Carnival Corp Ltd. Q1 FY2026 Earnings Call

Greetings, and welcome to the Carnival Corporation First Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Beth Roberts, Senior Vice President of Investor Relations. Thank you, Beth. You may begin.

Thank you. Good morning, and welcome to our first quarter 2026 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, all of which are on a net basis or adjusted as defined, unless otherwise stated. A reconciliation to U.S. 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. With that, I'd like to turn the call over to Josh.

Thanks, Beth. Good morning, everyone, and thank you for joining us today. Before we begin, I do want to acknowledge the ongoing conflict in the Middle East and the profound human impact it's having on so many people. Our thoughts are with the brave men and women of our armed forces, with all those affected, and with the countless families and communities facing hardship during this time. Like so many around the world, we remain hopeful for a resolution that brings relief to those impacted and a lasting peace to the region. Turning to our business. We are off to an excellent start to the year. First quarter results came in ahead of guidance, thanks to higher yields and better cost performance, reflecting healthy fundamentals and solid execution across the business. Close-in demand remained robust, guests continued to spend more onboard and pricing strengthened, enabling us to outperform our December guidance and deliver record first quarter revenues, net yields, operating income, EBITDA and customer deposits. We're seeing this momentum continue in onboard and pre-cruise sales. Guests are engaging earlier in the vacation journey, purchasing more inclusive packages, excursions and other experiences before they even step on board. That trend is contributing to higher onboard revenue and reflects the value guests place on the experiences our cruise lines deliver. We're also seeing it in our bookings. Bookings for current year sailings increased 10% year-over-year, adding to our record book position for the remainder of the year at historically high prices. With nearly 85% of 2026 already on the books and less inventory available than this time last year, we remain well positioned to keep improving yields as the year unfolds. Cumulative future year bookings also reached a first quarter record, adding to our continued confidence in the trajectory of the business. And as a result, we are seeing it in our customer deposits, which reached a new first quarter record of almost $8 billion, surpassing last year's high watermark by nearly 10%. Now what stands out most is that we're achieving all of this against such an unpredictable macroeconomic and geopolitical backdrop. It says a great deal about the demand we continue to see across our portfolio of world-class cruise lines, about the team's ability to execute on our long-term strategy and about the progress we've made in positioning the business to perform through a wide range of environments. This start to the year also supports increasing our full year outlook operationally by approximately $150 million compared to our December view. That improvement helps absorb a $500 million fuel headwind albeit that is against a substantial EBITDA forecast of $7 billion, which David will walk you through in more detail. This quarter and our outlook are further evidence of how far this business has come over the last several years. Over that time, we have restructured the organization, reconstituted the global leadership of the corporation and our cruise lines, actively managed the portfolio and its assets and sharpened our commercial operations. We have also just begun to better harness the power of our unmatched Caribbean and Alaskan destination footprints, improve pricing, fortify the balance sheet and embed greater rigor across the organization. As you know, thanks to those efforts, last year, we surpassed our SEA Change objectives in roughly half the originally outlined time frame. We more than doubled our ROIC, delivered our highest unit EBITDA in nearly two decades and meaningfully reduced our greenhouse gas intensity rate, all of which built momentum and, more importantly, reinforced that our approach is working. With this robust foundation in place, we are focused on the next chapter of value creation for Carnival. So today, we are introducing PROPEL: Powering Growth & Returns, Responsibly. By 2029, we are targeting return on invested capital above 16%, earnings per share growth of more than 50% versus 2025 and the distribution of more than 40% of our cash from operations to shareholders, or approximately $14 billion. At its core, PROPEL is about converting strong and growing demand into higher returns, earnings and cash flow while maintaining disciplined capacity growth and a strong balance sheet. That we see four primary drivers underpinning these targets. First, yield expansion. A continued focus on high-quality execution across our commercial operations will drive even more growth in same-ship demand, strong pricing, increased onboard spend and earlier guest engagement throughout the booking journey. These trends are already evident in our current performance and give us confidence in our ability to drive sustained yield improvement. Second, disciplined capacity growth and high-returning capital allocation. Our capacity growth remains intentionally measured with only three ships scheduled to enter service during the PROPEL period. At the same time, we'll be investing in return-generating modernization programs across many of our cruise lines, building on the success we are already seeing from AIDA Evolution. And the second cruise line announcing its program will be just next month, so stay tuned. Third, further monetizing our destination portfolio. We're expanding and enhancing our unique destination assets, including Celebration Key, Grand Bahama, RelaxAway, Half Moon Cay and Isla Tropicale, Roatan, along with our unrivaled Alaska land footprint to deliver differentiated guest experiences while generating attractive incremental returns. Fourth, continued cost discipline. We remain hyper-focused on maintaining our industry-leading cost structure and driving operational efficiencies across the P&L. And all of this is supported by a phenomenal team and advancing technologies to enhance revenue and improve efficiency. Importantly, these PROPEL targets will not come at the expense of financial strength, corporate responsibility or investing in our future. We are targeting net debt-to-EBITDA of 2.75x and a reduction in greenhouse gas intensity of more than 25% versus 2019 levels. For us, returns, resilience and environmental stewardship go hand in hand. And further, our growing cash flow will enable us to meet these targets while reinvesting over $15 billion back into the business over this time frame. With greater financial flexibility, we have the capacity to invest in our growth, to achieve our leverage target to grow our recently reinstated dividend and to return excess capital through an opportunistic buyback program, beginning with a $2.5 billion authorization announced today. This is a balanced approach, investing for growth, increasing shareholder returns and doing so in a way that supports the long-term earnings power of our business. Accelerating returns is a natural result of that strategy and a reflection of the attractive fundamentals of our business. Our capacity growth remains measured while demand continues to expand as cruising becomes even more mainstream, as consumers are choosing to spend more of their hard-earned money on well-deserved and much-needed vacations, and as we remain underpenetrated relative to the broader vacation market. We are well positioned with a strategy that is grounded, focused, diversified across our portfolio and built for consistent execution over the long term. As we continue to monitor developments in the Middle East, we remain focused on executing on that strategy and delivering for our guests, for our shareholders and our other stakeholders. While external conditions will continue to evolve, what gives us confidence is our ability to deliver exceptional vacation experiences, operate efficiently, allocate capital with discipline and grow in a measured way. Now none of this progress happens without the dedication of our global team, the best in all of travel and leisure. I want to thank our more than 160,000 team members, both ship and shore, for their hard work in delivering these first quarter results. They go above and beyond every day to deliver unforgettable happiness to our guests by providing them with extraordinary cruise vacations while honoring the integrity of every place we visit, life we touch and ocean we sail. I also want to thank our travel agent partners, our loyal guests, our investors, our destination partners and all of our stakeholders for their continued support. With that, I'll turn the call over to David to walk you through the quarter and our guidance in more detail.

