Carnival Corporation (NYSE: CCL) Q4 2025 Earnings Call dated Dec. 19, 2025
Corporate Participants:
Beth Roberts — Senior Vice President – Investor Relations
Josh Weinstein — President and Chief Executive Officer
David Bernstein — Chief Financial Officer and Chief Accounting Officer
Analysts:
Robin Farley — Analyst
Brandt Montour — Analyst
Matthew Boss — Analyst
Steve Wieczynski — Analyst
Ben Chaiken — Analyst
James Hardiman — Analyst
Lizzie Dove — Analyst
David Katz — Analyst
Jamie Katz — Analyst
Conor Cunningham — Analyst
Sharon Zackfia — Analyst
Presentation:
Operator
Greetings, and welcome to the Carnival Corporation & plc Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Beth Roberts, Senior Vice President, Investor Relations. Thank you, Beth. You may begin.
Beth Roberts — Senior Vice President – Investor Relations
Thank you. Good morning, and welcome to our fourth quarter 2025 earnings conference call. I’m joined today by our CEO, Josh Weinstein; our CFO, David Bernstein; and our Chair, Micky Arison.
Before we begin, please note that some of our remarks on this call will be forward looking. Therefore, I will refer you to today’s press release and our filings with the SEC for additional information on factors and risks that could cause actual results to differ from our expectations. We will be referencing certain non-GAAP financial measures, including yields, cruise costs without fuel, EBITDA, net income, ROIC and related statistics for all which are on a net basis or adjusted as defined, unless otherwise stated.
A reconciliation to US GAAP is included in our earnings press release and our investor presentation. References to ticket prices, yields and cruise costs without fuel are in constant currency unless we note otherwise. Please visit our corporate website, where our earnings press release and investor presentation can be found. For further information on our proposed DLC unification and shift in legal incorporation, please visit carnivalcorp.com/unify.
With that, I’d like to turn the call over to Josh.
Josh Weinstein — President and Chief Executive Officer
Thanks, Beth. It is definitely gratifying to begin this call by saying we delivered yet another very strong quarter to finish a fantastic year. Not only did we deliver historical fourth quarter highs for revenues, yields, operating income and EBITDA, we achieved these record results in each and every quarter of the year and for the full year. 2025 was clearly another step change forward for us. We delivered over $3 billion to the bottom line, a 60% increase over 2024 and an all-time high net income for our company. This was over 30% greater than our initial guidance.
Full year yields improved more than 5.5% over last year and topped our initial guidance by almost a point and a half, driven by successful commercial execution across our industry-leading cruise lines and all while absorbing the heightened volatility we encountered periodically throughout the year. We also brought unit costs in over a point better than initial guidance at a 2.6% increase for the year with successful cost management mitigating inflation, higher dry dock expenses and the inclusion of costs for our amazing new destination, Celebration Key, Grand Bahama. This combination pushed operating margins and EBITDA margins up by over 250 basis points year-over-year, leading to the highest operating income per ALBD in almost 20 years and EBITDA per ALBD reaching an all-time high.
For all of these incredible achievements, full credit goes to our hard working and dedicated team, the best in all of travel and leisure for the consistent outperformance throughout the year that resulted in ROIC in excess of 13%, the highest-level this company has seen in 19 years. Having said that, we are very well-positioned to top 2025’s fantastic results in 2026. We are already about two-thirds booked, in line with where we were a year ago at this time and at historical high prices for both North America and Europe.
And over the last three months, we achieved booking volumes that were at record levels for both 2026 and 2027. At the same time, closing demand remained strong as demonstrated by the outperformance in our fourth quarter by our onboard revenue per diem significantly outperforming prior year levels and our customer deposits up 7% year-over-year, hitting an all-time high for year end.
Our book position and recent performance are all despite Michigan’s US consumer sentiment readings dipping quite low for several months throughout 2025 and in fact, last month dropping pretty close to its lowest level in recorded history. It is a true testament to the strength of the product offering across our portfolio of world class cruise lines and our guests prioritizing their spending with us. In reality, the disconnect between consumer sentiment and actual booking behavior continues to reinforce what we’ve said for a long-time. Demand for our cruise lines is proving far more resilient than traditional macro indicators would suggest.
We are expecting another year of same ship yield improvement, marking our fourth consecutive year of low or mid-single-digit per diem growth. Normalizing for the accounting changes from the implementation of Carnival Cruise Line’s beneficial new loyalty program and late-stage deployment changes necessitated by geopolitical uncertainties in the Arabian Gulf, we are forecasting a 3% yield increase in 2026.
And while I think it’s obvious to address the question we’ve been getting most often, our 2026 guidance fully incorporates the 14% increase in non-carnival Corporation capacity growth in the Caribbean, taking that to a 27% increase in just two years as well as our 4% growth over that time period. Now even against that backdrop, we continue to drive the business forward, underscoring the advantage of our diversified global portfolio. We are also continuing to successfully mitigate inflation through effective cost management.
And again, with no ship deliveries for 2026, we don’t have the advantage of offsetting large cost increases with significant capacity growth. On that basis, we’ve guided to unit cost growth of 3.5%, which includes a partial year of operating costs from our successful new destination developments and the timing of expenses hitting in the first quarter of 2026 rather than Q4 2025. David will provide more color around the costs, but normalized just for these two items, net cruise cost ex-fuel per ALBD are expected to be up about 2.5% for the full-year. All told, in 2026, we will bring over $350 million more dollars to the bottom line year-over-year and generate over $7.6 billion of EBITDA.
