Royal Caribbean Cruises Q1 Earnings Call Highlights

Key Points

• Q1 beat and strong demand: Revenue rose ~11% year‑over‑year and adjusted EPS was $3.60 (about 33% above last year and $0.37 above the midpoint of guidance), driven by a "record wave season," elevated onboard spending, and $1.1 billion of capital returned (including $836 million of share repurchases).
• Geopolitical disruption and fuel headwind: Two ships were repositioned after Middle East disruptions and Mediterranean and West Coast Mexico demand moderated, while higher spot fuel is expected to cost roughly $0.62–$0.74 per share in 2026 (with ~59% of forward consumption hedged below market rates).
• Outlook and balance-sheet strength: Management expects 2026 revenue to grow roughly double‑digits, Net Yield up 1.5%–2.5% and adjusted EPS of $17.10–$17.50; the company finished the quarter with $6.9 billion of liquidity, leverage below 3x, and about $1 billion of buyback authorization remaining.

Royal Caribbean Cruises NYSE: RCL executives told investors the company delivered a first quarter that exceeded internal expectations, supported by what management called a “record wave season,” strong onboard spending, and continued demand for its portfolio of vacation brands.

Chairman and CEO Jason Liberty said revenue increased 11% year-over-year, while earnings came in “11% higher than guidance.” He also said the company returned $1.1 billion of capital through dividends and share repurchases during the quarter. “The consumer backdrop remains healthy and demand for our vacation experiences continue to be strong,” Liberty said.

First-quarter performance and consumer demand

Chief Financial Officer Naftali Holtz reported adjusted earnings per share of $3.60, which he said was $0.37 above the midpoint of guidance and 33% higher than the prior year. Holtz attributed the outperformance to “better than expected revenue, lower costs, and better performance from our joint ventures.”

Operationally, Holtz said the company delivered 12% more vacations than last year and noted a shift in mix toward younger travelers. “We observed an increase in the number of young guests, mainly millennials and younger demographics, as well as an increase in repeat guests compared to the previous year,” he said.

Royal Caribbean finished the quarter with Net Yield growth of 2%, which Holtz said was above the high end of the company’s guidance range. He also reported adjusted EBITDA of about $1.7 billion, representing an EBITDA margin of 38%—an increase of more than 300 basis points year-over-year—while operating cash flow rose 13% to $1.8 billion.

Liberty emphasized management’s read on consumer behavior, saying the company tracks demand through “millions of daily interactions” and more than 170,000 guests onboard each day. He said consumers remain engaged and continue to prioritize travel, adding that onboard spending remains “well above prior years.”

Geopolitical impacts: Middle East, Mediterranean, and West Coast Mexico

Liberty addressed recent geopolitical developments and said two of the company’s three ships sailing in the Middle East were directly impacted by the conflict and temporarily paused operations. He said the ships have since “safely repositioned out of the area” and are heading to the Mediterranean to welcome guests beginning in mid-May.

The most notable financial impact, executives said, has been fuel. Liberty said that at current spot levels, fuel prices are expected to increase costs by roughly $0.62 per share this year. Holtz put expected 2026 fuel expense at $1.35 billion and said the company’s “forward consumption for the remainder of 2026 is 59% hedged at significantly below market rates,” while reiterating that guidance is based on spot rates.

Management also described a short-term moderation in demand trends tied to Europe. Liberty said there was a “short-term moderation in demand trends for 2026 for high-yielding Mediterranean sailings,” while Holtz said Mediterranean bookings, which started the year “on an exceptionally strong trajectory,” moderated late in the first quarter following geopolitical developments and were influenced by increased air travel costs, airline capacity reductions, and flight disruptions.

During the Q&A, Liberty said he would not characterize the change as “damage,” noting that the wave period was a record. He also said airfare to Europe spiked “more than 40%” before moderating to around 15% and described the recent booking environment as improved. “We have turned the corner,” Liberty said, adding there is “very little inventory left” to sell for the second and third quarters. Holtz added that the company saw “moderation” rather than a “dip,” and that bookings “were still good” throughout.

Elsewhere, Liberty said the company experienced some disruption in demand for select West Coast Mexico itineraries due to travel disruption concerns. Holtz said West Coast Mexico itineraries, representing 5% of capacity, also moderated during the quarter due to geopolitical-related considerations specific to the region.

