Patrick Romero
Carnival Corporation's second quarter revenue hit a record $6.66 billion, and adjusted net income reached $569 million, but a cautious outlook for the third quarter sent the stock tumbling roughly 8% in early Monday trading. The cruise giant beat earnings expectations while falling just short on revenue, then guided below Wall Street's profit forecast for the coming quarter.
At a Glance
- Q2 adjusted EPS of $0.41, up more than 15% year over year; analysts expected $0.34
- Revenue of $6.66 billion set a second quarter record but came in slightly below the $6.7 billion consensus
- Q3 adjusted EPS guidance of roughly $1.35 fell short of the $1.42 analyst estimate
- Customer deposits hit an all time high of $9.0 billion, more than $450 million above the prior year record
- Fuel costs jumped nearly 30%, with cost per metric ton rising from $614 to $793
Record Results, Cautious Guidance
For the quarter ended May 31, Carnival posted both a revenue record and a record adjusted net income for a second quarter. Adjusted earnings of $0.41 per share easily cleared the $0.34 analysts had penciled in. Revenue, at $6.66 billion, landed just below the $6.7 billion consensus, a narrow miss that barely registered compared to the market's reaction to the forward guidance.
That guidance was the real story. Third quarter adjusted EPS of roughly $1.35 came in well below the $1.42 Wall Street expected. The company also trimmed its full year adjusted EBITDA target to roughly $7.11 billion from a prior goal of $7.19 billion. Full year adjusted EPS crept up by just one cent to $2.22, offering little comfort to investors already unsettled by the weaker quarterly outlook.
Geopolitics and Fuel Squeeze the Margins
CEO Josh Weinstein was direct about the pressure points. Geopolitical turbulence, particularly conflict near the Mediterranean, dented booking trends for European deployments. In a prepared statement, Weinstein noted that the company's booked position for the second half of 2026 remains higher than last year at historically high prices in constant currency, a solid underlying picture complicated by more than a full quarter of extreme geopolitical volatility.
Fuel costs added another layer of strain. Carnival does not typically hedge fuel, so when prices move, the company absorbs the full impact. Cost per metric ton climbed to $793 during the quarter, up from $614 a year earlier, a jump of nearly 30%. Fuel consumption per available lower berth day improved 5.6%, which softened the blow but could not fully offset the price surge.
Demand Holds Despite the Headwinds
The underlying demand picture is harder to dismiss. Roughly 93% of Carnival's full year capacity is already sold, leaving fewer open berths than at the equivalent point in 2025. Customer deposits surpassing $9.0 billion is a figure the company rightly highlighted: it is the highest on record and more than $450 million above where deposits stood a year ago.
Carnival has also returned capital to shareholders, repurchasing more than $450 million in stock and paying $414 million in dividends so far this year. Those numbers suggest management's confidence in cash generation even as near term profit guidance disappoints.
Rivals Feel the Same Pressure
Carnival was not alone in selling off. Royal Caribbean dropped roughly 5% and Norwegian Cruise Line Holdings slid around 2% in sympathy. Norwegian had already moved earlier this year to cut its full year profit outlook, blaming rising fuel costs and softer demand for European itineraries. The sector as a whole is absorbing the twin weight of elevated fuel bills and geopolitically sensitive booking patterns, especially for Mediterranean routes.
Frequently Asked Questions
Why did Carnival stock fall if earnings beat expectations?
Markets reacted to the third quarter adjusted EPS guidance of roughly $1.35, which came in below the analyst consensus of $1.42. Strong current results were overshadowed by concern about near term profitability.
How much did fuel costs affect Carnival this quarter?
Fuel cost per metric ton rose to $793 from $614 in the same period a year earlier, a jump of nearly 30%. Because Carnival does not typically hedge fuel, the company bore the full cost increase directly.
What are customer deposits, and why do they matter?
Customer deposits represent money paid in advance for future cruises. A record $9.0 billion in deposits signals strong forward demand and gives Carnival visibility into revenue it has not yet recognized.
How does Carnival's situation compare to other cruise lines?
Both Royal Caribbean and Norwegian Cruise Line Holdings also fell on the news. Norwegian had already trimmed its full year outlook earlier in 2025, pointing to the same fuel cost and European demand pressures Carnival now faces.
What Comes Next for Carnival
Record deposits and high advance booking rates give Carnival a real cushion heading into the back half of the year. The variables that matter most now are whether fuel prices ease and whether geopolitical tensions affecting Mediterranean travel stabilize before the peak summer season. The company's booked position for the second half of 2026 is already ahead of last year, which at least points to appetite for cruising beyond the current uncertainty.
