemnification provisions under certain agreements with parties with whom we have commercial relations of varying scope and terms. See Note 13, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K further information regarding our indemnification agreements.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

We believe that of our significant accounting policies, which are described in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows.

Lodging Tax Obligations

In jurisdictions where we do not collect and remit lodging taxes, the responsibility for collecting and remitting these taxes, if applicable, generally rests with Hosts. We estimate liabilities for a certain number of jurisdictions with respect to state, city, and local taxes related to lodging where we believe it is probable that Airbnb could be held jointly liable with Hosts for collecting and remitting such taxes and the related amounts can be reasonably estimated. Changes to these liabilities are recorded in general and administrative expense in our consolidated statements of operations.

Evaluating potential outcomes for lodging taxes is inherently uncertain and requires us to utilize various judgments, assumptions, and estimates in determining our reserves. A variety of factors could affect our potential obligation for collecting and remitting such taxes, which include, but are not limited to, whether we determine, or any tax authority asserts, that we have a responsibility to collect lodging and related taxes on either historic or future transactions; the introduction of new ordinances and taxes which subject our operations to such taxes; or the ultimate resolution of any historic claims that may be settled through negotiation. Accordingly, the ultimate resolution of lodging taxes may be greater or less than reserve amounts we have established. See Note 13, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions. We account for income taxes using the asset and liability method. We account for uncertainty in tax positions by recognizing a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination. Evaluating our uncertain tax positions, determining our provision for (benefit from) income taxes, and evaluating the impact of tax law changes, are inherently uncertain and require making judgments, assumptions, and estimates.

In determining the need for a valuation allowance, we weigh both positive and negative evidence in the various jurisdictions in which we operate related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2023, based on all available positive and negative evidence, having demonstrated sustained profitability which is objective and verifiable, and taking into account anticipated future earnings, we have concluded that it is more likely than not that our U.S. federal and state deferred tax assets will be realizable, with the exception of California research and development credits, capital loss carryovers, and certain losses subject to the dual consolidated loss rules. We continue to maintain a valuation allowance against our California research and development credit deferred tax assets due to the uncertainty regarding realizability of these deferred tax assets as they have not met the “more likely than not” realization criteria, particularly as we expect research and development tax credit generation to exceed our ability to use the credits in future years. When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as a discrete tax benefit in the interim period. We released $2.9 billion of our valuation allowance in 2023 and will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.

While we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for (benefit from) income taxes and the effective tax rate in the period in which such determination is made.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2022 refer to the year ended December 31, 2022, references to 2021 refer to the year ended December 31, 2021, and references to 2020 refer to the year ended December 31, 2020.

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 25, 2022.

Revision of Previously Issued Financial Statements

As described in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K, we have revised previously issued financial statements to correct immaterial misstatements. This had no impact on our consolidated financial statements outside of the presentation in the consolidated statements of cash flow and did not affect the consolidated statements of operations.

Overview

We are a community based on connection and belonging—a community that was born in 2007 when two Hosts welcomed three guests to their San Francisco home, and has since grown to over 4 million Hosts who have welcomed over 1.4 billion guest arrivals to over 100,000 cities and towns in almost every country and region across the globe. Hosts on Airbnb are everyday people who share their worlds to provide guests with the feeling of connection and being at home. We have five stakeholders and we have designed our company with all of them in mind. Along with employees and shareholders, we serve Hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive.

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We operate a global marketplace, where Hosts offer guests stays and experiences on our platform. Our business model relies on the success of Hosts and guests (collectively referred to as “customers”) who join our community and generate consistent bookings over time. As Hosts become more successful on our platform and as guests return over time, we benefit from the recurring activity of our community.

Initial Public Offering

Our initial public offering (“IPO”) was completed on December 14, 2020. Our consolidated financial statements as of December 31, 2020 and for the year then-ended reflect the sale by us of an aggregate of 55,000,000 shares in our IPO, including the exercise of the underwriters’ option to purchase additional shares, at the public offering price of $68.00 per share, for net proceeds to us of approximately $3.7 billion, after underwriting discounts and commissions and offering expenses, and the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 240,910,588 shares of Class B common stock, including 1,286,694 shares of Class B common stock issuable pursuant to the anti-dilution adjustment provisions relating to our Series C redeemable convertible preferred stock.

Our consolidated financial statements as of December 31, 2020 and for the year then-ended include stock-based compensation expense of $2.8 billion associated with the vesting of RSUs in connection with our IPO for which the requisite service-based vesting condition was met as of December 31, 2020. The liquidity-based vesting condition for RSUs was satisfied upon the effectiveness of our Registration Statement on Form S-1 on December 9, 2020.

2022 Financial Highlights

In 2022, revenue grew by 40% to $8.4 billion compared to 2021, primarily due to a 31% increase in Nights and Experiences Booked of 93.0 million combined with higher average daily rates driving a 35% increase in Gross Booking Value of $16.3 billion. The growth in revenue demonstrated the continued strong travel demand. On a constant-currency basis, revenue increased 46% in 2022 compared to 2021.

We ended 2022 with net income of $1.9 billion, an improvement from a net loss of $352.0 million in 2021, and our first profitable year to date. Our net profit margin increased to 23% from a negative 6% in 2021, primarily due to our revenue growth outpacing the growth in our operating expenses and cost management.

Adjusted EBITDA1 increased 82% to $2.9 billion in 2022 demonstrating the continued strength of our business and disciplined management of our cost structure.

Our net cash provided by operating activities was $3.4 billion in 2022, up from $2.3 billion in 2021, and we generated Free Cash Flow1 of $3.4 billion. The increase was driven by our revenue growth, net margin expansion, and significant growth in unearned fees.

In August 2022, our board of directors approved a share repurchase program with authorization to purchase up to $2.0 billion of our Class A common stock at management’s discretion. During 2022, we repurchased and retired 13.8 million shares of common stock for $1.5 billion.

Macroeconomic Conditions on our Business

As we look forward, we recognize the potential impact of challenging macroeconomic conditions on our business, including inflation and rising interest rates, foreign currency fluctuations, and potential decreased consumer spending. To date, these conditions have had a modest impact on our business, results of operations, cash flows, and financial condition; however, the impact in the future of these macroeconomic events on our business, results of operations, cash flows, and financial condition is uncertain and will depend on future developments that we may not be able to accurately predict.

Impact of COVID-19

In response to the outbreak of the novel strain of the coronavirus disease (“COVID-19”) in the first half of 2020, as well as subsequent outbreaks driven by new variants of COVID-19, governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions, social distancing, shelter-in-place orders, vaccination mandates, or requirements for businesses to confirm employees’ vaccination status, and other restrictions.

