Shares of Arcos Dorados Holdings Inc. (ARCO), the world's largest independent franchisee of McDonald's Corporation (MCD), got a premarket boost on Wednesday. Investors were digging into a third-quarter report that showed stronger profitability and momentum, even as total sales came in a bit light. The story here isn't just about burgers and fries—it's about digital adoption, navigating Latin American economies, and a very helpful tax credit from Brazil.

The company reported third-quarter sales of $1.192 billion, which missed the analyst consensus estimate of $1.229 billion. But sometimes the top line isn't the whole story. Systemwide comparable sales, which is a better measure of underlying store health, climbed 12.7% from last year. That growth was fueled in part by the digital channel, where revenue jumped 11.2% year-over-year. Digital sales now account for a whopping 61% of total systemwide sales for the quarter. Think about that: over six out of every ten sales in Latin America and the Caribbean are happening through apps or online orders.

Breaking it down by market, Brazil's comparable sales improved sequentially from the second quarter. Meanwhile, Mexico and Argentina posted results that management highlighted as growing 1.8 times and 1.3 times faster than local inflation, respectively. In economies where prices are moving quickly, growing sales even faster is a solid feat.

Now, let's talk about the profit. The headline earnings per share number was 71 cents, a huge leap from 17 cents per share in the same period last year. But there's a major asterisk attached. That result includes a net benefit of $125.2 million from a federal tax credit in Brazil related to years 2016 through 2023. If you strip that one-time item out, adjusted earnings per share were 12 cents. That's a more modest figure, but it's still growth from the prior year's adjusted numbers. The company expects this credit to start boosting its cash from operations in 2026, which is a nice future tailwind.

"We are pushing to have a solid finish to 2025, while positioning ourselves for a stronger performance next year, targeting sustainable topline growth and improved operational efficiency to drive profitability, generate free cash flow and create shareholder value," said CEO Luis Raganato.

The profitability metrics looked healthy. Adjusted EBITDA came in at $201.126 million, up from $124.999 million a year ago. The adjusted EBITDA margin expanded to 16.9% from 11%. The company also continued its expansion, opening 22 new restaurants in the quarter, 19 of which were free-standing locations. By the end of September, 72% of its restaurants featured what the company calls the "most modernized and compelling experience" for guests.

Arcos Dorados finished the quarter with cash and equivalents of $182.797 million. In premarket trading on Wednesday, shares were up 4.58% to $7.54.

So, what's the takeaway? It's a mixed but ultimately positive bag. Sales missed, but underlying store sales grew strongly. Profits soared, but a large chunk was due to a non-recurring tax benefit. The digital business is thriving, and the company is modernizing its footprint. For investors, it seems the promise of future cash flow from the tax credit and the ongoing operational improvements were enough to outweigh the revenue shortfall, at least for today.