What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-29 compared with 2025-06-26 · 94 added, 86 removed, 213 unchanged (46% of the section changed)

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Our ability to generate cash depends on many factors, including those beyond our control, and we may not be able to generate cash required to service our debt and sustain our operations.

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

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

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 which are unknown.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

2025 2024 2025 2024

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Fuel consumption in metric tons per thousand ALBDs 28.0 29.5 29.4 31.0

Fuel cost per metric ton consumed (excluding European Union Allowance) $ 614 $ 684 $ 628 $ 685

Fuel cost per metric ton consumed (excluding European Union Allowance (“EU Allowances”)) $ 607 $ 670 $ 621 $ 680

Currencies (USD to 1)

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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 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:

(c) For the three months ended August 31, 2025 compared to the three months ended August 31, 2024, we had a 2.5% capacity decrease in ALBDs comprised of a 3.1% capacity decrease in our North America segment and a 1.5% capacity decrease in our Europe segment.

Our North America segment’s capacity decrease was driven 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 Europe segment’s capacity decrease was driven by fewer ship operating days in 2025 compared to 2024.

For the nine months ended August 31, 2025 compared to the nine months ended August 31, 2024, we had a 0.9% capacity increase in ALBDs comprised of a 0.8% capacity increase in our North America segment and a 1.2% capacity increase in our Europe segment.

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

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

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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

• Nonrecurrence of the Red Sea rerouting without guests

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.

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

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

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

Passenger ticket revenues made up 67% of our 2025 total revenues.

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• $215 million - higher ticket prices driven by continued strength in demand

• $115 million - 3.1% capacity increase in ALBDs

• $115 million - net favorable foreign currency translation impact

• $35 million - 0.9 percentage point increase in occupancy

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 driven by:

These increases were partially offset by:

• $132 million - 2.5% capacity decrease in ALBDs

• $31 million - decrease in air transportation revenue

The remaining 33% of 2025 total revenues were comprised of onboard and other revenues, which increased by $66 million, or 2.5%, and were $2.7 billion in 2025 and 2024.

This increase was caused by:

• $90 million - higher onboard spending by our guests

• $37 million - 3.1% capacity increase in ALBDs

• $33 million - net favorable foreign currency translation impact

These increases were partially offset by a 2.5% capacity decrease in ALBDs, representing $65 million.

North America Segment

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Passenger ticket revenues increased by $15 million, or 0.4%, to $3.5 billion in 2025 from $3.4 billion in 2024.

This increase was caused by:

• $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.

This increase was caused by $156 million of higher ticket prices driven by continued strength in demand.

This increase was partially offset by:

• $105 million - 3.1% capacity decrease in ALBDs

• $31 million - decrease in air transportation revenue

The remaining 35% of our North America segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $12 million, or 0.6%, and were $1.9 billion in 2025 and 2024.

This increase was caused by $74 million of higher onboard spending by our guests, partially offset by a 3.1% capacity decrease in ALBDs, representing $57 million.

Europe Segment

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Passenger ticket revenues increased by $166 million, or 9.1%, to $2.0 billion in 2025 from $1.8 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

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This increase was caused by:

• $115 million - net favorable foreign currency translation

• $59 million - higher ticket prices driven by continued strength in demand

• $21 million - 1.3 percentage point increase in occupancy

These increases were partially offset by a 1.5% capacity decrease in ALBDs, representing $27 million.

The remaining 22% of our Europe segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $54 million, or 11%, to $569 million in 2025 from $515 million in 2024.

This increase was driven by:

• $33 million - 8.4% capacity increase in ALBDs

• $33 million - net favorable foreign currency translation impact

• $16 million - higher onboard spending by our guests

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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

• $67 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

• $31 million - higher onboard and other cost of sales driven by higher onboard spending by our guests

• $29 million - higher cruise payroll and related expenses

• $29 million - higher port expenses

• $24 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing

• $23 million - nonrecurrence of a change in pension valuation in 2024

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”)

• $109 million - 2.5% capacity decrease in ALBDs

• $26 million - lower fuel prices including the impact of the cost of EU allowances

• $26 million - lower fuel consumption per ALBD

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Depreciation and amortization expenses increased by $66 million, or 10%, to $717 million in 2025 from $651 million in 2024.