While COVID-19 still plagues the world, for the year ended December 31, 2022, Gross Booking Value (“GBV”) and revenue were $63.2 billion and $8.4 billion, respectively, which were both higher compared to the same periods in 2021, 2020, and pre-COVID-19. In 2020 and 2021, we faced lower demand for long distance travel and overall depressed Nights and Experiences Booked compared to pre-COVID-19. However, in 2022, we saw significant growth with Nights and Experiences Booked exceeding pre-COVID-19 levels for the same period. The trends in our recovery continue to vary by region due to a variety of factors, including the emergence of COVID-19 variants, vaccination rates, COVID-19 caseloads, and associated travel restrictions, as well as historical cross-border compared to domestic travel dependence. During 2022, we saw strength in all regions relative to 2021 as well as sequential growth in nights booked in Latin America and Asia Pacific.

The extent and duration of the impact of the COVID-19 pandemic over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the introduction and spread of new variants of the virus that may be resistant to currently approved vaccines, and the continuation of existing or implementation of new government travel restrictions, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general, and on our business in particular, which may result in a reduction in bookings and an increase in booking cancellations.

1 A reconciliation of non-generally accepted accounting principal financial measures to the most comparable generally accepted accounting principal financial measures is provided under the subsection titled “Key Business Metrics and Non-GAAP Financial Measures— Adjusted EBITDA” and “— Free Cash Flow” below.

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Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law in the United States. Among other changes, the IRA introduced a corporate minimum tax on certain corporations with average adjusted financial statement income over a three-tax year period in excess of $1 billion and an excise tax on certain stock repurchases by certain covered corporations for taxable years beginning after December 31, 2022. While the corporate minimum tax law change has no immediate effect and is not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate its impact as further information becomes available.

Key Business Metrics and Non-GAAP Financial Measures

We track the following key business metrics and financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) (“non-GAAP financial measures”) to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results.

These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with U.S. GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided under the subsection titled “— Adjusted EBITDA” and “— Free Cash Flow” below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

Key Business Metrics

We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies that may calculate similarly titled metrics in a different way.

Nights and Experiences Booked

Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking were canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.

In 2022, we had 393.7 million Nights and Experiences Booked, a 31% increase from 300.6 million in 2021. Nights and Experiences Booked grows as we attract new customers to our platform and as repeat customers increase their activity on our platform. Our Nights and Experiences Booked increased from prior year levels driven by strong growth across all regions, in particular in Europe, Latin America, and Asia.

Gross Booking Value

GBV represents the dollar value of bookings on our platform in a period and is inclusive of Host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain customers and reflects growth in Nights and Experiences Booked.

In 2022, our GBV was $63.2 billion, a 35% increase from $46.9 billion in 2021. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked. The travel recovery we are experiencing has been dominated by our higher average daily rate (“ADR”) regions—North America and Europe, in particular. Similar to Nights and Experiences Booked, our GBV improvement was driven by stronger bookings in all regions.

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Non-GAAP Financial Measures

Our non-GAAP financial measures include Adjusted EBITDA, Free Cash Flow, and revenue growth rates in constant currency, which are described below. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with U.S. GAAP is provided below. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures.

The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure:

Adjusted EBITDA

We define Adjusted EBITDA as net income or loss adjusted for (i) provision for (benefit from) income taxes; (ii) other income (expense), net, interest expense, and interest income; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements; (vi) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and (vii) restructuring charges.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations, and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Adjusted EBITDA also excludes certain items related to transactional tax matters, for which management believes it is probable that we may be held jointly liable with Hosts in certain jurisdictions, and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled “—Critical Accounting Policies and Estimates—Lodging Tax Obligations,” as well as the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

•Adjusted EBITDA does not reflect interest income (expense) and other income (expense), net, which include loss on extinguishment of debt and unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments, including the warrants issued in connection with a term loan agreement entered into in April 2020. We amended the anti-dilution feature in the warrant agreements in March 2021. The balance of the warrants of $1.3 billion was reclassified from liability to equity as the amended warrants met the requirements for equity classification and are no longer remeasured at each reporting period;

•Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy;

•Adjusted EBITDA excludes acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements. The contingent consideration, which was in the form of equity, was valued as of the acquisition date and is marked-to-market at each reporting period based on factors including our stock price;

•Adjusted EBITDA does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and

•Adjusted EBITDA does not reflect restructuring charges, which include severance and other employee costs, lease impairments, and contract amendments and terminations.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

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In 2022, Adjusted EBITDA was $2.9 billion, compared to $1.6 billion in 2021. This favorable change was due to our revenue growth combined with continued cost management.

Adjusted EBITDA Reconciliation

The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP measure, net income (loss):

(1)Excludes stock-based compensation related to restructuring, which is included in restructuring charges in the table above.

Free Cash Flow

We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management, investors and others about the amount of cash generated from operations, after purchases of property and equipment, that can be used for strategic initiatives, including continuous investment in our business, growth through acquisitions, and strengthening our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our customers and amounts payable to our customers do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by (used in) operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

In 2022, Free Cash Flow was $3.4 billion compared to $2.3 billion in 2021, representing 41% of revenue. The increase was primarily driven by revenue growth, margin expansion, and significant growth in unearned fees.

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Free Cash Flow Reconciliation

The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, net cash provided by operating activities:

Constant Currency

In addition to revenue growth rates derived from revenue presented in accordance with U.S. GAAP, we disclose below the percentage change in our current period revenue from the corresponding prior period by comparing results using constant currencies. We present constant currency revenue growth rate information to provide a framework for assessing how our underlying revenue performed excluding the effect of changes in exchange rates. We use the percentage change in constant currency revenues for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe the presentation of revenue on a constant currency basis in addition to the U.S. GAAP presentation helps improve the ability to understand our performance because it excludes the effects of foreign currency volatility that are not indicative of our core operating results. We calculate the percentage change in constant currency by determining the change in the current period revenue over the prior comparable period where current period foreign currency revenue is translated using the exchange rates of the comparative period.

Geographic Mix

Our operations are global, and certain trends in our business, such as Nights and Experiences Booked, GBV, revenue, GBV per Night and Experience Booked, and Nights per Booking vary by geography. We measure Nights and Experiences Booked by region based on the location of the listing.

We saw an increase in GBV per Night and Experience Booked in 2022 compared to 2021, in part because our geographic mix shifted to these higher GBV per Night and Experience Booked regions. Specifically, GBV per Night and Experience Booked in 2022 was $240.29 for North America compared to $127.99 for EMEA, $117.41 for Asia Pacific, and $92.89 for Latin America, with a total global GBV per Night and Experience Booked of $160.56.

Our total company average nights per booking, excluding experiences for 2022 were 4.2 nights for each of North America, EMEA, and Latin

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America, and 3.2 nights for Asia Pacific, with a total average of 4.1 nights. We expect that our blended global average nights per booking will continue to fluctuate based on our geographic mix and changes in traveler behaviors.

Components of Results of Operations

Revenue

Our revenue consists of service fees, net of incentives and refunds, charged to our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and Host type. For experiences, we only earn a Host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities.

