Good day, ladies and gentlemen, and welcome to the Amadeus Q3 2026 results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Luis Maroto, President and CEO of Amadeus. Please go ahead.
Good afternoon, and a very warm welcome to our quarter three results presentation. Thank you for attending today. I am joined by Carol Borg, our CFO. Let us begin with the presentation. If we turn to slide four for our takeaways from the first nine months. Despite the ongoing situation in the Middle East, we reported solid growth and profitability, demonstrating the strength and resilience of our diversified business. In the first nine months, at constant currency, Amadeus delivered 5% revenue growth, 6% adjusted EBIT growth, and 9% adjusted diluted EPS expansion. We reported solid unitary revenue growth, while our hospitality and other solution segment continued to perform healthily. We maintained cost discipline to drive operating leverage and support profitability. Commercial momentum remained strong throughout the third quarter. We expanded our customer base and increased adoption of our solutions while maintaining a robust commercial pipeline across our businesses.
We remain focused on delivering long-term growth, investing with conviction for the future. As a leader in travel technology, our goal is to be a neutral, embedded orchestrator in an AI-enabled travel ecosystem. We continue to advance our AI roadmap, partnering with leading players. This quarter, we add our partnership with NVIDIA and Anthropic and continue to develop and enhance AI capabilities and solutions across our portfolio. We also continue executing our strategy by supporting our customers in the retailing transformations through AI-powered next-generation solutions. We are pleased with our solid performance year-to-date. We maintain our outlook for 2026 despite the current volatility in the macroeconomic environment and expect to deliver at the lower end of the guided ranges. We continue to focus on what we can control, with fixed cost growth moderating as a result.
Our resilience and financial discipline ensure we are well-positioned to navigate short-term uncertainties. Now let us turn to our strategy and how it translates into commercial wins. We are powering the largest ecosystem of connected, open, AI-enabled solutions in travel. We remain on track with our AI roadmap, and we are pleased to announce several strategic partnerships. Amadeus is deepening its collaboration with NVIDIA to explore how accelerated computing, travel-specific AI, and infrastructure innovation can help shape the next generation of travel search. Together, we are exploring opportunities across flight search optimization, travel-specific foundation models, and cloud and infrastructure efficiency. By combining NVIDIA's expertise in AI and accelerated computing with Amadeus' deep travel expertise, we aim to help prepare the travel ecosystem for the age of AI-powered travel. Amadeus is also collaborating with Anthropic to advance the use of AI agents in travel.
We are exploring together how to make Amadeus capabilities easier to access by developers within Anthropic's Claude Code marketplaces, as well as how to enable travel industry professionals to use Amadeus systems with AI-powered workflows through Claude Cowork. Additionally, Amadeus is integrating Salesforce Agentforce with Amadeus Max for Travelers. We continue to advance our partnerships with Microsoft and Google, and we continue to progress in co-developing the Universal Commerce Protocol for lodging with Google. These collaborations reflect our commitment to exploring the technologies that will shape the future of the travel industry and reinforce the importance of partnerships in turning innovation into real business value. We also continue to expand the number of AI use cases that we have in production.
Amadeus is uniquely placed to deliver agentic AI functionality into products and solutions, supporting our customers on their own journey, and to serve as a neutral embedded orchestrator in an AI-enabled travel ecosystem. We are leading the airline industry's retailing transformation with Nevio, our AI-native next-generation airline IT platform. As you know, Lufthansa Group, British Airways, Air France-KLM, Saudia, and Finnair are engaged in Nevio. This quarter, Finnair became the first airline to connect NDC directly to an offer and order-based system. Amadeus Nevio bringing a solution mindset to the capabilities we have across the travel ecosystem. We continue to grow the scope of solutions adopted by our customers. We also had strong commercial traction in airport IT, such as with Queensland Airports, Kansai Airports, and Queen Alia International Airport, among others. In hospitality, we are becoming the IT provider of reference.
The Amadeus Hospitality Platform offers the most comprehensive AI-powered portfolio of core capabilities to the hotel industry, and it is the most broadly connected ecosystem of partners. We continue to progress with ACRS customer implementations for Marriott International, Accor, and The Ascott Limited. Our commercial momentum remains strong, and our customers are increasing the adoption of our solutions, such as The Ascott Limited, which has expanded its use of Amadeus advertising solutions. We also had new customer signatures across our travel intelligence, advertising, and distribution portfolio. In payments, American Airlines expanded its use of our airport payments solutions. We are growing leadership in airline distribution. We signed new NDC agreements, including with JetBlue, and expanded the low-cost carrier content we distribute through our Amadeus Travel Platform, adding Wizz Air, among others. Saudia signed for our MetaConnect solution to distribute its content through Google Flights.