Guidance details and quarterly cadence

Executives provided an updated outlook for 2026. Liberty said revenue is expected to grow “roughly double-digits” year-over-year and Net Yield is expected to increase 1.5% to 2.5%. He said cash adjusted earnings per share is expected to grow double digits and land between $17.10 and $17.50, which includes a $0.74 per share fuel headwind and lower income from joint ventures. Holtz similarly cited adjusted earnings per share guidance of $17.10 to $17.50, including a $0.62 headwind from fuel rates for the remainder of the year and a $0.12 headwind from a lower expected earnings contribution from TUI Cruises.

Holtz said capacity is expected to grow 6.7% for the year, with first and third quarters growing faster than the second and fourth, and reiterated Net Yield growth of 1.5% to 2.5%. Net Cruise Costs excluding fuel are expected to be approximately flat or 50 basis points better than prior guidance, reflecting efficiency improvements and cost management.

For the second quarter, Holtz guided to capacity growth of 4.9% year-over-year and Net Yields up about 0.2% in constant currency. He said year-over-year comparison items—including increased dry dock days and geopolitical impacts—create “almost 200 basis point headwind” to yields in the quarter, with a similar impact expected in the third quarter. Net Cruise Costs excluding fuel are expected to rise 4.6% to 5.1% in constant currency, with “almost 400 basis points” of cost headwinds tied to dry docks, comparisons, and increased crew travel expenses due to air disruptions and reduced capacity. Adjusted EPS for the second quarter is expected to be $3.83 to $3.93.

Asked about yield cadence for the remainder of the year, Liberty described 2026 as a “smiley face” year, with the Mediterranean and West Coast Mexico affecting the middle quarters more than the fourth quarter. He said the company’s fourth-quarter book position is “very strong” and that comparisons are easier in the period.

Technology, loyalty, and destination investments

Liberty highlighted technology and AI as an operational and commercial advantage, saying digital booking penetration has more than doubled since 2019, driven largely by the company’s app. He said monthly active app users are five times 2019 levels and adoption exceeds 90%. Liberty also said more than half of onboard revenue is booked before guests board, with most of those purchases made digitally.

On loyalty, Liberty said cross-brand initiatives—including a Status Match program introduced in 2024—have increased cross-brand bookings “significantly.” He also discussed the launch of Royal ONE co-branded credit cards and said cardholder accounts have more than doubled since 2019, with management seeing the potential to double again.

Executives also discussed destination development and newbuild plans. Liberty said the company recently opened the Royal Beach Club Santorini, while Royal Beach Club Cozumel is expected to open in early 2028. Perfect Day Mexico and Costa Maya are expected to open in late 2027 and ramp up in early 2028. Royal Caribbean International President and CEO Michael Bayley said Perfect Day Mexico is expected to have a “soft opening” in the fourth quarter of 2027, followed by a fuller opening in 2028, and said previously reported environmental “blips” have been resolved. In a follow-up, Liberty confirmed construction has resumed.

Liberty also said the company recently ordered Icon 6 and Icon 7 and pointed to strong demand for the upcoming Legend of the Seas, calling its book position “very strong” and saying prices are higher than those seen for Icon and Star.

Balance sheet, hedging, and capital return

Holtz said the company ended the quarter with $6.9 billion in liquidity and leverage below 3x, consistent with its goal of maintaining investment-grade metrics. He said Royal Caribbean completed a $2.5 billion investment-grade bond offering that was “significantly oversubscribed,” with proceeds used to refinance existing debt and near-term maturities.

Holtz also said the company repurchased 2.9 million shares for $836 million during the quarter and has $1 billion remaining under its current authorization. Liberty said management remains focused on disciplined cost control and using technology and AI to find efficiencies “without compromising the quality of the guest experience.”

About Royal Caribbean Cruises NYSE: RCL

Royal Caribbean Cruises NYSE: RCL, operating as part of the Royal Caribbean Group, is a global cruise company that develops, markets and operates passenger cruise ships. The company operates multiple consumer-facing cruise brands that offer short- and long-duration itineraries and a range of onboard experiences. Its core activities include itineraries and voyage operations, guest services and hospitality, onboard food and beverage, entertainment and recreation programming, and the commercial activities needed to sell and support cruises through both direct and travel‑agent channels.

Royal Caribbean's ships serve a broad set of geographies worldwide, regularly deploying vessels in the Caribbean, North America (including Alaska), Europe, Asia, Australia and South America.

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