RCL Q2 Deep Dive: New Ships, Digital Expansion, and Destination Investments Shape Outlook

Cruise vacation company Royal Caribbean (NYSE:RCL) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.4% year on year to $4.54 billion. Its non-GAAP profit of $4.38 per share was 7.4% above analysts’ consensus estimates.

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StockStory’s Take

Royal Caribbean’s second quarter results were met with a negative market reaction, despite the company meeting revenue expectations and surpassing consensus non-GAAP profit estimates. Management attributed the quarter’s performance to robust close-in demand, continued strength in onboard spending, and a favorable shift in expense timing. CEO Jason Liberty described strong guest engagement and highlighted that half of all onboard purchases were booked before sailing, with 60% of guests being new to cruising or new to the brand. Management also cited a shift toward last-minute bookings and higher load factors as key contributors. CFO Naftali Holtz noted that expense timing benefited margins this quarter but will shift to the second half of the year.

Looking ahead, Royal Caribbean’s updated guidance is driven by continued momentum in new ship launches, enhanced private destination offerings, and accelerating digital engagement. Management believes that further growth in close-in demand could provide upside beyond current guidance, while ongoing investments in technology and loyalty initiatives aim to deepen customer relationships and maximize spend. CEO Jason Liberty emphasized, “Our ambitions go well beyond current earnings targets, as our strategic initiatives are designed to drive significant growth for years to come.” The company’s expanded lineup of ships and land-based experiences is expected to further differentiate its portfolio, though management acknowledged that ramping up new destinations will require disciplined execution.

Key Insights from Management’s Remarks

Management highlighted a blend of strong demand, digital engagement, and product innovation as the main drivers of both the quarter’s results and the updated outlook.

• Close-in booking surge: Demand for last-minute cruise bookings increased, with management noting a higher proportion of guests booking closer to departure. This shift was especially pronounced among millennials and younger travelers, who now represent half of Royal Caribbean’s customer base.
• Onboard spend growth: Onboard revenue—spending by guests during the cruise—continued to outpace prior years, with half of all onboard purchases reserved before departure. Management attributed this to new digital initiatives that simplify pre-cruise planning and encourage early purchases.
• New ships drive appeal: The recent launch of Star of the Seas and the upcoming Celebrity Xcel generated strong interest and high load factors. These ships, along with a pipeline of additional vessels through 2028, are expected to support moderate capacity growth and premium pricing.
• Private destinations expanding: Early bookings for the Royal Beach Club Paradise Island exceeded expectations, reinforcing the strategy to offer exclusive land-based experiences. Management views these destinations as a critical differentiator, with dynamic pricing and premium packages already demonstrating strong demand.
• Digital ecosystem and loyalty: The mobile app now accounts for nearly half of all onboard purchases, and cross-brand loyalty bookings have reached 40%. Management is leveraging AI and data analytics to personalize offers, reduce friction, and increase customer lifetime value.

Drivers of Future Performance

Royal Caribbean expects continued margin expansion and earnings growth, underpinned by new ships, exclusive destinations, and digital engagement, but notes risks from cost timing and execution.

• Ship and destination rollouts: Ongoing introductions of new vessels—such as Star of the Seas and Celebrity Xcel—and the phased opening of new private destinations are expected to drive premium pricing, yield growth, and capacity expansion. These projects are key to differentiating Royal Caribbean’s offerings from competitors.
• Digital and loyalty investments: Enhanced digital platforms, including a more robust mobile app and AI-driven personalization, are expected to improve guest experience, increase pre-cruise spending, and support cross-brand loyalty. Management believes these investments will lower customer acquisition costs and boost lifetime value.
• Cost and operational headwinds: Management flagged the timing of expense recognition and ramp-up costs for new ships and destinations as potential margin pressures in the back half of the year. They also cited the need for flawless execution in the launch and scaling of new products to achieve targeted financial outcomes.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will watch (1) the ramp-up and guest response to new ships and the Royal Beach Club Paradise Island, (2) continued growth in digital engagement and onboard spend, and (3) the operational and financial impacts of expanding private destinations and river cruising. Progress on loyalty program integration and execution of cost controls will also be important signposts.

Royal Caribbean currently trades at $313.09, down from $352 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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