Key Highlights

● Southwest traded around $41.26 at 2:43pm ET on October 22.

● Third-quarter earnings of $0.66 a share beat the $0.58 expected.

● Revenue of $8.42 billion beat the $8.25 billion estimate, with record unit revenue.

● It cut 2026 guidance to $2.60 to $2.85 a share, citing extra fuel costs.

Southwest Airlines (NYSE:LUV) jumped on Thursday, October 22, 2026, ranking among the top gainers on the Dow Transportation Average after its third-quarter results, released after the close on Wednesday, showed record revenue and earnings above forecasts.

The shares traded around $41.26 at 2:43pm ET, as investors looked past a lower full-year profit forecast.

A record quarter

Southwest reported third-quarter earnings of $0.66 a share, ahead of the $0.58 analysts had expected. Revenue climbed to $8.42 billion, beating the $8.25 billion estimate and marking a sharp increase from a year earlier.

Revenue per available seat mile, a key industry measure of how much an airline earns for each seat it flies a mile, hit a record. That points to strong demand and firm pricing, as Southwest fills its planes and earns more from each seat.

The fuel problem

The catch was fuel. Southwest cut its 2026 earnings guidance to a range of $2.60 to $2.85 a share, down from $3.25 to $4.25 previously. The company pointed to $821 million in extra fuel costs and said it expects fourth-quarter fuel to cost $4.55 a gallon.

For the fourth quarter alone, Southwest guided to earnings of $0.55 to $0.80 a share.

Jet fuel is one of an airline's largest expenses, and its price tends to track crude oil. Brent crude settled at $113.17 a barrel on Thursday, its highest since May 4, after Houthi attacks in Saudi Arabia and a media report that the US and Israel plan renewed strikes on Iran after the November 3 midterm elections. Brent had been below $97 at the start of October.

Why the stock rose anyway

Investors appeared to focus on the strength of demand rather than the fuel hit. Record unit revenue suggests travelers are still willing to pay, while fuel costs, though painful, are an external factor that weighs on the whole industry. Airline stocks rose after Southwest's strong results.

Rivals followed. American Airlines (NASDAQ:AAL) climbed even though it guided to losses, and Delta Air Lines (NYSE:DAL) rose in sympathy. United Airlines (NASDAQ:UAL), which cut the high end of its guidance citing energy costs, according to market data, ended roughly flat.

Airlines also benefited from a broad rotation away from AI and chip stocks after Meta Platforms (NASDAQ:META) outlined heavy capital spending and Lam Research (NASDAQ:LRCX) gave a supply-constrained outlook. The Nasdaq Composite fell 694 points to 26,008.86, its steepest drop since June 5, and the S&P 500 lost 93.74 points to 7,663.43, its worst day since July. The Dow Jones Industrial Average ended essentially flat, up 11.89 points at 52,867.98.

Railroads were also strong, with Union Pacific (NYSE:UNP) and CSX (NASDAQ:CSX) rallying on earnings, and Ryder System (NYSE:R) soared after raising its outlook. About two of every three S&P 500 stocks rose, according to market reports. Treasuries rallied, pulling the 10-year yield back below a closely watched threshold for the first time since September 22, and weekly jobless claims fell to 194,000, the fewest in about three months, a supportive sign for travel demand.

Southwest Watches Fuel and Unit Revenue

Oil prices are the swing factor for Southwest's outlook, with Middle East tensions keeping crude elevated. Investors will watch whether fuel stays near the company's $4.55-a-gallon assumption for the fourth quarter, and whether demand stays strong enough to keep unit revenue at record levels. Upcoming consumer data, including the final University of Michigan sentiment reading on Friday, will offer clues on travel demand, while the Federal Reserve's decision on October 28 will shape the broader economic backdrop.