We expanded our agreements with CTM, Etraveli Group, and Trip.com, and signed new agreements with travel sellers across multiple markets. Please turn to slide six for our AI milestones. As you know, Amadeus plays a distinctive role within the travel industry. We operate as the embedded neutral execution layer at the core of the travel ecosystem. We are also the system of record that underpins how travel operates day-to-day. Our technology is deeply integrated into real operational processes, connecting travel suppliers, sellers, and increasingly AI-enabled interfaces. This depth of integration is what allows AI to move beyond experimentation and operate reliably within real-world workflows. Just as importantly, we deliver this at global scale with high levels of reliability, integrity, and trust. This combination of deep integration, scalability, and operational discipline continues to differentiate Amadeus within the industry.
This quarter, we continue to translate our AI strategy into tangible progress, strengthening the foundations that allow us to scale AI across Amadeus, deepening our collaboration with leading technology companies, and bringing new AI capabilities to our customers. As I mentioned before, this quarter, we are advancing our AI roadmap with NVIDIA and Anthropic. Together with Microsoft and Google, these collaborations demonstrate how we are combining Amadeus travel expertise with capabilities from leading AI technology companies. More importantly, we continue to bring AI into our products and customer operations. Amadeus Max for Travelers brings conversational, real-time support across airline touchpoints, combining a traveler-facing AI assistant, agentic orchestration capabilities, now including Salesforce Agentforce integration, and full connectivity with airline and Amadeus systems.
Taken together, these developments show the continued execution of our AI strategy from the foundations needed to scale AI, to collaboration with leading technology partners, to concrete applications for our customers. We are increasingly moving AI from exploration into practical, scalable use across the travel ecosystem. Now, I will pass on to Carol for our financial overview.
Thank you, Luis. Despite a volatile macroeconomic environment, we are pleased with our September year-to-date performance, showing strength and resilience supported by a diversified business. Revenue amounted to EUR 5,076 million, representing 5% constant currency growth. Reported growth was 4%. Adjusted EBIT increased to EUR 1,547 million, equal to 6% growth at constant currency, 5% reported growth. Adjusted diluted EPS expanded by 9% at constant currency. Free cash flow amounted to EUR 1,036 million, equal to 9% growth. Diluted EPS was EUR 2.54, 4% growth. We deployed R&D investment of EUR 1,030 million, equivalent to 20% of revenue. Leverage was at one time net debt to EBITDA as at the end of September, and we distributed dividends and executed share repurchase programs for an aggregated amount of EUR 1.2 billion.
In the first nine months of the year, our group revenue grew 3.7% on a reported basis, or by 5.2% at constant currency. Air IT Solutions delivered a solid performance, growing by 7.7%. Hospitality and Other Solutions continued to deliver faster growth, growing by 9.2%. Air Distribution, the segment most affected by the Middle East situation, delivered 2.1% growth, all at constant currency. Despite stagnation of our volumes, we continued to deliver good revenue growth. Our solid performance is supported by the resilience of our diversified business and our customer relevance. At constant currency, our adjusted EBIT grew 5.5%, and adjusted EBIT margin marginally expanded to 30.1%.
On a reported basis, adjusted EBIT grew 5.2%, driven by the revenue growth I described previously and a cost evolution consisting of the following: Cost of revenue increased by 6.1%, fundamentally driven by an increase in transactions in hotel distribution bookings and in payments due to the B2B Wallet expansion, as well as from customer and geographic mixes in Air Distribution and our airport IT business expansion. Fixed cost increased by 0.5%, mostly resulting from resource decreases, mainly in R&D following the completion of the migration of our systems to the cloud at the end of last year, and cost containment measures in response to the Middle East geopolitical situation. This was offset by higher unitary personnel costs and transaction processing costs from prior year ramp-up of our migration to the cloud.
Ordinary D&A expense increased by 5.2% as a result of higher amortization of internally developed software to continue to maintain our leadership position. Let's now review the performance of our operating segments, starting with our Air IT Solutions business. September year-to-date, Air IT Solutions revenue increased by 7.7% at constant currency, driven by a 6.3% higher revenue per PB and Amadeus PBs increasing by 1.3%. Revenue per PB growth was primarily due to incremental revenues from our Amadeus Nevio portfolio, upselling, and inflation, PB-linked performance from upselling of our solutions such as Altéa NDC, loyalty, and disruption management, non-transactional revenue expansion in airline professional services and airport IT, and transactional non-PB-linked performance such as digital commerce, Amadeus Ticket Changer, and direct distribution, partly due to an increase in transactions linked to the air traffic disruption caused by the situation in the Middle East, predominantly in Q1.
