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Item 2. Management’s Discussion and Analysis

2025-06-26 compared with 2025-03-25 · 157 added, 58 removed, 142 unchanged (60% of the section changed)

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Cautionary Note Concerning Factors That May Affect Future Results

Some of the statements, estimates or projections contained in this document are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, operations, outlooks, plans, goals, reputation, cash flows, liquidity and other events which have not yet occurred.

Some of the statements, estimates or projections contained in this document are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including statements concerning future results, operations, strategy, outlooks, plans, goals, reputation, cash flows, liquidity and other events which have not yet occurred.

These statements are intended to qualify for the safe harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended.

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• Our substantial debt could adversely affect our financial health and operating flexibility.

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The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.

Additionally, many of these risks and uncertainties are currently, and in the future may continue to be, amplified by our substantial debt balance incurred during the pause of our guest cruise operations.

There may be additional risks that we consider immaterial or

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which are unknown.

There may be additional risks that we consider immaterial or which are unknown.

Forward-looking statements should not be relied upon as a prediction of actual results.

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Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in the Form 10-K.

For a discussion of our critical accounting estimates, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in the Form 10-K.

Our passenger ticket revenues are seasonal.

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• We believe the volatility in the cost of fuel is reasonably likely to impact our profitability in both the short and long-term.

• We believe the increasing focus on the reduction of greenhouse gas emissions and new and evolving related regulatory requirements, is reasonably likely to have a material negative impact on our future financial results.

• We believe the increasing focus on the reduction of greenhouse gas emissions and new and evolving related regulatory requirements, are reasonably likely to have a material negative impact on our future financial results.

We became subject to the EU Emissions Trading System (“ETS”) on January 1, 2024, which includes a three-year phase-in period.

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Three Months Ended

February 28/29,

Six Months Ended

2025 2024 2025 2024

Passenger Cruise Days (“PCDs”) (in millions) (a)

25.3 24.3 49.6 47.8

Available Lower Berth Days (“ALBDs”) (in millions) (b) (c)

24.2 23.5 47.8 46.5

Occupancy percentage (d) 104 % 104 % 104 % 103 %

Passengers carried (in millions)

3.4 3.3 6.5 6.3

Fuel consumption in metric tons (in millions)

0.7 0.7 1.4 1.5

Fuel consumption in metric tons per thousand ALBDs 29.9 31.9 30.1 31.8

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ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.

(c) For the three months ended February 28, 2025 compared to the three months ended February 29, 2024, we had a 2.5% capacity increase in ALBDs comprised of a 5.7% capacity increase in our North America segment and a 2.9% capacity decrease in our Europe segment.

(c) For the three months ended May 31, 2025 compared to the three months ended May 31, 2024, we had a 3.1% capacity increase in ALBDs comprised of a 0.3% capacity increase in our North America segment and an 8.4% capacity increase in our Europe segment.

Our North America segment’s capacity increase was caused by a Carnival Cruise Line 4,130-passenger capacity ship that transferred from Costa Cruises and entered into service in April 2024.

The increase in our North America segment’s capacity was partially offset by the following:

• Seabourn 460-passenger capacity ship that left the fleet in September 2024

• P&O Cruises (Australia) 2,000-passenger capacity ship that left the fleet in February 2025

Our Europe segment’s capacity increase was caused by the following:

• Cunard 2,960-passenger capacity ship that entered into service in May 2024

• The return to normal operations for ships impacted by the Red Sea rerouting in the prior year

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For the six months ended May 31, 2025 compared to the six months ended May 31, 2024, we had a 2.8% capacity increase in ALBDs comprised of a 2.9% capacity increase in our North America segment and a 2.6% capacity increase in our Europe segment.

Our North America segment’s capacity increase was caused by the following:

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• Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024

• Carnival Cruise Line 4,130-passenger capacity ship that transferred from Costa Cruises and entered into service in April 2024

The increase in our North America segment’s capacity was partially offset by:

• Seabourn 460-passenger capacity ship that was removed from service in September 2024

• P&O Cruises (Australia) 2,000-passenger capacity that was removed from service in February 2025

Our Europe segment’s capacity decrease was caused by a Costa Cruises 4,240-passenger capacity ship that transferred to Carnival Cruise Line in April 2024.

