Carnival’s record Q3 beat-and-raise lifts FY25 EPS outlook; shares fade despite stronger bookings

Carnival (CCL) delivered exactly the kind of summer quarter investors hoped to see—record profitability, a clean beat on the top and bottom line, and another guidance raise—yet the stock faded after an initial pop. That contradiction is the tell. Even as demand and pricing stay firm, the bar for travel/leisure is higher, and a soft tape in airlines plus looming macro catalysts is making investors ask for more than just “better than expected.”

For fiscal Q3, adjusted EPS landed at $1.43 versus $1.32 consensus, with reported EPS of $1.33 up from $1.26 a year ago. Revenue reached a record $8.2 billion, edging past the roughly $8.1 billion estimate and marking the tenth consecutive quarter of record sales. Adjusted EBITDA printed about $3.0 billion versus ~$2.9 billion expected, while adjusted net income of ~$2.0 billion topped the ~$1.84 billion figure implied by street models; reported net income was $1.85 billion—both all-time highs. Operationally, net yields in constant currency rose 4.6% year over year, beating June guidance by about 110 basis points, and gross margin yields improved 6.4%. Q3 customer deposits hit a record $7.1 billion.

Costs were manageable, if not low. Cruise costs per ALBD rose 4.6% year over year, and adjusted cruise costs excluding fuel (constant currency) increased 5.5%—still 150 bps better than June guidance. Fuel efficiency continues to improve: fuel consumption per ALBD fell 5.2% year over year. The company refinanced $4.5 billion of debt and prepaid another $0.7 billion, simplifying the capital stack and reinforcing the deleveraging story. Management also highlighted adjusted return on invested capital at 13%, the first time it’s crossed that threshold in nearly two decades, reflecting both pricing power and tighter execution.

Guidance moved higher again. Carnival raised full-year 2025 adjusted EPS to roughly $2.14 from $1.97 previously (the Street sat closer to ~$2.02 ahead of the print). Full-year adjusted EBITDA is now pegged near $7.05 billion, up 15% year over year, with net yields in constant currency up about 5.3%—30 bps better than June—and adjusted cruise costs ex-fuel up about 3.3%, also better than June. For Q4, management guided adjusted EPS to about $0.23 and maintained an outlook for net yields up roughly 4.3% versus last year’s record quarter. On balance, this is the third straight upward revision this year—an unmistakably constructive pattern.

Bookings and pricing remain the core of the bull case. Since May, booking volumes have outpaced last year and capacity growth, with robust onboard spending underpinning net yield gains. Nearly half of 2026 is already booked, in line with the record 2025 pace and at historical high prices (constant currency) across North America and Europe. Early 2027 demand is also firm, with record booking volumes during Q3. Management’s message is consistent: the price-to-value gap versus land-based vacations remains wide, leaving room to keep nudging yields higher without pinching demand—a lever that doesn’t require heroic macro assumptions to work.

Why, then, did the stock slip after initially trading higher? Partly positioning and “sell the news.” The shares are up about 23% year to date into the print, and peers have rallied off April lows. Some investors likely wanted an even higher Q4 earnings bar or sharper cost deceleration to sustain momentum. There’s also a creeping worry across travel: the airlines (JETS) have been trending lower, and while cruises have decoupled positively, a weak tape in one corner of discretionary can tug on the rest. Add the week’s jobs report—potentially delayed by a government shutdown—and you get a setup where macro noise can overshadow micro beats, at least for a day.

From here, the checklist is straightforward. First, watch demand durability into shoulder season and the early 2026 “wave” period—does the “historical high prices” language persist as consumers digest higher rates and a softer labor pulse? Second, monitor the cadence on cost ex-fuel and the sustainability of fuel efficiency gains. Third, track balance-sheet execution: management has put points on the board with refinancing and prepayments; continued deleveraging is key for multiple expansion in a higher-for-longer rate world. Fourth, keep an ear on competitors: any signs of discounting from Royal Caribbean or Norwegian, or changes in onboard spend, will be read through quickly to CCL.

Bottom line: Carnival produced the trifecta—beat, raise, and bullish bookings—validating the multiyear recovery and reinforcing the pricing power story. The post-print wobble looks more like sentiment and sector nerves than a crack in fundamentals. If labor data cooperates and bookings/pricing hold, the path to roughly $2.14 of FY25 EPS and ~$7 billion of EBITDA remains intact. If macro turns against discretionary or travel sentiment frays, today’s hesitation could be the first hint that investors are getting more selective within leisure. For now, execution keeps earning them the benefit of the doubt.