Sabre

Sabre's second-quarter revenue increased 4%, with distribution up 6% and airline IT down 4%. Adjusted EBITDA margins expanded 272 basis points to 21.2%, helped by the timing of its technology investments.

Why it matters: Investments during 2020-25 have revitalized the technology platform to a cloud- and artificial intelligence-based infrastructure, helping drive air bookings growth of 1%, above the 4% decrease at narrow-moat peer Amadeus. We see air volumes accelerating to 5% in 2027, aided by economic growth. While some of the air booking outperformance was due to Sabre's mix of corporate travel (45% of volumes versus 20% for the industry) seeing stronger industry demand than leisure, it is also attributable to share gains from low-cost carrier partner adoption and its modernized technology. Air booking results are even more impressive considering the Iran war was about a 4-percentage-point headwind. Meanwhile, 35% of air bookings attached a hotel, where volumes rose 8%. We expect easing geopolitical tensions and enduring hotel demand, which buoys our 2027 prognosis.

The bottom line: We don't plan to change our $2.10 fair value estimate for no-moat Sabre materially. While Sabre's competitive positioning has improved, we see shares as fairly valued and remaining volatile given the company's elevated debt/adjusted EBITDA that we estimate at 7 times in 2026. Sabre continues to integrate its network capabilities into industry AI frameworks, supporting our view that its platform will serve as the foundational layer that will be used by agentic AI. Our valuation incorporates 3% and 7% average annual sales growth during 2026-35 for the company's marketplace and airline technology businesses, respectively. It assumes Sabre maintains its number-two revenue share behind Amadeus.

After reviewing second-quarter results, we have maintained our fair value estimate of $2.10 per share. Our fair value estimate implies a 2027 enterprise value/EBITDA multiple of 8 times.

Sabre's second-quarter revenue increased 4%, with distribution up 6% and airline IT down 4%. Adjusted EBITDA margins expanded 272 basis points to 21.2% helped by the timing of its technology investments.

We forecast 3% and 7% average annual 2026-30 revenue growth for the marketplace and airline technology solutions segments, respectively. For the marketplace business, our forward 10-year network sales forecast is derived from revenue per booking that reaches $6.25 in 2035, aided by an enduring mix of more cross-border travel and customers adding products. Our 2026-30 airline technology solutions sales forecast is derived from airline revenue per passenger boarded of $1.03 in 2035.

The company has completed its multiyear transformation to the cloud, which has lowered costs to the tune of $150 million, and innovated products, such as its new open-source retail platforms like SabreMosiac, that we think can drive incremental ancillary revenue for the company. We see the completion of incremental investments, cost-reduction initiatives, and still-recovering global distribution system travel demand supporting 14% average operating margins during 2026-30.

While we think Sabre's marketplace network is the foundational layer that will be used by agentic AI, we downgraded the company's moat to no moat from narrow due to its highly leveraged balance sheet that presents hurdles to adequately investing in an ever-changing landscape. Specifically, Sabre ended 2025 with $4.1 billion in debt, and we project just a 1.1 times EBIT/interest expense on average during 2026-30. This places the company in a tight position to invest more than $900 million in average annual technology costs we estimate over the next 10 years. Also, Sabre's ROIC including goodwill is estimated to average 12% during 2026-30, a thin margin over our 8% weighted average cost of capital.

Irrespective of Sabre's financial profile, we think the company holds characteristics of a network edge, driven by challenges in replicating its aggregation, cost, and customer data position, and the value offered to its suppliers, agents, and travelers.

Over decades, Sabre and Amadeus’ contractual rights to aggregate, normalize, and display flight content using their proprietary rules and logic infrastructures have processed billions of complex transactions (14,000 each second on Sabre’s platform) across complex connections with hundreds of partners and their specific network agreements (layer positioning and workflow complexity) with response times in the nanoseconds versus several seconds for airline supplier websites (switching costs), while providing servicing (switching costs) that are hard for AI bots to replicate. Overall, Sabre has accumulated 50 petabytes of data (about enough to store the written works of mankind in all languages) it can leverage into an AI-generated customized user experience. Sabre says its proprietary logic can’t be scrapped or reverse-engineered by AI engines, which would need to build such capabilities independently.

Also, Sabre is working with AI engines and partnering with players. In 2020, Sabre signed a 10-year partnership with Google to develop customized product offerings that leverage its travel expertise with Google’s cloud and AI/LLM capabilities. Recently, it has developed API and MCP server connections that AI agents can use to securely connect to the content on its platform, allowing them to utilize the speed and complexity expertise of its travel network. Also, Sabre has partnered with players like MindTrip and PayPal to launch an agentic travel app connected to its vast content and service capabilities.

Sabre’s platform costs airline operators just a low-single-digit percentage of their total ticket, which is comparable with the cost of a direct booking occurring on a carrier website after assuming marketing costs. Thus, it could be hard for a new competitor to beat. This low cost comes despite the platform’s global reach of travelers that can represent up to half of an airline operator’s total bookings. Low-cost carriers initially derived all their bookings from direct channels, but as the routes of these airlines expanded globally over the past several years, they have turned to Sabre’s distribution channel to reach a global corporate traveler.

Travel agents and travelers also benefit from Sabre’s platform. First, Sabre offers the world’s airline content on one platform for agencies to use versus having to do multiple searches across individual carrier websites or call centers. Further, agents also benefit from having Sabre’s platform integrated into their back-office systems, which makes for a more efficient process and allows for technology updates as innovation improves. Finally, we estimate agents already get a 50%-75% cut of an airline booking fee paid to them for using Sabre’s or Amadeus’ platform, which could be hard for others to surpass.

Both Sabre and Amadeus also offer cloud-based airline technology solutions with AI integration (20% of Sabre’s 2025 revenue) to suppliers. In our view, the real-time travel data insights and processing speeds of Sabre and Amadeus’ distribution platforms provide their modern retail IT solutions an advantage to offer travelers customized content. Also, the processing scale of these companies allows their IT solution customers sufficient capacity during times of higher volume. That said, AI could, in theory, vibe code these functions, although perhaps not in a secure fashion.

Videoconferencing is displacing some business travel. Here, we expect air volume on Sabre's GDS platform will recover to around the low 70s of 2019's level by the end of this decade. Then, our average total air booking industry forecast for 2031-34 of 2%-3% growth is derived from leisure air booking volumes growing by midsingle digits and corporate travel remaining flat. This compares with the 2.8% average growth rate for corporate air travel during 2011-19, according to Euromonitor.

The company's GDS marketplace hosts content from all airlines and is used by many travel agents, resulting in a large industry share. Replicating this would involve meaningful time and costs.

The marketplace is supported by Sabre's platform revitalization with next-generation cloud and AI technology, which drives innovation, reliability, and cost efficiencies.

The business model is predominantly driven by transaction volume and not pricing, leading to less cyclical volatility.

Slowing economic growth could present a headwind to demand for business and leisure travel booked on Sabre's platform.

Long-term incentive costs could increase for Sabre's network business, as online travel agents represent an increasing mix of GDS bookings, and they are lower-margin for the company.

Sabre is exposed to corporate travel, where volume could be hampered by some enduring use of video conferencing displacing internal and other meetings.