Despite beating analysts’ expectations with another quarter of record revenue, the travel site Ctrip.com International has hit some major turbulence.

Shares of Asia’s largest travel service provider recently took a dive due to a net loss of $165 million (RMB 1.1 billion) during the quarter, compared to a net profit of  $204 million (RMB 1.4 billion) in Q3 of 2017 and RMB 2.4 billion in Q2 2018. Shares were down nearly 17 percent from the opening bell as of 12:30 p.m. (Update: the stock fell $6.55 to close at $27.89 on November 8.)

Shares in Ctrip have taken a significant hit on the Nasdaq since the opening bell

Yet in its third-quarter earnings release, Ctrip.com reported that revenue increased 15 percent from the previous year to $1.4 billion (RMB 9.4 billion). That revenue was likely boosted by early reservations made for the Mid-Autumn Festival at the end of September and the weeklong National Day holiday in October, which saw a record number of travelers.

The company also noted that its international air business nearly tripled during the quarter, and that number excluded bookings through Ctrip’s subsidiary Skyscanner, which saw a 250 percent growth in revenue in Q3.

The report also cited a hotel booking revenue increase of 21 percent year-on-year to $528 million (RMB 3.6 billion) in Q3, while transportation ticketing revenue grew 6 percent during that period to $527 million (RMB 3.6 billion). The company attributed the increase in hotel reservation revenue to an increased volume of reservations.

The company’s stock dive may be partly due to their gross margin, which slipped again in Q3 to 79 percent, which is down from 84 percent in Q3 2017 and 80 percent in Q2 2018. The company also increased product development expenses by 14 percent year-on-year and 11 percent quarter-on-quarter to $363 million (RMB 2.5 billion). Sales and marketing expenses also increased 14 percent from the previous year to $394 million (RMB 2.7 billion).

The company’s gross margin has slipped since last year, which has affected profit

And curiously, while some industry analysts have claimed a slowdown in Chinese tour group travel (thanks to the popularity growth of independent travel), Ctrip reported that its package tour sales increased 28 percent from the previous year to $201 million (RMB 1.4 billion). That growth is perhaps partly due to the company’s sales of self-guided tour packages for more adventurous Chinese tourists.

Ctrip has continued to expand its presence in lower-tier cities in China as the “total gross merchandise value of the offline stores grew over 80 percent year-on-year.”

CEO Jane Sun noted that between Ctrip.com and Qunar, the company has about 130 million customers who spend an average of RMB 5,000 per year. She expects the number of customers to grow as China’s middle class expands over the next five to ten years and pointed out that the company’s customers are getting younger (70 percent under the age of 35 and nearly 50 percent under 29).

Therefore, despite a disappointing quarter, the company predicted that Q4 revenue would grow another 15-20 percent year-on-year.

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Corporate Earnings