We experience a difference in timing between when a booking is made and when we recognize revenue, which occurs upon check-in. We record the service fees that we collect from customers prior to check-in on our balance sheet as unearned fees. Revenue is net of incentives and refunds provided to customers.

Cost of Revenue

Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology. Because we act as the merchant of record, we incur all payment processing costs associated with our bookings, and we have chargebacks, which arise from account takeovers and other fraudulent activities. Cost of revenue may vary as a percentage of revenue from year to year based on activity on our platform and may also vary from quarter to quarter as a percentage of revenue based on the seasonality of our business and the difference in the timing of when bookings are made and when we recognize revenue.

Operations and Support

Operations and support expense primarily consists of personnel-related expenses and third-party service provider fees associated with community support provided via phone, email, and chat to customers; customer relations costs, which include refunds and credits related to customer satisfaction and expenses associated with our Host protection programs; and allocated costs for facilities and information technology.

Product Development

Product development expense primarily consists of personnel-related expenses and third-party service provider fees incurred in connection with the development of our platform, and allocated costs for facilities and information technology.

Sales and Marketing

Sales and marketing expense primarily consists of brand and performance marketing, personnel-related expenses, including those related to our field operations, policy and communications, portions of referral incentives and coupons, and allocated costs for facilities and information technology.

General and Administrative

General and administrative expense primarily consists of personnel-related expenses for management and administrative functions, including finance and accounting, legal, and human resources. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, allocated costs for facilities and information technology, indirect taxes, including lodging tax reserves for which we may be held jointly liable with Hosts for collecting and remitting such taxes, and bad debt expense.

Restructuring Charges

Restructuring charges primarily consist of costs associated with a global workforce reduction in May 2020, lease impairments, and costs associated with amendments and terminations of contracts, including commercial agreements with service providers.

Stock-Based Compensation

We grant stock-based awards consisting primarily of stock options, restricted stock awards (“RSAs”), and restricted stock units (“RSUs”) to employees, members of our board of directors, and non-employees. In addition, we have an Employee Stock Purchase Plan (“ESPP”), which was adopted by our board of directors in December 2020.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers.

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Interest Expense

Interest expense consists primarily of interest associated with various indirect tax reserves, amortization of debt issuance and debt discount costs, and the loss on extinguishment of debt related to the repayment of the first and second lien loans in March 2021.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, the change in fair value of investments and financial instruments, including the warrants issued in connection with a term loan agreement entered into in April 2020, and our share of income or loss from our equity method investments.

Our platform generally enables guests to make payments in the currency of their choice to the extent that the currency is supported by Airbnb, which may not match the currency in which the Host elects to be paid. As a result, in those cases, we bear the currency risk of both the guest payment as well as the Host payment due to timing differences in such payments. We enter into derivative contracts to offset a portion of our exposure to the impact of movements in currency exchange rates on our transactional balances denominated in currencies other than the U.S. dollar. The effects of these derivative contracts are reflected in other income (expense), net.

Provision for (Benefit from) Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, acquisitions, investments, tax audit developments, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains and losses, changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

We have a valuation allowance for our net U.S. deferred tax assets, including federal and state net operating loss carryforwards, tax credits, and intangible assets. We expect to maintain these valuation allowances until it becomes more likely than not that the benefit of our deferred tax assets will be realized by way of expected future taxable income in the United States. We regularly assess all available evidence, including cumulative historic losses and forecasted earnings. Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available in a future period to reach a conclusion that the U.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of material U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of sustained U.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded share price, foreign currency movements, and macroeconomic conditions, among other factors.

We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes.

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Results of Operations

The following table sets forth our results of operations for the periods presented (in millions, except percentages):

(1)Includes stock-based compensation expense as follows (in millions):

Comparison of the Years Ended December 31, 2021 and 2022

Revenue

Revenue increased $2.4 billion, or 40%, in 2022 compared to 2021, primarily due to a 31% increase in Nights and Experiences Booked combined with higher ADRs. On a constant-currency basis, revenue increased 46% compared to 2021, due to the strengthening of the U.S. dollar against the Euro and British Pounds.

Cost of Revenue

Cost of revenue increased $343.2 million, or 30%, in 2022 compared to 2021, primarily due to an increase in merchant fees of $313.9 million and an increase of $35.8 million in chargebacks, both related to an increase in pay-in volumes, an increase in cloud computing costs of $24.9 million due to increased server and data storage usage, and an increase of $10.0 million related to SMS notification costs, partially offset by a decrease of $44.3 million in amortization expense for internally developed software and acquired technology.

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Operations and Support

Operations and support expense increased $193.8 million, or 23%, in 2022 compared to 2021, primarily due to $130.7 million increase in third-party community support personnel and customer relations costs, a $29.8 million increase in insurance costs due to a higher Host Liability Insurance premium resulting from higher overall nights and a higher premium rate, and a $29.2 million increase in payroll-related expenses due to growth in headcount and increased compensation costs.

Product Development

Product development expense increased $77.4 million, or 5%, in 2022 compared to 2021, primarily due to a $51.9 million increase in payroll-related expenses due to growth in headcount and increased compensation costs, and a $14.9 million increase in third-party service providers for contingent workers and consultant support for infrastructure projects, quality assurance services, and support of new product rollouts, including AirCover. Product development expense as a percent of revenue decreased to 18% in 2022, from 24% in the prior year, primarily due to growth in revenue outpacing growth in product development expense as a result of the significant increase in Nights and Experiences Booked combined with higher ADRs and cost saving initiatives.

Sales and Marketing

Sales and marketing expense increased $329.9 million, or 28%, in 2022 compared to 2021, primarily due to a $197.8 million increase in marketing activities associated with our Made Possible by Hosts, Strangers, AirCover, Categories, and OMG marketing campaigns and launches, a $67.9 million increase in our search engine marketing and advertising spend, a $25.1 million increase in payroll-related expenses due to growth in headcount and increase in compensation costs, a $22.0 million increase in third-party service provider expenses, and a $11.1 million increase in coupon expense in line with increase in revenue and launch of AirCover for guests, partially offset by a decrease of $22.9 million related to the changes in the fair value of contingent consideration related to a 2019 acquisition.

General and Administrative

General and administrative expense increased $114.0 million, or 14%, in 2022 compared to 2021, primarily due to an increase in other business and operational taxes of $41.3 million, a $25.5 million increase in professional services expenses, primarily due to third-party service provider expenses, a $21.7 million increase in bad debt expenses, a $6.2 million increase in travel and entertainment expenses, and a $6.0 million increase in charitable contributions to Airbnb.org, primarily to support Ukrainian refugees.

