Carnival Corporation (NYSE: CCL) beat expectations on nearly every operating metric, then raised its full-year outlook by over $150 million. It did this while absorbing a $150 million fuel price spike. Operational outperformance and cost discipline defined the third quarter.
Revenue reached $8.44 billion, a record that topped the $8.39 billion consensus. Adjusted EPS came in at $1.43, matching last year despite a $0.10 per share drag from fuel and currency effects. Adjusted EBITDA held steady at $3.0 billion, matching last year's high but beating June guidance by $110 million. The strength was widespread. Constant-currency net yields climbed 2.4%, over a point better than the company's own forecast. At the same time, adjusted cruise costs excluding fuel per ALBD rose just 1.8%, a full point better than guided.
Gross margin yields fell 1.3%, but that was entirely due to fuel. The cost per metric ton jumped to $826 from $607 a year ago. Strip out fuel and currency, and the underlying operating leverage improves. Net yields at constant currency hit an all-time high. Cost containment on the non-fuel side beat management's internal targets. That's execution, not a favorable environment.
Management is confident. Full-year net yields (constant currency) are now projected to rise approximately 2.3%, a 50bp improvement from June guidance. Adjusted cruise costs excluding fuel per ALBD (constant currency) were reduced to approximately 2.2%. The result: full-year adjusted net income guidance increased to approximately $3.08 billion, or $2.24 per share, up from the prior $2.93 billion. For Q4, the company anticipates adjusted EPS of approximately $0.20 on adjusted EBITDA of $1.30 billion.
The buyback pace accelerated. Carnival has repurchased about $1.2 billion of its shares year to date, with nearly $800 million of that in Q3. This is an aggressive pace for a company that also redeemed $500 million of 7% notes and paid $204 million in dividends. The capital allocation mix—buybacks over debt reduction—signals management believes the stock is undervalued. S&P's upgrade to investment grade during the quarter removed the last secured debt from the balance sheet and should lower refinancing costs on the $23.9 billion debt stack.
Demand is the foundation. Customer deposits set a Q3 record of $7.6 billion, up almost 7% year over year on flat capacity. Booking volumes for 2027 are already at record levels for both occupancy and pricing. 2028 is off to a strong start, with higher occupancy and prices than last year. The booking curve has pushed further out, reducing revenue risk and giving Carnival pricing power.
The key variable ahead is fuel. Carnival's Q4 guidance assumes a fuel cost of $896 per metric ton, up from $826 in Q3 and $607 a year ago. The operating leverage is significant. Every 10% move in fuel cost impacts adjusted net income by about $59 million per quarter. The company absorbed a $150 million full-year fuel headwind and still raised guidance. If that headwind reverses, earnings could surprise to the upside in 2027.