Arcos Dorados Holdings Inc. (NYSE:ARCO) shares climbed 7% after the Latin American McDonald’s franchisee delivered second-quarter earnings and revenue above Wall Street forecasts. Record quarterly sales, stronger customer traffic and double-digit comparable sales growth helped the company overcome a challenging consumer environment across its markets.
Arcos Dorados beats Q2 forecasts
Arcos Dorados reported earnings of $0.22 per share for the second quarter, beating the analyst consensus of $0.15 by $0.07.
Revenue reached $1.31 billion, ahead of Wall Street expectations of $1.28 billion and 14.3% higher than in the comparable period last year.
The result represented the highest quarterly revenue in the company’s history, supported by improved customer traffic and continued sales growth across its restaurant network.
Net income increased to $45.0 million, or $0.22 per share, compared with $0.11 per share in the prior-year quarter.
“Total Revenues, Adjusted EBITDA and Net Income all grew strongly in US dollars, despite challenging consumer dynamics in the second quarter of 2026,” said Luis Raganato, Chief Executive Officer. “In fact, total revenues of $1.3 billion were our highest-ever quarterly revenues, supported by the best guest volume performance of the last six quarters.”
Comparable sales climb more than 15%
Systemwide comparable sales increased 15.3% during the quarter, supported by the company’s strongest guest volume performance in six quarters.
The improvement in customer traffic helped Arcos Dorados generate growth despite pressure on consumers in several Latin American markets.
Consolidated adjusted EBITDA rose 15.2% year over year to $126.8 million, setting a company record for a second quarter.
Adjusted EBITDA margin reached 9.7%, representing an improvement of 10 basis points from the previous year.
Excluding gains associated with a sub-franchisee transaction recorded in the second quarter of 2025, the underlying year-over-year margin improvement was 70 basis points.
Profitability strengthens
Arcos Dorados also delivered a significant improvement in its bottom-line profitability.
Net income margin expanded by 150 basis points year over year to 3.4%.
The increase was supported by improved net interest expense and financing results, together with a lower effective tax rate.
Combined with the growth in adjusted EBITDA, the figures indicate that the company was able to translate higher sales and customer traffic into stronger earnings during the quarter.
Digital sales account for 66% of systemwide revenue
Digital channels remained an important growth engine for Arcos Dorados, with sales through digital platforms increasing approximately 25%.
Digital transactions represented 66% of systemwide sales during the quarter, highlighting the increasing importance of mobile ordering, delivery and other digital channels to the company’s restaurant operations.
The company’s loyalty programme also continued to expand, reaching 34.3 million registered members.
Active loyalty members visited Arcos Dorados restaurants roughly five times as frequently as customers who were not members, demonstrating the programme’s potential to increase engagement and repeat visits.
Restaurant network expands to 2,548 locations
Arcos Dorados continued expanding its physical footprint alongside its digital operations.
The company opened 16 restaurants during the second quarter, bringing its total restaurant network to 2,548 locations.
Continued restaurant openings provide an additional source of long-term growth as the company strengthens its position as McDonald’s largest independent franchisee in Latin America and the Caribbean.
Expansion of the restaurant estate, combined with higher digital adoption and stronger loyalty engagement, gives Arcos Dorados several channels through which to drive future sales.
Free cash flow improves sharply
Cash generation also strengthened considerably.
Arcos Dorados generated adjusted free cash flow of $143.4 million over the latest 12-month period, compared with just $16.1 million during the equivalent prior-year period.
The substantial improvement provides greater financial flexibility for restaurant investment, shareholder returns and other strategic priorities.
Following the 7% rise in the shares, investors are likely to focus on whether Arcos Dorados can maintain its stronger customer traffic and double-digit comparable sales growth while continuing to expand margins and cash generation in the second half of 2026.