With this strong cash-flow, no new ship deliveries this year and the fantastic balance sheet improvements we’ve made over the last two years, we’re about a year ahead of schedule and can now embark on a capital allocation strategy that will return even more value to shareholders. Having reached a better-than-expected investment-grade leverage ratio of 3.4 times at year end, I am pleased to say we are now formally resuming our dividend at an initial rate of $0.15 per quarter, which we expect to grow responsibly over-time.
Reinstating the dividend reflects both our confidence in the durability of our cash generation and the structural improvements we’ve made to our balance sheet. Alongside the dividend, we will continue to delever to get below 3 times net-debt to EBITDA, while still allowing for opportunistic share repurchases in the future. In fact, we just kick-started that a bit by calling the last of our convertible debt and in the process using some cash to take out 18 million shares.
We will also have ample opportunity to deliver even greater shareholder value over-time, as we continue to reinvest in our future through our disciplined newbuild program, return generating vessel enhancement programs like our successful AIDA Evolution project, which will soon expand to several of our other brands and our ongoing destination development efforts.
We see much more pricing opportunity ahead, as we transition our destination strategy from what has historically been a utilitarian asset base to a marketable growth driver for years to come. Celebration Key is a real differentiator for us and will be complemented by the expansion at RelaxAway, Half Moon Cay later this year. This will soon be followed by Isla Tropicale, Roatan, as we lean into the rest of our Paradise collection even harder.
And as recently-announced, we’ll also be looking-forward to a great guest experience we’re developing with our partners in, Ensenada, Mexico, showcasing the culture and natural beauty of Baja California, Mexico that will greatly benefit our West Coast deployments. And our significant competitive land sea advantage in the incredibly profitable Alaska trades will continue to serve us well for decades to come.
On top of these important attributes, cruising has clearly become a mainstream vacation alternative and we have positioned our company with the most diversified portfolio of world-class cruise lines in the industry. And in fact, we hold the number one or two brand in every major market for cruising today. Our well-recognized cruise lines have been honing in on their target markets, sharpening their marketing messages and reaching target consumers in an incredibly efficient manner. Moreover, we are continuously improving upon our yield management tools and techniques to generate the most revenue possible from our asset base.
We’re also leaning into AI to further improve in areas such as marketing effectiveness and enhanced personalization and to find further efficiency gains across the business. And the good news is the price to experience ratio to land-based alternatives is still at a ridiculous value and provides enormous headroom for many years to come. And that’s despite what will be an approximately 20% cumulative yield increase for us since 2023.
So while we are not immune to things like the lowest consumer sentiment in years or capacity spikes in our most concentrated market or geopolitical conflicts around the world, having two-thirds of the business on the books at higher prices underscores the resilience of our business model. Against all of that background noise, we plan to deliver another double-digit earnings growth on-top of the 60% increase we achieved in 2025, leaving us well-positioned to continue to outperform in the consumer discretionary and travel space yet again. Again, thank you so much to each of our team members, ship and shore, who have delivered such phenomenal results in 2025 and set us up well for another step forward in 2026.
At the end of the day, this is about delivering unforgettable happiness to over 13.5 million people around the world by providing them with extraordinary cruise vacations, while honoring the integrity of every ocean we sail, place we visit, and life we touch and that is something we do incredibly well. Thanks also goes out to our travel agent partners, who have contributed immensely to this success. Likewise, a heartfelt thanks is owed to our loyal guests, investors, destination partners and other stakeholders.
Suffice it to say, these accomplishments reflect the effort, support and loyalty we’ve received from all of you. I continue to be very proud of what we’ve been able to accomplish together, while at the same time, remain incredibly excited about the runway ahead that leads to continued improvement to our business and results for years to come.
With that, I’ll turn the call over to David.
David Bernstein — Chief Financial Officer and Chief Accounting Officer
Thank you, Josh. I’ll start today with a summary of our 2025 fourth quarter results. Next, I will provide a recap of our 2025 deleveraging and refinancing efforts. Then I’ll give some color on our 2026 full year December guidance, as well as some key insights into our 2026 first quarter and then finish up with some comments on the recommended simplification of our corporate structure.
Turning to the summary of our fourth quarter results. Net income of $454 million was nearly 2.5 times the prior year and exceeded September guidance by $154 million or $0.11 per share as we outperformed once again. The performance versus September guidance was driven mainly by two things. First, favorability in revenue were $0.03 per share as yields came in up 5.4% compared to the prior year and that was on top of last year’s robust increase of nearly 7%. This was 110 basis points better than September guidance, driven by continued strong close in demand, which resulted in higher ticket prices and an acceleration of strong onboard spending. The increase in yield was driven by improvements on both sides of the Atlantic.
Second, cruise costs without fuel per available lower berth day or ALBD were only up 0.5% compared to the prior year. This was 2.7 points better than September guidance and was worth $0.04 per share. The favorability was driven by both cost saving initiatives, which we firmed up during the quarter as well as timing of certain expenses between the years. The balance of the favorability of $0.04 per share was a combination of better fuel prices, favorability in fuel consumption and fuel mix, slightly less depreciation than expected, favorable net interest expense and a variety of other small factors.