Restructuring Charges

Restructuring charges decreased $23.7 million, or 21%, in 2022 compared to 2021. The shift to a remote work model was in direct response to the change in how our employees work due to the impact of COVID-19. As a result, in 2022 we recorded restructuring charges of $89.1 million, which include $80.5 million relating to an impairment of both domestic and international operating lease right-of-use (“ROU”) assets,

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and $8.4 million of related leasehold improvements. Refer to Note 17, Restructuring, to our consolidated financial statements included in Item 8 of Part 2 of this Annual Report on Form 10-K for additional information.

Interest Income and Expense

Interest income increased $173.2 million, or 1,361%, in 2022 compared to 2021, primarily due to higher interest rates. Our investment portfolio was largely invested in money market funds and short-term, high-quality bonds. Interest expense decreased $413.9 million in 2022, primarily due to the $377.2 million loss on extinguishment of debt resulting from retirement of two term loans in March 2021. Refer to Note 9, Debt, to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K, for additional information.

Other Income (Expense), Net

Other income (expense), net increased $328.3 million in 2022 compared to 2021, primarily driven by $292.0 million of fair value remeasurement on our warrants issued in connection with our second lien loan in the prior year, which were reclassified to equity in March 2021 and no longer require fair value remeasurement.

Provision for Income Taxes

The provision for income taxes for the year ended December 31, 2022 increased $44.0 million, compared to 2021, primarily due to increased profitability. See Note 13, Income Taxes, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further details.

Liquidity and Capital Resources

Sources and Conditions of Liquidity

As of December 31, 2022, our principal sources of liquidity were cash and cash equivalents and marketable securities totaling $9.6 billion. As of December 31, 2022, cash and cash equivalents totaled $7.4 billion, which included $2.1 billion held by our foreign subsidiaries. Cash and cash equivalents consist of checking and interest-bearing accounts and highly-liquid securities with an original maturity of 90 days or less. As of December 31, 2022, marketable securities totaled $2.2 billion. Marketable securities primarily consist of highly-liquid investment grade corporate debt securities, commercial paper, certificates of deposit, and U.S. government and agency bonds. These amounts do not include funds of $4.8 billion as of December 31, 2022 that we held for bookings in advance of guests completing check-ins that we record separately on our balance sheet in funds receivable and amounts held on behalf of customers with a corresponding liability in funds payable and amounts payable to customers.

Cash, cash equivalents, and marketable securities held outside the United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of such funds may result in additional tax liabilities. We believe that our existing cash, cash equivalents, and marketable securities balances in the United States are sufficient to fund our working capital needs in the United States.

We have access to $1.0 billion of commitments under the 2022 Credit Facility. As of December 31, 2022, no amounts were drawn under the 2022 Credit Facility. See Note 9, Debt, to our consolidated financial statements included in Item 8 of Part 2 of this Annual Report on Form 10-K for a description of the 2022 Credit Facility entered into on October 31, 2022.

Material Cash Requirements

As of December 31, 2022, we had outstanding $2.0 billion in aggregate principal amount of indebtedness of our convertible senior notes due 2026. On March 3, 2021, in connection with the pricing of the 2026 Notes, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain of the initial purchasers and other financial institutions (the "option counterparties") at a cost of approximately

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$100.2 million. The cap price of the Capped Calls was $360.80 per share of Class A common stock, which represented a premium of 100% over the last reported sale price of the Class A common stock of $180.40 per share on March 3, 2021, subject to certain customary adjustments under the terms of the Capped Call Transactions. See Note 9, Debt, to our consolidated financial statements included in Item 8 of Part 2 of this Annual Report on Form 10-K for additional information.

As of December 31, 2022, our total minimum lease payments were $354.0 million, of which $80.7 million is due in the succeeding 12 months. We have a commercial agreement with a data hosting services provider to spend or incur an aggregate of at least $941.7 million for vendor services through 2027. See Note 8. Leases, Note 9, Debt, and Note 12, Commitments and Contingencies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information regarding these commitments.

On August 2, 2022, we announced that our board of directors approved a share repurchase program with authorization to purchase up to $2.0 billion of our Class A common stock at management’s discretion (the “Share Repurchase Program”). Share repurchases under the Share Repurchase Program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, or accelerated share repurchase transactions, or by any combination of such methods. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements, and other relevant factors. The Share Repurchase Program does not have an expiration date, does not obligate us to repurchase any specific number of shares, and may be modified, suspended, or terminated at any time at our discretion. During 2022, we repurchased and subsequently retired 13.8 million shares of our common stock for $1.5 billion under the Share Repurchase Program. As of December 31, 2022, we had $500.0 million available to repurchase shares pursuant to the Share Repurchase Program.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in millions):

Cash Provided by Operating Activities

Net cash provided by operating activities in 2022 was $3.4 billion, which is due to net income in 2022 of $1.9 billion, adjusted for non-cash charges, primarily consisting of $929.6 million of stock-based compensation expense, impairment of long-lived assets of $91.4 million, and $62.5 million of foreign exchange losses due to the strengthening of the U.S. dollar against the Euro and British Pound. Additional cash was provided by changes in working capital, including a $279.9 million increase in unearned fees resulting from significantly higher bookings and accrued expenses and other liabilities of $272.7 million.

Net cash provided by operating activities in 2021 was $2.3 billion. Our net loss for 2021 was $352.0 million, adjusted for non-cash charges, primarily consisting of $898.8 million of stock-based compensation expense, $377.2 million of loss on extinguishment of debt, $292.0 million of fair value remeasurement on warrants issued in connection with a term loan agreement entered into in April 2020, $138.3 million of depreciation and amortization, $112.5 million of impairment of long-lived assets, and $27.3 million of bad debt expense. Additional inflow of cash resulted from changes in working capital, including a $495.8 million increase in unearned fees resulting from significantly higher bookings.

Cash Used in Investing Activities

Net cash used in investing activities in 2022 was $28.0 million, which was primarily from the proceeds from maturities and sales of marketable securities of $3.2 billion and $909.5 million, respectively, partially offset by purchases of marketable securities of $4.1 billion.

Net cash used in investing activities in 2021 was $1.4 billion, which was primarily due to purchases of marketable securities of $4.9 billion, partially offset by proceeds resulting from sales and maturities of marketable securities of $1.6 billion and $2.0 billion, respectively.

Cash Provided by (Used in) Financing Activities

Net cash used in financing activities in 2022 was $689.2 million, primarily reflecting the increase in funds payable and amounts payable to customers of $1.3 billion resulting from significantly higher bookings, offset by our share repurchase of $1.5 billion under the Share Repurchase Program, and an increase in the taxes paid related to net share settlement of equity awards of $607.4 million.

Net cash provided by financing activities in 2021 was $1.3 billion, primarily reflecting the proceeds from the issuance of convertible senior notes, net of issuance costs, of $2.0 billion and an increase in funds payable and amounts payable to customers of $1.6 billion, partially offset by the repayment of long-term debt and a related prepayment penalty of $2.0 billion and $212.9 million, respectively.

