CCL

Carnival Corp Ltd. 10-Q Summary: Q1 2026

Business Context and Reporting Period

This report covers the quarterly period ended February 28, 2026, for Carnival Corporation & plc. The company operates as a large accelerated filer with a dual-listed company structure (Carnival Corporation in Panama and Carnival plc in the UK). The period reflects strong operational performance with a return to profitability, driven by increased ticket prices, higher onboard spending, and favorable foreign currency impacts, partially offset by higher repair and maintenance costs.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 6.1% year-over-year. Passenger ticket revenues rose 5.0% to $4.0 billion, driven by a $42 million increase in ticket prices and $158 million in favorable foreign currency translation. Onboard and other revenues grew 8.3% to $2.1 billion, fueled by higher guest spending.
• Profitability Turnaround: The company reported a net income of $258 million compared to a net loss of $78 million in Q1 2025. This improvement was aided by a $85 million reduction in net interest expense and the absence of $252 million in debt extinguishment costs recorded in the prior year.
• Expense Management: Operating expenses increased 4.6% to $3.9 billion. While fuel costs decreased by $68 million due to lower prices and improved efficiency, repair and maintenance expenses (including dry-docking) increased by $75 million.
• Debt Reduction: Total debt decreased by approximately $1.4 billion, primarily due to the settlement of $1.1 billion in convertible notes (partially via cash, partially via equity issuance) and regular principal repayments.

Guidance, Outlook, and Risks

• Capital Allocation: The Board approved a new $2.5 billion share repurchase program in March 2026, commencing after shareholder meetings expected on April 17, 2026. A cash dividend of $0.15 per share was paid in February 2026.
• Corporate Structure: The company is proceeding with the unification of its dual-listed company structure and the redomiciliation of Carnival Corporation to Bermuda. The S-4 registration statement was declared effective by the SEC in late February 2026.
• Regulatory Risks: The company is subject to the EU Emissions Trading System (ETS), with full scope impact expected in 2026. The 2025 impact was $91 million. Additionally, the company is awaiting a Supreme Court ruling on the Havana Docks Corporation litigation regarding alleged trafficking in confiscated Cuban property.
• Operational Outlook: Management cites fuel costs, foreign currency fluctuations, and geopolitical uncertainty as key variables affecting future profitability. Capacity increased 0.5% year-over-year, with growth in the North America segment offset by a decrease in the Europe segment due to dry-docking.

Investor Verification Checklist

• Debt Covenants: Verify continued compliance with the 3.0x interest coverage ratio and 65% debt-to-capital ratio, especially given the high leverage profile.
• Convertible Note Settlement: Confirm the dilutive impact of the 69.1 million shares issued in December 2025 to settle the 2027 Convertible Notes.
• Customer Deposits: Monitor the $7.9 billion in customer deposits as a key liquidity buffer and indicator of future revenue recognition.
• Legal Contingencies: Track the outcome of the Supreme Court review of the Havana Docks case and ongoing class actions in Australia and Italy regarding COVID-19 exposure.
• Share Repurchase Timing: Note that the new $2.5 billion buyback program is contingent on shareholder approval for the DLC unification, expected in mid-April 2026.