Amadeus: Navigating the Middle East Shock with a Diversified Playbook
Despite IATA's first global traffic decline in 15 years, Amadeus held 5% revenue growth, cut costs, and reaffirmed midterm targets—while prudently widening its 2026 outlook.
AMS.MC · Earnings Call · 2026-07-31
Setting the Stage: Middle East Shock Hits Global Air Traffic
The macro backdrop for Amadeus’s first-half 2026 results couldn’t have been more trying. From March, the geopolitical situation in the Middle East spiraled into a full-blown crisis for air travel. “From March, the geopolitical situation in the Middle East has significantly impacted global traffic with IATA announcing negative growth in April and May, the first time in 15 years, excluding the COVID period.” — Luis Camino, President and CEO · 2026-07-31 IATA’s full-year global air traffic growth assumption was slashed from 4.4% to 1.9% in June. Amadeus’s own bookings turned negative in Q2, with cancellations outpacing new reservations. Yet the company’s leadership remained measured. “Our feeling is that the worst has happened already with all these cancellations, adjustments of routes, adjustment of capacity of the airlines.” — Luis Camino, President and CEO · 2026-07-31 This sentiment set the tone for a quarter defined by resilience rather than despair.Delivering Through Diversification and Discipline
Amadeus’s diversified business proved its worth. Despite the macro drag, group revenue grew 5% at constant currency to €3,335 million, with an adjusted EBIT margin of 29.8%—flat year-on-year. “We are pleased with our performance in half 1, showing strength and resilience supported by a diversified business.” — Caroline Borg, Chief Financial Officer · 2026-07-31 Hospitality & Other Solutions accelerated to 9.2% cc growth, Air IT Solutions delivered 8.7% cc (bolstered by a 7.5% increase in revenue per PB), and even the beleaguered Air Distribution segment managed 1.1% cc growth on the back of 5.1% pricing gains, despite a 3.7% decline in bookings. The company leaned into cost containment measures with intensity. Fixed costs actually declined by 0.1% year-on-year, R&D spend was kept at 20% of revenue, and capital expenditure fell 16.8% as the cloud migration concluded. Free cash flow came in at €472 million, up 1%, and leverage remained at 1x net debt/EBITDA. The completion of the cloud transition also allowed for tight expense control—even as personnel costs rose, headcount is down year-on-year, driven by disciplined resource allocation rather than structural AI displacement (as Caroline Borg clarified). This financial prudence sits alongside continued investment: the company is pushing AI across its portfolio, including the launch of the Amadeus advertising platform and a new partnership as a founding partner of Google’s Universal Commerce Protocol for Login.Strategy Intact: AI, Nevio, and the Long Game
Amadeus’s strategic narrative remains unchanged from prior quarters. The pursuit of becoming a neutral embedded orchestrator in an AI-enabled travel ecosystem is now backed by concrete proof points—such as the new Altea PSS win (an airline group with over 40 million passengers) and continued progress with Nevio, now covering 25% of Altea business. The skeptic’s view on direct connect is as firm as ever. “We don't see an increase in direct connect to be honest.” — Luis Camino, President and CEO · 2025-11-07 This echoes the long-held stance that scale, integration, and operational optimization keep GDS relevant—a message that remains consistent with prior calls. AI is not new to Amadeus—“we have been working with AI for more than 20 years” — Luis Camino, Chief Executive Officer (CEO) · 2026-02-27—but the current wave is being weaponized more broadly. The company’s agentic AI ambition, first flagged in late 2025, is now visibly embedded in product announcements, from hospitality Max capabilities to airline pricing optimization. On the M&A front, the pending IDEMIA acquisition (expected to close in Q2 next year) adds digital identity and biometrics to the fold, complementing Vision-Box’s strong performance, which Luis described as "extremely optimistic." Hospitality, meanwhile, is on track to re-accelerate into the low double-digit range, driven by Marriott (peaking in 2027) and Accor (2028) implementations, alongside payment growth.The Revised Outlook: Prudent, Not Panicked
What actually changed at Amadeus is the outlook range. The company prudently widened its FY2026 guidance, trimming Air Distribution revenue growth to low-to-mid single-digit and group growth to mid-to-high single-digit, with EPS growth of high-single to low-double digits. Crucially, margin stability and free cash flow of €1.35–1.45 billion were maintained.This is a company that, even in the face of an unprecedented macro shock, is executing with discipline—cutting where it can, investing where it must, and keeping its strategic horizon clear. For investors, the short-term pain is real, but the structural story—diversification, cloud completion, AI monetization, and a nearing Nevio inflection—remains as compelling as ever. The July data already show a sequential improvement, and if the geopolitical clouds part, Amadeus looks well placed to revert to its long-term growth algorithm.The revision of our 2026 outlook reflects our current views and expectations, which affect the short term. The fundamentals of our business remain strong, and we continue to maintain our previously communicated midterm outlook.