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# Carnival Corporation Ltd. (CCL) — Company Narrative, Third Quarter Fiscal 2026 Carnival's fiscal year ends November 30. The third quarter of fiscal 2026 is the three months ended August 31, 2026. Carnival reports in US dollars. Sources: the Annual Report on Form 10-K for fiscal 2025 (year ended November 30, 2025), accession 0000815097-26-000007, filed January 27, 2026; the Quarterly Report on Form 10-Q for the quarter ended August 31, 2026, accession 0000815097-26-000107, filed September 29, 2026; and the quarterly earnings releases furnished on Form 8-K (accessions 0001628280-25-058106, 0000815097-26-000034, 0000815097-26-000086 and 0000815097-26-000104). Each section names its own source. --- ## Business *From the fiscal 2025 Form 10-K (accession 0000815097-26-000007), with the corporate structure updated from the Q3 fiscal 2026 Form 10-Q (accession 0000815097-26-000107) and the Form 8-K of May 7, 2026 (accession 0001104659-26-057200).* Carnival is the world's largest cruise company. It sells cruise vacations to leisure travelers under eight brands: Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, AIDA Cruises, Costa Cruises, P&O Cruises and Cunard. It earns money in two ways. The first is the cruise ticket, which covers the cabin, most meals, entertainment, port calls and youth programs. The second is what guests spend on board and before they sail: drinks, casino, shore excursions, spas, specialty restaurants, internet, shops and photos. In fiscal 2025, revenue was a record $26.6 billion. Passenger tickets brought in $17.4 billion (65%) and onboard and other revenue $9.2 billion (35%). Carnival carried 13.6 million passengers that year: 8.1 million from the US and Canada, 2.8 million from continental Europe, 1.1 million from the UK and 0.9 million from Australia and New Zealand. Guests usually book months ahead and pay a deposit, with the balance due before they sail. That cash sits on the balance sheet as customer deposits until the voyage is completed. It funds the business in advance and is why Carnival runs with a large working capital deficit: $8.9 billion at November 30, 2025, including $6.8 billion of current customer deposits. Demand peaks in the third quarter (the Northern Hemisphere summer), and that is when most of the year's operating income is earned. Holland America Princess Alaska Tours earns substantially all of its revenue from May through September. **Segments.** Carnival reports four segments: - **North America** — Carnival Cruise Line (29 ships, 94,340 berths), Princess Cruises (17 ships, 54,890), Holland America Line (11 ships, 23,030) and Seabourn (6 ships, 2,640). Together that is 63 ships and 64% of capacity at November 30, 2025. Fiscal 2025 segment revenue was $17.6 billion. - **Europe** — AIDA (11 ships, 32,270 berths; the leading brand in Germany), Costa (9 ships, 31,140), P&O Cruises (7 ships, 24,300; Britain's largest cruise line) and Cunard (4 ships, 9,770). Together that is 31 ships and 36% of capacity. Fiscal 2025 segment revenue was $8.5 billion. - **Cruise Support** — the company's port destinations and exclusive islands, plus other services run for the benefit of the cruise brands. - **Tour and Other** — Holland America Princess Alaska Tours: hotels, lodges, glass-domed railcars and motorcoaches in Alaska and the Canadian Yukon. The fleet totaled 94 ships and 272,380 lower berths at November 30, 2025. Carnival had 272,460 berths of the 764,310 in the global cruise industry at December 31, 2025. Carnival, Royal Caribbean Group, Norwegian Cruise Line Holdings and MSC Cruises together held about 80% of industry capacity. The 10-K said two older ships were expected to leave the fleet: Seabourn Sojourn in May 2026 and Costa Fortuna in September 2026. During 2025 the company retired the P&O Cruises (Australia) brand and folded its Australian operations into Carnival Cruise Line. For 2026, 35% of passenger capacity is deployed in the Caribbean, 17% in Europe outside the Mediterranean, 14% in the Mediterranean, 7% in Alaska, 5% in Australia and New Zealand, and 22% elsewhere. **Destinations.** Carnival owns or operates seven port destinations and exclusive islands. They are Amber Cove (Dominican Republic), Celebration Key and RelaxAway, Half Moon Cay and Princess Cays (all in The Bahamas), Grand Turk Cruise Center (Turks & Caicos), Isla Tropicale (Roatan, Honduras; formerly Mahogany Bay) and Puerta Maya (Cozumel, Mexico). Together they welcomed 7.4 million guests in 2025, up from 6.5 million in 2024. The newest, Celebration Key on Grand Bahama, opened in July 2025 and anchors the "Paradise Collection". Expansions at RelaxAway and Isla Tropicale followed in 2026. The company has also announced Ensenada Bay Village – Treasures of Baja in Mexico for its West Coast itineraries. **Newbuilds.