The decrease in our Europe segment’s capacity was partially offset by a Cunard 2,960-passenger capacity ship that entered into service in May 2024.

• Carnival Cruise Line 4,130-passenger capacity ship that was transferred from Costa Cruises and entered into service in April 2024

Our North America segment’s capacity increase was partially offset by:

• Seabourn 460-passenger capacity ship that left the fleet in September 2024

• P&O Cruises (Australia) 2,000-passenger capacity ship that left the fleet in February 2025

Our Europe segment’s capacity increase was caused by:

• Cunard 2,960-passenger capacity ship that entered into service in May 2024

• The return to normal operations for ships impacted by the Red Sea rerouting in the prior year

The increase in our Europe segment’s capacity was partially offset by a Costa Cruises 4,240-passenger capacity ship that transferred to Carnival Cruise Line in February 2024

(d) Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers.

Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.

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Three Months Ended February 28, 2025 (“2025”) Compared to February 29, 2024 (“2024”)

Three Months Ended May 31, 2025 (“2025”) Compared to Three Months Ended May 31, 2024 (“2024”)

Passenger ticket revenues made up 65% of our 2025 total revenues.

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• $115 million - 3.1% capacity increase in ALBDs

• $51 million - net favorable foreign currency translation impact

• $35 million - 0.9 percentage point increase in occupancy

These increases were partially offset by a net unfavorable foreign currency translation impact of $50 million.

The remaining 35% of 2025 total revenues was comprised of onboard and other revenues, which increased by $197 million, or 9.7%, to $2.2 billion in 2025 from $2.0 billion in 2024.

This increase was caused by:

This increase was driven by:

• $128 million - higher onboard spending by our guests

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This increase was caused by:

• $130 million - 5.7% capacity increase in ALBDs

• $102 million - higher ticket prices driven by continued strength in demand

• $23 million - 1.0 percentage point increase in occupancy

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The remaining 39% of our North America segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $122 million, or 8.1%, to $1.6 billion in 2025 from $1.5 billion in 2024.

This increase was driven by $103 million of higher onboard spending by our guests.

Europe Segment

Passenger ticket revenues made up 76% of our Europe segment’s 2025 total revenues.

Passenger ticket revenues increased by $234 million, or 18%, to $1.5 billion in 2025 from $1.3 billion in 2024.

This increase was driven by:

• $109 million - 8.4% capacity increase in ALBDs

• $67 million - higher ticket prices driven by continued strength in demand

• $52 million - net favorable foreign currency translation

The remaining 24% of our Europe segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $79 million, or 20%, to $474 million in 2025 from $395 million in 2024.

This increase was driven by:

• $33 million - 8.4% capacity increase in ALBDs

• $25 million - higher onboard spending by our guests

Operating Expenses

Operating expenses increased by $89 million, or 2.3%, to $3.9 billion in 2025 from $3.8 billion in 2024.

This increase was caused by:

• $101 million - 3.1% capacity increase in ALBDs

• $72 million - higher repair and maintenance expenses (including dry-dock expenses)

• $31 million - higher onboard and other cost of sales driven by higher onboard revenues

• $31 million - net unfavorable foreign currency translation

• $14 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

These increases were partially offset by:

• $103 million - gains on the sales of one North America segment ship and one Europe segment ship

• $40 million - lower fuel prices including the impact of the European Union allowance cost (“EU allowances”)

• $32 million - lower fuel consumption per ALBD

Selling and administrative expenses increased by $26 million, or 3.3%, to $816 million in 2025 from $789 million in 2024.

Depreciation and amortization expenses increased by $59 million, or 9.2%, to $692 million in 2025 from $634 million in 2024.

North America Segment

Operating expenses were $2.6 billion in 2025 and 2024.

The changes in operating expenses for the North America segment were not material.

Selling and administrative expenses increased by $8 million, or 1.8%, to $473 million in 2025 from $464 million in 2024.

Depreciation and amortization expenses increased by $35 million, or 8.5%, to $450 million in 2025 from $414 million in 2024.