Next, I will provide a recap of our 2025 deleveraging and refinancing efforts. We have reached a meaningful turning point, achieving an investment-grade net-debt to adjusted EBITDA ratio of 3.4 times, as of the end of the fiscal year 2025. We successfully completed our $19 billion refinancing plan in less than a year. These efforts strengthened our balance sheet by simplifying our capital structure, reducing interest expense and debt, optimizing our future debt maturities and enhancing our financial flexibility.
In total, we have reduced our debt by over $10 billion since the peak less than three years ago. These efforts and our strong continued operating performance resulted in multiple credit rating upgrades throughout the year, culminating in reaching investment-grade with Fitch and being one-notch away with a positive outlook from S&P. All of this is expected to result in an over $700 million improvement in net interest expense in 2026, as compared to 2023, which is fully reflected in our guidance.
Now I will provide some color on our 2026 full year December guidance. On top of the 17% yield growth over the last two years, we are expecting to deliver further yield improvement in 2026 with our guidance forecasting an increase of approximately 2.5%, which is really 3% when normalized for the Carnival Cruise Line loyalty program accounting and the last minute changes we made to our Arabian Gulf deployment and certain dry dock schedules. The 2.5% yield growth is worth over $0.35 per share when compared to 2025, which is a result of both an increase in ticket prices and higher onboard spending, which has continued to remain strong.
Turning to costs, cruise costs without fuel per ALBD are expected to be up approximately 3.5%, costing $0.27 per share for 2026 versus 2025. This is really a normalized rate of 2.5% when factoring in two things. First, operating expenses for full year operations of Celebration Key, Grand Bahama and the midyear opening of our new peer at RelaxAway, Half Moon Cay will impact our overall year-over-year cost comparisons by 0.5 point. Second, the sliding of some costs from fourth quarter 2025 to 2026 will impact our overall year-over-year cost comparisons by about three-tenths of a point.
The three main drivers of our normalized 2.5% cost increase are first, 3% attributable to inflation and higher advertising expenses. Second, about six-tenths of a point from dry dock expense on our income statement. In 2026, after optimizing our dry dock schedule, we are expecting 604 dry dock days. While the total actual spending for our dry docks in 2026 is expected to be roughly in line with 2025, as a result of the nature of the 2026 work, more of the spending is classified as operating expense and less as capital expenditures. And third, cost mitigation of approximately 1.1% from efficiency initiatives and further leveraging our industry leading scale.
Regulatory costs related to emission allowances and higher income taxes driven by Pillar 2 will cost us $0.11 per share. The benefits from net interest expense, fuel consumption and capacity were partially offset by increased depreciation for a net favorable impact of $0.06 per share. The net impact of fuel price and currency is expected to favorably impact 2026 by $0.20 per share with fuel prices favorable by $0.17 and the change in currency exchange rates adding $0.03.
In summary, putting all these factors together, our net income guidance for full year 2026 is over $3.45 billion, an improvement of more than 12% versus 2025 or $0.23 per share. In addition, this will result in $7.6 billion of EBITDA. As we mentioned on the last earnings call, for the longer-term, we’re targeting a net-debt to EBITDA ratio under 3 times. Well, I’m happy to report that even with four dividend payments modeled into our guidance for 2026, we are projecting to get there by the end of the year.
Before I leave our 2026 guidance, I did want to update you on the impact of Carnival Cruise Line’s new loyalty program, Carnival Rewards, which will now start in September 2026 impacting results for the fourth quarter. As a reminder, while the program will be cash flow positive from day one, it does impact our yields in 2026. The impact is expected to be two-teens of a point in 2026, half a point in 2027, two-teens of a point in 2028 and turn positive thereafter.
Now some key insights into our 2026 first quarter. Yield improvement is approximately 1.6% or 2.4% when normalizing for the last minute changes to our Arabian Gulf deployment and certain dry docks in the first quarter. First quarter 2026 has a difficult prior year comparison as 2025 was at a record level with a 7.3% increase compared to 2024. In addition, the quarter is being affected by the Caribbean double-digit industry-wide growth along with the first quarter having the largest absolute quarterly capacity in the Caribbean during the year, as well as the impact of volatility in the first-half of last year had on our advanced booking curve.
Adjusted cruise costs excluding fuel per ALBD are expected to be up approximately 5.9% compared to the prior year and higher than the full year. This results from the fact that all of the items that are expected to impact the full year will have a greater impact on the first quarter.
I’ll finish up with some comments on the recommended simplification of our corporate structure. We are recommending to our shareholders that we unify the dual listed company or DLC framework into a single company listed solely on the New York Stock Exchange. This aligns with the marketplace. We are aware of 15 dual listed companies or DLCs created over the last four decades, including our DLC in 2003.
A substantial number of those have been unified in recent years for many of the same reasons we are recommending our unification. Today, we know of only three other major DLCs remaining. Under our plan, Carnival plc shareholders would receive Carnival Corporation shares on a one-for-one basis and Carnival plc shares and ADSs would be delisted.
Carnival plc would become a wholly-owned UK subsidiary of Carnival Corporation. This would create a single global share price, streamline governance and reporting and reduce administrative costs. We believe it will also increase liquidity for stock trades and increase weighting of the stock in major US stock indices. We intend to hold meetings of our shareholders in April to consider the recommendation. Subject to shareholders approving our recommendation, we intend to complete the unification in the second-quarter of 2026.
Now, operator, let’s open the call for questions.
Questions and Answers:
Operator
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Robin Farley with UBS. Please proceed with your question.