Effect of Exchange Rates

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The effect of exchange rate changes on cash, cash equivalents, and restricted cash on our consolidated statements of cash flows relates to certain of our assets, principally cash balances held on behalf of customers, that are denominated in currencies other than the functional currency of certain of our subsidiaries. During 2021 and 2022, we recorded reductions of $209.9 million and $337.4 million, respectively, in cash, cash equivalents, and restricted cash, primarily due to the strengthening of the U.S. dollar against certain currencies. The impact of exchange rate changes on cash balances can serve as a natural hedge for the effect of exchange rates on our liabilities to our customers.

We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we believe that the cash flows generated from operating activities will meet our anticipated cash requirements in the short-term. In addition to normal working capital requirements, we anticipate that our short- and long-term cash requirements will include funding capital expenditures, debt repayments, share repurchases, introduction of new products and offerings, timing and extent of spending to support our efforts to develop our platform, and expansion of sales and marketing activities. Our future capital requirements, however, will depend on many factors, including, but not limited to our growth, headcount, and ability to attract and retain customers on our platform. Additionally, we may in the future raise additional capital or incur additional indebtedness to continue to fund our strategic initiatives. On a long-term basis, we would rely on either our access to the capital markets or our credit facility for any long-term funding not provided by operating cash flows and cash on hand. In the event that additional financing is required from outside sources, we may seek to raise additional funds at any time through equity, equity-linked arrangements, and/or debt, which may not be available on favorable terms, or at all. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be materially adversely affected. Our liquidity is subject to various risks including the risks identified in the section titled "Risk Factors" in Item 1A and market risks identified in the section entitled "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A.

Indemnification Agreements

In the ordinary course of business, we include limited indemnification provisions under certain agreements with parties with whom we have commercial relations of varying scope and terms. Under these contracts, we may indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with breach of the agreements, or intellectual property infringement claims made by a third party, including claims by a third party with respect to our domain names, trademarks, logos, and other branding elements to the extent that such marks are applicable to its performance under the subject agreement. It is not possible to determine the maximum potential loss under these indemnification provisions due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions.

In addition, we have entered into indemnification agreements with our directors, executive officers, and certain other employees that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, executive officers, or employees.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

We believe that of our significant accounting policies, which are described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition, results of operations, and cash flows.

Lodging Tax Obligations

In jurisdictions where we do not collect and remit lodging taxes, the responsibility for collecting and remitting these taxes, if applicable, generally rests with Hosts. We estimate liabilities for a certain number of jurisdictions with respect to state, city, and local taxes related to lodging where we believe it is probable that Airbnb could be held jointly liable with Hosts for collecting and remitting such taxes and the related amounts can be reasonably estimated. Changes to these liabilities are recorded in general and administrative expense in our consolidated statements of operations.

Evaluating potential outcomes for lodging taxes is inherently uncertain and requires us to utilize various judgments, assumptions, and estimates in determining our reserves. A variety of factors could affect our potential obligation for collecting and remitting such taxes which include, but are not limited to, whether we determine, or any tax authority asserts, that we have a responsibility to collect lodging and related taxes on either historic or future transactions; the introduction of new ordinances and taxes which subject our operations to such taxes; or the ultimate resolution of any historic claims that may be settled through negotiation. Accordingly, the ultimate resolution of lodging taxes may be greater or less than reserve amounts we have established. See Note 12, Commitments and Contingencies, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information.

Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions. We account for income taxes using the asset and liability method. We account for uncertainty in tax positions by recognizing a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination. Evaluating our uncertain tax positions, determining our provision for (benefit from)

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income taxes, and evaluating the impact of tax law changes, are inherently uncertain and require making judgments, assumptions, and estimates.

In determining the need for a valuation allowance, we weigh both positive and negative evidence in the various jurisdictions in which we operate to determine whether it is more likely than not that our deferred tax assets are recoverable. We regularly assess all available evidence, including cumulative historic losses and forecasted earnings. Due to cumulative losses in the U.S. during the prior three years, including tax deductible stock compensation, and based on all available positive and negative evidence, we do not believe it is more likely than not that our U.S. deferred tax assets will be realized as of December 31, 2022. Accordingly, a full valuation allowance has been established in the United States, and no deferred tax assets and related tax benefit have been recognized in the financial statements. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that sufficient positive evidence may become available in a future period to allow us to reach a conclusion that the U.S. valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of material U.S. federal and state deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded. The exact timing and amount of the valuation allowance release are subject to change on the basis of the level of sustained U.S. profitability that we are able to actually achieve, as well as the amount of tax deductible stock compensation dependent upon our publicly traded share price, foreign currency movements, and macroeconomic conditions, among other factors.

While we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for (benefit from) income taxes and the effective tax rate in the period in which such determination is made.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2021 refer to the year ended December 31, 2021, references to 2020 refer to the year ended December 31, 2020, and references to 2019 refer to the year ended December 31, 2019.

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 26, 2021.

Due to the unprecedented impact of COVID-19 on our operating results in 2020, we have included certain key comparisons to 2019 to provide a more useful picture of our results in 2021. We believe that the modest recovery in the latter half of 2020 beginning in the second quarter was attributable to the renewed ability and willingness for guests to travel, the resilience of our Hosts, and relative strength of our business model. From December 31, 2019 through December 31, 2020, active listings remained stable at approximately 5.6 million despite the decline in booking activity on our platform due to COVID-19. Against an otherwise highly negative travel backdrop, there are several areas of our business that have shown resilience, notably, domestic travel, short-distance travel, travel outside of our top 20 cities, and long-term stays.

Overview

We are a community based on connection and belonging—a community that was born in 2007 when two Hosts welcomed three guests to their San Francisco home, and has since grown to over 4 million Hosts who have welcomed over 1 billion guest arrivals to over 100,000 cities and towns in almost every country and region across the globe. Hosts on Airbnb are everyday people who share their worlds to provide guests with the feeling of connection and being at home. We have five stakeholders and is designed with all of them in mind. Along with employees and shareholders, we serve Hosts, guests, and the communities in which they live. We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive.

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Our Business Model

We operate a global marketplace, where Hosts offer guests stays and experiences on our platform. Our business model relies on the success of Hosts and guests who join our community and generate consistent bookings over time. As Hosts become more successful on our platform and as guests return over time, we benefit from the recurring activity of our community.

Initial Public Offering

Our IPO was completed on December 14, 2020. Our consolidated financial statements as of December 31, 2020 and for the year then-ended reflect the sale by us of an aggregate of 55,000,000 shares in our IPO, including the exercise of the underwriters’ option to purchase additional shares, at the public offering price of $68.00 per share, for net proceeds to us of approximately $3.7 billion, after underwriting discounts and commissions and offering expenses, and the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 240,910,588 shares of Class B common stock, including 1,286,694 shares of Class B common stock issuable pursuant to the anti-dilution adjustment provisions relating to our Series C redeemable convertible preferred stock.