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Europe Segment

Operating expenses increased by $73 million, or 6.5%, to $1.2 billion in 2025 from $1.1 billion in 2024.

This increase was caused by:

• $95 million - 8.4% capacity increase in ALBDs

• $31 million - net unfavorable foreign currency translation

These increases were partially offset by a $57 million gain on sale of one ship.

Selling and administrative expenses increased by $18 million, or 8.0%, to $248 million in 2025 from $230 million in 2024.

Depreciation and amortization expenses increased by $22 million, or 14%, to $187 million in 2025 from $164 million in 2024.

This increase was driven by increases in capacity, fleet enhancements and net unfavorable foreign currency translation.

Operating Income

Our consolidated operating income increased by $374 million to $934 million in 2025 from $560 million in 2024.

Our North America segment’s operating income increased by $167 million to $691 million in 2025 from $525 million in 2024, and our Europe segment’s operating income increased by $199 million to $368 million in 2025 from $168 million in 2024.

These changes were primarily due to the reasons discussed above.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest decreased by $109 million, or 24%, to $341 million in 2025 from $450 million in 2024.

The decrease was substantially all due to a decrease in total debt, lower average interest rates and increased capitalized interest.

Debt extinguishment and modification costs decreased by $29 million to $4 million in 2025 from $33 million in 2024 as a result of debt transactions occurring during the respective periods.

Six Months Ended May 31, 2025 (“2025”) Compared to Six Months Ended May 31, 2024 (“2024”)

Passenger ticket revenues made up 65% of our 2025 total revenues.

Passenger ticket revenues increased by $566 million, or 7.7%, to $7.9 billion in 2025 from $7.4 billion in 2024.

This increase was caused by:

• $320 million - higher ticket prices driven by continued strength in demand

• $207 million - 2.8% capacity increase in ALBDs

• $68 million - 0.9 percentage point increase in occupancy

These increases were partially offset by a decrease of $29 million in air transportation revenue.

The remaining 35% of 2025 total revenues was comprised of onboard and other revenues, which increased by $386 million, or 10%, to $4.2 billion in 2025 from $3.8 billion in 2024.

This increase was driven by:

• $252 million - higher onboard spending by our guests

• $103 million - 2.8% capacity increase in ALBDs

• $29 million - 0.9 percentage point increase in occupancy

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North America Segment

Passenger ticket revenues made up 62% of our North America segment’s 2025 total revenues.

Passenger ticket revenues increased by $268 million, or 5.6%, to $5.0 billion in 2025 from $4.7 billion in 2024.

This increase was caused by:

• $148 million - higher ticket prices driven by continued strength in demand

• $138 million - 2.9% capacity increase in ALBDs

• $30 million - 0.7 percentage point increase in occupancy

These increases were partially offset by a decrease of $31 million in air transportation revenue.

The remaining 38% of our North America segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $295 million, or 10%, to $3.1 billion in 2025 from $2.8 billion in 2024.

This increase was driven by:

• $199 million - higher onboard spending by our guests

• $82 million - 2.9% capacity increase in ALBDs

Europe Segment

Passenger ticket revenues made up 77% of our Europe segment’s 2025 total revenues.

Passenger ticket revenues increased by $52 million, or 3.8%, and were $1.4 billion in 2025 and 2024.

This increase was caused by:

Passenger ticket revenues increased by $286 million, or 11%, to $3.0 billion in 2025 from $2.7 billion in 2024.

This increase was driven by:

• $173 million - higher ticket prices driven by continued strength in demand

• $69 million - 2.6% capacity increase in ALBDs

• $38 million - 1.4 percentage point increase in occupancy

These increases were partially offset by:

• $46 million - net unfavorable foreign currency translation

• $39 million - 2.9% capacity decrease in ALBDs

The remaining 23% of our Europe segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $88 million, or 11%, to $887 million in 2025 from $799 million in 2024.

This increase was caused by $27 million of higher onboard spending by our guests, partially offset by a 2.9% capacity decrease in ALBDs, representing $12 million.