Robin Farley
Great. Thank you very much and that was a lot of information that covered a lot of the initial questions. Maybe just one thing when we think about your guidance and it sounds like if we were just taking out the accounting accrual, it would be closer to sort of 2.8% yield growth for next year. You mentioned that a lot of the beat in Q4 similar to what you’ve said during the year with this acceleration in onboard spend and better close-in demand. Would you say that you — when you’re thinking about your guidance for 2026, are you factoring in that those things will continue at that level? Or are you kind of assuming that those would be at the rate that you’d originally thought? In other words, I’m just thinking about whether that acceleration and good close-in demand is in your guidance or that would really be upside to your guidance? Thanks.
Josh Weinstein
Hey, Robin. So I think the fair thing to say is, look, this is our guidance based on what we expect to happen at this point in time when we look into 2026, taking into account the business we’ve got on the books, the momentum we’ve got and the fact that the world changes on a pretty daily basis. And so we’re always going to try to continue the momentum on the onboard side. We’re always going to try to make sure that the close-in bookings are going to hopefully beat our expectations. But at this point in time, it’s truly our best guess.
And as we always do around this time of year, you could say that waves started early. It always starts early at this point, which I do believe and it’s really something that takes off as we get into the latter part of November, but we’re still right in the mix of it, as you know. And so we do need some more time to see how it all develops.
Robin Farley
Okay, great. And then you alluded to the increase in Caribbean capacity and a lot of that really is focused on Q1. Typically at this point, right, you would be over 80% booked for Q1 or if you could just kind of remind us where that is? I know you mentioned kind of overall for the year and that your overall for the year in line with those record highs. Would you say for Q1 that you’re further ahead than typical or sort of in line with typical just when we think about your — how far past the point of digesting anything in the Caribbean is already — has already happened? Thanks.
Josh Weinstein
Yeah. I mean, for our Q1 sailings, you know, there’s not that much left to go. And we are at least at this point in time, we’re a little bit better-positioned tiny bit versus last year-on the fringes. So not much to — not much to say about the first quarter.
Robin Farley
Okay, great. Thank you.
Josh Weinstein
Okay. Thanks.
Operator
Thank you. Our next question comes from the line of Brandt Montour with Barclays. Please proceed with your question.
Brandt Montour
Great. Thanks and congratulations on the dividend and the results. So the first question is on the bookings. You guys called out the momentum that was clear in the release and the commentary. We had heard that there had been some slight — a slightly less robust demand, still good, but this is not quite what some folks have seen last year. And so just wondering from a revenue management perspective, as you guys had chosen to take any volume at the expense and slightly less pricing growth this year if that was a strategy at all for you guys.
Josh Weinstein
Yeah. Hey, thank you for the question. We’re — as you said, we — our revenue managers brand-by-brand, voyage by voyage are doing the right things to maximize ultimately the amount of revenue we have in the bank by the time the ship comes back to port. And so the momentum has been good. We’re doing things that we think are going to continue to help support the guidance and support the business, not only for 2026, but for 2027 and even some that we’re getting into 2028. So we feel — we feel-good about the way our teams are going about managing the curve.
Brandt Montour
Yeah. Okay. That’s great. Thanks for that, Josh. And then on the Caribbean commentary, you know, we hear about that capacity lift, a lot of it is in the close-in market three and four-day itineraries. I don’t know if you want to comment in terms of your exposure to that market specifically or if you could get in the weeds and kind of help us understand if you have a little bit of different mix versus what you guys see coming into that market for this first quarter specifically.
Josh Weinstein
I actually don’t have it offhand with respect to the first quarter, but clearly, there is — there’s all sorts coming into the Caribbean, right? You’ve got the seven nighters, you got the shorts from others. When it comes to us, Carnival has been America’s cruise line operating in the Caribbean on shorts for, I don’t know, five decades and they’ll continue to do that and do that thoughtfully.
We like the portfolio approach we’re taking even into the Caribbean because when you think about our mix and you look at the first quarter, 20% of our Caribbean capacity is actually from our European brands that have fly crew programs going into places like Barbados and Dominica and — and it works very well for us. So I probably in a roundabout way to answer your question, there is shorts, there is seven nighters and there’s things that are even longer, and we play in all of it.
Brandt Montour
Okay. That’s helpful. Thanks. Nice results.
Josh Weinstein
Thank you.
Operator
Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question.
Matthew Boss
Great. Thanks and congrats on another nice quarter.
Josh Weinstein
Thank you.
Matthew Boss
So, Josh, could you elaborate on the momentum carrying into ’26 that you cited, specifically maybe the cadence of booking volumes that you’ve seen up through holiday, prices in North-America and Europe, which I think you cited at historical highs. And maybe even to say it a different way, have you seen anything irrational at all? And does your guidance for the 3% normalized yields for the year, does that require today’s level of momentum to sustain? Did you bake in benefit for Celebration Key, Half Moon? Is there anything in there for lapping up against the tariff volatility from a year-ago that you saw in bookings? And did you put anything in at all for stimulus in terms of potential benefit?
Josh Weinstein
Yeah. Hey, thanks for the questions, Matt. Let me see if I can answer it holistically. So as a starting point, like I said in an earlier call, we are very happy with the momentum that’s taken us through the end of the first quarter and into the last few weeks and volume is up nicely and we’re doing that the way that we always do that, which is managing the curve and putting out — putting out our product and our experiences to our guests, who are looking for value and that’s what we do and that’s what we’ve done over the last couple of years, as our yields have gone up 17% and we’ll continue to do that.
