Royal Caribbean's Record Year: Can 2026 Match the Momentum?

Date of Call: Jan 29, 2026

Financials Results

• Revenue: Total revenue grew 8.8% for full year 2025, with nearly $18 billion achieved.
• EPS: Adjusted EPS for full year 2025 was $15.64, up 33% YOY.
• Gross Margin: Not explicitly provided. Net cruise costs, excluding fuel, decreased 6.3% in constant currency in Q4.
• Operating Margin: Not explicitly provided. Adjusted EBITDA margin expected to be just over 40% for full year 2026.

Guidance:

• Revenue for 2026 expected to increase double digit year-over-year.
• Full year net yield growth expected in the range of 1.5% to 3.5%.
• Full year adjusted EPS expected between $17.70 and $18.10, a 14% YOY increase at the midpoint.
• Operating cash flow for 2026 expected to be over $7 billion.
• Q1 2026 adjusted EPS expected between $3.18 and $3.28.
• Net cruise costs, excluding fuel, for full year 2026 expected flat to up 1%.
• Capacity growth for 2026 expected at 6.7%.

Business Commentary:

Strong Financial Performance in 2025:

• Royal Caribbean Cruises Ltd. achieved a record 9.4 million vacations, nearly $18 billion in total revenue, and a 33% increase in earnings, with an adjusted EPS of $15.64.
• The growth was driven by strong demand for their brands, disciplined execution, and effective balance sheet management.

Capacity and Yield Growth in 2026:

• The company projects a 6.7% increase in capacity for 2026, with an expected net yield growth of 1.5% to 3.5%.
• This growth is supported by new ship deliveries, strategic investments in loyalty programs, and efficient cost control.

Caribbean and European Market Performance:

• The Caribbean accounts for 57% of capacity, with yields growing 35% since 2019, while Europe is growing 5%.
• High demand and strong pricing in the Caribbean, along with the introduction of new ships in Europe, contribute to their competitive positioning.

Loyalty Program and Digital Engagement:

• Royal Caribbean's loyalty program saw a 25% increase in active app users year-over-year, enhancing customer personalization and engagement.
• The expansion of digital capabilities and Points Choice loyalty program are aimed at deepening guest relationships and driving more frequent bookings.

Strategic Expansion and New Ship Orders:

• The company announced a commitment for 10 additional ships to expand Celebrity River Cruises to 20 vessels by 2031, and launched the Discovery Class ships.
• These expansions are part of a strategy to broaden vacation offerings, attract new guests, and reinforce their vacation ecosystem.

Sentiment Analysis:

Overall Tone: Positive

• Management described 2025 as 'outstanding' with 'record 9.4 million memorable vacations' and '33% earnings growth.' The call highlighted 'strong demand,' 'flawless execution,' and 'durable margin expansion.' Outlook for 2026 is confident, with 'record start' booking weeks and expectations for 'meaningful margin expansion' and continued growth.

Q&A:

• Question from Matthew Boss (JPMorgan Chase & Co): Could you elaborate on the further acceleration and momentum into 2026 that you cited? And how do you see your portfolio differentiated today relative to that $2 trillion total vacation market?
  Response: Momentum is driven by strong consumer demand, loyalty program growth, and strategic investments in product innovation and destinations to capture more market share and enhance margins.

• Question from Steven Wieczynski (Stifel, Nicolaus & Company): What are you seeing in the Caribbean today, and does your 2026 yield guidance of 2.5% fit your profile of moderate yield growth?
  Response: Demand in the Caribbean remains strong across all brands with higher pricing than last year. Yield growth is in the expected moderate range of 2-4%, despite some capacity increases and deployment shifts.

• Question from James Hardiman (Citigroup Inc.): How should I think about the organic business versus inorganic contributions, specifically in the Caribbean?
  Response: About half of 2026 yield growth is from new hardware; the other half is from like-for-like performance, including the gradual ramp-up of new destinations like Royal Beach Club.

• Question from Elizabeth Dove (Goldman Sachs Group): Could you share more on the net yield cadence for the year, especially for Q2?
  Response: Net yield growth is expected to be higher in the second half than the first half due to dry dock timing, Royal Beach Club ramp-up, and deployment mix changes.

• Question from Robin Farley (UBS Investment Bank): Can you talk about the new Discovery class ships and the sustainability of low net cruise cost growth?
  Response: Discovery class details are limited but described as a 'game changer.' Low net cruise cost growth is supported by scale, operational efficiencies, and technology like AI, not just temporary dry dock timing.

• Question from Brandt Montour (Barclays Bank PLC): How rational is the industry's reaction to Caribbean capacity, and can things improve?
  Response: The industry is more rational with price integrity; promotional activities are similar to past cycles, and the environment is seen as stable and competitive.

• Question from Conor Cunningham (Melius Research LLC): Can you comment on close-in booking strength and the skew towards shorter itineraries?
  Response: Shorter itineraries are part of a strategy to meet guest demand for frequent, weekend getaways. Yield management models are sophisticated, and close-in demand is now well understood and managed.