** At November 30, 2025, seven ships were on order for delivery through 2033, all from Fincantieri (Italy) and Meyer Werft (Germany): - Carnival Festivale (April 2027) and Carnival Tropicale (March 2028), each with 5,360 berths. - Three 6,160-berth Carnival Cruise Line ships due July 2029, July 2031 and June 2033. - Two 4,280-berth AIDA ships due February 2030 and December 2031, which are still subject to financing. In the second quarter of 2026, Carnival ordered three LNG-powered Voyager-class ships for Princess Cruises, due in 2035, 2038 and 2039. In the third-quarter release, Carnival Cruise Line unveiled Carnival Destiny, arriving in 2029, as the first ship of its next-generation Ace class. At August 31, 2026, contracted newbuild commitments were $0.3 billion for the rest of 2026 and $1.6 billion, $1.5 billion, $1.8 billion and $1.7 billion for fiscal 2027 through 2030, with $11.4 billion thereafter. **Corporate structure.** Through fiscal 2025, Carnival was a dual listed company. Carnival Corporation was incorporated in Panama and Carnival plc in England and Wales, and the two operated as one economic enterprise with separate listings. On May 7, 2026, the two were unified under a single company, Carnival Corporation Ltd., which is listed only on the New York Stock Exchange under the symbol CCL. Carnival plc became its UK subsidiary. Carnival plc shareholders received one Carnival Corporation Ltd. common share for each Carnival plc share, and Carnival plc ADSs were exchanged one-for-one. The London Stock Exchange listing was cancelled, and the "CUK" securities were suspended from NYSE trading. At the same time, Carnival Corporation moved its incorporation from Panama to Bermuda. The company states that its strategy, assets and operations did not change materially. **People and taxes.** Carnival has more than 160,000 team members from about 150 countries. In 2025 an average of 101,000 people worked on board its ships. Collective bargaining agreements cover 48% of shipboard and 21% of shoreside employees. For fiscal 2025, substantially all of Carnival Corporation's income was exempt from US federal income tax under Section 883 of the Internal Revenue Code. For fiscal 2026, the company expects its North American cruise businesses' US-source transportation income to be exempt under the US-UK income tax treaty. Cunard and P&O Cruises are taxed under the UK tonnage tax regime, and AIDA and Costa have elected to stay in the Italian tonnage tax regime through 2034. --- ## Risk Factors *From Item 1A of the fiscal 2025 Form 10-K (accession 0000815097-26-000007). The Q3 fiscal 2026 Form 10-Q (accession 0000815097-26-000107) reports no material change to these risk factors. Where 2026 filings show a risk actually materializing, that is noted.* These are the risks that matter most to the investment case. All of them act on a business with high fixed costs, which depends on travelers' willingness to book a vacation months in advance. - **Geopolitics, war, pandemics and the economy.** Travel advisories, conflict, health scares and recessions can cut cruise demand quickly. The COVID-19 pause of guest operations is the precedent. In 2026 this risk materialized: the company said "extreme geopolitical volatility" from the Middle East conflict hurt bookings for its European, and especially Mediterranean, deployments in the second quarter. The company also cited elevated logistics costs from the disruption, alongside a sharp rise in fuel prices. - **Fuel.** Fuel was $1.8 billion of operating expense in fiscal 2025. Prices depend on world markets, supply disruptions and emissions rules. In the third quarter of 2026, fuel cost per metric ton was $826, against $607 a year earlier. The company estimates that a 10% move in fuel cost per ton would change fourth-quarter 2026 adjusted net income by $59 million. - **Debt and covenants.** Carnival had $24.6 billion of debt principal outstanding at August 31, 2026. Its loan agreements require interest coverage of at least 3.0 to 1.0, debt-to-capital of no more than 65%, minimum liquidity of $1.5 billion and at least $5.0 billion of issued capital and reserves. Cross-default and cross-acceleration clauses mean a breach could make substantially all of the debt due at once. - **Emissions regulation.