Our Amadeus PB evolution in the nine-month period was supported by the Altéa migration of All Nippon Airways in Q2, albeit still moderated by the air traffic disruption experienced due to the geopolitical instability in the Middle East region. In the third quarter, our organic PBs returned to growth. Revenue per PB growth slowed down relative to prior quarter, mainly due to timing effects related to airport IT contract execution. In October, our PB growth was slightly softer than Q3, driven by the traffic disruption caused by the incident at the Riyadh Airport. Excluding this impact, our volume performance was broadly in line with Q3. Moving to our business highlights. In Q3, we continued to partner with airlines and airports around the globe. Luis has already mentioned Finnair adopting Nevio NDC. Also, Uganda Airlines will be the first African carrier to deploy Amadeus SkyWORKS.
Additionally, the oneworld airline alliance selected Amadeus Travel Ready to enhance digital check-in across its global network, and eight oneworld members have implemented it. In airport IT, we continued to expand our presence across regions. In Asia Pacific, Queensland Airports Limited at Kansai Airports selected Amadeus to provide biometric-enabled passenger processing solutions. In the Middle East, Queen Alia International Airport will implement seamless bag drop units and kiosks, and Emirates will deploy new biometric boarding gates. In Europe, the U.K. Home Office and U.K. Border Force have started the rollout of a nationwide biometric border. September year-to-date, Hospitality and Other Solutions revenue grew by 9.2% at constant currency. Revenue growth was driven across both hospitality and payments due to new customer implementations and increased transaction volume, albeit impacted by the situation in the Middle East.
Within hospitality, the fastest-growing solutions were customer implementations of our Central Reservations System and hotel distribution, both growing by double digit versus last year. In payments, both our merchant services and our payout services reported strong growth. In the third quarter, revenue growth accelerated, predominantly supported by hotel IT as we are progressing with our ACRS customer implementation and distribution, despite the ongoing headwind from the instability in the Middle East. Into Q4, we are further advancing our ACRS customer implementations, and our distribution business continues to perform well despite the Middle East situation. To further elaborate on what Luis said, we continued our commercial success worldwide. The Ascott Limited, One King West Hotel & Residence, and the Oberoi Sukoonvilas, Wadi Safar signed for advertising solutions. In addition, Strawberry expanded their adoption of travel intelligence solutions, deploying our solutions to all properties across its portfolio.
Abu Dhabi's Department of Culture and Tourism also added travel intelligence alongside its existing use of Amadeus digital advertising capabilities. We also had several customers signing for our distribution services, such as Rent A Car for content distribution. And in payments, American Airlines expanded its use of our airport payment solution, and Volotea adopted Amadeus Xchange Payment Platform, our orchestration platform, which helps to manage payment flows across multiple providers. Voyzant, a global travel technology platform connecting travel sellers with travel suppliers worldwide, will integrate B2B Wallet into its distribution ecosystem. September year-to-date, despite continued contraction of volume, Air Distribution revenue increased by 2.1% at constant currency, driven by revenue per booking growth of 5%, primarily resulting from positive pricing effects from renewals, new agreements, and inflation. Amadeus bookings declined by 2.8%.
Our booking performance up to February was strong, and since March, our booking evolution has been impacted by the Middle East geopolitical situation. This caused a reduction in air traffic as well as a deceleration in new bookings and an increase in booking cancellations globally. In the third quarter, as we predicted, we saw a notable improvement in our booking performance relative to the prior quarter, supported by a gradual normalization in the level of booking cancellations. Revenue returned to growth, driven by healthy revenue per booking growth. In October, our booking evolution was slightly softer than in Q3, driven by the incident at the Riyadh Airport. Excluding this impact, our booking performance improved compared to Q3.
Moving to our business highlights, complementing Luis, we signed NDC content agreements, including with JetBlue, and broadened our airline content offering through the Amadeus Travel Platform with low-cost carriers Wizz Air, Air Arabia, and SalamAir. Also, Saudia Airlines will use Amadeus MetaConnect for accurate distribution of dynamic offers through Google Flights. We also broadened our agreements with travel sellers. CTM selected Amadeus as its preferred travel content provider, and Talma Travel Solutions selected Amadeus as their preferred technology and booking platform. In addition, Etraveli Group, Trip.com, Pacific Arena, Dwidaya Tour, Panorama JTB Tours, Smailing Tour, and XL Travel all expanded their agreements with Amadeus. Let's move on now to review our R&D investment. Our R&D investment amounted to EUR 1,030 million in the first nine months, equivalent to 20% of our revenue.
It decreased by 4.4% versus prior year, following the completion of the migration of our systems to the public cloud at the end of last year. Given the challenging geopolitical situation, we are prioritizing our investments where it matters most for our future growth. We are executing our strategy within our capital allocation framework and financial commitments, and we are investing in the right place to maintain our leadership position whilst preserving spend in critical areas such as cybersecurity, reliability, and stability. Half of our investment was dedicated to the expansion of our portfolio, as well as the evolution of our solutions.
