Royal Caribbean (RCL) Q4 2025 earnings review
Record Wave Season Fuels 2026 Optimism, Despite Yield Normalization
Royal Caribbean capped 2025 with a significant beat, delivering $15.64 Adjusted EPS (vs. guidance of ~$15.58) and strong 30% earnings growth. The narrative has shifted from post-COVID recovery to steady, premium execution. Management announced the 'highest seven booking weeks in history' driven by Wave season, underpinning a bullish 2026 guidance of $17.70–$18.10 EPS. While revenue growth is healthy, the era of double-digit yield expansion is over; growth is normalizing to historical ranges (2-4%). Strategic expansion continues with the announcement of the new 'Discovery Class' ships and an aggressive entry into river cruising.
🐂 Bull Case
The company reported the 'highest seven booking weeks' in its history. Two-thirds of 2026 capacity is already booked at record rates, providing exceptionally high visibility and pricing power for the coming year.
Q4 Net Cruise Costs (ex-fuel) dropped 5.8% YoY, significantly aiding margins. While costs are expected to tick up slightly in 2026 (+0.4% to +1.4%), the company has demonstrated excellent operational discipline.
🐻 Bear Case
After double-digit yield growth in 2023 and 2024, Net Yield growth has compressed to 3.8% for FY25 and guides to ~3.1% (midpoint) for FY26. The 'easy wins' of the recovery are gone; future growth relies entirely on pricing power and mix shift.
Management explicitly flagged a 30 basis point headwind to 2026 Net Yields stemming from itinerary modifications in China, signaling geopolitical or operational friction in a key growth market.
⚖️ Verdict: 🟢
Bullish. The deceleration in yield growth is a mathematical inevitability after the post-COVID boom, but RCL is managing the transition to 'steady state' masterfully. With a booked position of 66% for 2026 and new hardware pipelines (Discovery Class, River), the growth story remains intact.
Key Themes
Yields Normalizing to Historical Patterns
Decelerating. Net Yield growth has moved from the blistering pace of 2024 (+11.6%) to a stable, normalized range. FY25 finished at +3.8%, and FY26 guidance sets a range of 2.1% to 4.1%. While positive, investors must adjust expectations from 'recovery growth' to 'normalized growth.'
Aggressive Fleet Expansion: Discovery & River
RCL isn't sitting on cash. They announced the 'Discovery Class' (ocean) and a massive expansion into river cruising with Celebrity (10 ships by 2031). This diversifies the portfolio and creates new revenue streams, though it keeps CapEx elevated ($5B guided for 2026).
China Operations Drag
Specific itinerary modifications in China are creating a measurable drag on performance, cited as a 30 basis point headwind to both Q1 and Full Year 2026 Net Yields. While manageable, it highlights the fragility of the Asian recovery compared to the robust Caribbean/US market.
Customer Deposits Signaling Record Demand
Customer deposits—the best proxy for future demand—hit $5.74 billion, up from $5.50 billion a year ago. Coupled with the 'highest seven booking weeks' commentary, this confirms the consumer is not pulling back on travel spending despite macro concerns.
Cost Inflation Returning
Reversing. Q4 2025 saw a massive 5.8% drop in Net Cruise Costs (ex-fuel), boosting margins. However, 2026 guidance sees costs flipping back to positive growth (0.4% to 1.4%). The deflationary tailwind experienced in late 2025 appears to be a one-off timing benefit rather than a permanent trend.
Other KPIs
Accelerating. Up 13.2% YoY (vs $3.76B in 24Q4), outpacing the 10.3% capacity increase, indicating strong pricing power.
Accelerating. Up 36% YoY from $559M in 24Q4. Margins are expanding significantly as revenue growth outpaces operating expense growth.
Stable/Strong. Up from $5.27B in FY24. The company is generating massive cash, sufficient to cover the heavy $5B CapEx load projected for 2026.
Guidance
Accelerating. Midpoint implies ~14% growth vs FY25 ($15.64). This aligns with the 'Perfecta' multi-year goal of 20% CAGR through 2027.
Decelerating. Midpoint (3.1%) is below the FY25 result of 3.8%. This reflects the normalization of pricing power as the post-COVID rebound stabilizes.
Accelerating. Compared to $2.71 in 25Q1, this implies ~19% growth, driven by strong Wave season bookings and capacity additions.
Accelerating (Inflationary). Costs are rising again after the deflationary Q4 2025 (-5.8%). While low, it reverses the recent cost-saving trend.
Key Questions
Discovery Class Economics
With the announcement of the new Discovery Class ships, how do the targeted ROIC and payback periods compare to the Icon Class, considering the current high-cost shipbuilding environment?
China Market Recovery
You cited a 30bps yield headwind from China itinerary modifications. Is this a temporary operational hurdle, or a signal of structurally softer demand/pricing in the region for 2026?
River Cruise Cannibalization
As you aggressively expand Celebrity River Cruises (10 ships by 2031), are you seeing this demand come from new-to-cruise customers, or is it cannibalizing your high-end Silversea or Celebrity ocean bookings?
Cost Inflation Reversal
Q4 saw NCC ex-fuel drop nearly 6%, but guidance calls for an increase in 2026. What specific cost lines are re-inflating in 2026 that were dormant or deflationary in late 2025?