** The EU Emissions Trading System cost $91 million in 2025, when 70% of in-scope emissions were covered. In 2026, 100% of in-scope emissions are covered. The 10-K estimated about $170 million for 2026, and the Q3 10-Q updated this to about $160 million. FuelEU Maritime has applied since January 2025. The UK planned to bring domestic legs and port calls of international voyages into its ETS from July 2026, which the company did not expect to be material. Adoption talks on the IMO's draft Net Zero Framework were postponed to late 2026. Rules like these could require capital spending, carbon allowances or costlier fuels. They could also reduce ships' resale values or restrict access to some ports. - **Ship incidents and reputation.** Illness outbreaks, fires, collisions, groundings and environmental incidents can disrupt voyages, harm guests and crew, and spread quickly on social media. That affects bookings and how much Carnival must pay to hire crew. - **Weather and climate.** Hurricanes and other natural disasters can force itinerary changes or cancellations and damage shoreside assets. The company's growing investment in Caribbean exclusive destinations increases this exposure. - **Cybersecurity and data privacy.** Breaches can disrupt ship and shore operations and lead to litigation and fines. This risk also materialized: a data security incident on April 14, 2026 led to six purported class actions in the Southern District of Florida. The court consolidated them, and on August 14, 2026 it stayed the case until December 11, 2026. The company does not expect a material impact. - **Foreign exchange.** Carnival earns and spends in euros, sterling, Australian and Canadian dollars, and its shipbuilding contracts are mostly in euros. At November 30, 2025, euro-denominated newbuild payments for brands that do not use the euro totaled $8.4 billion. A 1% move in the euro would change their cost by $84 million. - **People, suppliers and shipyards.** Carnival hires many qualified shipboard crew every year in a competitive labor market. Supply-chain disruptions and inflation can raise costs. Only a few shipyards can build or refit large cruise ships, so delays or shipyard financial trouble can push back deliveries and growth. - **Overcapacity, competition and port restrictions.** Industry capacity can grow faster than demand. Carnival competes with other cruise lines and with land-based vacations. Some popular destinations have moved to limit cruise visitors or raise cruise fees and taxes. - **Tax and legal regime.** Changes to tax treaties, Section 883 or tonnage-tax rules could raise Carnival's tax bill sharply. The Bermuda redomiciliation means shareholder rights are now governed by Bermuda law, which differs from the company's previous jurisdictions. The 10-K also warned that a redomiciliation can attract negative publicity. - **Litigation.** In the Havana Docks case under the Helms-Burton Act, a December 2022 judgment against Carnival Corporation of $110 million plus $4 million in fees was reversed by the 11th Circuit in October 2024. On May 21, 2026, the Supreme Court vacated that reversal and sent the case back to the 11th Circuit. COVID-19 class actions remain pending in Australia and Italy. In the Italian case, the appeals court ordered a non-material damages payment on April 21, 2026. A March 2022 notice from the US Department of Justice and EPA over alleged Clean Water Act violations remains unresolved. The company expects none of these to have a material impact. --- ## Management's Discussion and Analysis — Fiscal 2025 *From Item 7 of the fiscal 2025 Form 10-K (accession 0000815097-26-000007). Adjusted (non-GAAP) figures are from the fourth-quarter 2025 earnings release furnished on Form 8-K (accession 0001628280-25-058106).* Fiscal 2025 set records on both revenue and profit, and Carnival used the cash to repair its balance sheet. **Results.