In addition to continuing to evolve our offerings to drive our customer IT transformations, we are infusing AI and developing AI capabilities across our portfolio, and are undertaking strategic developments, including Amadeus Nevio and Navitaire Stratos for airlines, our hospitality platform, NDC technology for airlines and travel sellers, and solutions for airports and payment services. A third was dedicated to customer implementations across our business, such as the Amadeus Central Reservations System for Marriott International, Accor, and The Ascott Limited for ACRS, new Nevio customers and airline portfolio upselling, customers implementing NDC technology, as well as efforts related to bespoke professional services provided to our customers. Finally, the remainder is investments in our IT infrastructure, including AI development and our partnerships, such as with Microsoft, Google, and Adobe, among others, as well as platform developments related to stability, security, data protection, and cloud optimization.
Finally, our free cash flow. We generated EUR 1,036 million of free cash flow, 8.5% ahead of last year, as a result of our EBITDA expansion and lower capital expenditure and tax payments, partially offset by a higher change in working capital outflow and higher interest payments. Capital expenditure decreased by 16.9%, largely reflecting the completion of the migration of our systems to the cloud and cost containment measures as a large proportion of our employees develop solutions for our customers. This represented 9.9% of revenue. Net debt amounted to EUR 2,537 million at the end of September, EUR 395 million higher than at the end of December 2025, fundamentally due to the acquisition of treasury shares under our share repurchase programs, the dividend payment, and the acquisition of SkyLink, partially offset by our free cash flow generation.
Our leverage was one times net debt to EBITDA as at the end of September. We are pleased with our solid performance year-to-date. We maintain our outlook for 2026 despite the current volatility in the macroeconomic environment and expect to deliver at the lower end of the guided range. With this, we have finished the presentation. We can now open the call for any questions that you may have. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have any questions, please press star followed by one on your telephone keypad. Should you wish to cancel your request, please press star followed by two. If you are using a speakerphone, please lift up your handset before pressing any keys. Your first question comes from George Webb from Morgan Stanley. Please go ahead.
Hi, Luis and Carol. I have got a few questions on the distribution business from my side to kick off with, please. Firstly, maybe just on the financials, you called out the cost of revenue growth being a little over 14% in Q2. You mentioned, I think, Carol, a couple of factors around the customer and geographic mix on the distribution side, and then separately, hospitality and payments volumes. On the Air Distribution side of that, could you add a bit of detail around what is driving that, and how are you seeing incentive cost per booking trend versus revenue per booking at the moment?
Second question, you have added JetBlue into that list of NDC content agreements you have, I think it is 80. How many of those airlines are now live with NDC content on the Amadeus Travel Platform today? For the ones which are live, do you have any view on what share of the Amadeus bookings now come through NDC rather than EDIFACT? Just one very last question. Could you give us any kind of clarity or rough idea on what percentage of your total bookings NDC volumes are today? Thank you.
Okay, I can start with those because they tend to be a little bit financial in nature. So let us start with cost of revenue and the cost of revenue evolution. I mean, there is a couple of things I would say on that. Firstly, gross margin evolution is inherently lumpy, yeah? So, by quarter is not really a good representation. We always suggest to focus on year-to-date performance as a more reliable measure of the performance. The second point I would add is that growth was impacted by a very high base last year. So, our cost of revenue last year, same time last year, had a higher gross margin or a lower cost of revenue. So the growth rates are a little bit distorted. Then, fundamentally to how you have phrased the question, you are right.
The composition of our business mix, and that is geographies when it comes to distribution in terms of weighting of different geographies and weighting of different business lines, has a different effect on how that computes into our gross margin. We are comfortable with that cost margin evolution. I think that I would encourage you to consider more the year-to-date perspective rather than the seasonal lumpiness that can happen in quarter, and that is impacted by the different composition of business lines. The second question you asked was around NDC. You are right, we mentioned that we have about 80 NDC contracts. About half of them are live at the moment, and the adoption rate, as you would well know, is really dependent on the adoption of our customers, travel sellers in particular.
The share of our NDC bookings as a result of our bookable inventory is still in the low teens, but it is progressing and growing very actively month-on-month, quarter-on-quarter. You can appreciate that as we onboard more NDC content, it affects the denominator, so it kind of hovers around this teens number for a little while there. We do not disclose the percentage of NDC, percentage of our total booking, well, other than it is in the teens. So, we do not give a specific number on that. So I hope that is answered those questions.
That is great. Thank you, Carol.
Your next question comes from Sven Merkt from Barclays. Please go ahead.
Hi, Luis. Hi, Carol. Thanks for taking my questions. Maybe one on the lower guidance range. Does this also apply to the free cash flow, especially considering that CapEx is also running more towards the lower end what you have guided? Carol, you mentioned that you continued to advance on the ACRS implementation. Can you expand a bit on this and what this means for Q4 and whether the full year guidance of low double-digit growth is still achievable? Thank you.
