Arcos Dorados Beats ProfitArco Forecasts in Q2, But Revenue Miss and Slowing Growth Signal Headwinds.
The world's largest McDonald's franchisee reported a strong earnings beat, yet a slight revenue shortfall and a significant deceleration in same-store sales created a mixed picture for the quarter.
MONTEVIDEO, Uruguay – Arcos Dorados (NYSE: ARCO), the largest McDonald’s franchisee in Latin America and the Caribbean, announced its second-quarter 2025 financial results, presenting a complex picture for investors. The fast-food giant showcased impressive profitability, handily beating earnings estimates, but fell short on revenue expectations amid signs of slowing sales momentum.
A Quarter of Contrasting Results
In its unaudited report for the quarter ending June 30, 2025, Arcos Dorados posted total revenue of $1.14 billion. While this represents a 2.8% year-on-year increase, it missed analysts’ consensus estimates of $1.16 billion.
The more positive story was on the bottom line. The company reported a GAAP profit of $0.11 per share, soaring 40.8% above the projected 110.1 million**, which surpassed analyst expectations of $96.33 million by a notable 14.3%.
Despite the strong earnings beat, the company’s operating margin saw a decline, falling to 5.5% from 6.7% in the same quarter last year, indicating potential pressure on operational efficiency.
Diving into Sales and Expansion
A key metric for any restaurant chain, same-store sales, revealed a significant trend. Arcos Dorados reported a 12.1% increase in same-store sales year-on-year. While this growth is robust on its own, it marks a sharp deceleration from the exceptional 49.6% growth recorded in Q2 2024. This slowdown is a critical data point that analysts and investors will be watching closely in the coming quarters.
On a positive note, the company, whose name translates to “Golden Arches,” continued its strategic expansion. It ended the quarter with 2,457 locations, an increase of 62 restaurants from 2,395 in the prior year. This represents an average annual growth rate of 2.6% over the last two years, outpacing the broader restaurant sector and signaling management’s confidence in long-term demand across its 20+ markets.
Long-Term Context and Future Outlook
With a market capitalization of $1.46 billion and trailing 12-month revenue of $4.50 billion, Arcos Dorados remains a dominant force in the Latin American restaurant industry. The company has demonstrated consistent long-term performance, with a compounded annual revenue growth rate of 7.4% since 2019, normalizing for pandemic-related impacts.
Looking ahead, Wall Street analysts appear optimistic, forecasting revenue growth to accelerate to 10.3% over the next 12 months. This suggests a belief that new menu offerings and strategic initiatives could reignite stronger top-line performance.
Key Takeaways
The second-quarter results from Arcos Dorados were a mixed bag. The significant beats on EPS and Adjusted EBITDA highlight the company’s ability to manage profitability effectively. However, the miss on revenue, coupled with a sharp slowdown in same-store sales growth and a lower operating margin, raises valid concerns about near-term growth headwinds. The market’s muted reaction, with the stock remaining flat at $7 immediately following the report, reflects this divided sentiment.
Ultimately, the quarter showcased a company that is successfully expanding its footprint and controlling costs, but is also facing the challenge of maintaining the high-growth trajectory it has recently enjoyed.