Thank you, Josh. I'll start today with a summary of our first quarter 2026 results, then I'll provide color on our full year March guidance and finish up with some additional insights into PROPEL. Once again, we delivered record first quarter operating results with strong execution, resulting in us beating guidance on revenue, costs and net income. Net income of $275 million was more than 55% higher than the prior year and exceeded our December guidance by $40 million or $0.03 per share. The outperformance versus December guidance was driven by three factors. First, revenue favorability contributed $0.04 per share as yields were up 2.7% versus the prior year on top of the more than 7% increase in the first quarter last year. This was over 100 basis points better than our December guidance, driven by continued strong close-in demand which drove higher ticket prices and stronger onboard spending. Yield improvement was driven by increases on both sides of the Atlantic. Second, cruise costs without fuel per available lower berth day, or ALBD, were up 5.3% versus the prior year. This is more than 0.5 point better than our December guidance and contributed $0.01 per share. This benefit was driven by cost-saving initiatives that we firmed up during the quarter. Third, the remaining $0.02 per share of operational favorability came from improvements in depreciation expense, net interest expense and fuel consumption, where we delivered a 4.7% year-over-year reduction. Total first quarter operational improvements of $0.07 per share are fully reflected in our full year guidance. However, those first quarter operational improvements were partially offset by the unfavorable impact of fuel price and currency costing $0.04 per share. Turning now to our full year March guidance. Our full year guidance calls for earnings per share of $2.21. This includes the first quarter operational improvement of $0.07 per share as well as an additional $0.04 per share of improvement in depreciation expense, fuel consumption, net interest expense and income tax expense over the remaining three quarters of 2026. However, that $0.11 per share operational improvement for 2026 will be more than offset by a $0.38 per share headwind from higher fuel prices driven by recent geopolitical events and reflected in our March guidance. Given the recent spike in volatility in fuel prices, we believe it is reasonable to assume some moderation over the balance of the year rather than base our guidance on current elevated spot prices. As a result, our guidance assumes the purchase price of fuel for the month of March and early April, Brent averaging $90 per barrel for the remainder of April and May, Brent averaging $85 per barrel for the third quarter and Brent averaging $80 per barrel for the fourth quarter. A 10% change in our fuel cost per metric ton, excluding emission allowances, for the remainder of the year impacts our bottom line by $160 million or $0.11 per share. Turning now to yield growth. Our March guidance assumes yield growth of approximately 2.75%, which is 25 basis points better than our December guidance and fully reflects the first quarter yield improvement. Importantly, our yield assumptions for the balance of 2026 remain unchanged from our December guidance. Yield growth versus 2025 reflects both higher ticket prices and continued strength in onboard spending. It is also worth noting that full year 2026 yield growth is approximately 3.25% on a normalized basis, excluding the previously disclosed impact of the summer 2025 close-in decision to redeploy away from the planned first quarter 2026 Arabian Gulf voyages and the impacts of loyalty program accounting for Carnival Cruise Line. Cruise costs without fuel per ALBD are now expected to be up approximately 3.1%, which is 15 basis points better than our December guidance and reflects the first quarter improvement. Like yields, our cruise costs assumptions for the balance of 2026 remain unchanged from our December guidance. On a normalized basis, cruise costs without fuel per ALBD are up just 2.3% after factoring in the partial year of operating expenses associated with Celebration Key, Grand Bahama and RelaxAway, Half Moon Cay as well as the timing of certain expenses between the years. In addition, you will see that our cost growth decelerates from the first half of 2026 to the second half. The main drivers of the deceleration are the sliding of some costs from the fourth quarter of 2025 to the first half of 2026, which will impact our first half, second half comparison, as we indicated on the December earnings call. The full year operation of Celebration Key, Grand Bahama, which opened in July 2025, will also impact our first half, second half comparison. This comparison is also affected by the seasonalization of advertising and repair and maintenance spending. I will close with a few additional thoughts on PROPEL. As Josh said, at its core, PROPEL is about converting strong and growing demand into higher returns and stronger operating cash flow while maintaining disciplined capacity growth and a strong balance sheet. Our confidence in achieving our PROPEL targets is grounded in the same strategies, priorities and disciplined execution that have delivered strong results and momentum in recent years. It is also supported by realistic assumptions and performance metrics that give us confidence in the path ahead. From 2026 through 2029, we expect moderate yield growth on a CAGR basis and low single-digit CAGR growth in cruise costs, excluding fuel per available lower berth day. Because we expect yield growth to grow faster than costs, we believe this will drive significant margin expansion. Achieving these targets will require heightened cost discipline and a focus on further strengthening our industry-leading cost structure. We will drive operational efficiencies and realize scale benefits within ship operating expenses and G&A through technology and sourcing, resulting in decelerating cost growth throughout the period. While it is true we are announcing PROPEL at a time of heightened volatility, these targets are about the long-term trajectory of our business, for which I have great optimism. And I say that based on very relevant experience. During my time at Carnival, we have managed through so many challenges, 9/11, the global financial crisis, the Arab Spring uprisings, COVID, and the Ukraine war, just to name a few. And we have always come away demonstrating our ability to execute and achieve new record results while building resilience and growing stronger. I expect no less as we look ahead to our future.