Okay, Sven, no problems. In terms of our outlook, I think just to remind everybody that our outlook is maintained for all of our metrics, and the outlook that we adjusted was really the Air Distribution revenue growth last time. Your specific questions, Sven, on free cash flow remains the same. Our free cash flow guidance range is still EUR 1.35 billion-EUR 1.45 billion for the full year, and we expect to deliver within that. In terms of ACRS implementations, they are progressing really well. I think we can publicly say that Marriott have now got 3,000 properties online, so that is a significant milestone, and we are progressing to implement that quite well together.
The Accor implementations have just started, and of course, we have Ascott that is still to go. So, we still expect to see some solid growth in our hotel IT segment into Q4. Just to bear in mind that the hospitality segment is not just hotel IT. It includes other areas. We have our hotel distribution business, our travel intelligence business, our media business, and our payments business as well. We are on track to continue to deliver good growth in our hospitality segment into Q4.
Is the right way to think about when you say you expect to deliver the lower end of the guided ranges that this primarily applies to the revenue guidance?
No, that is all of our guidance.
Including the free cash flow?
Well, I mean, it is. I think it is difficult to say. Free cash flow is performing better because of CapEx.
Okay, thank you.
Your next question comes from Michael Briest from UBS. Please go ahead.
Great. Thank you. Good afternoon. Just in terms of the midterm outlook through 2028, the high single-digit organic growth that you are anticipating, do you think you can get back on track for that? Is there something which would cause you to catch up and actually deliver the number you were thinking about back in January, February when you set that target? Luis, how do you address investors' well-known concerns about personal agents executing search and purchase directly on airline websites through APIs or MCP servers? I know Meta's Muse is not doing that. It is using an agent in the background, but it is obviously a concern that many investors have. Why is that direct sort of execution unlikely to happen in your view? Thank you.
I think I have explained why, in my view, direct connects or direct links have many cons. I mean, in terms of complexity, of course, this can happen when you have, and we have explained many times that, as you mentioned, this is not new. We really don't think with AI will be different. We manage a huge amount of transactions, queries, searches. We are in the 3 billion per day of queries, of searches. This is massive, and it requires a lot of knowledge, integration, capabilities to do that in an efficient way. The more you go to direct, the more you add in the complexity.
Of course, you can do that with some specific carriers, but you want to handle in a global spectrum and in a global way, what travel means in terms of combining airlines, combining itineraries, combining options for shopping, and finding that in the right economic way and with the right level of quality and speed in the answer, you need to really have a deep integration and knowledge. So yes, there may be some connectivity, direct connects, but the need of somebody that can do that at a scale, in my view, is really needed. We have always explained, yeah, the cons of maintaining the direct connectivity, because it is not just the connectivity. You can always connect via an API, as you mentioned, but then you need to deal with economics, you need to deal with the flow, with the transaction volumes that are going to increase.
This is our assumption moving forward now with the AI, and all that need to be managed in the proper way to be cost-effective but reliable. So, we feel that we will provide these alternatives, and we will provide these capabilities. There may be some direct connects. I think the direct connects that have happened in the past, as we mentioned, have already gone, many of that, when it is very concentrated.
And when we deal with the rest of the market, which is more complex, it is much more difficult to address that. So, we do not think this is going to accelerate. Again, it is proven in the figures, when you see the figures, and we keep delivering the results based on our belief. And we will continue evolving our technology, evolving the capabilities to be reliable for the carriers and the travel agencies to really work with us.
The next question was on midterm guidance.
Yeah. What do you think? I will start, because you covered the previous, Carol, but you can insist. For the timing, we are not changing the guidance. Again, it is still a bit difficult to really address more the short-term evolution than the medium-term. But in terms of medium-term, we expect the traffic to come back to healthy figures. And as we have delivered this year, we expect, based on this traffic, to be able to really deliver the outlook that we have provided to the market. Of course, as I mentioned to you, we feel more confident with the medium-term than what may happen in the next month due to the volatility that we are having, that hopefully, as the time moves on, we will have much more clarity and normality that we have had during 2026. But Carol, would you like to add something about the medium-term guidance?
No. Well, I think you've answered it. We're holding our midterm guidance. We'll come out again in February with guidance for 2027. But I echo your point. I think the short term remains the most difficult to predict, but the fundamental long term, the fundamentals of the business midterm are very, very strong.
Okay, thank you.
Your next question comes from Charles Brennan from Jefferies. Please go ahead.
Great. Thanks for taking my question. Can I do two as well, please? Firstly, just on the forward-looking guidance, can I just maybe press you for some early observations on 2027? Obviously, you're not in a position of being able to predict market volumes, but the Q4 exit run rate's probably a little bit lower than we would like. You've had capacity cuts across the airlines that presumably depress some trends in the early part of 2027. I think one of your peers came out and said they're not expecting a particularly rapid recovery next year.