** Revenue rose to $26.6 billion from $25.0 billion. Passenger ticket revenue grew $956 million (5.8%) to $17.4 billion. Most of that growth came from higher ticket prices ($635 million), with currency translation adding $196 million and a 1.0% increase in capacity adding $159 million. Onboard and other revenue grew $644 million (7.5%) to $9.2 billion, of which $466 million came from higher guest spending. Operating expenses rose only 2.0%, to $15.9 billion, because lower fuel prices and lower fuel use per berth day ($109 million each) largely offset volume and currency effects. Operating income hit an all-time high of $4.5 billion, up $909 million (25%): North America earned $3.3 billion and Europe $1.7 billion. Interest expense fell $406 million (23%) to $1.3 billion as rates and debt both came down. Debt extinguishment and modification costs were $409 million. Net income was $2.76 billion ($2.02 per diluted share), against $1.92 billion ($1.44) in fiscal 2024. On the company's adjusted basis, net income was a record $3.1 billion ($2.25 per diluted share) and adjusted EBITDA was $7.2 billion. Occupancy was 105% and capacity was 96.5 million available lower berth days (ALBDs). Year-end customer deposits were a record, up nearly 7%. **Balance sheet.** In December 2025 the company finished a $19 billion refinancing plan in under a year. It has cut total debt by more than $10 billion since the January 2023 peak and has passed its investment-grade leverage threshold. Net debt to adjusted EBITDA was 3.4x at year-end, and Fitch rated the company investment grade. Operating cash flow was $6.2 billion, against $5.9 billion in fiscal 2024. Capital expenditures were $3.6 billion, mainly for one new North America ship, ship improvements and destination development. Ship sales brought in $323 million. The company repaid $12.9 billion of debt and issued $11.2 billion. At November 30, 2025, liquidity was $6.4 billion: $1.9 billion of cash plus $4.5 billion of revolving credit capacity. Another $7.8 billion of export credit facilities was available for future ship deliveries. In December 2025, the boards reinstated the quarterly dividend at $0.15 per share, first payable February 27, 2026. **Accounting change.** Effective December 1, 2025, Carnival extended ship depreciable lives from 30 to 35 years. Residual values were cut from 15% of original cost to 5% for LNG-powered ships, and to salvage values under $25 million for all other ships. The company says the change is not material. **Strategy.** Management's stated priorities for 2026 and beyond are: - Commercial excellence, including AI-driven marketing and personalization. - A disciplined newbuild program with limited capacity growth. - Return-generating ship enhancement programs across some of its cruise lines. - Expansion of its exclusive Caribbean destinations. The aim is to grow same-ship yields and to narrow the price gap between cruises and land-based vacations. --- ## Current Quarter — Third Quarter Fiscal 2026 (three months ended August 31, 2026) *From the Q3 fiscal 2026 Form 10-Q (accession 0000815097-26-000107) and the third-quarter earnings release furnished as Exhibit 99.1 to Form 8-K (accession 0000815097-26-000104, September 29, 2026). Guidance history is from the earnings releases of December 19, 2025 (0001628280-25-058106), March 27, 2026 (0000815097-26-000034) and June 23, 2026 (0000815097-26-000086).* **Summary.** Revenue and net income reached records in the third quarter, the seasonal peak. Higher fuel prices, together with higher selling, administrative and depreciation costs, outweighed the revenue gain, and operating income fell slightly. **Revenue.** Total revenue was $8.44 billion, against $8.15 billion a year earlier. Passenger ticket revenue rose $99 million (1.8%) to $5.5 billion, from a 1.5% capacity increase ($80 million) and higher ticket prices ($36 million). Onboard and other revenue grew faster, up $183 million (6.7%) to $2.9 billion, led by $104 million of higher guest spending. The two segments diverged on price: - **North America.** Ticket revenue rose 1.6% because capacity grew 2.7%, worth $92 million, but lower ticket prices took away $40 million. Onboard revenue rose 7.3%. - **Europe.** Ticket revenue rose 2.0% on $75 million of higher ticket prices. Onboard revenue rose 2.7%. Occupancy was 111.8%, against 111.7% a year earlier. On the company's adjusted measure, net yields in constant currency rose 2.4% to an all-time high, more than a point above June guidance. Gross margin yields fell 1.3% because of higher fuel prices. **Costs.** Operating expenses rose $243 million (5.5%) to $4.6 billion. Higher fuel prices added $149 million, capacity $70 million and higher EU emission-allowance costs $26 million. Fuel cost per metric ton was $826, up from $607. Fuel use per thousand ALBDs improved to 26.9 metric tons from 28.0, a 3.8% gain. Cruise costs per ALBD rose 4.2%, but adjusted cruise costs excluding fuel per ALBD in constant currency rose only 1.8%, one point better than June guidance. Selling and administrative expense rose 7.1% to $834 million, and depreciation and amortization rose 5.0% to $754 million. **Profit.