Our consolidated financial statements as of December 31, 2020 and for the year then-ended include stock-based compensation expense of $2.8 billion associated with the vesting of RSUs in connection with our IPO for which the requisite service-based vesting condition was met as of December 31, 2020. The liquidity-based vesting condition for RSUs was satisfied upon the effectiveness of our IPO Registration Statement on December 9, 2020.

Key Business Metrics and Non-GAAP Financial Measures

We track the following key business metrics and financial measures that are not calculated and presented in accordance with GAAP (“non-GAAP financial measures”) to evaluate our operating performance, identify trends, formulate financial projections, and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided under the subsection titled “— Adjusted EBITDA” and “— Free Cash Flow” below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

Key Business Metrics

We review the following key business metrics to measure our performance, identify trends, formulate financial projections, and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics, which may hinder comparability with other companies that may calculate similarly titled metrics in a different way.

Nights and Experiences Booked

Nights and Experiences Booked is a key measure of the scale of our platform, which in turn drives our financial performance. Nights and Experiences Booked on our platform in a period represents the sum of the total number of nights booked for stays and the total number of seats booked for experiences, net of cancellations and alterations that occurred in that period. For example, a booking made on February 15 would be reflected in Nights and Experiences Booked for our quarter ended March 31. If, in the example, the booking were canceled on May 15, Nights and Experiences Booked would be reduced by the cancellation for our quarter ended June 30. A night can include one or more guests and can be for a listing with one or more bedrooms. A seat is booked for each participant in an experience. Substantially all of the bookings on our platform to date have come from nights. We believe Nights and Experiences Booked is a key business metric to help investors and others understand and evaluate our results of operations in the same manner as our management team, as it represents a single unit of transaction on our platform.

In 2021, we had 300.6 million Nights and Experiences Booked, a 56% increase from 193.2 million in 2020 and an 8% decrease from 326.9 million in 2019. Nights and Experiences Booked grows as we attract new Hosts and guests to our platform and as repeat guests increase their activity on our platform. Our Nights and Experiences Booked saw continued strength in Nights and Experiences Booked in North America, EMEA and Latin America.

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Gross Booking Value

GBV represents the dollar value of bookings on our platform in a period and is inclusive of Host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations that occurred during that period. The timing of recording GBV and any related cancellations is similar to that described in the subsection titled “— Key Business Metrics and Non-GAAP Financial Measures — Nights and Experiences Booked” above. Revenue from the booking is recognized upon check-in; accordingly, GBV is a leading indicator of revenue. The entire amount of a booking is reflected in GBV during the quarter in which booking occurs, whether the guest pays the entire amount of the booking upfront or elects to use our Pay Less Upfront program. Growth in GBV reflects our ability to attract and retain Hosts and guests and reflects growth in Nights and Experiences Booked.

In 2021, our GBV was $46.9 billion, a 96% increase from $23.9 billion in 2020 and a 23% increase from $38.0 billion in 2019. The increase in our GBV was primarily due to an increase in Nights and Experiences Booked and higher average daily rates (“ADRs”). The travel recovery we are experiencing has been dominated by our higher ADR regions—North America and Europe, in particular, whereas our lowest ADR region, Asia Pacific remains depressed. On a constant currency basis, the increase in GBV was 92% for the year ended December 31, 2021, as compared to 2020.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

The following table summarizes our non-GAAP financial measures, along with the most directly comparable GAAP measure, for each period presented below.

Adjusted EBITDA

We define Adjusted EBITDA as net income or loss adjusted for (i) provision for (benefit from) income taxes; (ii) interest income, interest expense, and other income (expense), net; (iii) depreciation and amortization; (iv) stock-based compensation expense and stock-settlement obligations related to the IPO; (v) acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements; (vi) net changes to the reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and (vii) restructuring charges.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items is unpredictable, not driven by core results of operations and renders comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Adjusted EBITDA also excludes certain items related to transactional tax matters, for which management believes it is probable that we may be held jointly liable with Hosts in certain jurisdictions, and we urge investors to review the detailed disclosure regarding these matters included in the subsection titled “—Critical Accounting Policies and Estimates—Lodging Tax Obligations,” as well as the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Adjusted EBITDA has limitations as a financial measure, should be considered as supplemental in nature, and is not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

•Adjusted EBITDA does not reflect interest income (expense) and other income (expense), net, which include loss on extinguishment of debt and unrealized and realized gains and losses on foreign currency exchange, investments, and financial instruments, including the warrants issued in connection with a term loan agreement entered into in April 2020. We amended the

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anti-dilution feature in the warrant agreements in March 2021. The balance of the warrants of $1.3 billion was reclassified from liability to equity as the amended warrants met the requirements for equity classification and are no longer remeasured at each reporting period;

•Adjusted EBITDA excludes certain recurring, non-cash charges, such as depreciation of property and equipment and amortization of intangible assets, and although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect all cash requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy as well as stock-settlement obligations, which represent employer and related taxes related to the IPO;

•Adjusted EBITDA excludes acquisition-related impacts consisting of gains (losses) recognized on changes in the fair value of contingent consideration arrangements. The contingent consideration, which was in the form of equity, was valued as of the acquisition date and is marked-to-market at each reporting period based on factors including our stock price. The changes in fair value of contingent consideration were insignificant prior to the fourth quarter of 2020;

•Adjusted EBITDA does not reflect net changes to reserves for lodging taxes for which management believes it is probable that we may be held jointly liable with Hosts for collecting and remitting such taxes; and

•Adjusted EBITDA does not reflect restructuring charges, which include severance and other employee costs, lease impairments, and contract amendments and terminations.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

In 2021, Adjusted EBITDA was $1.6 billion, compared to $(250.7) million in 2020 and $(253.3) million in 2019. This favorable change was due to our record high revenue combined with continued cost management.

Adjusted EBITDA Reconciliation

The following is a reconciliation of Adjusted EBITDA to the most comparable GAAP measure, net loss:

(1)Excludes stock-based compensation related to restructuring, which is included in restructuring charges in the table above.

Free Cash Flow

We define Free Cash Flow as net cash provided by (used in) operating activities less purchases of property and equipment. We believe that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after purchases of property and equipment, that can be used for investment in our business and for acquisitions as well as to strengthen our balance sheet. Our Free Cash Flow is impacted by the timing of GBV because we collect our service fees at the time of booking, which is generally before a stay or experience occurs. Funds held on behalf of our Hosts and guests and amounts payable to our Hosts and guests do not impact Free Cash Flow, except interest earned on these funds. Free Cash Flow has limitations as an analytical

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tool and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by (used in) operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

In 2021, Free Cash Flow was $2.2 billion compared to $(667.1) million in 2020, representing 36% of revenue. Free Cash Flow increased in 2021 due to the increase in Nights and Experiences Booked and GBV, as described above. Free Cash Flow decreased in 2020 due to the reduction in Nights and Experiences Booked and GBV due to the COVID-19 pandemic, as described above, partially offset by cost reductions.

