Royal Caribbean expects 31% EPS growth and outlines major expansion as digital and destination strategies gain momentum

Earnings Call Insights: Royal Caribbean Cruises Ltd. (RCL) Q2 2025

Management View

Jason T. Liberty, President and CEO, highlighted “strong second-quarter results and updated outlook for the year,” attributing outperformance to “stronger-than-expected close-in demand, a shift in the timing of some expenses and favorability below the line that was mainly driven by the outperformance of our TUI Cruises joint venture and lower interest costs.” He announced an increased earnings guidance for the year, forecasting adjusted earnings per share to grow 31% year-over-year. The company is “accelerating our path to achieving our Perfecta financial targets by 2027” and expects “significant benefits from our current strategies” in 2028, including new ship launches and destination openings.
Liberty emphasized the launch of Star of the Seas and the upcoming debut of Celebrity Xcel, both registering strong bookings. He also noted the robust early demand for Royal Beach Club Paradise Island and the acquisition of the Port of Costa Maya.
Naftali Holtz, Chief Financial Officer, stated, “Net yields grew 5.2% in constant currency compared to the second quarter of last year, 70 basis points above the midpoint of our guidance.” He further reported, “Adjusted EBITDA margin was 41%, 300 basis points better than last year, and operating cash flow was $1.7 billion. Adjusted earnings per share were $4.38, 36% higher than last year and 8% higher than the midpoint of our guidance.”

Outlook

Management now expects net yield growth of 3.5% to 4% for 2025, with full-year adjusted earnings per share projected between $15.41 and $15.55, reflecting a $0.43 increase over prior guidance. Holtz explained, “The $0.43 increase compared to our prior guidance is driven by Q2 outperformance of $0.23, taking into account $0.10 of timing shift of spend and $0.20 benefit from lower spend and below-the-line favorability for the remainder of the year.” Capacity is expected to grow 6% for the full year and 3% in the third quarter. The company indicated that current guidance does not include possible further acceleration in close-in demand, which could provide additional upside.

Financial Results

Royal Caribbean reported adjusted earnings per share of $4.38 for the second quarter. Capacity increased 6%, delivering over 2 million vacations and a 10% year-over-year rise in guest count. Net yield grew 5.2%, and load factor reached 110%, two percentage points higher than last year. Onboard revenue rose across all categories, with about half of onboard spend booked pre-cruise. Net cruise costs, excluding fuel, increased 2.1%, 180 basis points below initial guidance. The company ended the quarter with $7.1 billion in liquidity.

Q&A

Matthew Robert Boss, JPMorgan: Asked about the “continued acceleration in demand” and near-term booking trends. Liberty explained, “one of the things that we have seen of late is just this kind of overall acceleration in close-in demand,” and described investments in fleet, destinations, loyalty, and digital to “increase repetition, which ultimately leads to an increase in lifetime value of the customer.” Boss followed up on embedded close-in demand assumptions; Holtz replied, “to the extent that there is further acceleration of the mail of closing demand, obviously, that creates an upside for the second half of the year.”
Steven Moyer Wieczynski, Stifel: Inquired about the impact of persistent close-in demand on yield. Liberty stated, “if we see similar patterns, the answer is that the back half of the year will be better,” but cautioned that guidance reflects a 50-50 forecast approach and the difficulty of quantifying incremental demand.
Brandt Antoine Montour, Barclays: Asked about Royal Beach Club ramp-up. Michael W. Bayley responded, “Sales are very strong. Interest is very high. Our first sailing will be in December 21… Prices start from around $139. It is dynamic… we’ve been extremely pleased with the sales to date.”
Benjamin Nicolas Chaiken, Mizuho: Queried about attach rates for Royal Nassau visitors. Bayley said, “when you look at the volume we’re going to bring in ’26 into Nassau… around 3 million guests and the overall capacity of the Beach Club will be around, give or take, 1 million, then you’re looking at 33% of our guests, we think will be more than happy.”

Sentiment Analysis

Analyst tone was positive, focusing on the company’s ability to capitalize on close-in demand, the effectiveness of new initiatives, and the ramp-up of new destinations and ships. Analysts pressed for details on the impact of demand on yields, loyalty program enhancements, and destination utilization.
Management maintained a confident and optimistic tone in both prepared remarks and Q&A. Liberty repeatedly emphasized “very healthy customer,” “strong demand for our brands,” and “very strong financial position.” He acknowledged areas of uncertainty with cautious language such as “it’s tough to actually quantify,” but overall reflected high confidence in execution and forward momentum.
Compared to the previous quarter, the tone has shifted from cautious optimism amid macro uncertainty to a more assertive and confident outlook, underpinned by outperformance and upgraded guidance.

Quarter-over-Quarter Comparison

Net yield growth guidance increased from 2.6%-4.6% in Q1 to 3.5%-4% in Q2. Full-year adjusted EPS guidance was raised from a 28% growth forecast in Q1 to 31% in Q2, with the lower end of the range $14.55 in Q1 rising to $15.41 in Q2.
The company reported higher EBITDA margin (41% in Q2 vs. 35% in Q1) and stronger operating cash flow ($1.7 billion in Q2 vs. $1.6 billion in Q1).
Management’s tone advanced from acknowledging macro volatility and maintaining expanded guidance ranges in Q1 to narrowing guidance and expressing greater confidence in demand and execution in Q2.
Analysts shifted from pressing about downside protection and macro risk to seeking clarity on upside drivers, new initiatives, and guidance rationale.
Strategic focus advanced from a broad emphasis on growth and balance sheet strength to highlighting digital innovation, loyalty, and the acceleration of private destination-led experiences.

Risks and Concerns

Management cited the timing of new ship deliveries and dry dock days as impacting yield growth in the second half, estimating a 150 basis point headwind in Q3 and about 90 basis points in Q4.
Holtz mentioned “ramp-up of costs related to our acquisition of the Costa Maya port and other new private destinations” as a factor in cost guidance.
The company remains vigilant on cost control and is managing fuel expense with 66% hedged at below-market rates.
Analysts raised questions about yield drag from new ships, attach rates for new destinations, and the ability to sustain current demand trends.

Final Takeaway

Royal Caribbean Cruises Ltd. communicated a robust second quarter, delivering outperformance on net yield, earnings, and cash flow, and raised its full-year guidance for both yield and adjusted earnings per share. Management highlighted accelerating close-in demand, successful new ship launches, strong digital and loyalty momentum, and the ramp-up of exclusive private destinations as key growth drivers. The company remains on track to achieve its Perfecta targets by 2027, with additional upside potential if current demand trends persist and new initiatives come online as planned.

Read the full Earnings Call Transcript