With respect to all of the ins and outs of what’s been baked in, like I said before, every forecast to some extent is a guess and it’s based on some assumptions. So as far as stimulus specifically, we didn’t really bake anything into that. As far as you know, the macroeconomic impacts that we saw this year, yeah, that did play into it to some extent. I mean, we know that we’re going to lap some of the volatility in the spring. And we also know we didn’t have the volatility of the spring on our radar screen this time last year. Things do happen all the time all-around the world. And so, we just got to be prepared to deliver in light of that.
I just keep going back to the wells. The one thing I’d reiterate to everybody is the fact that things happen in cycles, things happen differently in different geographies and the diversity that we’ve got sets us up very well to be able to withstand volatility and the fact that we’re guiding to a normalized yield increase of 3%, I think is very good.
And I’d just remind you that if you remember what we’ve talked about with respect to the volatility last spring, it was really having an impact on the second half of ’25 into the first half of ’26, which is what’s been built-in exactly to our — to our forecast. So as always, we’re going to try to — we’re going to try to exceed everything. That’s always the goal, but this is our guess at this time. Best guess.
Matthew Boss
Great. It’s great. It’s great color. And then, David, just relative to your 3.25 [Phonetic] net cruise cost outlook for the full-year, what have you embedded, if anything as it relates to cost management? Last two quarters, you’ve shown really nice results on the cost side. I think you cited hundreds of items that you found to leverage scale as potential offsets to the transitory cost headwinds. What have you embedded on the cost management side that could be potential offsets to the cost headwinds that are in your forecast, if anything?
David Bernstein
Yeah. So as I mentioned in my prepared remarks, we did put in about 1.1% of cost mitigation from efficiencies and other initiatives, sourcing, which leverage our scale, etc. So we put in a substantial amount, which offset inflation.
Matthew Boss
Great. Best of luck.
Josh Weinstein
Thank you.
Operator
Thank you. Our next question comes from the line of Steve Wieczynski with Stifel. Please proceed with your question.
Steve Wieczynski
Yeah, hey guys, good morning and happy holidays to all you guys. So, Josh, want to dig into the Caribbean a little bit more and I know it’s — it’s a topic you probably haven’t been asked about a lot recently. You know but if we think about 2026, can you maybe give us some color on what you’re seeing right now in terms of demand for your Caribbean products? And maybe that’s not the right way to ask it and maybe a better way to ask that is your ability to take pricing action right now in the Caribbean. And then maybe how you’re thinking about pure Caribbean yields in ’26 relative to your overall 2.5% yield guidance?
Josh Weinstein
Yeah. I mean, just I guess I’m going to broken record myself, right? I mean, we’re managing the business as we think is appropriate. I’m not going to comment on our competitors on any type of individual basis. I can just tell you, our profile is 4% growth over the last two years between ’25 and 2026. I will tell you that when the industry, when you back us out is growing as much as it has, it’s — yeah, that’s just the backdrop, but we feel good about what we’ve been able to accomplish and how we put it into the forecast. So I’m not sure if you want to try to take it from a different angle, but we feel good about the way we’ve been tackling our business.
Steve Wieczynski
Let me ask it this way then. Caribbean yields will be positive in 2026.
Josh Weinstein
Caribbean yields will absolutely help support the momentum of this business and we look forward to talking at the end of the year when we find out what happens.
Steve Wieczynski
Okay. I thought — I probably try to ask it that way. Okay, second question. Second question is probably going to be a David question. Obviously, we have the first quarter guidance. Wondering, David, if you could help us think a little bit more about the cadence over the last three quarters in terms of both yields and costs and anything we should think about in terms of timing of both of those metrics as we update our models. Thanks.
David Bernstein
Yeah. So as far as cost is concerned, the first quarter was, as you saw, higher than the full year. So when you start thinking about the second, third and fourth quarter, I do believe that there’ll probably be all three quarters less than the full year. However, keep in mind, there’s a lot of decisions left to be made on particular items and exact spending and advertising, repair and maintenance and other things. So the seasonalization between the quarters, as I’ve said before, is a — it’s a tough thing to forecast. Judge us on the full year and not the quarters, but I think it will be probably less than the full year.
As far as the revenue is concerned, you know, you saw the first-quarter. I mean the prior year first half has much more difficult comparisons, higher yield increases than the back half. So relatively speaking, I would expect to see on a year-over-year basis higher yield increases in the back half of this year than the first half.
Steve Wieczynski
Okay. Got you. Thanks guys. Have a good holiday.
Josh Weinstein
Thank you. Happy holidays.
Operator
Thank you. Our next question comes from the line of Ben Chaiken with Mizuho Securities. Please proceed with your question.
Ben Chaiken
Hey, thanks. For ’26 on the cost side, it sounds like the 2.5 [Phonetic] normalized cost has six-tenths of a point for dry docks in it with more opex versus capex. To your point, David, I guess, what’s the more typical allocation as we think about the future? Is it the ’25 version or the ’26 version, if that makes sense, assuming I understood you properly?
David Bernstein
Yeah. It’s really difficult to depict here because remember, we’re talking about a very small movement on a large number, maybe 4% or 5% on over $1 billion. So as a result of that, it is very difficult to project what will happen in 2027. You know, this has been going on for a long time. One is that — and it has swung both ways. I mean, one of the things that I used to — that I’ve always said many times is the fact that not every dry dock day is created equal. And this is what I was referring to. Now I’m just getting a little bit more detail of the split between capex and opex. But we’re really talking about a small movement. And as we plan through 2027, we’ll get better visibility into that. But on the margin, it’s kind of small. It’s a handful of percent difference between the two pieces.
