RCL Q3 Deep Dive: Demand Growth Counters Caribbean Headwinds and Strategic Cost Focus

Cruise vacation company Royal Caribbean (NYSE:RCL) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 5.2% year on year to $5.14 billion. Its non-GAAP profit of $5.75 per share was 1.2% above analysts’ consensus estimates.

Is now the time to buy RCL? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Royal Caribbean’s third quarter results drew a negative market reaction as revenue came in just below Wall Street expectations, despite higher non-GAAP earnings per share. Management attributed the quarter’s performance to strong close-in demand for vacation offerings and ongoing guest satisfaction momentum, with CEO Jason Liberty highlighting “accelerated demand, growing loyalty and all-time high guest satisfaction.” The company pointed to high digital engagement and pre-cruise onboard revenue bookings, but also acknowledged adverse weather and the temporary closure of Labadee as operational challenges impacting results.

Looking ahead, Royal Caribbean’s updated outlook is shaped by moderate capacity growth, the rollout of new exclusive destinations, and disciplined cost management strategies. Management sees continued yield improvements and robust demand for the company’s expanding vacation ecosystem, including new land-based offerings. CFO Naftali Holtz emphasized the use of technology and artificial intelligence to hold cost growth at “anemic” levels, even as new investments like the Royal Beach Club in Nassau come online. Management expects these initiatives to support further margin expansion and earnings growth in 2026.

Key Insights from Management’s Remarks

Management credited strong digital engagement, successful new product launches, and disciplined cost control as major drivers of Q3 performance, while also noting headwinds from weather and destination closures.

• Digital channels drive engagement: Nearly 90% of pre-cruise onboard purchases were made through Royal Caribbean’s digital platforms, with the app emerging as a key driver of customer engagement and conversion. This digital shift has improved operational efficiency and increased revenue per guest.
• Exclusive destinations expand: The announcement of the Royal Beach Club in Santorini and progress on other exclusive destinations reflect the company’s strategy to expand its land-based portfolio from two to eight by 2028. Management believes these exclusive offerings are differentiating the brand and attracting both loyal and new guests.
• Close-in demand strength: The quarter saw particularly strong demand for close-in bookings, which refers to reservations made shortly before departure. This trend was notable across both new and existing ships, supporting yield growth despite higher capacity.
• Cost discipline through technology: Management cited ongoing investment in artificial intelligence and process automation as key to maintaining strong cost control, with non-fuel operating costs rising more slowly than anticipated and technology helping to offset inflationary pressures.
• Weather and operational disruptions: Adverse weather events and the temporary closure of Labadee, one of its exclusive Caribbean destinations, were called out as headwinds that impacted performance and outlook for the remainder of the year.

Drivers of Future Performance

Royal Caribbean’s outlook for the next year is anchored by continued demand, new destination launches, and ongoing cost discipline through technology and process improvements.

• Launch of new destinations: Management expects the opening of the Royal Beach Club in Nassau and the continued development of Perfect Day Mexico to drive incremental demand and onboard spending. These experiences are designed to enhance itinerary appeal and support premium pricing, particularly in the Caribbean.
• Disciplined cost management: The company plans to keep net cruise cost growth “anemic” in 2026, leveraging scale, technology, and artificial intelligence to offset the added expenses of new destinations and regulatory headwinds such as the EU Emissions Trading System.
• Yield and demand resilience: Bookings for 2026 are at historically high levels, with management citing strong rate growth and continued willingness of guests to pay premium prices for differentiated experiences. Management also noted that while the consumer environment has normalized, demand for leisure travel remains robust and is expected to support margin expansion.

Catalysts in Upcoming Quarters

Looking ahead, our analyst team will be monitoring (1) the ramp-up and guest reception of new exclusive destinations like the Royal Beach Club in Nassau, (2) how effectively Royal Caribbean leverages digital engagement and AI to drive both revenue and cost efficiencies, and (3) the impact of increased Caribbean capacity on yields and onboard spending. Progress on regulatory compliance and ongoing cost management will also be essential signposts for sustainable margin growth.

Royal Caribbean currently trades at $292.13, down from $320.28 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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