Royal Caribbean Cruises (RCL 7.00%) has managed to stand out despite being the second-largest cruise line by passenger volume. Despite lagging behind Carnival in market share, its $80 billion market cap is more than double that of Carnival's.
That larger size did not stop it from outperforming the S&P 500 over the past year. Still, the obvious drawback to that growth is that it trades at the second-highest valuation in the industry. Only its fast-growing rival Viking Holdings has a higher P/E ratio.
Amid those conditions, will Royal Caribbean continue to sail in smooth waters over the next year, or is it destined to run aground?
Image source: Getty Images.
How Royal Caribbean has fared
For now, Royal Caribbean seems to be firing on all cylinders. The company has mostly recovered from the pandemic-driven shutdown in 2020 and 2021.
Today, load factors are at record rates. In an industry that defines a full ship as two people in every cabin, Royal Caribbean reported 112% occupancy in the third quarter of 2025. With that, it launched new ships in August and November to help address the rising demand for cruise vacations.
Moreover, 2026 bookings are higher than the 2025 bookings at this time last year. This means the company is having to offer fewer discounts to fill its cabins, a factor that should boost its top and bottom lines. To that end, it reported nearly $14 billion in revenue for the first nine months of 2025, rising 7% compared to the same period in 2024.
Additionally, the company kept cost and expense growth in check. It also reduced interest expenses by 45%, resulting in a net income of $3.5 billion in the first three quarters of 2025, a 51% yearly increase.
NYSE: RCL
Key Data Points
Ongoing challenges
The reduced interest costs are critical, as Royal Caribbean took on massive debts to keep the company open during the COVID-19 pandemic. Now, it has to allocate capital to build additional ships to meet demand. Those obligations likely explain why its nearly $20.8 billion in debt is only down from $21.4 billion one year ago.
The debt still represents a tremendous burden for a company with $10.3 billion in book value. Still, interest payments have dropped dramatically due to debt repayments and refinancing efforts, which bodes well for the company's financials.
Moreover, the economy could become a concern. Indeed, the cruise industry has appeared immune to economic uncertainty. However, much of the progress could stop or even reverse should economic woes start cutting into bookings. Furthermore, from an investor perspective, Royal Caribbean outperformed Carnival and Norwegian Cruise Line Holdings over the past year.
Still, its performance has significantly lagged that of Viking, whose stock only came to market in May 2024. Viking's share of cruise passengers is under 1%, but with the company claiming over 4% of the cruise industry's revenue, it punches significantly above its weight.
Additionally, Viking tends to serve higher-end customers, meaning it is less likely to be affected by economic woes. Even though Royal Caribbean's 20 P/E ratio is well below Viking's 34 earnings multiple, it could lose some investor interest to this smaller but emerging rival.
Royal Caribbean in 2026
Given the state of the cruise line, Royal Caribbean is likely to continue beating the market in 2026. Despite that prediction, high debt levels and the economy remain serious concerns. Also, despite a lower valuation, it may lose ground to Viking among investors since Viking appears to have a stronger business model.
Still, economic woes have not affected Royal Caribbean so far. Moreover, the considerable drop in interest expenses speaks to the company's ability to pay down and carry its tremendous debts.
Also, its P/E ratio of 20 makes this an inexpensive stock. That valuation also gives Royal Caribbean stock more room to grow, especially if it keeps filling up its ships. Ultimately, such conditions appear to set Royal Caribbean stock up to maintain a slow and steady move higher over the next year.