Ben Chaiken
Okay. Got it. And then on the fuel side, there was — it’s — there’s some rounding, so it’s not like perfect math, but it seems like there was quite a step up in the emission allowance tax. I could be mistaken, but I think it’s around $160 million for you in ’26. Is there any way to — is it?
David Bernstein
The increase was about $0.06 a share or about, let’s call it roughly $80 million. Remember, in ’26, we went from — we went to the full 100% versus ’25 where we were at — it was 70% of the emissions allowances. So because of the step up, there was an increase plus there was a slight increase in the projected cost of the EU allowances as well.
Ben Chaiken
Totally. No, I got you. I was just thinking, is there a smart way to think about the out years? Like are we — is clearly — is that step-function over and now it just grows by whatever you guys do on a
David Bernstein
Yeah. This step function is over because we’re at 100%.
Ben Chaiken
Okay. Thanks.
Operator
Thank you. Our next question comes from the line of James Hardiman with Citi. Please proceed with your question.
James Hardiman
Hey, good morning. So circling back to the Caribbean conversation. As we think about — obviously, there’s some one-timers in the first quarter, the Arabian Gulf deployment changes, but sort of your like-for-like numbers that you’ve given us, right, 2.4% for Q1 relative to 3% for the year. Is that delta primarily just the outsized mix of the Caribbean in Q1?
And then to Steve’s question, as we think about like the shape of the year, do you ultimately feel better we move into the year about that Caribbean piece? I think the Caribbean is a much larger chunk of Q4 as well. But it seems like based on the answer to the previous question that you feel pretty good that the Q4 yields, if anything, are probably going to be better than the full year. So just trying to understand the Caribbean dynamic in the context of all that. Thanks.
Josh Weinstein
Yeah. Hi, James. So I think you’ve heard pieces of this throughout. So first of all, if you look at the first quarter versus the first half versus the second half, the comps are a lot different when it comes to the yields that we’re lapping. We have the impact of the volatility in the spring, which is having an the outsized impact now, not for the second half of 2026. And overall, we feel good about the business. There are some specific drivers for Q1 that we’ve talked about and we’ll hopefully continue to, like I said, ride the momentum and keep improving the business.
James Hardiman
Got it. And then I guess moving to the other side of the pond. Obviously, as we think about global capacity growth for 2026, it’s in a very good spot, right? The issue is that a lot of that capacity is moving from Europe into the Caribbean. I would think that given your relative exposure to some of your peers in Europe that maybe that’s a net benefit to you guys, maybe speak to that dynamic and whether or not you feel like you’re sort of uniquely positioned there? Thanks.
Josh Weinstein
Yeah. So I’d say, yeah, love it. Keep clearing out of Europe, that will be fine with us. At the end of the day, with our strategy and our approach, when you have P&O Cruises, which is the biggest invest in the UK and AIDA, which is the biggest and the best in Germany. And then we’ve got Costa that’s really servicing the Southern European countries. Our European strategy, we think is very, very effective over the long-term as we’ve been saying for a long-time. And we also frankly see strength in our North American brands European program. So we’re very happy with, a, where we’re sourcing and b, where we’re deploying. And so, we’ll — we’ll continue to stick to our strategy.
James Hardiman
Got it. Appreciate it. Thanks, Josh, and happy holidays.
Josh Weinstein
Happy holidays. Thanks, James.
Operator
Thank you. Our next question comes from the line of Lizzie Dove with Goldman Sachs. Please proceed with your question.
Lizzie Dove
Hi, good morning. Thanks for taking the question. I wanted to go higher-level and just on the strategy that you’ve taken. You have fewer ships launching than some of your peers, yet you’re seeing clearly congrats to the great yield growth. Could you maybe talk more about what you think is driving that same ship yield growth from here? How much of that is maybe brand improvements in some of the brands that have been lagging, maybe more exposure to new to cruise? Just anything you could share there would be helpful.
Josh Weinstein
Yeah, Lizzie. So I think it is our brands getting better and better at their commercial execution up-and-down that silo, right, is everything from how we do the revenue management and the tools we use and the capabilities that we have. It’s the performance marketing. It’s the better and clearer brand messaging that’s really speaking to why you shouldn’t just want to take a vacation with us or a cruise with us, but you want to take a cruise with that brand. That’s when we know we’re doing it right and that’s what we’ve been focused on.
And of course, I always say I talk about this at the least only because we’re really so good at it. We’re always trying to figure out how do we make the experience on-board meet and exceed expectations of our guests. And as you’ve heard me say, we have a tremendously ridiculous price to experience ratio gap between what we give to our guests and what you can get in land-based alternatives. And that value proposition, I think, is getting clearer and clearer when it comes to how we can market and talk about this.
Now because we don’t have capacity growth in the next couple of years to speak of any of any of any real size, we don’t have this situation where we’re trying to figure out how do we get more people onto our ships. We have actually got pretty maximum capacity on our ships. So newcomers are welcome as are our loyal guests, who we love, as are folks who have cruised on others and want to try one of ours. And so, we’re trying to appeal to as broad an audience as we can for the limited space that we have, which is a good recipe for being able to improve our revenue.
