Arcos Dorados Holdings (NYSE: ARCO) delivered its highest-ever quarterly revenue in the second quarter of 2026, reaching $1.3 billion, a 14% increase year-over-year. The Latin American McDonald's franchisee also reported record adjusted EBITDA and net income, supported by strong performance in Brazil and effective cost management across its footprint.

Financial Performance

Total revenue growth was driven by a 15.3% increase in systemwide comparable sales, primarily due to a higher average check and improved guest volume. Adjusted EBITDA totaled $126.8 million, rising more than 20% from the prior-year period. Excluding a one-time transaction with a Mexican subfranchisee recorded in last year's results, the adjusted EBITDA margin expanded by 70 basis points.

Net income reached a record high for the quarter, with earnings per share doubling compared to the same period last year. This improvement was fueled by solid operating results, lower net interest expense due to capital structure optimization, and a reduced effective tax rate.

Regional Highlights

Brazil emerged as the standout performer, with adjusted EBITDA growing more than 40% in US dollar terms. The division achieved an EBITDA margin of 14.6%, an expansion of 180 basis points driven by lower food and paper costs, disciplined G&A management following late-2025 restructuring, and currency appreciation. Sales in Brazil grew more than 25% in US dollars, aided by strong home sales and new restaurant openings.

In North Latin America (NOLAD), comparable sales faced a demanding comparison base due to the prior year's Holy Week period and successful Minecraft promotion. Despite modest guest volume growth, the division maintained resilience through strong brand positioning and value propositions. In South Latin America (SLAD), sales grew in line with inflation, which averaged 46-47% in the region. SLAD's adjusted EBITDA grew by approximately $3 million (6.6%), with margins remaining stable at around 10%.

What the Numbers Show

Digital channels are becoming the dominant driver of top-line growth, now accounting for 66% of total sales after expanding by over 25% year-over-year. This shift coincides with identified sales surpassing 28% of total transactions, indicating that loyalty program engagement is directly correlating with higher digital penetration. The data suggests that Arcos Dorados is successfully converting casual traffic into repeatable, high-frequency digital interactions, particularly through self-ordered kiosks and delivery aggregators in Brazil.

Operational Updates

The company opened 16 new restaurants in the quarter, bringing the first-half total to 35. Capital expenditures for the quarter were $49.1 million, contributing to a total H1 spend of nearly $86 million. More than 77% of the portfolio has now been modernized. Management noted that freestanding units continue to account for the bulk of new openings.

Arcos Dorados also completed the second liability management transaction of the year, fully repaying its 2029 senior notes. Net leverage improved modestly to 1.1 times at quarter-end, supported by strong cash generation and lower capital expenditures relative to operating cash flow.

Arcos Dorados Holdings Inc. (NYSE: ARCO) delivered its strongest quarterly performance to date in Q2 2026, reporting record total revenues of $1.306 billion. This figure beat the analyst consensus estimate of $1.290 billion by 1.20% and marked a 14.3% increase year over year. Earnings per share reached $0.22, surpassing the consensus estimate of $0.15 by 46.67% and representing a 100% increase from the $0.11 per share reported in Q2 2025.

The Latin American and Caribbean restaurant chain’s growth was fueled by a 15.3% rise in systemwide comparable sales, reflecting the best guest volume performance in six quarters. Digital sales penetration hit an all-time high, with digital channels accounting for 66% of systemwide sales. CEO Luis Raganato noted that FIFA World Cup sponsorship campaigns helped push digital sales penetration and support market share gains across the region.

Financial Performance

Total revenues grew 14.3% in US dollars compared to the prior year period, reaching $1.306 billion. On a constant currency basis, revenue growth was even stronger at 18.5%. Company-operated restaurant sales rose 14.2% as reported, while revenues from franchised restaurants increased 15.4%.

Adjusted EBITDA margin expanded by 10 basis points to 9.7%, supported by lower Food and Paper costs and general and administrative expenses as a percentage of revenue. Excluding gains from sub-franchisee transactions recorded in the prior year, margin expansion was 70 basis points. Higher payroll and occupancy expenses partially offset these operational efficiencies.

What the Numbers Show

The divergence between operating leverage and bottom-line growth highlights significant non-operational tailwinds. While Adjusted EBITDA grew 15.2%, net income nearly doubled (+99.3%). This acceleration was driven primarily by better results below the operating line, including lower net interest expense, favorable foreign currency exchange results, and a reduced effective tax rate, rather than purely from top-line or operating margin expansion.

Regional Highlights

Brazil was the standout market, with revenue jumping 25.3% to $520.6 million and adjusted EBITDA surging 43.2% to $75.8 million. Systemwide comparable sales increased 5.4% in Brazil. In contrast, NOLAD revenue increased 9.3%, but adjusted EBITDA declined 18.3%, with systemwide comparable sales falling 2.2%. SLAD revenue rose 7.0% as reported but surged 38.1% on a constant currency basis due to local currency appreciation against the US dollar, with comparable sales up 42.9%.

Operational Updates

• Store Count: Total restaurants increased to 2,548 units from 2,457 in the prior year, with 16 new units opened in the quarter, including 10 freestanding locations.
• Digital & Loyalty: The loyalty program grew to 34.3 million registered members. Active redeeming members visited restaurants five times more frequently than non-members. Kiosk sales benefited from restaurant modernization, with 77% of the systemwide portfolio now offering the most modernized experience.
• Capital Expenditure: The company spent $49.1 million on capital expenditures during the quarter and nearly $86 million in the first half.

Cash Flow and Balance Sheet

The company generated $143.4 million in Adjusted Free Cash Flow over the last twelve months ended June 30, 2026, a substantial improvement from $16.1 million in the prior-year comparable period. Net cash provided by operating activities totaled $362.1 million for the same period.

Net financial debt stood at $692.5 million as of June 30, 2026, resulting in a net debt-to-Adjusted EBITDA leverage ratio of 1.1x, down from 1.2x at year-end 2025. Total financial debt decreased to $962.5 million from $1.1 billion at the end of 2025, aided by the redemption of remaining 2029 Sustainability-Linked Senior Notes completed on July 16, 2026. Arcos Dorados ended June with $260 million in cash and cash equivalents, or about $270 million including short-term investments.

Outlook

Management expects conditions to remain dynamic through the second half of 2026 but remains confident in its operating plans and financial discipline. Executives pointed to encouraging early third-quarter trends in Brazil, noting that the country’s quick-service restaurant industry appears to be returning to volume growth. 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.