Royal Caribbean Lowers 2026 EPS Forecast as Fuel Costs Rise

Royal Caribbean Group reported first-quarter 2026 results that exceeded its own guidance, supported by higher revenue and cost efficiencies even as the company flagged rising fuel costs and a brief, geopolitics-linked booking slowdown in March and early April.

Quarterly performance outpaced internal targets

Royal Caribbean posted earnings per share of $3.48 and adjusted EPS of $3.60 for the quarter. Total revenue rose 11% year over year to $4.5 billion, while the company reported net income of $0.9 billion and adjusted net income of $1.0 billion, with adjusted EBITDA of $1.7 billion.

Occupancy and volume were notable features of the quarter. The company reported a 109% load factor, indicating ships sailed above standard double occupancy, and said capacity increased 8% year over year as it served 2.5 million guests, up 12%.

• Earnings: EPS was $3.48 and adjusted EPS was $3.60, which the company said exceeded its guidance due to higher revenue and cost efficiencies.
• Revenue and profitability: Revenue totaled $4.5 billion (up 11% year over year), with net income of $0.9 billion and adjusted net income of $1.0 billion.
• Operating cash generation: Adjusted EBITDA was $1.7 billion, reflecting both demand trends and cost performance during the quarter.
• Occupancy and volumes: The 109% load factor reflected sailing above standard double occupancy, alongside 2.5 million guests and an 8% year-over-year capacity increase.
• Onboard monetization: The company said onboard revenue rose as demand increased for offerings such as specialty dining and other curated experiences.

CEO Jason Liberty said the company remains focused on delivering innovative vacation offerings, pointing to new ships such as Legend of the Seas and destination projects including Royal Beach Club Santorini.

Demand held up after a brief spring slowdown

After a record WAVE season, Royal Caribbean said demand across its portfolio remained strong, although it saw short-lived booking moderation tied to external events. Bookings for Mediterranean sailings and West Coast of Mexico itineraries softened in March and early April amid geopolitical developments, increased air travel costs, and flight disruptions, but the company said demand recovered and is now running ahead of the same period last year for remaining inventory.

The company also cited continued strength in close-in reservations, which contributed to better-than-expected net yield performance during the quarter. CFO Naftali Holtz said that even with global uncertainty, demand for travel experiences has remained solid, adding that consumers are becoming more selective and focused on value in their spending.

Fuel and operating costs moved in different directions

Royal Caribbean reported gross margin yields up 6.9% on an as-reported basis in the first quarter. Net yields rose 3.6% as reported, or 2.0% in constant currency.

On costs, gross cruise costs per available passenger cruise day fell 1.0% as reported. Net cruise costs excluding fuel were up 0.6% as reported and down 0.5% in constant currency.

Fuel was a bigger headwind. Royal Caribbean said first-quarter fuel pricing averaged $613 per metric ton after hedging, with consumption of 432,000 metric tons. For the full year, it expects fuel expense of about $1.3 billion based on current prices, net of hedging, and said the fuel outlook adds roughly $0.62 per share versus prior expectations; the company said it is 59% hedged for 2026 at below-market rates.

Guidance points to midyear pressure before improvement later in 2026

On the earnings call, Liberty described a “smiley face” yield shape for 2026, with more pressure expected in the second and third quarters before improvement later in the year. Royal Caribbean revised its full-year net yield guidance to a range of 1.5% to 2.5%, compared with its earlier range of 1.5% to 3.5%.

Royal Caribbean updated full-year 2026 adjusted EPS guidance to $17.10 to $17.50, citing higher fuel costs and the earnings impact of recent geopolitical events, partially offset by lower non-fuel costs and the benefit of share repurchases.

For the second quarter, the company guided to adjusted EPS of $3.83 to $3.93. It expects net yields to rise about 0.9% as reported (0.2% in constant currency) versus the same quarter last year, while net cruise costs excluding fuel per available passenger cruise day are expected to rise 4.9% to 5.4% as reported, driven in part by increased drydock days and higher crew movement costs.

