Arcos Dorados Q2 Earnings Call Highlights

Key Points

• Record quarterly results: Arcos Dorados reported $1.3 billion in Q2 revenue, up more than 14% year over year, while adjusted EBITDA rose over 20% to $126.8 million and EPS doubled. Digital sales grew more than 25% and reached about 66% of total sales.
• Brazil drove profitability: Brazil’s adjusted EBITDA increased 43% and its margin expanded 180 basis points to 14.6%, aided by sales growth, lower input costs, operating leverage, reduced G&A expenses and currency appreciation.
• Expansion and balance-sheet progress: The company opened 16 restaurants in Q2 and 35 in the first half, while reducing net leverage to 1.1 times trailing-12-month adjusted EBITDA and fully repaying its 2029 senior notes.

Arcos Dorados NYSE: ARCO reported record second-quarter revenue, adjusted EBITDA, net income and earnings per share for the period, as digital sales growth, market-share gains and FIFA World Cup promotions helped offset uneven consumer conditions across Latin America.

Total revenue reached $1.3 billion, the company’s highest quarterly revenue level, and increased more than 14% year over year, according to Chief Executive Officer Luis Raganato. Adjusted EBITDA rose more than 20% from the prior-year quarter to $126.8 million, Chief Financial Officer Mariano Tannenbaum said. Earnings per share doubled from a year earlier, supported by operating performance, improved non-operating results and a lower effective tax rate.

Raganato described the quarter’s central theme as “resilience,” saying the company’s operating model continued to perform despite pressure on consumer spending in several markets and difficult comparison periods in others.

Digital channels and World Cup campaign support sales

Digital sales increased more than 25% year over year and represented about 66% of total sales during the quarter. Identified sales, or transactions connected to customer data, exceeded 28% of sales and reached their highest level in the company’s history.

Raganato said loyalty members who actively redeem points visit McDonald’s restaurants five times as often as non-loyalty members, positioning the program as a potential long-term driver of customer lifetime value.

The company used its exclusive FIFA World Cup sponsorship to run regional campaigns before and during the tournament, including Mundialista sandwiches, Panini sticker books, digital offers and other activations. Raganato said the campaigns supported traffic, premium sandwich sales and brand metrics, particularly in Argentina, Brazil, Colombia and Mexico.

Based on guest traffic, McDonald’s restaurants across Arcos Dorados’ footprint gained about half a percentage point of market share compared with the second quarter of 2025, management said. The company said its guest traffic remained more than twice that of its nearest competitors.

Brazil leads profitability improvement

Brazil was the company’s strongest division during the quarter. Comparable sales continued a rebound that began late in the first quarter, while U.S.-dollar sales increased more than 25%, aided by comparable sales growth, new restaurant openings and currency appreciation.

Brazil’s adjusted EBITDA margin expanded 180 basis points to 14.6%, and adjusted EBITDA increased $23 million, or 43%, according to Tannenbaum. He attributed the improvement to lower food and paper costs, sales growth above inflation, operating leverage, lower G&A expenses following a restructuring completed late last year, and a stronger Brazilian real.

Management said lower costs were not limited to beef, which had pressured results in 2025. Tannenbaum cited improvements in dairy and potato costs, as well as benefits from revenue-management efforts. He said the company remains focused on growing sales above inflation while maintaining a balance between affordability and profitability.

Raganato said Brazil’s recovery was supported by the company’s Economia value platform, targeted digital campaigns and World Cup marketing. The company manages prices by channel, location and customer segment, he said, using targeted promotions as part of a broader revenue-management strategy.

While consumer disposable income in Brazil remains constrained, management said third-party data indicate that quick-service restaurant volumes have begun to turn positive. Raganato said early third-quarter trends were positive and in line with the company’s expectations.

Mixed conditions in NOLAD and SLAD

In the NOLAD division, comparable sales faced a demanding prior-year comparison that included a full Holy Week period and a successful Minecraft promotion. Consumer spending also remained pressured across much of the division. Still, the company generated modest guest-volume growth and maintained positive comparable traffic, Raganato said.

In Mexico, management said economic uncertainty pressured household disposable income, but the food-service industry remained resilient. Arcos Dorados said it outperformed both the broader food-service industry and the quick-service restaurant segment, delivering positive comparable volumes and gaining market share. The World Cup sponsorship, the McCafé Para Todos value platform and loyalty-program growth helped support results, according to Raganato.

NOLAD’s margin declined 110 basis points excluding income from a restaurant transaction in the prior-year quarter, primarily because lower operating leverage outweighed improved food and paper costs, Tannenbaum said. Delivery and Dessert Centers were the division’s strongest sales channels.

SLAD posted solid sales growth, supported by traffic gains in most markets and inflation-driven comparable sales gains in Argentina and Venezuela. Adjusted EBITDA increased about $3 million, or 6.6%, while the division’s margin remained near 10%, Tannenbaum said. He cited G&A improvements and favorable food and paper trends in Chile, Colombia and Uruguay, partly offset by food and paper pressure in Argentina.

Argentina’s consumer environment was more challenging than expected, with overall retail sales declining 3%, Raganato said. Arcos Dorados nevertheless reported positive sales growth and nearly flat guest counts. Its campaign featuring signature burgers created with prominent Argentine national-team players helped drive record sales in May, as well as all-time highs in market share and brand preference, he said.

Openings, capital spending and balance sheet

Arcos Dorados opened 16 restaurants during the second quarter, bringing first-half openings to 35. The company deployed $49.1 million in capital expenditures during the quarter and nearly $86 million during the first half, including development, restaurant modernization, maintenance and other spending.

• More than 65% of first-half openings were company-operated restaurants, compared with about 60% in the first half of 2025.
• Management said average cost reductions per new restaurant were between 15% and 20%, while emphasizing that its broader objective is to improve returns on investment.
• More than 77% of the restaurant portfolio has been modernized.

The company completed its second liability-management transaction of 2026 in July and has fully repaid its 2029 senior notes, Tannenbaum said. Net leverage improved to 1.1 times trailing-12-month adjusted EBITDA at quarter-end.

Raganato also addressed earthquakes in Venezuela and Colombia. In Venezuela, the company converted one restaurant into a medical center and another into a shelter following the late-June earthquake. Other than those two locations, all McDonald’s restaurants in Venezuela were open, he said. The company was continuing to assess the impact of a subsequent earthquake in Colombia.

About Arcos Dorados (NYSE:ARCO)

Arcos Dorados Holdings Inc is the largest independent McDonald's franchisee in the world, operating under an exclusive license agreement with McDonald's Corporation. The company develops, owns and operates quick-service restaurants, offering the full McDonald's menu, including hamburgers, chicken sandwiches, salads, sides, desserts and McCafé beverages. In addition to restaurant operations, Arcos Dorados manages supply chain logistics, property development, training and support services for its franchise network.

Headquartered in Montevideo, Uruguay, Arcos Dorados serves 20 markets across Latin America and the Caribbean, including Argentina, Brazil, Chile, Colombia, Mexico, Puerto Rico and Uruguay.

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