Royal Caribbean (RCL) - Q3 2025 Earnings Call
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Call Details
Call Title: Royal Caribbean Q3 2025 Earnings Call
Date held: October 28, 2025
Management team members present:
Jason Liberty, President and Chief Executive Officer
Naftali Holtz, Chief Financial Officer
Michael Bailey, President and CEO of the Royal Caribbean Brands
Blake Banyer, Vice President of Investor Relations
Call Summary
Financial Performance
Royal Caribbean reported adjusted earnings per share of $5.75 for Q3 2025, representing an 11% year-over-year increase. This growth was attributed to increased close-in demand for vacation offerings alongside lower costs.
Net yield increased by 2.4% year-over-year, driven by strong demand across key itineraries. The company emphasizes that yield growth is part of its strategy to ensure value for customers.
The total revenue is projected to rise by approximately 13% year-over-year for Q4 2025, with a capacity increase of 10% during the same period.
Adjusted EBITDA margin stood at 44.6%, displaying a 60 basis points improvement compared to last year, indicating effective cost management alongside revenue generation efforts.
Revenue from onboard activities saw a record share of bookings made pre-cruise, indicating strong engagement through digital channels and enhancing overall profitability.
The company anticipates full-year net yield growth of 3.5% to 4%, which is an improvement from initial expectations outlined in January, showcasing resilient demand for its cruise offerings.
Royal Caribbean aims for nearly $6 billion in operating cash flow this year, describing it as a significant step change in financial performance associated with its growth strategy.
Guidance
For Q4 2025, the company expects adjusted earnings per share to range between $2.74 to $2.79. They anticipate slightly lower yield growth due to factors such as the timing of new ship deliveries impacting revenues.
Operating costs excluding fuel are expected to decline by around 6.6% to 6.1% in Q4, reflecting continued focus on cost control.
In terms of annual guidance, net cruise costs, excluding fuel, are estimated to decline by approximately 0.1% for the full year, indicating efficient operations amid growth ambitions.
Looking ahead to 2026, Royal Caribbean targets an earnings per share figure starting with a $17 handle, anticipating a 6% capacity growth and moderate yield increments, while maintaining cost disciplines.
Naftali Holtz, CFO, indicated a strong commitment to capital management to maintain investment-grade financial metrics while returning capital to shareholders with increased dividends.
Capital Allocation
The company successfully issued $1.5 billion of investment-grade unsecured notes, which were utilized to finance the delivery of the Celebrity Excel at lower costs compared to prior commitments.
The board approved a 30% increase in the quarterly dividend to $1 per share, demonstrating a commitment to shareholder returns alongside growth prospects.
Share repurchases included about 1.3 million shares, reflecting company confidence in its financial standing and commitment to return capital.
The company reported cash on hand of $6.8 billion and adjusted leverage below three times, which provides flexibility for strategic investments while returning capital to shareholders.
Macro & Demand Trends
Jason Liberty emphasized that consumers are maintaining budgets for experiences, with three-quarters of respondents intending to spend the same or more on vacations in the upcoming year.
Despite normalization from prior record-breaking demand, cruising and leisure travel continue to thrive compared to the broader travel market.
Responses from independent research indicate that demand sentiment for travel and leisure remains robust, and the company is well-positioned to exploit this momentum with unique offerings.
The business is benefitting from a growing loyalty base, with the introduction of new products receiving extraordinary responses, like the sold-out Celebrity River itineraries.
Book load factors for 2025 and 2026 show strong positioning at record rates, and demand from key geographical markets remains relatively high.
The expansion into the river cruise market represents a significant opportunity, attracting new customers who previously may not have considered river cruising, thus broadening its revenue base.
Competition
Jason Liberty noted the ongoing strong competitive positioning within the cruise industry, emphasizing that Royal Caribbean’s differentiated assets and brand loyalty allow it to effectively manage supply increases in the market.
The launch of innovative products and exclusive destinations underpin the company’s strategy to attract both loyal customers and new travelers, building on distinct competitive advantages.
The company views its ability to offer a broader vacation ecosystem, including river cruises, as a vital aspect of enhancing market share and competing successfully.
AI Trends
Royal Caribbean has integrated advanced technology and AI into its operations to enhance customer experience and operational efficiencies.
The digital app introduced back in 2017 has evolved significantly, now driving engagement and significantly improving onboard revenue bookings pre-cruise.
Liberty shared that AI tools are progressively refining their customer targeting and forecasting capabilities, leading to better engagement and satisfaction levels.