This increase was driven by fleet enhancements.

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.

Operating expenses decreased by $65 million, or 2.2%, to $2.9 billion in 2025 from $3.0 billion in 2024.

This decrease was caused by:

• $92 million - 3.1% capacity decrease in ALBDs

• $28 million - lower fuel prices including the impact of the cost of EU allowances

These decreases were partially offset by $23 million of higher cruise payroll and related expenses.

Selling and administrative expenses decreased by $19 million, or 4.2%, to $436 million in 2025 from $455 million in 2024.

Depreciation and amortization expenses increased by $37 million, or 8.8%, to $461 million in 2025 from $424 million in 2024.

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Operating expenses increased by $135 million, or 12%, to $1.3 billion in 2025 from $1.2 billion in 2024.

This increase was caused by:

• $95 million - 8.4% capacity increase in ALBDs

This increase was driven by:

• $67 million - net unfavorable foreign currency translation

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

• $23 million - nonrecurrence of a change in pension valuation in 2024

• $21 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing

Selling and administrative expenses increased by $22 million, or 9.8%, to $244 million in 2025 from $223 million in 2024.

Depreciation and amortization expenses increased by $24 million, or 14%, to $196 million in 2025 from $173 million in 2024.

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

This increase was driven by fleet enhancements.

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.

Our consolidated operating income increased by $94 million to $2.3 billion in 2025 from $2.2 billion in 2024.

Our North America segment’s operating income increased by $73 million to $1.5 billion in 2025 from $1.4 billion in 2024, and our Europe segment’s operating income increased by $40 million to $810 million in 2025 from $770 million in 2024.

These changes were primarily due to the reasons discussed above.

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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 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”)

Debt extinguishment and modification costs increased by $98 million to $111 million in 2025 from $13 million in 2024 as a result of debt transactions occurring during the respective periods.

Nine Months Ended August 31, 2025 (“2025”) Compared to Nine Months Ended August 31, 2024 (“2024”)

Passenger ticket revenues made up 66% of our 2025 total revenues.

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• $118 million - 0.9% capacity increase in ALBDs

• $116 million - net favorable foreign currency translation impact

• $65 million - 0.5 percentage point increase in occupancy

These increases were partially offset by a decrease of $59 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.

The remaining 34% of 2025 total revenues were comprised of onboard and other revenues, which increased by $452 million, or 7.0%, to $6.9 billion in 2025 from $6.5 billion in 2024.

This increase was driven by:

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• $53 million - 0.9% capacity increase in ALBDs

• $29 million - 0.9 percentage point increase in occupancy

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• $65 million - 0.8% capacity increase in ALBDs

• $30 million - 0.7 percentage point increase in occupancy

These increases were partially offset by a decrease of $65 million in air transportation revenue.

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• $221 million - higher ticket prices driven by continued strength in demand

• $69 million - 2.6% capacity increase in ALBDs

• $121 million - net favorable foreign currency translation

• $55 million - 1.3 percentage point increase in occupancy

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.

• $53 million - 1.2% capacity increase in ALBDs

The remaining 23% of our Europe segment’s 2025 total revenues were comprised of onboard and other revenues, which increased by $143 million, or 11%, to $1.5 billion in 2025 from $1.3 billion in 2024.

This increase was driven by:

• $67 million - higher onboard spending by our guests

• $21 million - 2.6% capacity increase in ALBDs

• $35 million - net favorable foreign currency translation impact

Operating Expenses

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• $105 million - 0.9% capacity increase in ALBDs

• $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)

• $85 million - higher onboard and other cost of sales driven by higher onboard spending by our guests

• $63 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

• $60 million - higher repair and maintenance expenses (including dry-dock expenses)

• $57 million - net unfavorable foreign currency translation

• $33 million - higher cruise payroll and related expenses

• $27 million - higher port expenses

These increases were partially offset by:

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• $82 million - lower fuel consumption per ALBD

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.

Selling and administrative expenses increased by $76 million, or 3.2%, and were $2.4 billion in 2025 and 2024.

