Southwest Beats Q3 Estimates on Record Revenue but Cuts 2026 Profit Outlook as Fuel Costs Climb

LUV reported record third-quarter 2026 operating revenue of $8.4 billion after the close on Oct. 21, up 21.2% from a year earlier, as unit revenue (RASM) rose 21.6% on capacity that was down 0.4%. Adjusted EPS was $0.66, beating the Zacks consensus of $0.61, and revenue topped the Zacks estimate by 1.89%. On a GAAP basis, net income was $270 million, or $0.55 per diluted share.

Fuel is what changed the outlook. Southwest paid $3.92 per gallon in the quarter, above its own prior assumption of $3.70 to $3.75, and the company said fuel expense rose $821 million year over year, a $1.08 headwind to adjusted EPS. It now guides full-year 2026 adjusted EPS to $2.60 to $2.85, down from the $3.25 to $4.25 range it set in July, and fourth-quarter adjusted EPS to $0.55 to $0.80, below the $0.99 consensus Zacks had for the coming quarter. CNBC also covered the reduced profit outlook.

Operating details were mixed rather than weak. Load factor was 79.8%, unchanged from the third quarter of 2025, and unit costs excluding fuel (CASM-X) rose 3.8%. Full-year capacity growth is now about 1.2%, trimmed from about 1.5%. CEO Bob Jordan said the airline's earnings power is durable "even with significantly higher fuel costs."

The stock came into the print down about 4.1% year to date against a 12.7% gain for the S&P 500. The questions from here are whether the record unit revenue can keep absorbing higher fuel, how much of the Q4 guide depends on the fuel assumption, and whether Southwest's revenue initiatives keep RASM growth near the 19% to 21% it guides for the fourth quarter.