Fast-food chain Arcos Dorados (NYSE:ARCO) fell short of the market’s revenue expectations in Q2 CY2025 as sales rose 2.8% year on year to $1.14 billion. Its GAAP profit of $0.11 per share was 40.8% above analysts’ consensus estimates.
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Arcos Dorados (ARCO) Q2 CY2025 Highlights:
- Revenue: $1.14 billion vs analyst estimates of $1.16 billion (2.8% year-on-year growth, 1.8% miss)
- EPS (GAAP): $0.11 vs analyst estimates of $0.08 (40.8% beat)
- Adjusted EBITDA: $110.1 million vs analyst estimates of $96.33 million (9.6% margin, 14.3% beat)
- Operating Margin: 5.5%, down from 6.7% in the same quarter last year
- Locations: 2,457 at quarter end, up from 2,395 in the same quarter last year
- Same-Store Sales rose 12.1% year on year (49.6% in the same quarter last year)
- Market Capitalization: $1.46 billion
MONTEVIDEO, Uruguay--(BUSINESS WIRE)--Arcos Dorados Holdings Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”), Latin America and the Caribbean’s largest restaurant chain and the world’s largest independent McDonald’s franchisee, today reported unaudited results for the three and six months ended June 30, 2025.
Company Overview
Translating to “Golden Arches” in Spanish, Arcos Dorados (NYSE:ARCO) is the master franchisee of the McDonald's brand in Latin America and the Caribbean, responsible for its operations and growth in over 20 countries.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $4.50 billion in revenue over the past 12 months, Arcos Dorados is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions.
As you can see below, Arcos Dorados’s sales grew at a decent 7.4% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Arcos Dorados’s revenue grew by 2.8% year on year to $1.14 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 10.3% over the next 12 months, an acceleration versus the last six years. This projection is noteworthy and implies its newer menu offerings will catalyze better top-line performance.
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Restaurant Performance
Number of Restaurants
The number of dining locations a restaurant chain operates is a critical driver of how quickly company-level sales can grow.
Arcos Dorados sported 2,457 locations in the latest quarter. Over the last two years, it has opened new restaurants quickly, averaging 2.6% annual growth. This was faster than the broader restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Arcos Dorados has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 26.3%. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop because it gives Arcos Dorados multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Arcos Dorados’s same-store sales rose 12.1% year on year. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Arcos Dorados can reaccelerate growth.
Key Takeaways from Arcos Dorados’s Q2 Results
We were impressed by how significantly Arcos Dorados blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its same-store sales missed and its revenue fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $7 immediately after reporting.
Big picture, is Arcos Dorados a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.