Southwest Airlines Q3 2026 Earnings: EPS Beat, Revenue Record, Fuel Cuts Guide

Southwest Airlines is the third major U.S. carrier this month to tell investors that jet fuel is eating into 2026 profits, and the market kept buying anyway. The company beat Wall Street forecasts on both profit and revenue for the third quarter, reported record revenue, then cut its full-year outlook because fuel prices keep climbing. LUV shares traded near $42.51 on Monday, up about 1.8%, roughly 7% above the $39.88 close on October 21, when the report landed.

The numbers that moved the stock came in the earnings release Southwest issued on October 21 after the market closed. Net income was $270 million, or $0.55 a diluted share, up from $54 million, or $0.10 a share, a year earlier. Excluding one-time items, adjusted EPS was $0.66, ahead of the $0.58 analysts had expected, according to LSEG consensus figures cited by CNBC.

Revenue was the headline. Operating revenue of $8.42 billion rose 21.2% from a year earlier, a third-quarter record for the carrier, and unit revenue, a gauge of what the airline earns per seat flown, jumped 21.6% to an all-time high. Passenger revenue was a record and average fare reached $231.69, up almost 27% from the same quarter of 2025, according to the company's earnings release.

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The reason people are searching for the results days after they came out is the tension between the strong quarter and the cautious outlook. Fuel averaged $3.92 a gallon in the third quarter, above the $3.70 to $3.75 Southwest had assumed, and the airline now expects roughly $4.55 a gallon in the fourth quarter. The fuel expense increased $821 million year over year, which the company said was a $1.08 drag on adjusted EPS.

That fuel pressure forced the guidance cut that makes the numbers a story. Southwest lowered its 2026 adjusted EPS forecast to $2.60 to $2.85, from the $3.25 to $4.25 range it had issued in July. Chief Executive Bob Jordan said in the earnings release that demand remained strong and that the carrier's earnings power is durable even with higher fuel costs. "The consumer is incredibly strong and we do not see that abating," he told CNBC.

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For the fourth quarter, Southwest forecast adjusted EPS of $0.55 to $0.80 and unit revenue up 19% to 21% from a year earlier. The carrier also said it would grow capacity up to 4% year over year in the quarter.

The market reaction has been measured but positive. Southwest shares closed at $39.88 on October 21, rose to $42.03 the next day, and reached $41.75 by October 23. Monday trading near $42.51 leaves the stock up about 7% since the report, though still well below its 52-week high of $55.11 and roughly 45% above the low of $29.26.

Related reading: Morgan Stanley Q3 2026 earnings beat street estimate.

Southwest is not alone in blaming fuel. Delta Air Lines and United Airlines both cut their 2026 profit forecasts this month as energy costs climbed, per CNBC. For investors, the lesson is that the airline's record revenue and pricing power were not enough to shelter profit from a commodity none of them control, and the rally since the report reflects a market betting the fuel pressure eases before the fourth-quarter bill comes due.

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