You've got to take a view when you're thinking about your investments that you're doing now and the cost base for next year. Should we assume that you're already planning for something a little bit more modest than high single-digit revenue growth? And then separately, can you just touch and give us some context to the security headlines that we've seen, and the leakage of a small number of bookings data, and whether there are any remedial actions that we need to be thinking about for the cost development next year? Thank you.
Let me start a little bit with next year, even if Carol can elaborate a bit more. Look, there are some positives and some negatives. What are the negatives? Yes, you are right. I mean, with the price of oil, of course, some airlines have decided to really cut capacity. But to be honest, I mean, the last days, there has been some decrease in the price. Still, if you look at the capacity for next year, it is positive. But again, this can be reduced or this can be adjusted if things become difficult. So quite difficult still to predict how 2027 may look like.
At the same time, we had a bad 2026 in terms of volume, so there is a natural adjustment or rebound just due to the low base of 2026. So, look, we are putting everything into play. It is true, it is more difficult. We are working with some different scenarios. And of course, we will provide you with our view of 2027 as we present the full-year results. But this is an ongoing work happening today in the company. Carol, would you like to—
The only thing I would add to that as well is we are quite proud of our revenue growth despite a stagnated volume. So, I think there is something in there, Charles, about the resilience of our business, the diversification of our business. Sometimes the disconnect of correlation of volume and revenue disruption and things like that. So, for us to at least reconfirm our midterm guidance indicates that we would have to recover something in the next couple of years to get to that guidance. That is the only thing I would add, that we are very pleased with how our revenue has grown despite the volume volatility.
With regards to the second questions, what we can tell you is that we became aware of a vulnerability that was affecting a travel booking display environment, and certain booking display data was accessible through this vulnerability. I mean, we continue the investigation, but we can confirm that there is no evidence that payment or financial data was accessed, and that any of this vulnerability has been exploited for ransomware purposes. So, we have fixed the vulnerability. We are enhancing our monitoring and detection capabilities, and of course, we are in direct dialogue with our customers and authorities. And we have also made a public announcement on the Amadeus website with more information.
Great. Thank you.
Your next question comes from Laurent Daure from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Good afternoon. I have two as well. The first is for you, Carol, to bounce back on previous question on the free cash flow, and possibly being in the lower end of the range. That would call for pretty soft Q4. So anything specific, maybe on cash tax that were weak in Q3 that may be higher in the fourth quarter? So any further explanation would be very useful. And my second question is on the hospitality business. I understand that most of the three large implementations are going well. My question is more if you compare the positive impact on 2026 versus 2027, shall we expect a stronger tailwind? And would it mean that potentially next year, your hotel business could be materially better than this year? Thank you.
Okay, Laurent, I will take them both. Yes, the free cash flow, we are quite pleased with its performance in Q3, but we do not expect that growth rate to continue into Q4. There is some softening that is happening. This is timing effects. Then I guess you will choose where you want to fit within the guidance range that we have guided. But we do not expect the same level of growth in Q4 as we saw in Q3. Then in terms of hospitality, you are right.
As we increase our implementations and we ramp up, we will see a bigger proportion of growth in hotel IT. We have guided on that as well, in the low double-digit range for this year. We continue with our Marriott implementations that hit full run rate in 2027, beg your pardon, and Accor hit full run rate in 2028. Yes, you can expect to see an improvement in growth within hotel IT.
Great. Thank you.
Your next question comes from Toby Ogg from JPMorgan. Please go ahead.
Yeah. Hi, good afternoon, and thanks for the questions. Just on the October commentary, air bookings and distribution ex the Riyadh Airport incident, the performance improved relative to Q3 on the booking side. But the October commentary for Air IT indicates that it was more in line with Q3. Just wondering why you haven't seen an improvement in PBs ex the Riyadh Airport situation, just given that the bookings had improved quite significantly between Q2 and Q3. Just on the Air IT revenue per PB. I know, Carol, you mentioned some timing effects there on airport IT contract execution that drove the slight slowdown in growth. Could you give a little more detail on that? Were any If so, what drove the delays, and how do you expect that dynamic to evolve going forward? Thank you.
Okay. Well, let's start with the revenue per PB, just to mix it up a little bit. Toby, as we mentioned in Q1, a third of our growth was related to disruption-related services, so that artificially inflated our Q1 performance. Q2 reverted to a more normal rate, which we communicated in the half. Q3 saw a bit of a softening, particularly in the non-transactional revenues. Services and airport IT, which is really dependent on implementation timelines and can therefore be a bit lumpy, again, by nature. So we are seeing some timing delays in airport IT due to the conflict in the Middle East. So, this is the evolution of our revenue per PB.