Shareholder returns, liquidity, and refinancing activity

Royal Caribbean returned about $1.1 billion to shareholders in the first quarter, including $836 million in share repurchases and $270 million in dividends. The company repurchased 2.9 million shares for $836 million and said it had $1.0 billion remaining under its current share repurchase authorization at quarter end.

The company ended the quarter with $6.9 billion in liquidity, including cash and capacity under its revolving credit facility. In February 2026, Royal Caribbean issued $2.5 billion in senior unsecured notes maturing in 2033 and 2038, which it said was aimed at refinancing debt and reducing near-term maturities.

Fleet and destination investments remain central to growth plans

Royal Caribbean said it expects 2026 capital expenditures of about $5 billion, primarily for new ship deliveries and destination development. The company plans to take delivery of Legend of the Seas in the second quarter, and it also has Icon VI and Icon VII on order, while continuing work on destination projects including Royal Beach Club Santorini.

Liberty said the company remains focused on delivering “responsible, differentiated vacations,” while working to accelerate revenue growth and manage costs. Royal Caribbean expects capacity to grow 6.7% in 2026, with additional increases planned through 2029.

Peers face their own mix of operational and market pressures

Across the cruise industry, operators have been navigating a landscape shaped by inflation, elevated fuel costs, and geopolitical disruptions, while benefiting from continued consumer interest in travel. Norwegian Cruise Line Holdings, for example, has faced operational headwinds, and its first-quarter revenue and profit fell below analyst expectations, contributing to a 24% stock decline in March 2026; management cited challenges with staffing, operating costs, and Caribbean capacity increases, alongside Elliott Management’s activist involvement calling for turnaround initiatives.

Norwegian has launched Norwegian Luna, which will serve Caribbean routes and is set to debut in New York in 2027, while analysts projected 2026 adjusted EPS of $2.38 and trimmed recent price targets to the $19 to $24 range amid execution concerns. Carnival Cruise Line, meanwhile, reinstated its dividend at $0.15 per share after achieving investment-grade metrics, and while its adjusted net income rose more than 60% in 2025, it continues to face fuel sensitivity and carries a $26.6 billion debt balance, with its stock trading at a forward P/E of about 9x.

Frequently Asked Questions (FAQs)

How is Royal Caribbean managing geopolitical disruptions?

Royal Caribbean said it saw a temporary slowdown in bookings for Mediterranean sailings and West Coast of Mexico itineraries in March and early April amid geopolitical developments, higher air travel costs, and flight disruptions. The company said those itineraries subsequently rebounded, with reservations now exceeding last year’s pace for remaining inventory.

What does a 109% load factor mean for a cruise line?

A load factor above 100% indicates ships are sailing above standard double occupancy, such as through additional guests in staterooms. Royal Caribbean reported a 109% load factor in the first quarter, reflecting strong close-in demand and higher onboard volumes.

Why did Royal Caribbean lower its full-year adjusted EPS guidance range?

The company said its updated full-year 2026 adjusted EPS range of $17.10 to $17.50 reflects higher fuel costs and the effects of recent geopolitical events on certain itineraries. Royal Caribbean said these impacts were partly offset by lower non-fuel costs and the benefit of share repurchases.

What fuel cost strategies are impacting cruise operators’ profitability?

Royal Caribbean said it is 59% hedged for 2026 at below-market rates, and it expects about $1.3 billion in fuel expense for the full year based on current prices, net of hedging. The industry has highlighted fuel as a key headwind, and Royal Caribbean has noted that Norwegian and Carnival face higher exposure, particularly with euro-denominated debt and broader geopolitical uncertainties.

Why is onboard spending becoming a key revenue driver for cruise lines?

Royal Caribbean said onboard spending rose as guests spent more on offerings such as specialty dining and other onboard experiences, helping lift results alongside close-in demand. The company has also positioned destination projects such as Royal Beach Club Santorini as part of a broader effort to expand experience-driven, higher-margin revenue streams.

Looking ahead, Royal Caribbean said it expects the biggest itinerary-related pressure to fall in the second and third quarters before improvement later in the year, while it prepares to bring Legend of the Seas into service in the second quarter and continues destination development projects included in its approximately $5 billion 2026 capital plan.