** Operating income fell $52 million to $2.22 billion, from $2.27 billion. North America's operating income fell $41 million but stayed at $1.5 billion. Europe's fell $37 million to $774 million, from $810 million. Below operating income, interest expense dropped $31 million (9.9%) to $285 million on lower debt. Debt extinguishment costs were $23 million, against $111 million a year earlier. Net income attributable to Carnival was an all-time high of $1.92 billion, against $1.85 billion. Diluted EPS was $1.40, against $1.33, on a diluted share count of 1,368 million versus 1,402 million. Basic EPS was $1.41 in both years. On the company's adjusted basis, net income was $1.96 billion against $1.98 billion. Adjusted EPS was $1.43, flat with the prior year, despite a $0.10 ($131 million) hit from fuel prices and currency. Adjusted EBITDA was $2.99 billion, matching last year's record. **Nine months.** For the first nine months of fiscal 2026, against the same period of 2025: - Revenue was $21.26 billion, against $20.29 billion. - Net income attributable to Carnival was $2.72 billion ($1.96 per diluted share), against $2.34 billion ($1.71). - Operating income was $3.68 billion, against $3.75 billion. - Operating cash flow was $5.3 billion, against $4.7 billion. - Capital expenditures were $2.1 billion. **Bookings and deposits.** Customer deposits reached a third-quarter record of $7.6 billion, $0.5 billion above the prior-year record, on flat capacity growth over the next twelve months. Management said bookings strengthened through the quarter, with volumes well ahead of last year. For full-year 2027, both booked occupancy and pricing are at record levels, and 2028 has opened at higher occupancy and prices than the year before. This follows the second quarter, when the Middle East conflict slowed European and Mediterranean bookings. At that time the company chose to protect pricing on those sailings by drawing on the occupancy lead it had built up. **Balance sheet and capital returns.** - **Debt.** Total debt, net of unamortized issuance costs and discounts, fell to $23.9 billion from $26.6 billion at November 30, 2025. In December 2025, $1.1 billion of 5.75% convertible notes due 2027 were settled with 69.1 million shares and $500 million of cash. In June 2026 the 7.00% notes due 2029 became unsecured, and on August 15, 2026 the company redeemed the full $500 million at 103.50% of principal, booking $23 million of extinguishment costs. The 7.88% notes due 2027 and 4.00% notes due 2028 were also released from their collateral. The company says it no longer has any secured debt. - **Ratings.** Moody's upgraded the company in the second quarter. In the third quarter, S&P became the second agency to rate Carnival investment grade. - **Maturities.** Principal due is $301 million for the rest of 2026, $2.5 billion in 2027, $4.0 billion in 2028 and $3.6 billion in 2029. - **Debt mix.** 85% of debt is fixed-rate: 52% US dollar and 33% euro. - **Liquidity.** Liquidity was $5.7 billion: $1.2 billion of cash plus $4.5 billion available on the revolver, which runs through June 2030. Undrawn export credit facilities were $10.7 billion. The working capital deficit was $9.1 billion. - **Dividends.** Carnival paid $204 million in the quarter ($0.15 per share) and $618 million ($0.45 per share) year to date. - **Buybacks.** Under the $2.5 billion repurchase program announced in March 2026, which has no expiration date, Carnival bought 20.3 million shares in the quarter at an average of $27.03. Repurchases were $939 million for the nine months on the equity statement ($929 million in cash), and $1,562 million of authorization remained at August 31, 2026. - **Leverage.** Net debt to adjusted EBITDA was 3.1x at the second quarter. **Long-term targets (PROPEL).** In March 2026 the company set targets to reach by 2029: - Return on invested capital above 16%. - Adjusted EPS growth of more than 50% from 2025. - More than 40% of operating cash flow, about $14 billion, distributed to shareholders. Carnival also aims to reach 2.75x net debt to adjusted EBITDA and to cut its greenhouse-gas emissions rate by more than 25% from 2019 levels. **Outlook (September 29, 2026).