Then in terms of the difference between bookings and PBs, there's always a difference between when bookings are made and when the flight's actually taken or the passenger actually boards the flight. What we're seeing in October, what we're trying to do is articulate and give more information on actual information that we're seeing in October. As you correctly interpreted, our October bookings, not for the Riyadh impact, would have been greater than Q3, and PBs would have been in line with Q3. But they're obviously comparing to the growth rates that they had in their original position. So, we're not seeing any divergence or any areas of concern as a result of it. It's just a function of what the base is that we're comparing it to.
Very clear. Thank you.
Next question comes from Victor Cheng of Bank of America. Please go ahead.
Hi. Thanks for taking my questions. Two from my side. Thinking about gross margins, you mentioned cost of sales roughly 75% over the year. As I think about hospitality growing faster and then IDEMIA completion next year, among other things, should we expect higher cost of sales over the medium term? As you also develop more AI capabilities, how should we think about the impact of growth in EBIT margins?
Second question relates to Nevio announcements, which I guess has been somewhat a bit slower than some people would have expected, but we do know it will take many, many years for the industry to shift to offer an order. Is the progress actually slower than expected within the industry itself? With AI as well, how does that impact your discussions with airlines where we anecdotally hear some of the airlines doing more work in-house with AI? Thank you.
Okay, let me start with the last one. I mean, look, usually these transformations, and again, that was pushed and led by the airlines themselves, the movement to offer an order, I mean, takes time. If you see the history of NDC, the history of e-ticketing, I mean, it takes time because there are different priorities in the airlines. They have their own timing, so it takes time, definitely. Saying that, I mean, we have already 25% of our PBs contracted. We have a very strong pipeline of discussions with airlines. But yes, it will take years before we have the whole industry migrating and working under the offer and order scheme. That's a reality. However, we feel pleased with the airlines we are working. We are engaging programs with many of them, and hopefully we will keep getting more customers into our platform as we move forward.
In our discussions with the airlines, of course, we talk about AI. AI, of course, provides more capabilities. We do not think this is going to really change the way we deal with airlines. It may help development, yes, to all of us, but in general, this is not the only factor. I mean, having better capabilities does not mean that people are going to develop more in-house or more themselves. That is not what we see today in our discussions with airlines, not at all. It is more how we can leverage AI, how you can help us with that, and of course, for the teams that they have internally, they will also apply that.
AI is an enabler, but then the complexity of the integration, the complexity of everything we do, we will keep doing that. We do not see a change in the conversations or in the agreements that we are having with the airlines today. Of course, AI is part of the discussion, but our solutions are embedding AI capabilities in what we deliver to our customers.
With regards to effectively profitability, is your question. You are right, the composition of mix- customer geographies, all that sort of stuff will impact how gross margins evolve over time. What we prefer to do is actually guide on EBIT margin, which is what we have done this time round, and we have also guided on EPS. We are projecting in accordance with our midterm guidance for EBIT margin expansion, and that will come from the more efficient use of our cost base, our resources, our people, the redeployment of people with productivity gains on pursuing our growth areas, the lapping of the cloud cost migration. All of that sort of stuff links into the equation where we are trying to drive expanded EBIT margins and EPS at low double-digit growth rate in the midterm. That all points to improved profitability.
What about the impact on AI potentially, in terms of compute costs and stuff?
Again, this is what I mentioned before. We are really working on seeing, but again, this is not new. If you see the increase of transactions that are happening into the system in the last 30 years, there is an increase. We have been able to really manage well the cost. Of course, we will need to really see and keep working on that. This is why our engagement with people like NVIDIA makes sense, because we are trying to really see what is the best way to optimize that, assuming that AI will generate new ways of inspiration, of shopping, and of course, with our knowledge, how we can do that in an efficient way. Saying that, we will need to see, okay, how this increase of transactions, if there could be additional costs, if part of this cost, who is going to pay for that?
Because, of course, we are also the IT provider of many carriers. All that will need to be seen. There is a need to optimize the cost, of course, in the way we treat the transactions coming from AI. On top of that, we need to see our contractual commitments, the intention of our customers, and how this is going to evolve. Again, nothing new, because if we think about the last 30 years, this has been a constant evolution in the way we do with shopping and bookings. This is why having a lot of focus and a lot of investment and evolution of our technology is needed. We do not expect AI to impact negatively in our margins, in what you mentioned, which are the costs related to that. That is not our assumption moving forward.
Very clear. Thank you, Luis. Thank you, Carol.
Thank you, Victor.
Your next question comes from Nooshin Nejati from Deutsche Bank. Please go ahead.
Hi. Thanks for taking my question. On CapEx and R&D, as NVIDIA, Anthropic, and agentic travel are becoming increasingly important, should we expect R&D and CapEx intensity to remain around current level, or does scaling AI require a new investment cycle? The second one, as AI is expecting to increase the query volumes, how does that change the economics of distribution? Does higher AI-driven search intensity create incremental revenue for you, or maybe additional infrastructure costs that maybe through this partnership with NVIDIA, it can help to offset it? Thank you.