Free Cash Flow Reconciliation

The following is a reconciliation of Free Cash Flow to the most comparable GAAP cash flow measure, net cash provided by (used in) operating activities:

Impact of COVID-19 on our Business

COVID-19 Has Had a Disproportionately Negative Effect on the Travel Industry

For over a year, many travelers have avoided traveling long distance because of COVID-19 concerns, quarantines, and travel restrictions.

However, we have been seeing signs of travel recovery as the rate of vaccinations increases and quarantine requirements and certain travel restrictions are lifted. For example, during 2021, we saw a significant increase in Nights and Experiences Booked compared to the same prior year period.

While COVID-19, including new strains of variants, continues to disrupt travel across the world, we have seen continued resiliency in not only our guests' travel behavior, but in our business model and its ability to adapt to the changing needs of our guests. In early 2020, as COVID-19 disrupted travel across the world, Airbnb’s business declined significantly. However, beginning in the second quarter of 2020, our business model started to rebound even with limited international travel, demonstrating its resilience. People wanted to get out of their homes and yearned to travel, but they did not want to go far or to be in crowded hotel lobbies. Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home. Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform is suited to and has proven adaptable to serve these new ways of traveling. From long weekends to monthly stays, Airbnb allows you to book any home, anywhere, for any duration—and ultimately, to live anywhere. We believe this trend towards more flexibility will continue to accelerate. In 2021, some of the largest companies in the world announced increased flexibility for employees to work remotely, and we expect more companies to follow their lead.

While COVID-19 still plagues the world, for the year ended December 31, 2021, GBV and revenue were $46.9 billion and $6.0 billion, respectively, which were both higher compared to the same periods in 2019 and 2020. These improvements were primarily driven by stronger results in North America and EMEA, and acceleration in Latin America, in particular with resilience in domestic and short-distance travel, with more people gravitating toward Airbnb stays within driving distance of their homes.

The extent and duration of the impact of the COVID-19 pandemic over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the introduction and spread of new variants of the virus, including, for example, the Omicron variant which emerged in November of 2021, that may be more easily transmittable and resistant to currently approved vaccines, the continuation of existing or implementation of new government travel restrictions, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general, and on our business in particular, which may result in a reduction in bookings and an increase in booking cancellations.

Geographic Mix

Our operations are global, and certain trends in our business, such as Nights and Experiences Booked, GBV, revenue, GBV per Night and Experience Booked, and Nights per Booking vary by geography. We measure Nights and Experiences Booked by region based on the location of the listing.

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We saw an increase in GBV per Night and Experience Booked in 2021 compared to 2020, again in part because our geographic mix shifted to these higher GBV per Night and Experience Booked regions. Specifically, GBV per Night and Experience Booked in 2021 was $221.92 for North America compared to $123.71 for EMEA, $109.75 for Asia Pacific, and $95.42 for Latin America, with a total global GBV per Night and Experience Booked of $155.93.

Average nights per booking, excluding experiences, for 2021 were 4.4 nights for EMEA, 4.3 nights for each of North America and Latin America, and 2.7 nights for Asia Pacific, with a total average of 4.1 nights. The average nights per booking decreased slightly in 2021, but still reflects elevated demand for longer stays. We expect that our blended global average nights per booking will continue to fluctuate based on our geographic mix and changes in traveler behaviors.

Seasonality

Our business is seasonal, reflecting typical travel behavior patterns over the course of the calendar year. In a typical year, the first, second,

and third quarters have higher Nights and Experiences Booked than the fourth quarter, as guests plan for travel during the peak travel season, which is in the third quarter for North America and EMEA. Our business metrics, including GBV and Adjusted EBITDA, can also be impacted by the timing of holidays and other events. We experience seasonality in our GBV that is generally consistent with the seasonality of Nights and Experiences Booked. Revenue and Adjusted EBITDA have historically been, and are expected to continue to be, highest in the third quarter when we have the most check-ins, which is the point at which we recognize revenue. Seasonal trends in our GBV impact Free Cash Flow for any given quarter. Our costs are relatively fixed across quarters or vary in line with the volume of transactions, and we historically achieve our highest GBV in the first and second quarters of the year with comparatively lower check-ins. As a result, increases in unearned fees make our Free Cash Flow and Free Cash Flow as a percentage of revenue the highest in the first two quarters of the year. We typically see a slight decline in GBV and a peak in check-ins in the third quarter, which results in a decrease in unearned fees and lower sequential level of Free Cash Flow, and a greater decline in GBV in the fourth quarter, where Free Cash Flow is typically negative. As our business matures, other seasonal trends may develop, or these existing seasonal trends may become more extreme.

We have seen COVID-19 overwhelm the historical patterns of seasonality in our GBV, revenue, Adjusted EBITDA, and Free Cash Flow as a result of travel restrictions and changing travel preferences relating to the COVID-19 pandemic. While we expect this impact on seasonality to continue as long as COVID-19 is impacting travel patterns globally, we have seen the time between when guests make their bookings on our platform and when they expect to complete their stays increase towards a return to pre-COVID-19 levels. Typically, booking lead times sequentially lengthen from the fourth quarter to the first quarter when guests start to book travel for later in the year. Even taking normal seasonal patterns into consideration, we have seen lead times lengthen during 2021.

Regulations Permitting or Limiting Our Offerings

Regulations that permit or limit our Hosts’ ability to provide their listings impact our growth and penetration in certain geographies. In particular, among other regulations governing our short-term rentals, many large cities have placed night caps on short-term rentals of certain types of properties, limited short-term rentals to primary residences, or limited the length of a stay. No single city represented more than 1.0% of our revenue before adjustments for incentives and refunds during the year ended December 31, 2021 or 1.1% of our active listings as of December 31, 2021. An increase in short-term rental regulations could harm our business and negatively impact our financial performance. See the section titled “Risk Factors — Laws, regulations, and rules that affect the short-term rental and home sharing business may limit the ability or willingness of Hosts to share their spaces over our platform and expose our Hosts or us to significant penalties, which could have a material adverse effect on our business, results of operations, and financial condition.”

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Components of Results of Operations

Revenue

Our revenue consists of service fees, net of incentives and refunds, charged to our customers. We consider both Hosts and guests to be our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and Host type. For experiences, we only earn a Host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities.

We experience a difference in timing between when a booking is made and when we recognize revenue, which occurs upon check-in. We record the service fees that we collect from customers prior to check-in on our balance sheet as unearned fees. Revenue is net of incentives and refunds provided to customers.

Cost of Revenue

Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology. Because we act as the merchant of record, we incur all payment processing costs associated with our bookings, and we have chargebacks, which arise from account takeovers and other fraudulent activities. We expect our cost of revenue will continue to increase on an absolute dollar basis for the foreseeable future to the extent that we continue to see growth on our platform. Cost of revenue may vary as a percentage of revenue from year to year based on activity on our platform and may also vary from quarter to quarter as a percentage of revenue based on the seasonality of our business and the difference in the timing of when bookings are made and when we recognize revenue.

