Carnival outlines new 5% yield guidance and sets early 2026 targets amid record-high margins and destination investments

Earnings Call Insights: Carnival Corporation & plc (CCL) Q2 2025

Management View

• CEO Joshua Ian Weinstein opened by addressing the recent conflict in the Middle East, noting “this is all unfolding too quickly in real time to try to project how it could impact our future business” and confirmed that no discernible impact on business had been observed yet.
• Weinstein highlighted record results for the eighth consecutive quarter, stating “EBITDA was up 26%, operating income increased by 67% and net income more than tripled as we continue to benefit from our focus on commercial execution.” He reported net income exceeded guidance by $185 million and yields grew by almost 6.5%, outperforming expectations.
• Margins reached their highest levels in nearly 20 years, with Weinstein emphasizing, “this past quarter’s margins were the highest we’ve achieved in nearly 20 years.”
• The company outperformed its 2026 SEA Change targets for EBITDA per ALBD and ROIC, reaching both metrics 18 months ahead of schedule. Weinstein stated, “we met and exceeded both of these targets a full 18 months ahead of schedule.”
• Carnival raised its full-year yield guidance to 5% and announced new investment in destination assets, including the imminent launch of Celebration Key and planned expansions for RelaxAway, Half Moon Cay, and Mahogany Bay (to be renamed Isla Tropicale). Weinstein described Celebration Key as “consistently ranked among the most searched cruise destinations on Google, and it hasn’t even opened yet.”
• The company announced a new Carnival Cruise Line loyalty program, starting June 2026, tying benefits and status to total spending, aimed at boosting customer engagement and lifetime value.
• CFO David Bernstein stated, “Net income exceeded March guidance by $185 million as we outperformed once again, achieving our highest ever second quarter operating results.” He detailed that yield increases and cost favorability drove this outperformance.

Outlook

• Carnival increased its full-year net income guidance to approximately $2.7 billion, a $200 million improvement over March guidance, primarily from higher yields and additional voyages added in the fourth quarter.
• Full-year yield guidance is now 5% higher than 2024, with Bernstein stating, “June guidance net income of approximately $2.7 billion is a $200 million improvement over March guidance.”
• Guidance for cruise costs without fuel per ALBD is now expected to be up 3.6% compared to the prior year, with a continued focus on cost optimization.
• EBITDA is forecasted at $6.9 billion for the year, representing a 13% increase over 2024, driven largely by same-store revenue growth.
• Third quarter cruise costs without fuel per ALBD are expected to rise 7% year-over-year, driven by the launch of Celebration Key, advertising expense, and lower capacity. Bernstein explained, “Celebration Key, I had mentioned, was about 0.5 point impact for the full year. So it’s about a full point for the back half of the year in each of the third and the fourth quarter.”
• The new Carnival Rewards loyalty program is expected to have a 0.5 point negative impact on yields in 2026, becoming accretive after two years.

Financial Results

• Carnival achieved record-high second quarter EBITDA and operating income, with EBITDA up 26% and operating income up 67% year-over-year. Net income was $185 million better than guidance.
• Yields grew by almost 6.5%, surpassing internal projections by 200 basis points. Customer deposits reached an all-time high, up over $250 million versus the prior year.
• Cruise costs without fuel per ALBD increased 3.5% year-over-year, but this was 200 basis points lower than guidance due to timing of expenses.
• Credit rating upgrades were noted, and the company reduced its net debt-to-EBITDA ratio from 4.1x to 3.7x during the quarter, with plans to continue debt reduction and refinancing.