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This increase was driven by:

• $52 million - higher onboard spending by our guests

• $21 million - 2.6% capacity increase in ALBDs

Operating Expenses

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• $206 million - 2.8% capacity increase in ALBDs

• $38 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

• $63 million - higher onboard and other cost of sales driven by higher onboard revenues

• $50 million - higher repair and maintenance expenses (including dry-dock expenses)

• $44 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

These increases were partially offset by:

• $40 million - net favorable foreign currency translation

• $28 million - lower fuel prices

• $103 million - gains on the sales of one North America segment ship and one Europe segment ship

• $68 million - lower fuel prices including the impact of the cost of EU allowances

• $58 million - lower fuel consumption per ALBD

• $24 million - lower repair and maintenance expenses (including dry-dock expenses)

Selling and administrative expenses increased by $34 million, or 4.2%, to $848 million in 2025 from $813 million in 2024.

Depreciation and amortization expenses increased by $41 million, or 6.7%, to $654 million in 2025 from $613 million in 2024.

Selling and administrative expenses increased by $61 million, or 3.8%, to $1.7 billion in 2025 from $1.6 billion in 2024.

Depreciation and amortization expenses increased by $100 million, or 8.0%, to $1.3 billion in 2025 from $1.2 billion in 2024.

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North America Segment

Operating expenses increased by $54 million, or 1.1%, and were $5.0 billion in 2025 and 2024.

This increase was caused by a 5.7% capacity increase in ALBDs, representing $138 million.

This increase was partially offset by:

• $44 million - lower repair and maintenance expenses (including dry-dock expenses)

This increase was caused by:

• $145 million - 2.9% capacity increase in ALBDs

• $40 million - higher onboard and other cost of sales driven by higher onboard revenues

These increases were partially offset by:

• $56 million - lower fuel prices including the impact of the cost of EU allowances

• $46 million - gain on sale of one ship

• $42 million - lower fuel consumption per ALBD

• $23 million - lower fuel prices

Selling and administrative expenses increased by $27 million, or 2.8%, to $993 million in 2025 from $966 million in 2024.

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Europe Segment

Operating expenses were $1.3 billion in 2025 and 2024.

The changes in operating expenses for the Europe segment were not material.

Operating expenses increased by $92 million, or 3.9%, to $2.5 billion in 2025 from $2.4 billion in 2024.

This increase was caused by:

• $62 million - 2.6% capacity increase in ALBDs

• $35 million - higher repair and maintenance expenses (including dry-dock expenses)

• $25 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

• $23 million - higher onboard and other cost of sales driven by higher onboard revenues

These increases were partially offset by a $57 million gain on sale of one ship.

Selling and administrative expenses increased by $34 million, or 7.4%, to $499 million in 2025 from $464 million in 2024.

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Operating Income

Our consolidated operating income increased by $267 million to $543 million in 2025 from $276 million in 2024.

Our North America segment’s operating income increased by $244 million to $516 million in 2025 from $272 million in 2024, and our Europe segment’s operating income increased by $21 million to $140 million in 2025 from $119 million in 2024.

Our consolidated operating income increased by $641 million to $1.5 billion in 2025 from $0.8 billion in 2024.

Our North America segment’s operating income increased by $410 million to $1.2 billion in 2025 from $0.8 billion in 2024, and our Europe segment’s operating income increased by $220 million to $508 million in 2025 from $288 million in 2024.

These changes were primarily due to the reasons discussed above.

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Interest expense, net of capitalized interest decreased by $203 million, or 22%, to $718 million in 2025 from $921 million in 2024.

The decrease was substantially all due to a decrease in total debt and lower average interest rates.

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The decrease was substantially all due to a decrease in total debt, lower average interest rates and increased capitalized interest.

Debt extinguishment and modification costs increased by $190 million to $255 million in 2025 from $66 million in 2024 as a result of debt transactions occurring during the respective periods.

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Liquidity, Financial Condition and Capital Resources

As of February 28, 2025, we had $3.8 billion of liquidity including $0.8 billion of cash and cash equivalents and $2.9 billion of borrowings available under our multi-currency revolving credit facility.

In addition, we had $7.8 billion of undrawn export credit facilities to fund ship deliveries planned through 2033 .

As of May 31, 2025, we had $5.2 billion of liquidity including $2.1 billion of cash and cash equivalents and $3.0 billion of borrowings available under the Revolving Facility.