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Depreciation and amortization expenses increased by $166 million, or 8.7%, to $2.1 billion in 2025 from $1.9 billion in 2024.

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:

• $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:

Operating expenses decreased by $11 million, or 0.1%, and were $8.0 billion in 2025 and 2024.

This decrease was caused by:

• $84 million - lower fuel prices including the impact of the cost of EU allowances

• $46 million - gain on sale of one ship

• $58 million - lower fuel consumption per ALBD

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

Depreciation and amortization expenses increased by $71 million, or 8.7%, to $884 million in 2025 from $813 million in 2024.

• $46 million - gain on sale of one ship

These decreases were partially offset by:

• $64 million - 0.8% capacity increase in ALBDs

• $48 million - higher onboard and other cost of sales driven by higher onboard spending by our guests

Selling and administrative expenses increased by $8 million, or 0.6%, and were $1.4 billion in 2025 and 2024.

Depreciation and amortization expenses increased by $108 million, or 8.8%, to $1.3 billion in 2025 from $1.2 billion in 2024.

Europe Segment

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This increase was caused by:

• $61 million - net unfavorable foreign currency translation

• $49 million - higher commissions, transportation costs, and other expenses driven by increased ticket pricing and an increase in the number of guests

• $42 million - 1.2% capacity increase in ALBDs

• $38 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

• $38 million - higher onboard and other cost of sales driven by higher onboard spending by our guests

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

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Depreciation and amortization expenses increased by $51 million, or 10%, to $552 million in 2025 from $501 million in 2024.

This increase was driven by fleet enhancements and increases in capacity.

Operating Income

Our consolidated operating income increased by $735 million to $3.7 billion in 2025 from $3.0 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.

Our North America segment’s operating income increased by $484 million to $2.7 billion in 2025 from $2.2 billion in 2024, and our Europe segment’s operating income increased by $260 million to $1.3 billion in 2025 from $1.1 billion in 2024.

These changes were primarily due to the reasons discussed above.

Nonoperating Income (Expense)

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

Interest expense, net of capitalized interest decreased by $317 million, or 23%, to $1.0 billion in 2025 from $1.4 billion in 2024.

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

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Liquidity, Financial Condition and Capital Resources

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.

As of August 31, 2025, we had $6.3 billion of liquidity including $1.8 billion of cash and cash equivalents and $4.5 billion available for borrowing under the Revolving Facility.

In additio n, we had $8.7 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 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 had a working capital deficit of $7.6 billion as of August 31, 2025 compared to a working capital deficit of $8.2 billion as of November 30, 2024.

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

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 $8.1 billion and $6.4 billion of current customer deposits as of May 31, 2025 and November 30, 2024.

Included within our working capital are $6.7 billion and $6.4 billion of current customer deposits as of August 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 $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).

Our business provided $4.7 billion of net cash flows from operating activities during the nine months ended August 31, 2025, a decrease of $0.3 billion, compared to $5.0 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), partially offset by an increase in net income compared to the same period in 2024.

Investing Activities

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

During the nine months ended August 31, 2025, net cash used in investing activities of $1.8 billion was caused by:

• Capital expenditures of $2.1 billion primarily attributable to ship improvements and development of our portfolio of exclusive destinations

• 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.

• Advances of $90 million made to Floating Docks S.

During the nine months ended August 31, 2024, net cash used in investing activities was $4.0 billion.

This was caused by capital expenditures of $4.0 billion primarily attributable to the delivery of two North America segment ships and one Europe segment ship.

Financing Activities

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

During the nine months ended August 31, 2025, net cash used in financing activities of $2.4 billion was caused by:

• Repayments of $10.7 billion of long-term debt

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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:

During the nine months ended August 31, 2024, net cash used in financing activities of $2.0 billion was driven by:

• Repayments of $4.8 billion of long-term debt

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2025 2026 2027 2028 2029 Thereafter

Future export credit facilities at May 31, 2025

Future export credit facilities at August 31, 2025

$ 0.8 $ — $ 1.4 $ 1.3 $ 1.7 $ 3.5

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

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

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

In September 2025, Sun Princess II borrowed $0.8 billion under an export credit facility due in semi-annual installments through 2037.

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