Operations and Support

Operations and support expense primarily consists of personnel-related expenses and third-party service provider fees associated with community support provided via phone, email, and chat to Hosts and guests; customer relations costs, which include refunds and credits related to customer satisfaction and expenses associated with our Host protection programs; and allocated costs for facilities and information technology. We expect that operations and support expense will continue to increase on an absolute dollar basis for the foreseeable future to the extent that we continue to see growth on our platform. We also expect operations and support expense to increase in the near-term as a percentage of revenue, as we had made investments in trust and safety programs and scaled our frontline community support staff in preparation for the travel rebound. We are also investing in the near-term in initiatives to reduce customer contact rates and improve the operational efficiency of our operations and support organization, which we expect will decrease operations and support expense as a percentage of revenue over the longer term.

Product Development

Product development expense primarily consists of personnel-related expenses and third-party service provider fees incurred in connection with the development of our platform, and allocated costs for facilities and information technology. We expect that our product development expense will increase on an absolute dollar basis and will vary from period to period as a percentage of revenue for the foreseeable future as we continue to invest in product development activities relating to ongoing improvements to and maintenance of our technology platform and other programs, including the hiring of personnel to support these efforts.

Sales and Marketing

Sales and marketing expense primarily consists of brand and performance marketing, personnel-related expenses, including those related to our field operations, policy and communications, portions of referral incentives and coupons, and allocated costs for facilities and information technology. We expect our sales and marketing expense will vary from period to period as a percentage of revenue for the foreseeable future, and over the long term, we expect it will decline as a percentage of revenue relative to 2019. Sales and marketing expense as a percentage of revenue was lower in the second half of 2021 than in the first half. This is partially due to the marketing campaign that we began running in February 2021 in advance of the summer travel season.

General and Administrative

General and administrative expense primarily consists of personnel-related expenses for management and administrative functions, including finance and accounting, legal, and human resources. General and administrative expense also includes certain professional services fees, general corporate and director and officer insurance, allocated costs for facilities and information technology, indirect taxes, including lodging tax reserves for which we may be held jointly liable with Hosts for collecting and remitting such taxes, and bad debt expense. We expect to incur additional general and administrative expense as a result of operating as a public company, including expenses to comply with the rules and regulations of the SEC and Listing Rules of Nasdaq, as well as higher expenses for corporate insurance, director and officer insurance, investor relations, and professional services. Overall, we expect our general and administrative expense will vary from period to period as a percentage of revenue for the foreseeable future.

Restructuring Charges

Restructuring charges primarily consist of costs associated with a global workforce reduction in May 2020, lease impairments, and costs associated with amendments and terminations of contracts, including commercial agreements with service providers.

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Stock-Based Compensation

We grant stock-based awards consisting primarily of stock options, restricted common stock, and restricted stock units (“RSUs”) to employees, members of our board of directors, and non-employees. In addition, we have an Employee Stock Purchase Plan (“ESPP”), which was adopted by our board of directors in December 2020. Stock-based compensation expense was $898.8 million for the year ended December 31, 2021.

Prior to December 9, 2020, no stock-based compensation expense had been recognized for certain awards with a liquidity-event performance-based vesting condition based on the occurrence of a qualifying event, as such qualifying event was not probable. Upon our IPO, the liquidity-event performance-based condition was met and $2.8 billion of stock-based compensation expense was recognized related to these awards.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, marketable securities, and amounts held on behalf of customers.

Interest Expense

Interest expense consists primarily of interest associated with various indirect tax reserves, amortization of debt issuance and debt discount costs, and the loss on extinguishment of debt related to the repayment of the first and second lien loans in March 2021.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized and unrealized gains and losses on foreign currency transactions and balances, the change in fair value of investments and financial instruments, including the warrants issued in connection with a term loan agreement entered into in April 2020, and our share of income or loss from our equity method investments.

Our platform generally enables guests to make payments in the currency of their choice to the extent that the currency is supported by Airbnb, which may not match the currency in which the Host elects to be paid. As a result, in those cases, we bear the currency risk of both the guest payment as well as the Host payment due to timing differences in such payments. We enter into derivative contracts to offset a portion of our exposure to the impact of movements in currency exchange rates on our transactional balances denominated in currencies other than the U.S. dollar. The effects of these derivative contracts are reflected in other income (expense), net.

Provision for (Benefit from) Income Taxes

We are subject to income taxes in the United States and foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, changes in how we do business, acquisitions, investments, tax audit developments, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains and losses, changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can vary based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

We have a valuation allowance for our net deferred tax assets, including federal and state net operating loss carryforwards, tax credits, and intangible assets. We expect to maintain these valuation allowances until it becomes more likely than not that the benefit of our deferred tax assets will be realized by way of expected future taxable income in the United States. We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes.

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Results of Operations

The following table sets forth our results of operations for the periods presented:

(1)Includes stock-based compensation expense as follows:

The following table sets forth the components of our consolidated statements of operations for each of the periods presented as a percentage of revenue:

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Comparison of the Years Ended December 31, 2020 and 2021

Revenue

Revenue increased $2.6 billion, or 77%, in 2021 compared to 2020, and 25% compared to 2019, primarily due to the recovery in Nights and Experiences Booked combined with higher ADRs. In addition, during 2020, we had higher reductions to revenue largely attributable to payments made to customers related to our extenuating circumstances policy for cancellations resulting from COVID-19 totaling $205.1 million, the majority of which was recorded as reduction to revenue. The increase compared to pre-COVID pandemic levels in 2019, reflects the resiliency of the business and higher ADRs. On a constant currency basis, revenue increased 74% in 2021 compared to 2020.

Cost of Revenue

Cost of revenue increased $279.8 million, or 32%, in 2021 compared to 2020. The change was primarily due to a $285.2 million increase in merchant fees and an increase of $32.8 million of amortization expense for internally developed software and acquired technology, partially offset by a $40.9 million decrease in chargebacks. For the year ended 2020 and 2021, payment processing costs, consisting of merchant fees and chargebacks, totaled $600.2 million and $844.4 million, respectively, which represented 3% and 2% of GBV, respectively. The increase in merchant fees is primarily due to increased dollar value of payments processed through our platform associated with the growth in GBV.

Operations and Support

Operations and support expense decreased $30.8 million, or 4%, in 2021 compared to 2020. The change was primarily due to a $76.4 million decrease in payroll-related expenses, predominantly comprised of stock-based compensation related to RSUs, and information technology expenses of $7.2 million, partially offset by a $41.9 million increase in insurance costs.

Product Development

Product development expense decreased $1.3 billion, or 48%, in 2021 compared to 2020. The change was primarily due to a $1.3 billion decrease in payroll-related expenses, predominantly comprised of stock-based compensation related to RSUs.

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Sales and Marketing