Royal Caribbean Group 10-Qquarter ended 2026-06-30

Legal / investigation

Star of the Seas and Celebrity Xcel boosted capacity; rising payroll, fuel and depreciation squeezed earnings despite higher onboard spending.

Filed 2026-07-28 17:05 ET

Key figures · Q2 FY2026 · period ended 2026-06-30

  • Revenue$4.8BYoY +6.5%QoQ +8.5%
  • Operating income$1.3BYoY −1.7%QoQ +12.5%
  • Net income$1.1BYoY −6.8%QoQ +19.9%
  • Total assets$44.6BQoQ +6.3%
  • Total debt
    How total debt adds up
    Long-term debt$21,263M
    + Current portion of long-term debt$1,573M
    Total debt$22,836M

    Lines as the filer presents them on its balance sheet.

    $22.8B1QoQ +8.2%
  • Shareholders' equity$10.2B2QoQ +4.3%
  • Tangible book value$9.4B3QoQ +4.7%
Notes (3)
  1. Total debt: About the summary: The summary’s $23.4B is total debt before issuance costs; the claim’s $22.84B is the reported debt measure after those costs.
  2. Shareholders' equity: About the summary: The summary’s $10.5B measures total equity including noncontrolling interests; the claim’s $10.24B excludes noncontrolling interests.
  3. Tangible book value: No intangible assets are reported.

How this filing reads

  • Health−0.1Liquidity was $6.9B, H1 free cash flow $457M, and debt increased 6.9%.
  • Momentum−0.2Q2 revenue rose 6.5%, while EBITDA margin fell to 37.9% and net income declined 6.8%.
  • Outlook0.0Orders cover 43,230 berths, with $14.3B committed ship financing and a planned 20-ship river fleet.
  • Legal / investigation“The Supreme Court vacated a favorable appellate ruling in the Havana Docks case on 5/21/2026; the prior lower-court judgment was ≈$112M”

Executive Summary

Royal Caribbean’s fleet expansion and higher onboard spending delivered Q2 revenue growth of 6.5%, but rising payroll, fuel and depreciation costs pushed earnings lower. H1 profitability still improved, although ship deliveries sharply reduced free cash flow while repurchases and dividends exceeded that cash generation. New ships, destination breadth and planned river-cruise expansion offer growth opportunities, supported by substantial committed financing. For investors, the question is whether pricing and passenger spending can outpace higher operating costs while funding expansion without materially increasing leverage.

Key Financial Highlights

Metric Q2 2026 H1 2026 / 6/30/2026 Investor interpretation
Revenue $4.83B, +6.5% Y/Y $9.28B, +8.7% Y/Y Capacity and pricing supported growth.
Gross margin $1.82B, broadly flat $3.56B, +6.5% Y/Y Quarterly revenue growth did not lift gross profit.
Operating income / adjusted EBITDA $1.31B / $1.83B $2.47B / $3.53B Adjusted EBITDA margin fell to 37.9% from 40.8% in Q2.
GAAP net income $1.13B, −6.8% Y/Y $2.07B, +6.7% Y/Y Q2 weakened despite H1 growth.
Diluted EPS $4.20, −4.8% Y/Y $7.68, +8.2% Y/Y A smaller share count supported per-share results.
OCF / capital expenditures / FCF — $3.69B / $3.24B / $457M FCF fell from $2.11B as ship spending accelerated.
Total assets — $44.6B Capital-intensive fleet expansion.
Shareholders’ equity / net tangible assets — $10.5B / $9.65B Tangible equity excludes $808M of goodwill.
Total debt, including finance leases, before issuance costs — $23.4B, +6.9% since year-end Expansion increased borrowings.
Liquidity — $6.9B Primarily $6.0B of undrawn revolving capacity.
  • Revenue mix: onboard and other revenue grew 11% Y/Y in Q2, faster than ticket revenue’s 4.5%, reaching 31% of revenue; higher onboard spending is becoming a larger growth contributor.
  • Cost pressure: Q2 cruise operating expenses rose 12%, including payroll growth of $76M and fuel growth of $76M; depreciation increased to $464M as new ships entered service. Equity investment income also fell to $67M from $107M, adding pressure below operating income.
  • Cash conversion: H1 OCF exceeded net income partly because customer-deposit growth contributed $996M; deposits reached $6.74B, representing advance booking cash rather than completed-cruise revenue.
  • Capital return: H1 repurchases of $1.04B accompanied a net share-count decline of 1.1%, from 270M to 267M; dividends paid were $674M. Combined shareholder distributions exceeded FCF, alongside increased borrowings.

Business Developments

  • Fleet deployment: Star of the Seas and Celebrity Xcel supported capacity growth; Legend of the Seas was delivered in June, financed with a $1.9B unsecured term loan that is 95% guaranteed by Finnvera. The 50%-owned TUI Cruises venture also received Mein Schiff Flow.
  • Expansion pipeline: orders represented 43,230 berths, with Royal Caribbean’s ship orders costing ≈$16.5B and $1.3B deposited. Additional Icon-class and Discovery-class ships and a planned 20-ship Celebrity River Cruises fleet broaden future capacity and markets, but require substantial capital before generating revenue.
  • Funding strategy: February’s $2.5B senior-note issuance primarily refinanced maturities and other debt. Committed ship financing totaled ≈$14.3B, excluding Celebrity River Cruises; management forecasts 2026 capital expenditures of ≈$4.7B, excluding Partner Brand ships.

Risk Assessment

  • Capital intensity and funding: obligations through 6/30/2027 include $1.6B of debt maturities, $1.1B of interest and $800M of ship progress payments, making liquidity dependent on operating cash generation and financing access.
  • Cost and pricing imbalance: Q2 operating expenses grew faster than revenue, showing that strong occupancy alone cannot protect margins from payroll, fuel and depreciation increases.
  • Fuel and currency exposure: fuel swaps cover 58% of projected 2026 purchases, while 53% of ship-under-construction costs remain exposed to euro movements; hedges limit but do not eliminate volatility.
  • Litigation: the Supreme Court vacated a favorable appellate ruling in the Havana Docks case on 5/21/2026; the prior lower-court judgment was ≈$112M, leaving renewed uncertainty after the earlier contingency release.

This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.

Strategic Outlook and Investor Actionables

Management is betting that larger ships, higher passenger spending and broader cruise offerings will justify sustained capital investment. The opportunity is growth across multiple brands and markets; the threat is that rising costs and financing needs absorb the incremental revenue.

  • Capacity monetization: Q2 available passenger cruise days grew 4.9%, with occupancy at 110.2%. Later filings should show revenue and gross margin rising with capacity; growth without margin improvement would weaken the expansion thesis.
  • Onboard spending: Q2 onboard and other revenue reached $1.49B, up 11%. Continued growth faster than ticket revenue would support the spending strategy; convergence or reversal would reduce this earnings lever.
  • Funding discipline: H1 FCF was $457M against $1.71B of repurchases and dividends. Future filings should show operating cash generation supporting expansion and distributions without persistent debt growth; continued reliance on borrowing would increase financial risk.

Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.

Model 006 · prompt bdad6d7239

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