• Question from David Katz (Jefferies LLC): What information is driving the increased commitment to River cruises, and can you take share from existing River cruise companies?
  Response: Research and strong initial demand, especially from existing loyal customers, indicate a significant opportunity to expand the market and attract new River cruise experiences under the Celebrity brand.

Contradiction Point 1

Yield Growth Expectation and Outlook for 2026

It involves differing characterizations of 2026 yield growth guidance, impacting investor understanding of future performance expectations.

What are the current Caribbean performance trends by brand, itinerary, and product? Is the 2026 2.5% yield growth midpoint consistent with your "moderate yield growth" tagline, or is it impacted by industry capacity increases? - Steven Wieczynski (Stifel, Nicolaus & Company)

2025Q4: The yield guidance (1.5%–3.5%) aligns with the company’s definition of moderate growth (2%–4%)... - Jason Liberty(CEO)

Given the strong 2026 bookings and demand, is it correct to assume the company will follow its formula of moderate yield growth (low-to-mid single digits), disciplined cost growth (low single-digit or anemic), and 6% capacity growth? - Steven Wieczynski (Stifel)

2025Q3: Confirmed it's a good high-level framework... moderate yield growth (low-to-mid single digits) and disciplined (low single-digit or anemic) cost growth... - Jason Liberty(CEO)

Contradiction Point 2

Performance and Outlook for the Caribbean Market

It involves differing assessments of yield and competitive dynamics in the Caribbean, affecting perceptions of market strength and company positioning.

What are current Caribbean performance trends by brand, itinerary, and product, and is the 2026 2.5% yield growth midpoint consistent with "moderate yield growth" or impacted by industry capacity increases? - Steven Wieczynski (Stifel, Nicolaus & Company)

2025Q4: Demand for the Caribbean remains strong... Yields are higher than last year despite industry capacity growth. - Jason Liberty(CEO)

Does increased Caribbean capacity lead to oversupply, and how do you project the Caribbean's setup for 2026? - Elizabeth Dove (Goldman Sachs Group, Inc.)

2025Q3: Acknowledged increased supply but described it as 'manageable.' The company's differentiated assets... allow it to maintain good yields. - Jason Liberty(CEO)

Contradiction Point 3

Nature of Industry Competition

It involves shifting characterizations of the competitive environment, from a focus on market expansion to a focus on price integrity.

How has the industry responded to Caribbean capacity, is the current environment more rational than past cycles, and can conditions improve? - Brandt Montour (Barclays Bank PLC)

2025Q4: The industry is more rational and focused on price integrity today compared to past cycles. - Jason Liberty(CEO)

Can you elaborate on the factors driving the acceleration in demand for your brands and experiences, and outline your strategic approach to staying ahead in the $2 trillion growing global vacation market through investments and initiatives? - Matthew Robert Boss (JPMorgan)

2025Q2: The company is focused on increasing customer repetition and lifetime value by investing in fleet growth, new ship launches... to close the gap to the land-based vacation market. - Jason T. Liberty(CEO)

Contradiction Point 4

Contribution from New Hardware to Yield Growth

It involves differing explanations for the drivers of yield growth, with a reduced emphasis on new hardware in the latest guidance.

How should we assess the organic versus inorganic components of yield growth in 2026, particularly in the Caribbean where new competitor capacity is emerging? - James Hardiman (Citigroup Inc.)

2025Q4: Roughly half of 2026 yield growth will come from new hardware, and half from like-for-like performance. - Jason Liberty(CEO)

Could you provide details on the contribution from new ship premiums versus like-for-like pricing changes? - Lizzie Dove (Goldman Sachs Group, Inc.)

2025Q1: In Q1, yield growth was roughly half from like-for-like pricing and half from new hardware. This split is consistent throughout the year except for Q3, which is mostly like-for-like due to the timing of the new ship delivery. - Naftali Holtz(CFO)

Contradiction Point 5

Yield Growth Forecast and Cadence

It involves a moderated yield growth range in Q4 guidance compared to the expanded range in Q1, reflecting changing macroeconomic assumptions.

What are the current Caribbean performance trends by brand, itinerary, and product, and is the 2026 yield growth (2.5% midpoint) consistent with your "moderate yield growth" tagline, considering industry capacity increases? - Steven Wieczynski (Stifel, Nicolaus & Company)

2025Q4: The yield guidance (1.5%–3.5%) aligns with the company’s definition of moderate growth (2%–4%), though China-related itinerary modifications and deployment shifts to lower-yielding itineraries modestly impact the range. - Jason Liberty(CEO)

How did you incorporate expanded assumption ranges into this year's guidance due to the current macroeconomic environment, and has your outlook for the multiyear 20% earnings growth CAGR changed based on recent developments? - Matthew Boss (JPMorgan)

2025Q1: The guidance ranges were expanded, particularly for yield (now ~100 bps vs. prior ~50 bps) to account for macroeconomic uncertainty. - Naftali Holtz(CFO)