Lizzie Dove
Great. And then I know you get asked this every quarter, but I’ll ask it again, especially in the — in the context of contribution to your net yield guidance this year. Celebration Key has been open a number of months now. I think you’ve had 1 million guests you said go there. I think we all make our own estimates of ticket yield contribution onboard. Anything you can share of just participation rate, spend rate, what you are seeing on uplift and what you’re expecting on the go-forward and as you kind of develop RelaxAway more?
Josh Weinstein
Well, thanks for asking again. So I’d say we celebrated just yesterday, the one millionth guest coming to Celebration Key, which we were ecstatic to be able to celebrate. And it will give you the same answer, which is we’re getting the ticket premium that we anticipated, the output from the onboard short operations is in-line and the fuel consumption is too. So it’s proceeding pretty much as we had planned. We’ll continue to learn and adopt over time as we should.
And we’ll certainly factoring in, as you said, what are some lessons learned that could be translatable to Half Moon RelaxAway. But I would say we’re trying to make them very distinct and different experiences. And I think our guests are going to be delighted with that, and we can’t wait to show them both for much of our capacity on the same itinerary. So we’re looking-forward to that.
Lizzie Dove
Thank you.
Josh Weinstein
Thanks, Lizzie.
Operator
Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
David Katz
Hi, good morning. David, and thanks for taking my question. David, could you just help us a bit with fixed versus variable costs within where you’re at today. You know, I know we’re not going to be able to predict the future necessarily, but we’d love to get a sense for how we might find leverage in the model should it turn out to be a better year than anticipated?
David Bernstein
So it’s a difficult question to answer because we do operate at full capacity and essentially sell every cabin. So once you have that basic premise in the business, you know what you’re basically saying is a ship size and most of your costs are fixed. However, that doesn’t mean that you can find better ways and optimize the business by doing things differently, which is whether it’s been using AI or other things in order to improve your cost structure. We’re doing that shoreside as well. You know, shoreside, you find that obviously, somebody could say your advertising expense is variable, but in the long run, it really isn’t. So what we have to do and what we focus on continually is being most efficient with every single dollar we spend and find ways to do more with less.
David Katz
Understood. And as my follow-up, one more for you, David. Sorry, Josh. On the —
Josh Weinstein
I’m happy for the break. Thank you.
David Katz
So on the listing, you presume that there could be a couple of bucks of cost savings, you know, upfront and ongoing, you know, thinking of a few million dollars upfront and maybe a few million as an ongoing, every little bit helps. Is that the neighborhood, David?
David Bernstein
Yeah, that’s the neighborhood. You know. And so — and the payback on this is very quick. It’s just less than two years. And so we feel very good about the situation and it also streamlines reporting and simplifies governance and other things for us. So we’re — we feel very good about the decision and we finally got to it.
David Katz
Me too. Thanks.
Josh Weinstein
Thanks, David.
Operator
Thank you. Our next question comes from the line of Jamie Katz with Morningstar. Please proceed with your question.
Jamie Katz
Hey, good morning. Nice quarter, guys. Can I ask a little bit about consumer demand? I think you guys did a nice job dissecting demand by geography, but maybe can you talk a little bit about the behavior of consumers between income levels because we’ve been hearing a lot about this K-shaped demand patterns and how they’ve differentiated, are we seeing things like seaborne consumers being more resilient than Carnival consumers or vice versa? Is there any way to parse that out to a better degree for us?
Josh Weinstein
Yeah, sure. So you know, when you look at the segments, you got contemporary premium and luxury. We’re not seeing any meaningful difference across the segments. I would say, yeah, and this has been asked before when you think about our US consumer across the big brands that we’ve got in the US, excluding seaborne, the range of our — of our household income is something in the $100,000 to $150,000 range. So it’s certainly in the middle class and up.
Now having said that, our guests don’t live in a vacuum. They live in the same world as every other consumer does and they see the headlines. And they’re looking, I think in a lot of cases to figure out how do they get more value for what they’re spending. That’s been a pretty constant theme for a long-time and it certainly was in the fall, as you heard not only us and people in the crew space talk, but I think as you hear retailers talk and as we’ve been getting into the holiday season, some people are looking to make sure that they are getting the most they can get for the money that they spend. And they’re specifically looking to preserve and protect things that are dearly important to them like spending time with their friends and family on holidays.
And when you put all of that together, that is a very nice tailwind for what we have to offer because we are an amazing value. We give an amazing experience and we can help you make your money go farther than what the land-based alternatives are. And so we feel good about the positioning. I’m happy to always have a gap to land and always be a value and close the gap over time and always have a gap and be of value. I think that’s a great thing that we can provide to our guests.
Jamie Katz
Okay. And then I think there was a comment on always failing full. But can you talk a little bit about how you guys are thinking about managing occupancy in 2026 just relative to the past given that prices are at an all-time high and maybe the experience improves with fewer people on the ship. So maybe how is occupancy being optimized in the year ahead? Thanks.
Josh Weinstein
Sure. And I think that’s a fair call out. We are not mandating — I am not mandating to my teams, you better sell full to the — to the last decimal point going three places over, right? At the end of the day, we want people to maximize revenue and that’s why we could miss an occupancy by a little bit and we still end up with more revenue than what our forecast was because we’re managing and our teams are managing that balance and I think doing it the right way.
And so, you know, there’s always going to be opportunity to figure out on the fringes whether it’s worth getting the last few people onboard or it’s not and keep a little bit more price integrity overall and generate more in the long run. So we give our brands rightly so, the leeway to do that and they have been doing it. And I expect that, that will continue.