Q&A

• Matthew Robert Boss, JPMorgan: Asked about product improvements and incremental opportunities. Weinstein explained that improvements are ongoing and incremental, describing them as “business as usual,” and confirmed “we’re still in the early innings” with more to come, including Celebration Key.
• Boss also inquired about margin potential. Weinstein replied, “highest in 20 years, right? So we feel good about that trajectory,” and reiterated a dual focus on cost control and revenue growth.
• Benjamin Nicolas Chaiken, Mizuho: Asked about Celebration Key pricing and marketing. Weinstein confirmed the asset is achieving expected premiums and marketing spend is being shifted to promote the destination.
• Chaiken followed up on the loyalty program, questioning if it would drive direct bookings. Weinstein clarified, “definitely not a push to go more direct. Bookings with our travel agents will get the same benefit.”
• Steven Moyer Wieczynski, Stifel: Asked about booking trends amid geopolitical uncertainty. Weinstein noted April saw more volatility, but May and June improved, stating “May, nicely better than April and the first couple of weeks of June, nicely better than May.”
• Wieczynski also asked about upside potential for the back half of the year. Weinstein indicated less upside than in December but said, “we are always going to strive to meet and exceed guidance.”
• Robin Margaret Farley, UBS: Asked about Q3 Europe demand and onboard revenue resilience. Weinstein reported “Europe, Q3 is looking great” and onboard revenues remained strong, with guidance reflecting both ticket and onboard expectations.
• Brandt Antoine Montour, Barclays: Inquired about lower income consumer trends. Weinstein stated, “we haven’t seen anything that’s really showing us a differentiation in patterns… nothing in particular to speak of.”
• Montour also asked about Q4 guidance. Weinstein noted Celebration Key contributes to Q4’s sequential lift.
• James Lloyd Hardiman, Citi: Asked about booking trends and potential Middle East itinerary changes. Weinstein said volatility was managed without sacrificing pricing and noted limited exposure to impacted regions, with mitigation plans in place.
• Conor T. Cunningham, Melius Research: Asked for specifics on Celebration Key cost impact and loyalty program credit card tie-in. Bernstein provided detailed breakdowns, and Weinstein confirmed the credit card will “supercharge” earning loyalty points, with more details to come.
• David Brian Katz, Jefferies: Asked about ship sale strategy. Bernstein and Weinstein described recent ship sales as opportunistic and not impacting core markets.
• Sharon Zackfia, William Blair: Asked if the loyalty program would boost onboard spend. Weinstein said, “we think the engagement and the ability to earn points through spend is a great thing.”
• Xian Siew Hew Sam, BNP Paribas: Asked about visitor growth potential at RelaxAway and Isla Tropicale. Weinstein stated RelaxAway’s output “can certainly double and more” with expanded infrastructure.
• Christopher Nicholas Stathoulopoulos, Susquehanna: Asked why the loyalty program is launching now and about the 0.5 point yield impact. Weinstein said the program was not contemplated two years ago and Bernstein detailed the accounting impact.

Sentiment Analysis

• Analyst tone was largely positive, with repeated congratulations on strong results and guidance. Questions focused on sustainability of margin improvement, demand amid global volatility, and incremental opportunities rather than fundamental concerns.
• Management maintained a confident tone in prepared remarks, highlighting record performance, early achievement of targets, and strong outlook. During Q&A, there was some caution regarding the unpredictability of the global environment, but responses remained composed with statements such as “we are always going to strive to meet and exceed guidance.”
• Compared to the previous quarter, both analysts and management expressed slightly more caution due to increased global volatility, but optimism about operational execution and demand remained high.

Quarter-over-Quarter Comparison

• Carnival raised full-year net income guidance again, compared to the prior quarter’s increase, and upgraded yield guidance from 4.7% to 5%.
• Strategic focus expanded on destination investments, with greater emphasis on Celebration Key, RelaxAway, and Isla Tropicale.
• Management reported achieving 2026 SEA Change financial targets 18 months ahead of schedule, compared to the previous quarter’s forecast of reaching these by year-end 2025.
• Analysts continued to focus on demand, pricing, cost controls, and incremental growth, but with more direct questions on sustainability of trends given geopolitical developments.
• Management confidence remained strong, though more attention was given to geopolitical risks and their potential impact on bookings.

Risks and Concerns

• Weinstein addressed the Middle East conflict, noting it is too early to project potential business impacts and that “we will actively monitor the situation over the coming days and weeks.”
• Booking volatility was observed in April, as acknowledged by management, but subsequent months improved.
• Third quarter guidance anticipates higher costs due to the launch of Celebration Key, advertising, and lower capacity.
• Management discussed mitigation plans for itineraries potentially impacted by Middle East instability, emphasizing safety and flexibility.

Final Takeaway

Carnival reported another record quarter, surpassing both revenue and margin targets while raising full-year guidance and achieving its 2026 financial goals ahead of schedule. With new destination investments and a revamped loyalty program positioned to drive future growth, management remains confident in navigating near-term volatility, maintaining a strong book position, and optimizing performance through both commercial execution and cost discipline.

Read the full Earnings Call Transcript