Company Overview
Arcos Dorados Holdings Inc. operates as the largest independent McDonald’s franchisee globally and represents the largest quick-service restaurant (QSR) chain across Latin America and the Caribbean. The company holds the exclusive rights to own, operate, and grant franchises for McDonald’s restaurants in 21 countries and territories throughout the region. As of December 31, 2025, Arcos Dorados commands a massive operational footprint, operating or sub-franchising a total of 2,520 restaurants and employing over 100,000 individuals. The company integrates its “Recipe for the Future” to target positive environmental impacts while actively supporting youth employment in the communities it serves.
Key Financial Performance Highlights
Fourth Quarter 2025 Results
For the three months ended December 31, 2025, Arcos Dorados reported total revenues of $1.26 billion, representing a 10.7% increase year-over-year on an as-reported basis. On a constant currency basis, this top-line growth equaled 18.5%, illustrating the underlying strength of the business before accounting for a negative $89.9 million impact from currency translation during the quarter. The revenue composition was primarily driven by sales from company-operated restaurants, which totaled $1.20 billion, while revenues from franchised operations contributed $59.4 million.
Consolidated Adjusted EBITDA for the fourth quarter reached $172.7 million, a 17.2% increase as reported compared to Q4 2024. The Adjusted EBITDA margin expanded by 0.8 percentage points to 13.6%. Notably, Q4 2025 Adjusted EBITDA included a $20.5 million benefit related to a net tax benefit recorded in Brazil, whereas the Q4 2024 result included a $13.6 million positive impact from payroll tax credits in Brazil.
Net income attributable to the company for the fourth quarter declined sharply by 56.9% year-over-year to $25.2 million. This reduction was primarily attributed to higher income tax expenses, alongside an $8.7 million reorganization and optimization expense recorded under General & Administrative (G&A) expenses, which was excluded from the Adjusted EBITDA calculation. Consequently, the net income margin dropped by 3.1 percentage points to 2.0%, yielding earnings per share (EPS) of $0.12, compared to $0.28 in Q4 2024.
Full Year 2025 Results
For the full year 2025, total revenues amounted to $4.67 billion, a 4.7% increase in US dollars relative to the prior year, or a 15.7% growth on a constant currency basis. Total operating costs and expenses for the year were $4.31 billion, resulting in an operating income of $364.3 million. A detailed breakdown of major annual expenses reveals food and paper costs of $1.60 billion, payroll and employee benefits of $835.1 million, and occupancy/other operating expenses of $1.23 billion.
Full-year Consolidated Adjusted EBITDA peaked at $575.2 million, establishing a new record high US dollar result for the company. Net income for the year was strong at $212.1 million, translating to an annual EPS of $1.01. The company’s full-year net income included a substantial net tax benefit in Brazil totaling $159.0 million, which management expects will convert to cash over the next five years.
Segment-Wise Performance Analysis
Brazil Division As the company’s largest market, Brazil ended 2025 with 1,230 restaurants. In Q4 2025, the division generated $502.0 million in revenues, representing a 12.6% increase as reported. Adjusted EBITDA for the quarter was reported at $99.4 million. Systemwide comparable sales in Brazil grew by 1.5% in the fourth quarter, showing sequential improvement relative to the third quarter of 2025. For the full year, Brazil generated $1.77 billion in revenues and $358.7 million in Adjusted EBITDA.
North Latin American Division (NOLAD) The NOLAD segment, comprising 669 restaurants at year-end, reported Q4 revenues of $338.1 million, an 11.5% increase on an as-reported basis. Operating income for the quarter stood at $16.3 million, while Adjusted EBITDA was $30.8 million. Systemwide comparable sales growth was 1.7% in Q4. Over the full year 2025, NOLAD contributed $1.22 billion to top-line revenues and $116.2 million to Adjusted EBITDA.
South Latin American Division (SLAD) Ending the year with 621 units, the SLAD segment functioned as a primary growth driver regarding systemwide sales, recording 49.5% comparable sales growth in Q4 and largely driving the consolidated full-year comparable sales performance in line with blended inflation. Q4 revenues reached $426.4 million, an as-reported increase of 7.9%, but a massive 44.4% surge in constant currency. Adjusted EBITDA for the quarter was $42.6 million. Annually, SLAD generated $1.47 billion in total revenues and $133.6 million in Adjusted EBITDA.
Operational Metrics and Key Business Drivers
Digital Strategy and Customer Engagement
Digital channels remained a critical pillar for Arcos Dorados, accounting for 62% of systemwide sales in Q4 2025 and 61% for the full year. Digital sales experienced a robust year-over-year increase of 18.7% during the fourth quarter, driven by strong performance across Self-order kiosks, Delivery, and the Loyalty program. The sustained strength in Self-order kiosk sales underscored the ongoing relevance of the on-premise dining experience within the regional QSR industry.
The company successfully finalized its planned year-end rollout of the Loyalty program. As of December 31, 2025, the platform was active in nine countries, including Q4 additions Mexico and Chile, and boasted over 27.2 million registered members. The program is now available across more than 90% of the company’s restaurant base.
