Arcos Dorados Holdings Inc-A (NYSE:ARCO) Posts Mixed Q2 2025 Results with Strong EPS Beat but Revenue Shortfall

Arcos Dorados Holdings Inc-A (NYSE:ARCO) Reports Mixed Q2 2025 Results Amid Regional Divergence

Arcos Dorados Holdings Inc., the largest independent McDonald’s franchisee in Latin America and the Caribbean, reported its second-quarter 2025 financial results, delivering a mixed performance relative to analyst expectations. While earnings per share (EPS) surpassed estimates, revenue fell short, reflecting regional disparities and currency headwinds.

Key Financial Highlights

• Revenue: $1.14 billion, up 2.8% year-over-year (YoY) but below the consensus estimate of $1.16 billion.
• EPS: $0.11, significantly above the estimated $0.0782, marking a 40.8% beat.
• Systemwide Comparable Sales: Rose 12.1% in constant currency, driven by strong performances in the North Latin America Division (NOLAD) and South Latin America Division (SLAD), which grew 1.8x and 1.4x blended inflation, respectively.
• Adjusted EBITDA: Declined 7.3% YoY to $110.1 million, though it increased 2.4% in constant currency when excluding a one-time labor contingency benefit in Brazil from the prior year.

Market Reaction

The stock has shown modest pre-market gains (+0.43%), suggesting cautious optimism despite the revenue miss. Over the past month, shares have declined 2.9%, reflecting broader market concerns, but the strong EPS beat may provide near-term support.

Regional Performance

• Brazil: Revenue declined 6% YoY (but up 2% in constant currency), weighed down by consumer spending pressures and higher beef costs.
• NOLAD & SLAD: Both divisions outperformed, with SLAD revenue surging 37.8% in constant currency.
• Digital & Loyalty Programs: Digital sales accounted for over 60% of systemwide sales, while the loyalty program reached 21.5 million members, contributing 22.6% of sales in active markets.

Growth Initiatives

The company opened 20 new "Experience of the Future" (EOTF) restaurants and expanded into Saint Martin, its 21st market. Management emphasized ongoing investments in digital channels and marketing campaigns, such as the Formula 1 promotion and Minecraft Happy Meal, to drive engagement.

Debt & Liquidity

Net debt to Adjusted EBITDA increased to 1.4x from 1.1x at year-end 2024, though liquidity remains stable with $233.9 million in cash.

Outlook vs. Analyst Estimates

While no explicit guidance was provided, analysts project full-year 2025 revenue of $4.77 billion and Q3 2025 sales of $1.23 billion. The company’s focus on cost efficiencies and digital growth could align with these targets.

Conclusion

Arcos Dorados delivered a resilient quarter despite macroeconomic challenges, with profitability outperforming expectations. The market’s muted reaction may reflect lingering concerns over Brazil’s margin pressures, but the company’s strategic initiatives and regional diversification provide a foundation for recovery.

For detailed earnings estimates and historical performance, visit Arcos Dorados' earnings page.

Disclaimer: This article is not investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.