Jamie Katz
Thanks. Happy holidays.
Josh Weinstein
Thank you. You too.
Operator
Thank you. Our next question comes from the line of Conor Cunningham with Melius Research. Please proceed with your question.
Conor Cunningham
Hi, everyone. Thank you. Just on the balance sheet, you’ve obviously done a tremendous amount of work. I think you’re targeting, I think you said sub-3 [Phonetic], David. Just why is that the right level? And is there a desire to go above and beyond the $2.6 billion I think that you have naturally come in due this year in general? Thanks.
David Bernstein
Sure. So overall, if you calculate using our guidance, where we’ll wind-up the year, we will wind-up less than 3 [Phonetic]. We wind-up at about 2.8 times. So we are moving in the right direction and feel very good about that. I would say we had said sub-3 [Phonetic], but overall, we’re probably targeting something in the range of 2.75% that should get us around a BBB rating and we feel that, that is strong at this point in time for a company like ours.
Conor Cunningham
Okay. And then I know there’s been a lot of talk about the Caribbean, but like there — it’s pretty normal in this industry to have big swings in supply from time-to-time. I think when — I mean, not too long ago, I think we were talking about Alaska as having too much supply at one point, but it normalized pretty quickly. So can you just — I know you talked a little bit about this, Josh, but just on core pricing versus occupancy, like what — the biggest change to me seems to be that Carnival is less willing to discount to fill. So I mean, I know you’ve talked about maximizing revenue, but if you could just talk like holistically or how that’s changed versus history, I think would be helpful just given I think that’s a big deal here. Thanks.
Josh Weinstein
Sure. And I think that’s a great intro. I mean, first of all, let me just say real clearly, the Caribbean is and it always will be a fantastic market for us. Yeah, and we have successfully absorbed elevated supply in the Caribbean before and in Europe and Alaska many times over the last many decades. And it comes and it goes and it gets absorbed and we move along. And I don’t feel any different about the long-term in light of what this particular instance is because we do that very well.
With respect to the philosophy, you know, look, I think it is fair to say that we are thinking and acting, I think in a rational basis, in a way that we want to maintain price integrity in the market for us and at the same time, making sure we get folks onboard that are happy and spending money not only in the ticket but the onboard. And because we have evolved over the last several years and we’ll continue to with bundled pricing and packages, it does — it does change the dynamic about how we can position ourselves in the market and do things and make folks think that and understand that it’s a great value.
We have been — like I said before, we’ve been doing this over the last couple of years and our yields are up 17%. It’s part of the arsenal to put out promotions, to make people interested in what we have to offer and get our base of business and hopefully generate as much revenue as we can and as much happy guests as we can. So no specific formula to give you, but I think it’s fair to say that that’s the approach.
Conor Cunningham
Good stuff. Thanks.
Josh Weinstein
Thank you. Operator, I think we’ve got time for one more.
Operator
Thank you. Our final question will come from the line of Sharon Zackfia with William Blair. Please proceed with your question.
Sharon Zackfia
Hi, thanks for keeping it in alphabetical order with the ZE [Phonetic] coming last. I wanted to ask you about market — always in the back row. I wanted to ask about marketing because clearly, you’ve had a lot of success with increasing your marketing spend, and I think that was called out as something you will increase more in ’26. Can you talk about where you ended with marketing as a percent of sales in ’25? How you think about that for ’26?
And then there’s a lot of talk about the way to get to consumers kind of changing with maybe SEO and things like that being less effective. I mean, how do you think about targeting consumers as the way to get to them maybe shifting particularly in the digital landscape.
Josh Weinstein
Yeah. Well, so I’ll talk about the last part first. I mean, you’re 100% correct. It is one of the fastest changing areas of our business when it comes to technology use of AI tools, not only by us, but by the consumer and how are we marrying all of that up. And so, there are lots of things that are already in place because not surprisingly, there are third — third-party companies that have tools already available that we’re taking advantage of to make sure that we’re keeping pace with the way that consumers are changing, how they go about looking for not just a vacation, but frankly anything nowadays.
So that is — I think that’s just going to be a common theme as we move ahead over the next several years and we’ve got to be — we have to be nimble and we have to be really thoughtful about the fact that the world is going to change dramatically, I think over the next five years and we just — we need to make sure we’re keeping pace. So that — so we are reallocating dollars as we talk with our operators about how they need to spend differently to adjust to that. I think it’s fair to say though there will still be top of funnel things that we’re always going to want to do to get into the consideration set. And we’re talking about how do we optimize once you get below that to make sure that we’re being put the right way in front of the right guest or potential guests to close the booking.
As far as — as far as how we’re seeing the advertising, it’s not — it’s not like it’s spiking dramatically over as a percentage of revenue. We’re just trying to do what we think is the right thing, is the right thing for our brands and our business. It’s about 3.5%, give or take. And that’s — it’s a metric we look at, but it’s not the metric that ends the discussion about how much people should be spending on advertising because as you can probably appreciate, there’s a lot behind it as we develop and change those plans real time.
Sharon Zackfia
Okay. Thank you. Have a good holiday.
Josh Weinstein
Thank you very much. So for everybody, I would just say, thank you. Happy holidays and thank you again for all the support that we have had as a corporation and for all of our guests and all of our trade partners, thank you very much for everything you do for us. And for the team, well-deserved — well-deserved break next week. So thanks very much and happy holidays.
Operator
[Operator Closing Remarks]