** The company raised its full-year operational outlook by more than $150 million of adjusted net income compared with June. Better net yields, non-fuel unit costs and fuel efficiency offset about $150 million of higher fuel prices. The guidance figures below come in two versions. The first is as reported. The "adjusted" version reflects different items for each metric. For net yields, it reflects the summer 2025 close-in decision to redeploy away from the previously planned first-quarter 2026 Arabian Gulf voyages and loyalty-program accounting at Carnival Cruise Line. For cruise costs excluding fuel, it reflects the timing of certain expenses between the years, partial-year operating expenses from two exclusive destinations, and certain elevated logistics costs caused by disruption from the Middle East conflict. - **Full-year 2026 net yields (constant currency):** up about 2.3%, or about 2.7% adjusted. - **Full-year 2026 adjusted cruise costs excluding fuel per ALBD (constant currency):** up about 2.2%, or about 1.1% adjusted. - **Full-year 2026 earnings:** adjusted net income about $3.08 billion, adjusted EPS about $2.24 and adjusted EBITDA about $7.14 billion. Capacity is up 1.0% and fuel is assumed at $768 per metric ton. - **Fourth quarter 2026:** net yields (constant currency) up about 1.7%, or about 2.3% adjusted for loyalty accounting. Adjusted EPS about $0.20, and capacity down 0.1%. **How the fiscal 2026 guidance moved.** Fuel has been the main swing factor in fiscal 2026 earnings guidance: - **December 2025:** adjusted EPS of about $2.48, adjusted net income of about $3.45 billion and adjusted EBITDA of about $7.63 billion, assuming fuel at $524 per metric ton. - **March 2026:** adjusted EPS cut to about $2.21. The company said fuel price changes cost more than $500 million, partly offset by nearly $150 million of operational improvement. - **June 2026:** about $2.22. - **September 2026:** about $2.24, with fuel assumed at $768 per metric ton. For comparison, fiscal 2025 adjusted EPS was $2.25. **Other developments in the period.** - In 2026 the company completed its Paradise Collection projects: the Celebration Key pier extension, which lets four ships dock at once, the new two-ship pier at RelaxAway, Half Moon Cay, and the Isla Tropicale expansion. - Celebration Key welcomed almost 2.5 million guests in its first year. - AIDAbella became the third AIDA ship upgraded under AIDA Evolution, and Holland America named Zuiderdam as the second ship in its Evolution program. **Known trends.** Management warns that geopolitical tensions could keep weighing on profitability, and that further escalation could push fuel prices higher. It also flags currency swings and evolving greenhouse-gas rules as reasonably likely to affect profitability in both the short and the long term. --- ## Subsequent Events *From the Q3 fiscal 2026 Form 10-Q (accession 0000815097-26-000107) and the third-quarter earnings release furnished on Form 8-K (accession 0000815097-26-000104), both dated September 29, 2026.* The Q3 fiscal 2026 10-Q has no separate subsequent-events note, and neither filing discloses any acquisition, divestiture or new borrowing after August 31, 2026. The filings disclose these developments after quarter-end: - **Share repurchases continued.** The September 29 release puts year-to-date repurchases at nearly $1.2 billion, and nearly $800 million since the start of the third quarter. These figures are larger than the $939 million recorded through August 31 and the $549 million of third-quarter repurchases (20.3 million shares at an average of $27.03), so buying continued in September. - **Debt shelf registration.** The 10-Q says the company expected to file a shelf registration statement on Form S-3 on September 29, 2026. It would let Carnival Corporation Ltd. offer debt securities from time to time, which may be guaranteed on an unsecured basis by its wholly owned subsidiary Carnival UK Ltd. No offering amount was disclosed. - **Carnival Rewards launch.** Carnival Cruise Line launched its new Carnival Rewards loyalty program on September 1, 2026. Co-branded credit card issuances in the weeks after launch were more than 300% above pre-announcement levels. The loyalty program's accounting requires part of the ticket price to be deferred, and this is one of the effects the company backs out of its adjusted net-yield guidance. - **Pending litigation milestones.** The data-security class action is stayed until December 11, 2026. The Havana Docks case is back before the 11th Circuit following the Supreme Court's May 21, 2026 decision. - **No new dividend declaration.** Neither filing discloses a dividend declaration after August 31, 2026.