Well, I can take them, Nooshin. So CapEx and R&D, what we are very proud of is that we have incorporated our AI investments within our portfolio of CapEx spend and within our financial framework. So we continue to guide at CapEx at 10%-12% of revenue, and that incorporates all of the efforts that we are doing within AI. So we are not expecting perhaps what you are seeing with the hyperscalers as a blowout of AI investments within Amadeus.
In terms of distribution, what we are seeing with AI is AI and the agentic world will be a new channel that comes in, but ultimately will still result in a booking, and that is not really changing the commercials at the moment. Who knows what will happen in the future, but at the moment, we are still working as our GDS business is still working as a many-to-many relationship between travel airlines and travel sellers. We do not see changes just purely because of AI changing that at the moment.
Thank you.
Your next question comes from Thomas Poutrieux from BNP Paribas. Please go ahead.
Good afternoon, Luis. Good afternoon, Carol. Thanks for taking the question. A couple of questions for me as well. Maybe coming back to the agentic debate, as I think Michael alluded to, Muse is partnering with Duffel for airline content. What do you think are the main reasons for them choosing to partner with Duffel instead of Amadeus, and how do you think you could still help Muse in the future? That is the first one. Then secondly, on AI-related partnership, as you said, you have announced these partnerships with Anthropic and NVIDIA, which are good to see, but they are not focused on the distribution segment of your business. What timeframe do you have in mind for potential expansion of partnerships with LLMs to distribution, in particular, in the future? Thank you.
I do not follow the last part. It was the question—
On NVIDIA. I can talk on the NVIDIA one.
Okay, look, let me start with Salesforce. As you know, part of our strategy is working with different technology partners. It is not new that we work with Salesforce.
But the question was on Muse.
I am sorry. I thought it was about the partnership with—
Yeah. I can start.
I misunderstood that.
Yeah. The partnership with Muse and Duffel really reinforces our belief that AI assistants will rely on existing platforms that aggregate airline content rather than build the infrastructure themselves. As we understand it, Muse acts as the front end customer entry point, but it still needs to go to something like Duffel, which is the content aggregator, the merchant of record, the responsibility for the servicing, and all that sort of stuff. From that perspective, we do not think that this type of arrangement displaces a GDS. It actually reinforces it, I think, in terms of reinforces our belief that agents are still needing to come through a neutral embedded execution layer to deal with that. That is the Muse question. The other one was on NVIDIA, and what are we doing, and it is not really doing anything in distribution. I beg to differ.
There are three things we are doing with NVIDIA. The first one is flight search optimization. I think Luis mentioned that in his address. We are assessing really what parts of flight search and pricing algorithms can run more effectively on GPUs rather than the traditional CPUs. Can they potentially be more accurate? There is a cost differential, it is faster, things like that. I think this is quite revolutionary in terms of we are rethinking with world-class leaders about how we can do flight search differently.
The second thing that Luis mentioned was we are working with them on potentially travel-specific foundation models. So, not using a generic LLM, as you referenced, but using a more specific one to explore travel and transaction-related foundations specifically for the travel ecosystem rather than a generalist model. Then the third thing that we are doing with NVIDIA is about cloud and infrastructure efficiency.
How do we use accelerated computing to improve the workload that we have? Luis mentioned an impressive level of volume that we do, 3 billion search transactions per day, 150,000 transactions per second, equivalent to the scale of someone like Google. In terms of storage, 200 PB of storage, which is about 40% of Spotify's music catalog. We have lots and lots of data, and we are working with NVIDIA on how we can optimize in these three areas. We are quite excited about this partnership.
Okay, thank you.
Your next question comes from Carlos J. Treviño from Santander. Please go ahead.
Yes, good afternoon. Thanks for taking my question. It is a question a bit based on the short term. You have been highlighting weakness in October because of the incident in Riyadh Airport. This is almost one month ago now. My question is if over the last days, over the last week, you have seen a bit of normalization on this, or do you still think that this could continue to impact your volumes during November and December? Thank you.
I mean, really, it is impossible to talk about days because in days, we had elections in different parts of the world. You have always impact of holidays. Again, we have seen that this had an impact, of course, as the airport recovers normality, which is not the case yet. This may improve. I will say, look, this had an impact in October definitely because we had at the beginning of the month better performance than later in the month. Look, I would say normality is not the right word today, as we are living in a moving conflict. I will say, look, difficult to really tell you specific days.
Fully understood. Thanks, Luis.
There are no further questions at this time. I will now hand the call back over to Luis Maroto for closing remarks.
Thank you very much again for attending and your questions, and we will talk to you with the full-year results at the end of February. We will also provide you, of course, with an updated guidance for 2027. Thank you very much.
The conference call has now ended. Thank you for participating. You may all disconnect your lines.