Marketing and Menu Innovation
Arcos Dorados utilized culturally relevant marketing campaigns to drive engagement and sales. A notable initiative included a fully integrated menu strategy linked to the Netflix series Stranger Things, which successfully boosted brand conversations. The company heavily catered to price-sensitive consumers via compelling value platforms, notably “EconoMéqui” in Brazil and “McXMenos” in Chile. Product innovations featured a new chicken sandwich in Colombia and limited-time dessert flavors, such as Ovomaltine in Brazil. Additionally, Happy Meal sales saw uplift from licensing partnerships featuring Friends, Zootopia 2, and Disney Villains.
Unit Development and Portfolio Composition
The company accelerated its physical expansion, opening 48 restaurants during the fourth quarter, consisting of 41 Free-Standing units. This brought full-year 2025 openings to 102 locations (including 88 Free-Standing units), surpassing the company’s guidance while utilizing lower total capital expenditures than the prior year.
At the close of 2025, the systemwide restaurant portfolio of 2,520 locations was categorized as follows:
- Ownership: 1,800 Company-Operated and 720 Franchised.
- Formats: 1,384 Free-Standing, 874 Mall Store & Food Court, and 124 In-Store.
- Ancillary Formats: The ecosystem also featured 3,279 Dessert Centers and 467 McCafés. Management noted that 73% of the total restaurant portfolio had been modernized by the end of 2025.
Capital Structure, Liquidity, and Balance Sheet Health
Arcos Dorados concluded 2025 with a solid liquidity profile. Total cash and cash equivalents (including short-term investments) stood at $422.3 million as of December 31, 2025, a significant increase from $138.5 million at the end of 2024. Total financial debt was recorded at $1.10 billion, leading to a net financial debt position of $679.3 million. The company’s leverage ratio, measured as Net Financial Debt to LTM Adjusted EBITDA, ended the year slightly higher at 1.2x compared to 1.1x at the end of 2024.
The consolidated balance sheet highlighted total assets of $3.88 billion, including $851.9 million in current assets and $3.03 billion in non-current assets (primarily driven by $1.30 billion in net property and equipment and $1.13 billion in lease right of use assets). Total liabilities were reported at $3.11 billion, distributed between $828.7 million in current liabilities and $2.28 billion in non-current liabilities. Shareholders’ equity attributable to Arcos Dorados Holdings Inc. was $770.4 million.
Operating cash flows remained robust; for the twelve months ended December 31, 2025, net cash provided by operating activities totaled $296.3 million. This operational cash generation successfully funded the company’s full-year capital expenditures of $281.4 million.
Management Commentary and Strategic Updates
CEO Luis Raganato emphasized the resilience of the Arcos Dorados business model, noting that a culture focused on operational excellence delivered record US dollar profitability across all three divisions. Raganato outlined that the company entered 2026 prioritizing structural efficiency and aiming to monetize the significant market share gains acquired over the preceding years, setting a foundation for a new phase of profitable growth.
2026 Strategic Guidance and Corporate Actions
- Unit Expansion & CapEx: Arcos Dorados projects the opening of 105 to 115 new restaurants in 2026. Total capital expenditures are expected to range between $275 million and $325 million, which the company intends to fund internally via cash on hand and operating cash flows.
- Liability Management: On January 30, 2026, the company initiated a cash tender offer to purchase up to $150 million of its outstanding 2029 Notes. Ultimately, the company redeemed 38.6% of these notes for $135.2 million, plus accrued and unpaid interest.
- Shareholder Returns: The Board of Directors declared a cash dividend of $0.28 per share for 2026. This dividend will be distributed to Class A and Class B shareholders across four equal installments of $0.07 per share in April, June, September, and December of 2026.
Notable Risks and Operational Challenges
While demonstrating topline growth, the financial disclosures highlight several operational risks and margin pressures:
- Currency Volatility: The company is heavily exposed to foreign exchange fluctuations against the US dollar. Currency translation negatively impacted Q4 2025 total revenues by $89.9 millionFor context, the Brazilian Real depreciated from a period average of 5.84 per US$ in Q4 2024 to 5.40 in Q4 2025, while the Argentine Peso saw extreme movement, averaging 1,437.94 per US$ in Q4 2025 versus 999.57 in the prior year period.
- Cost Pressures: Underlying Adjusted EBITDA margins faced headwinds from higher Food and Paper costs in both the NOLAD and SLAD divisions, though these were partially offset by improvements in Brazil.
- Restructuring Exclusions: The company absorbed $8.7 million in reorganization and optimization expenses in Q4 2025 as management executed plans to restructure operations and enhance structural efficiencies.
- Taxation Impacts: A sharply higher income tax expense in Q4 2025 ($72.0 million compared to $33.2 million in Q4 2024) acted as a primary drag on bottom-line profitability, contributing heavily to the 56.9% year-over-year decline in net income for the quarter.