Arcos Dorados Holdings Inc. (NYSE:ARCO) stock edged higher Thursday after the McDonald’s franchisee reported better-than-expected second-quarter earnings and revenue, helped by stronger guest traffic, digital sales and growth in Brazil.

Arcos Dorados reported earnings of 22 cents per share, topping the analyst estimate of 15 cents. Revenue of $1.306 billion beat the $1.290 billion consensus estimate.

Revenue rose 14.3% year over year and marked the highest quarterly revenue in the company’s history. Earnings per share doubled from 11 cents a year earlier.

Guest Traffic, Digital Sales Drive Growth

Systemwide comparable sales rose 15.3%, driven by higher guest traffic across all three divisions and higher average checks in Brazil and SLAD. Guest traffic was the strongest in six quarters.

Digital sales rose about 25% and represented 66% of systemwide sales, with self-order kiosks, Delivery and Loyalty performing strongly.

Kiosk sales benefited from restaurant modernization and increased customer adoption, while Delivery remained a growth driver as penetration expanded across the region.

The company’s loyalty program reached 34.3 million registered members. Active members who redeemed points visited restaurants about five times as frequently as non-members.

The company’s FIFA World Cup sponsorship also supported traffic and sales through tournament-themed products and digital campaigns. During the earnings call, CEO Luis Raganato said the campaigns helped push digital sales penetration and identified sales to record levels while supporting market share gains across the region.

Profitability Improves

Adjusted EBITDA rose 15.2% year over year to a second-quarter record of $126.8 million. Adjusted EBITDA margin expanded 10 basis points to 9.7%.

Excluding a gain from sub-franchisee restaurant transactions in Mexico in the year-ago quarter, the margin expanded 70 basis points. Lower Food and Paper costs and general and administrative expenses as a percentage of revenue supported the improvement.

Net income nearly doubled to $45 million from $22.6 million, with net income margin rising to 3.4% from 2%.

Brazil was the standout market. Revenue jumped 25.3% to $520.6 million, while adjusted EBITDA surged 43.2% to $75.8 million.

NOLAD revenue increased 9.3%, but adjusted EBITDA declined 18.3%. SLAD revenue rose 7%, with adjusted EBITDA up 6.6%.Systemwide comparable sales increased 5.4% in Brazil and 42.9% in SLAD, while declining 2.2% in NOLAD.

Cash Flow And Restaurant Expansion

Arcos Dorados opened 16 restaurants during the quarter, including 10 freestanding locations. The company ended June with 2,548 restaurants.

By the end of the quarter, 77% of its systemwide restaurant portfolio offered its most modernized restaurant experience in the Latin American and Caribbean quick-service restaurant industry.

The company spent $49.1 million on capital expenditures during the quarter. It opened 35 restaurants and invested nearly $86 million in capital expenditures during the first half.

Net cash provided by operating activities totaled $362.1 million for the 12 months ended June 30. Adjusted free cash flow surged to $143.4 million from $16.1 million in the comparable prior-year period.

Arcos Dorados ended June with $260 million in cash and cash equivalents, or about $270 million including short-term investments. Net leverage improved to 1.1 times adjusted EBITDA from 1.2 times at the end of 2025.

What’s Next

Management said it expects conditions to remain dynamic through the second half of 2026 but remains confident in its operating plans and financial discipline.

Executives also pointed to encouraging early third-quarter trends in Brazil and said the country’s quick-service restaurant industry appears to be returning to volume growth.

Raganato said the company plans to remain prudent on pricing while leaning on value offerings, digital campaigns and operational execution to sustain traffic and market share gains.

ARCO Price Action: Arcos Dorados Holdings shares were up 3.67% at $8.19 at the time of publication on Thursday, according to Benzinga Pro data.

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