Here's our initial take on Carnival's (CCL 7.11%) financial report.
Key Metrics
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $5.8 billion | $6.3 billion | 9.5% | Beat |
| Earnings per share (adjusted) | $0.11 | $0.35 | 218% | Beat |
| Customer deposits | $6.8 billion | $8.5 billion | 26% | n/a |
| Debt-to-EBITDA | 4.1x (Q1 2025) | 3.7x | N/A | n/a |
Carnival's Results Show Strong Cruise Demand
The short version is that Carnival's fiscal second-quarter results look very strong and represent the company's highest second-quarter revenue ever. On the headlines, both revenue and earnings surpassed analysts' expectations, and by a significant margin. In fact, net income beat Carnival's own guidance by $185 million, and management specifically called out higher ticket prices and higher onboard spending as catalysts.
Beyond the headlines, virtually every metric is at a record high or looks extremely impressive. For example, adjusted EBITDA was up by 26% year over year to an all-time high, and operating margin improved by 500 basis points and is now significantly above where it was before the pandemic-era disruption.
Carnival also made significant progress on its balance sheet (debt management has been a focus in recent years). It prepaid some of its debt maturing in 2026 and refinanced the remainder at a lower rate, reducing interest expense. Thanks to debt reduction and strong business performance, Carnival's net debt-to-adjusted EBITDA ratio fell from 4.1x to 3.7x sequentially.
Looking ahead, advanced bookings remain near an all-time high, and Carnival's customer deposits (for future trips) reached a record level of $8.5 billion. Management expects costs to rise slightly in the third fiscal quarter due to expenses involved with the highly anticipated opening of its Celebration Key private destination but calls for adjusted net income to rise by "over 40%" for the full fiscal year. Full-year adjusted EPS guidance calls for a range of $1.83 to $1.97 per share, which is one penny more than expected at the midpoint.
Immediate Market Reaction
Not surprisingly, the immediate market reaction to Carnival's earnings report was a rather strong one. Shortly after the opening bell, Carnival was higher by more than 9% on the announcement.
However, it's worth noting that this reaction came before Carnival's conference call, which is scheduled for 10 a.m. on the same morning (Tuesday).
What to Watch
First, it's worth noting that the cruise industry is a very seasonal business. It makes the most money when kids are out of school and families have the ability to travel. So the fiscal third quarter (June, July, and August) is much stronger than the two we've already seen this year. In fact, in the company's third fiscal quarter of 2024, revenue was 33% higher than the next-busiest period. Carnival is calling for $1.90 in full-year adjusted EPS, based on the midpoint of its guidance range, with nearly 70% of that expected to come from the third quarter alone. So to call the company's next earnings report important would be an understatement.
Second, Carnival Cruise Line recently disappointed many of its loyal cruisers with the announcement of a new loyalty program. Of course, when airlines, hotels, etc. change their loyalty programs, there are almost always some people who are unhappy with it, but it's rare to see a virtually universal negative reception like Carnival just got. So one thing I'll be watching is whether some of Carnival's loyal cruisers start booking trips on competing lines more often.
