Carnival Q3 2025 Earnings: Pricing Power Drives Strong Profitability

Carnival Corporation, a titan of the global cruise industry, recently released its third-quarter financial results for 2025. To understand the company's performance, let's dive into the numbers from their latest 10-Q filing with the SEC and see what they reveal about the state of their business.

From Strong Sales to Solid Profits

For the three months ending August 31, 2025, Carnival reported total revenue of $8,153 million ($8.15 billion), which translated into a robust net income of $1,852 million ($1.85 billion). This performance yields a healthy net margin of approximately 22.7%, indicating the company is effectively converting its sales into profit.

The following chart visualizes how Carnival's revenue flows through its various costs and expenses to arrive at its net income for the quarter.

In the chart, the small "Unallocated" revenue of $1.0 million represents a minor rounding difference between the sum of the reported business division revenues and the company's total revenue, a common occurrence in detailed financial reporting.

Revenue Streams and Pricing Power

Carnival's revenue is primarily generated from two sources: passenger tickets and onboard spending. For the quarter, passenger tickets accounted for $5.43 billion, while onboard and other revenues—such as drinks, shore excursions, and specialty dining—brought in $2.72 billion.

Notably, the company's passenger ticket revenue grew by 3.6% compared to the same period last year, even though its capacity, measured in Available Lower Berth Days (ALBDs), decreased by 2.5%. According to the filing, this growth was driven by two key factors:

• Higher ticket prices, which added $215 million to revenue.
• Favorable foreign currency exchange rates, which contributed another $115 million.

This suggests that strong consumer demand is allowing Carnival to command higher prices, more than compensating for a slight reduction in available sailing capacity. Onboard spending also saw a healthy increase, driven by guests spending more during their voyages.

A Look at the Business Divisions

Carnival operates through several segments, with two powerhouse divisions leading the way:

• North America: This segment, which includes well-known brands like Carnival Cruise Line and Princess Cruises, is the company's largest. It generated $5.35 billion in revenue and an impressive $1.52 billion in operating income.
• Europe: This division also performed strongly, with $2.55 billion in revenue and $810 million in operating income.
• Cruise Support: This segment, which covers various corporate and port-related operational costs not assigned to a specific cruise line, registered an expected operating loss of $125 million.

Navigating the Costs of Cruising

Running a global fleet of massive cruise ships is a capital-intensive business. The company's total operating costs for the quarter were nearly $5.9 billion. This includes $4.39 billion in direct cruise and tour operating expenses (like fuel, food, and crew payroll) and another $1.5 billion in general operating expenses. A significant portion of these general expenses is Depreciation and Amortization ($717 million), a non-cash charge that reflects the gradual decline in the value of its ships and other long-term assets.

Beyond operational costs, Carnival's balance sheet carries a significant amount of debt. The company paid $317 million in interest expense this quarter. Furthermore, it incurred $111 million in "Debt extinguishment and modification costs," indicating active efforts to refinance and manage its debt portfolio.

In conclusion, Carnival's Q3 filing paints a picture of a company skillfully capitalizing on sustained demand for travel. Strong pricing power is boosting the top line and leading to impressive profitability. However, the substantial costs associated with fleet maintenance and debt servicing remain critical factors for the company as it navigates the global travel market.