Royal Caribbean’s third quarter results drew a negative market reaction as revenue came in just below Wall Street expectations, despite higher non-GAAP earnings per share. Management attributed the quarter’s performance to strong close-in demand for vacation offerings and ongoing guest satisfaction momentum, with CEO Jason Liberty highlighting “accelerated demand, growing loyalty and all-time high guest satisfaction.” The company pointed to high digital engagement and pre-cruise onboard revenue bookings, but also acknowledged adverse weather and the temporary closure of Labadee as operational challenges impacting results.
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Royal Caribbean (RCL) Q3 CY2025 Highlights:
- Revenue: $5.14 billion vs analyst estimates of $5.16 billion (5.2% year-on-year growth, 0.5% miss)
- Adjusted EPS: $5.75 vs analyst estimates of $5.68 (1.2% beat)
- Adjusted EBITDA: $2.29 billion vs analyst estimates of $2.2 billion (44.6% margin, 4.2% beat)
- Management slightly raised its full-year Adjusted EPS guidance to $15.61 at the midpoint
- Operating Margin: 33.1%, in line with the same quarter last year
- Passenger Cruise Days: 15.36 million, up 570,443 year on year
- Market Capitalization: $75.76 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Royal Caribbean’s Q3 Earnings Call
- Steven Wieczynski (Stifel): Asked if 2026’s capacity and cost outlook align with past growth formulas. CEO Jason Liberty agreed, noting “anemic” cost growth includes structural investments, with margin expansion driven by moderate yield growth and strong demand.
- Robin Farley (UBS): Sought clarification on cost growth and whether “anemic” guidance includes new destination expenses. CFO Naftali Holtz affirmed that “anemic” cost growth covers all planned investments, including the Royal Beach Club, supported by efficiencies from technology.
- Matthew Boss (JPMorgan): Inquired about global demand momentum and the effect of new customer acquisition. Liberty highlighted strong demand across all markets, improved forecasting via AI, and higher conversion from both first-time cruisers and guests switching from competitors.
- Elizabeth Dove (Goldman Sachs): Questioned potential oversupply in the Caribbean. Liberty acknowledged increased capacity in the region, but said Royal Caribbean’s differentiated ships and destinations allow the company to maintain pricing power and attract demand.
- Sharon Zackfia (William Blair): Asked about the revenue mix as owned destinations grow. Brand President Michael Bayley explained that Beach Clubs drive more onboard revenue, while Perfect Day destinations primarily lift ticket prices, indicating a shifting revenue composition as new offerings launch.
Catalysts in Upcoming Quarters
Looking ahead, our analyst team will be monitoring (1) the ramp-up and guest reception of new exclusive destinations like the Royal Beach Club in Nassau, (2) how effectively Royal Caribbean leverages digital engagement and AI to drive both revenue and cost efficiencies, and (3) the impact of increased Caribbean capacity on yields and onboard spending. Progress on regulatory compliance and ongoing cost management will also be essential signposts for sustainable margin growth.
Royal Caribbean currently trades at $277.49, down from $320.28 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).
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