Arcos Dorados (NYSE:ARCO) Q3 2025 Earnings: EPS Beats Estimates, Revenue Misses

Arcos Dorados Holdings Inc (NYSE:ARCO) has reported its financial results for the third quarter of 2025, delivering a performance characterized by a significant earnings beat that was tempered by a top-line revenue miss compared to Wall Street expectations. The market's initial reaction appears to be cautiously positive, with the stock showing a notable uptick in pre-market trading.

Earnings and Revenue Versus Estimates

The company's bottom-line performance was the standout feature of the quarter. Arcos Dorados reported a GAAP profit of $0.71 per share, which substantially exceeded analyst estimates of $0.17 per share. This impressive result was largely driven by a one-time, non-recurring benefit.

Conversely, the company's top-line figure came in below expectations. Total revenue reached $1.19 billion, marking a 5.2% year-over-year increase. However, this fell short of the analyst consensus estimate of $1.25 billion for the quarter.

Key financial metrics from the report include:

• Reported GAAP EPS: $0.71, significantly above the estimated $0.17.
• Reported Revenue: $1.19 billion, below the estimated $1.25 billion.
• Systemwide Comparable Sales: Grew 12.7%, in line with the company's blended inflation rate.
• Adjusted EBITDA: Reached $201.1 million, yielding a robust margin of 16.9%.

Market Reaction

The market's response to this mixed report has been positive in early trading, with the stock rising over 3.4% in the pre-market session. This suggests that investors are focusing more on the substantial earnings beat and strong profitability metrics, particularly the surge in Adjusted EBITDA, rather than the revenue miss. The performance indicates that the market may be viewing the revenue shortfall as less critical in the context of the company's overall operational strength and one-time gains.

Key Highlights from the Quarter

Beyond the headline numbers, the quarter was marked by several important operational and financial developments.

Operational Performance: The company demonstrated solid underlying business growth, with constant currency revenue growth of 15.1%. The digital sales channel, which accounted for 61% of systemwide sales, continues to be a critical driver. The loyalty program also saw substantial expansion, reaching 23.6 million registered members—a nearly 50% increase since the end of 2024.

Brazilian Tax Credit: A pivotal event in the quarter was the recognition of a federal tax credit in Brazil, with a total net benefit of $125.2 million. This one-time item had a direct and material impact on both operating income and net income, accounting for the majority of the earnings per share beat. The company expects this credit to provide a positive cash impact over the next five years as it is used to offset federal tax obligations.

Growth and Expansion: Arcos Dorados continues to execute its expansion strategy, opening 22 new restaurants during the quarter, 19 of which were free-standing locations. The company also ended the period with 72% of its restaurant portfolio modernized, enhancing the customer experience across its footprint.

Looking Ahead

While the press release does not provide a specific quantitative financial outlook for the next quarter or full year, management expressed a focus on "targeting sustainable topline growth and improved operational efficiency to drive profitability, generate free cash flow and create shareholder value" for the coming year. Investors will be comparing this qualitative optimism to the existing analyst estimates for the fourth quarter and full-year 2025.

For a detailed breakdown of future earnings estimates and historical performance, you can review the analysis on the Arcos Dorados earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, nor does it recommend buying or selling any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.