In June 2025, Carnival Corporation and Carnival plc entered into a $4.5 billion New Revolving Facility, which replaced the Revolving Facility.

The New Revolving Facility matures in June 2030 and contains an accordion feature, allowing for up to $1.0 billion of additional revolving commitments.

In additio n, we had $8.4 billion of undrawn export credit facilities to fund ship deliveries planned through 2033 .

We will continue to pursue various opportunities to repay portions of our existing indebtedness and refinance future debt maturities to extend maturity dates and reduce interest expense.

Refer to Note 3 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.

We had a working capital deficit of $8.6 billion as of February 28, 2025 compared to a working capital deficit of $8.2 billion as of November 30, 2024.

The increase in working capital deficit was caused by an increase in customer deposits and decreases in cash and cash equivalents as well as accrued liabilities and other.

We had a working capital deficit of $8.6 billion as of May 31, 2025 compared to a working capital deficit of $8.2 billion as of November 30, 2024.

The increase in working capital deficit was driven by an increase in customer deposits, partially offset by an increase in cash and cash equivalents as well as decreases in accrued liabilities and other and the current portion of long-term debt.

We operate with a substantial working capital deficit.

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The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash.

Included within our working capital are $6.9 billion and $6.4 billion of current customer deposits as of February 28, 2025 and November 30, 2024.

Included within our working capital are $8.1 billion and $6.4 billion of current customer deposits as of May 31, 2025 and November 30, 2024.

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations.

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Operating Activities

Our business provided $0.9 billion of net cash flows from operating activities during the three months ended February 28, 2025, a decrease of $0.8 billion, compared to $1.8 billion provided for the same period in 2024.

This was driven by the nonrecurrence of cash provided by the release of $0.8 billion in credit card reserves in 2024 (included in the change in prepaid expenses and other assets).

Our business provided $3.3 billion of net cash flows from operating activities during the six months ended May 31, 2025, a decrease of $0.5 billion, compared to $3.8 billion provided for the same period in 2024.

This was caused by the nonrecurrence of cash provided by the release of $0.8 billion in credit card reserves in 2024 (included in the change in prepaid expenses and other assets).

Investing Activities

During the three months ended February 28, 2025, net cash used in investing activities was $605 million.

This was caused by capital expenditures of $607 million primarily attributable to ship improvements and developments in our port destinations and exclusive islands.

During the three months ended February 29, 2024, net cash used in investing activities was $2.2 billion.

This was driven by capital expenditures of $2.1 billion principally attributable to the delivery of two North America segment ships.

During the six months ended May 31, 2025, net cash used in investing activities was $1.2 billion.

This was driven by:

• Capital expenditures of $1.5 billion primarily attributable to ship improvements and developments in our port destinations and exclusive islands

• Proceeds of $312 million substantially all from the sales of one North America segment ship and one Europe segment ship

During the six months ended May 31, 2024, net cash used in investing activities was $3.4 billion.

This was caused by capital expenditures of $3.5 billion primarily attributable to the delivery of two North America segment ships and one Europe segment ship.

Financing Activities

During the three months ended February 28, 2025, net cash used in financing activities of $690 million was driven by:

During the six months ended May 31, 2025, net cash used in financing activities of $1.2 billion was caused by:

• Repayments of $5.1 billion of long-term debt

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• Issuances of $4.1 billion of long-term debt

During the three months ended February 29, 2024, net cash provided by financing activities of $0.2 billion was caused by:

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During the six months ended May 31, 2024, net cash used in financing activities of $1.2 billion was caused by:

• Repayments of $4.1 billion of long-term debt

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• Issuances of $3.0 billion of long-term debt

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Funding Sources

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2025 2026 2027 2028 2029 Thereafter

Future export credit facilities at February 28, 2025

Future export credit facilities at May 31, 2025

$ 0.8 $ — $ 1.3 $ 1.3 $ 1.7 $ 3.4

Our export credit facilities contain various financial covenants as described in Note 3 - “ Debt ”.

At February 28, 2025 , we were in compliance with the applicable covenants under our debt agreements.

At May 31, 2025 , we were in compliance with the applicable covenants under our debt agreements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis