An 'ultimate backbreaker' sparked a record plunge in Airbnb stock after earnings

• Airbnb stock fell a record amount after the company reported earnings after the bell on Tuesday.
• The company noted US demand is slowing and that marketing costs are expected to rise.

Airbnb stock dropped by the most on record on Wednesday as the company reported second-quarter earnings that revealed it is seeing a slowdown in demand from travelers in the US.

The stock dropped as much as 14% Wednesday morning. It pared some of that loss and was trading 13% lower at $113.49 at 12:45 pm.m ET.

Airbnb noted that consumers aren't booking as many stays on the site, and also said marketing costs will rise as it looks to invest in new markets.

Analysts were downbeat on the results, with RBC Capital Markets noting concerns about the marketing costs in particular.

"Kicking up marketing spend at a moment when demand is softening tends to be the ultimate backbreaker for an internet stock in our experience," analysts from RBC wrote in a Wednesday note.

In a letter to shareholders, Airbnb's executives said they're "seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests," joining other big companies to that have warned consumer spending is drying up, including McDonalds and Amazon.

They added that Airbnb's marketing costs will likely outpace revenue growth in the next quarter.

"Marketing expense is expected to grow faster than revenue on a year-over-year basis in Q3 2024, partially due to timing and investments in new growth markets," they wrote.

Analysts from Bank of America said Airbnb remains the top competitor in alternative accommodation, but growth in the sector is slowing as the post-pandemic travel surge weakens. There's a risk that competition will further drive up Airbnb's marketing spend, they added.

"We continue to favor gig economy over Online travel as reopening benefits fade," the analysts wrote.

Airbnb's revenue for the most recent quarter increased 11% year-over-year, but earnings missed estimates. Net income fell 15%, and earnings per share came in at $0.86 cents, falling short of analyst expectations of $0.92 cents, according to LSEG data.

The earnings miss comes as other companies have also warned of slowing consumer spending in recent earnings reports. McDonald's saw its global comparable sales fall 1% year-over-year last quarter and is now focusing on its $5 value meals to get customers back in the door.

And Brian Olsavsky, Amazon's chief financial officer, told reporters last week that consumers "are continuing to be cautious with their spending," and that people are on the hunt for deals.