Royal Caribbean Cruises Ltd. (RCL) Earnings & Analysis

Latest quarter

Royal Caribbean reported Q2 FY2026 revenue of $4.8 billion, up 6.48% from $4.5 billion a year earlier. Revenue matched the consensus of $4.8 billion, with revenue as the consensus counts it reported 0.45% above that benchmark. The company reported adjusted EPS, as the consensus counts it, of $4.21 against consensus adjusted EPS of $3.97, or 6.05% above the consensus.

The filing said revenue growth reflected increased capacity and higher pricing. Passenger ticket revenue rose to $3.3 billion, while onboard and other revenue increased to $1.5 billion; the company attributed the latter increase partly to higher onboard spending per passenger. The filing reported that total cruise operating expenses rose to $2.5 billion, citing capacity growth, crew payroll associated with new ships and higher fuel costs per metric ton.

Royal Caribbean reported diluted EPS of $4.20, down 4.76% from $4.41 a year earlier. Gross margin was 47.3%, versus 49.7%, and operating margin was 27.1%, versus 29.3%. Free cash flow was −$877.0 million, compared with $910.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Jason Liberty said second-quarter net yields rose 1.2%, 100 basis points above the company’s guidance, as closing demand was better than expected and onboard revenue was particularly strong for Caribbean products. He said consumers were booking closer to departure for flexibility and ease, while the company’s book position for 2026 and 2027 was in line with prior years at record pricing. Liberty also said onboard spending and pre-cruise purchases continued to exceed prior years.

Liberty said the prolonged Middle East conflict had modestly weighed on bookings for some near-term deployment, principally in the third quarter. He said the disruption influenced destination preferences and resulted in more modest yield growth for European sailings during the summer, although booking trends improved following the initial disruption. Naftali Holtz said Europe represented 28% of third-quarter capacity and that the conflict had reduced the yield outlook for the remainder of the year.

Holtz said Q2 adjusted EPS of $4.21 came in 33 cents above the midpoint of the company’s guidance, driven by higher revenue, lower costs and favorable items below the line, including joint ventures. He said net cruise costs per APCD excluding fuel rose 3.9% year over year, about 90 basis points better than expected because costs shifted into the second half. The CFO said full-year net cruise costs excluding fuel were expected to be approximately flat, reflecting efficiency work and cost management.

On capital allocation, Holtz said the company ended the quarter with $6.9 billion of liquidity and leverage below three times. He said Royal Caribbean paid $404 million of dividends, repurchased 800,000 shares and had $805 million remaining under its repurchase authorization. He also said the company increased revolving-credit-facility capacity by $250.0 million in July.

Analysts asked Liberty whether competitor promotions in the Caribbean affected pricing. Liberty said the company was in a good position in the Caribbean for the rest of 2026 and continued to see demand into 2027, citing its ships, destinations, loyalty programs and technology. When asked about 2027 yields, Liberty said it was too early to provide a yield outlook. Holtz also said the company was not guiding to the effects of its river product.

Guidance

Royal Caribbean raised its FY2026 adjusted EPS outlook to $17.73–$17.87 from its prior $17.10–$17.50 range. The company now expects FY2026 revenue growth of 9.00%, while its prior outlook had called for roughly double-digit growth. It now expects FY2026 net yield growth of 1.75% to 2.25%, compared with its previous 1.5% to 2.5% range. The company lowered its FY2026 fuel-expense expectation to $1.3 billion from $1.4 billion.