On Tuesday, shares of Royal Caribbean Cruises (RCL.US) declined sharply, dropping over 8% to $294.6 by press time. Despite reporting better-than-expected Q3 earnings and raising its full-year guidance, the company's revenue and outlook for the next quarter and fiscal year fell short of market expectations, triggering the sell-off.

The downturn also dragged down peers in the cruise sector: Carnival Corporation (CCL.US) slid over 4.7%, Norwegian Cruise Line (NCLH.US) dropped more than 4.8%, and Viking Holdings (VIK.US) fell over 2.5%.

Royal Caribbean posted positive core operational metrics for Q3, with occupancy rates, passenger counts, and average cruise days all rising year-over-year. Ticket revenue and onboard spending also increased, driving total revenue up 4.3% to $5.14 billion, slightly below the consensus estimate of $5.17 billion.

Cost controls in labor, food, and fuel helped boost adjusted EPS to $5.75, up 11% YoY and $0.07 above expectations. Adjusted EBITDA rose 7% to $2.3 billion. Liquidity stood at $6.8 billion at quarter-end, down from $7.1 billion in Q2 but sufficient to cover maturing debt.

However, higher debt levels led the company to raise its full-year interest expense guidance to $945–$955 million from $930–$940 million.

For Q4, Royal Caribbean expects capacity to grow 10.3% due to the delivery of its new ship "Star of the Seas" and the debut of "Celebrity Xcel" next month. Costs are projected to decline 5.7%–6.2% YoY. Adjusted EPS is forecast at $2.74–$2.79, nearly double last year’s figure but below the $2.90 consensus.

Full-year EPS guidance was raised to $15.58–$15.63 (from $15.41–$15.55), still missing the $15.69 market estimate. CEO Jason Liberty expressed confidence in 2026 and beyond, citing strong bookings and projecting EPS above $17 for 2026—though current consensus estimates exceed $18.21.