Royal Caribbean’s Best Quarter Ever Still Leaves a Big Question

Key Points

• Royal Caribbean continues to benefit from strong travel demand, premium pricing, and higher onboard spending.
• Management expects earnings growth to continue as passenger volumes rise and expansion plans move forward.
• Investors should weigh the company's strong fundamentals against a stock price that has already gained 250% over five years.

The cruise industry is rising, and Royal Caribbean Cruises NYSE: RCL is sailing along with it.

The Miami-based company, which reported double-digit increases in this year’s first three months, is projecting further growth through the end of this year.

Analysts are positive on the direction of the stock. And the company is investing in the future with new destinations and a giant, new ship.

The combination of strong results and forward confidence is what most growth-oriented investors want to see.

But after a remarkable runup in share price over the past few years, is the timing right to get into the stock, or has the easy money already been made?

Royal Caribbean Delivers Another Strong Quarter

So far this year, the numbers are convincing. Royal Caribbean reported that net income in the first three months came in at $950 million, or $3.48 per diluted share, an increase of nearly 30% year-over-year.

Adjusted earnings were $1 billion, or $3.60 per share, topping analysts’ projections, thanks to strong demand and last-minute bookings coming in better than expected. Costs also ran slightly below forecast. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $1.7 billion from $1.4 billion in the year-ago period.

Overall revenue also saw a notable increase, rising 11% year-over-year, though slightly below analysts’ expectations. For the first quarter, revenue hit $4.45 billion, up from $4 billion a year earlier, and just under the $4.46 billion that analysts had projected.

Importantly, there was little sign that Royal Caribbean was filling its ships through aggressive discounting, which can help it hit revenue targets but erode profit margins in the process. Royal Caribbean’s numbers showed premium pricing holding firm and onboard spending, such as excursions, restaurants, and spa services, adding to the bottom line.

Management Expects Growth to Continue

With the first quarter results, management continued to project growth for the year. 2025 was already impressive as the company reported adjusted net income of $4.3 billion, or earnings per share of $15.64, an increase of over 30% from the year before. Adjusted EBITDA was $7 billion, up 18% for the year.

Growth for this year is already evident. The company said passengers carried for the first quarter rose to 2.5 million, from 2.24 million a year earlier. Passenger cruise days were up to 14.9 million from 13.8 million. And the increase in passengers is expected to continue.

For full-year 2026, the company said it’s now looking at adjusted earnings per share in a range of $17.10 to $17.50 per share, representing likely double-digit growth. On a constant-currency net yield basis—an important measure in the industry to gauge revenue efficiency—the company is expecting growth of 1.5% to 2.5% for the full year.

Expansion Plans Support Long-Term Strategy

Plans for further growth are also moving ahead. Royal Caribbean, already one of the world’s largest cruise vacation brands, has a fleet of 69 ships and is adding to that number. The company recently began work on a seventh Oasis-class ship, the largest class of cruise vessels, signaling confidence that demand for premium ocean travel will remain strong well into the next decade.

In addition, the company is pushing into more branded experiences that passengers can’t find with other cruise lines or by staying at premium, all-inclusive resorts. It is increasingly investing in private island destinations and branded experiences, including a hotel to help service Antarctica.

Analysts Still See More Upside

Wall Street generally likes what it sees. Even with a significant increase in the price of the stock, analysts generally believe the earnings story has more room to run. The stock is up 12% this year and 16% over the past 12 months.

Of the 21 analysts following the stock, the overall consensus rates it a Moderate Buy. Fifteen analysts have tagged it a Buy, five suggest Hold, and one recommends Sell. With an average 12-month price target of $345.53, investors are looking at just over a 10% jump assuming the target is met. Other analysts, however, are tagging the target as high as $425, while the lowest price target is $280.

Valuation Leaves Less Room for Error

That potentially limited one-year upside is precisely the factor that investors should consider. The recovery story, post-pandemic, has already played out. Royal Caribbean shares are up a whopping 250% over the past five years.

The dividend yield sits just below 2%, which means this is not a stock to buy for income. It’s a company whose value depends on earnings growth, brand strength, and continued execution.

Risks for the industry are also ever-present. Cruises are planned for months in advance, which means any demand slowdown can show up in bookings well before it hits earnings. If U.S. consumers pull back on discretionary spending, whether because of job concerns, credit stress, or general uncertainty, premium bookings can compress very quickly.

Current projections have already been scaled back slightly for 2026 compared with the guidance the company gave at the start of the year. Changes and uncertainties in the global outlook, potential currency fluctuations, and evolving booking patterns led to the adjustment.

Growth Story Remains Strong, But Risks Persist

Still, a leading company with revenue growth in the double digits, adjusted earnings per share of $3.60 beating guidance, and a healthy full-year outlook is not easy to ignore. These achievements are not simple for a company already operating from near-record highs.

And for growth investors comfortable with cycles, Royal Caribbean is among the better-run alternatives. The company’s pricing power, branded destination strategy, and continued earnings growth make it one of the more attractive stories in the travel sector.

But the current valuation already reflects the good news. Competition in the consumer discretionary sector from other major cruise lines, including Carnival NYSE: CCL and Norwegian Cruise Line NYSE: NCLH, is always steep. And the future spending power of consumers is forever prone to change. The question for investors is whether this is a stock whose ship has already sailed.