Product Updates
Recent announcements include the unveiling of the Royal Beach Club in Santorini, which enhances the portfolio of exclusive land-based destinations aimed at delivering comprehensive experiences beyond the cruise itself.
The introduction of Celebrity River has shown promising demand from repeat guests and new customers, indicating potential shifts in consumer preferences within the company’s offerings.
New ships, particularly the Star of the Seas and Celebrity Excel, continue to exceed expectations, supporting the company’s strategic capacity expansion plan and aiding in revenue growth.
NOTABLE QUOTES
“This has been another great quarter for us. We continue to see strong momentum across our business, powered by accelerated demand.” – Jason Liberty
“Our commercial flywheel continues to drive sustained growth in guest trust and our ability to deliver the best vacation experiences responsibly.” – Jason Liberty
“We expect to increase our exclusive land-based destination portfolio from two to eight by 2028.” – Jason Liberty
“Demand for experiences and leisure travel remains intact.” – Jason Liberty
“Cruising offers superior value for money versus alternative options.” – Jason Liberty
“E-commerce visits and conversion rates both increased double digits versus last year.” – Naftali Holtz
“We anticipate earnings in 2026 to have a $17 handle on it.” – Naftali Holtz
“We remain focused on both growing the company through strategic investments and returning capital to shareholders.” – Naftali Holtz
“Our liquidity position allows us to fund our growth ambitions while returning capital to shareholders.” – Naftali Holtz
“The majority of booked guests are Royal Caribbean Group loyalty members without prior river cruise experiences.” – Jason Liberty
Q&A SUMMARY
Q: Steve Wojcicki (Steeple), [inquired about the progression of the 2026 EPS, including capacity growth, yield growth, and cost control expectations for the year.]
A: Jason Liberty affirmed, “It is early in our planning process,” highlighting that while the company expects moderate yield growth, they remain focused on maintaining strong cost control strategies amidst new destination openings and technology investments.
Q: Robin Farley (UBS), [asked for clarification on the meaning of anemic net cruise cost growth and if that included impacts from the new destinations.]
A: Naftali Holtz clarified that the “anemic” cost growth incorporates costs related to new initiatives, emphasizing that the company is working on improving efficiencies through innovative technologies and AI.
Q: Matthew Boss (JP Morgan), [asked about the progression of global demand through Q3 and any changes in October.]
A: Jason Liberty responded that the demand environment remains strong, indicating that their “arrangement with AI and historical forecasting capabilities” has improved, enabling better prediction models and stronger customer acquisition rates.
Q: Lizzie Dove (Goldman Sachs), [inquired about the potential oversupply in the Caribbean and how it might impact the business.]
A: Jason Liberty acknowledged the increase in supply but mentioned, “We’re able to manage that demand and see our guests pay up to experience our delivery,” indicating confidence in the company’s positioning despite competition.
Q: James Hardiman (Citi), [asked about consumer willingness to pay amid a weaker overall economic environment.]
A: Jason Liberty maintained, “The consumer or our guest is strong,” indicating continued willingness to spend on vacations, though he noted potential moderations in rates compared to previous exceptional years.
Q: Ben Chaiken (Mizuho), [inquired about the effective capital allocation for the river cruise opportunity and its impact on Royal Caribbean’s positioning.]
A: Jason Liberty replied, highlighting, “We do expect to be a substantial vacation player in the river business,” indicating concerted efforts on aligning product quality and market expansion.
Q: Connor Cunningham (Melius Research), [asked about opportunities tied to shorter itineraries and how that influences earnings dynamics for 2026.]
A: Jason Liberty responded that while the dynamics of shorter itineraries influence customer booking patterns, “the behavior in our other products remains strong,” indicating a diverse strategy for revenue optimization.
Q: Sharon Zakvia (William Blair), [sought clarification on revenue composition shifts as new destinations ramp up.]
A: Michael Bailey noted that the upcoming beach clubs are expected to push more revenue into onboard activities compared to ticket sales, enhancing overall profitability while maintaining high guest experience standards.
Q: Vincey Peel (Cleveland Research), [asked about the yield growth breakdown between first and second half of 2025.]
A: Naftali Holtz suggested looking at year-to-date figures for a clearer picture, indicating that complexities arise from new ship deliveries impacting revenue fluctuations.
Q: Andrew DeDora (Bank of America), [asked about financing preferences for ship acquisitions.]
A: Naftali Holtz confirmed that the company is leveraging the market to secure financing that benefits from lower overall costs while maintaining strategic partnerships for future ship deliveries.
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