Our first question today is coming from Robin Farley of UBS.

I wonder if you could just give us a little insight into when you were thinking about your long-term targets. Did anything change from four weeks ago aside from obviously the changes in fuel? Just wondering how anything in the last month would have impacted your longer term, the other indicators. And then just as a follow-up on the share repurchase, if you could just spell out a little clearly what dividend and share repurchase over the next three years. I mean I think I can back into the math from what your dividends are and your total capital return. It's just a significant step-up from what you had done pre-COVID. So I just want to make sure that we're thinking about that right.

So first, sorry for the technical delays. We got hung up on, which is not good when you're the speakers. So with respect to the long-term targets, I mean, at the end of the day, they're long-term targets and we have a lot of confidence in our ability to deliver over that period. With respect to the current situation and what its impact could be, I'm not going to speculate on how it's going to play out, but we do have very minimal exposure to that region. We didn't have any this year because of the decisions we took and we've already made that decision for next year. And we have the ability to move our assets as everybody knows. So we feel very good about the long-term trajectory. We certainly didn't just do it based on fuel prices from 2025. We thought about this and stress-tested it in various scenarios and it's something that we do believe strongly that we can deliver. With respect to the capital allocation, remember if you think about what the world looked like ten years ago versus where we are today, our profile is very, very different. We've got no ships this year. We've got one ship a year thereafter. We are generating a lot more cash than we used to. And even with the spending that we're investing, as we noted, in our materials, in ourselves, which is quite important, including the destination strategy and revitalization plans for our brands, it still leaves us with a tremendous amount of free cash flow that we can give back. And we will do just that. And you should expect both the dividend and the initial authorization of $2.5 billion. Those are starting points, and we'll progress from there.

Our next question is coming from Steve Wieczynski of Stifel.

Congrats, Josh, on the strong results here. So I guess, first of all, it seems like the booking environment remains very healthy at this point. But Josh, wondering if you could maybe walk us through what you've seen from a booking perspective for both your North American and your EAA brands. I guess what I'm trying to understand here is if there's been any material differences in the bookings across your brands. And then also maybe you've seen any changes in your cancellation rates as we head into the summer, specifically around I assume it would probably be European cruises this summer.

Yes. Let me start by addressing the cancellation question. We're not observing any significant trends regarding cancellations. Our onboard spending has remained strong as we moved from Q1 into Q2. Looking at the last three weeks, it feels reminiscent of last year. People are aware of current events but may not fully grasp their implications, both globally and personally, leading to a normalization of life. We're currently undergoing that normalization. It’s understandable that there are varying impacts based on sailing locations; for instance, Eastern Mediterranean sailings differ from those in the Western Mediterranean, Northern Europe, and regions like the Caribbean, Alaska, and Australia. Overall, we're quite satisfied with the progress we're making. Volumes have certainly increased in places like Alaska and the Caribbean, and Northern Europe is also performing well. We've made strides with our Eastern European sailings as well, improving the booking percentage compared to a few weeks ago. While activity would have likely been higher without recent events, we had a strategy to boost occupancy and bookings going into the wave season, and we successfully did that. We entered this period with a solid buffer, which we have been able to maintain. There will be fluctuations as we navigate through these circumstances, and there may be unknown aftereffects, but our teams are adapting and responding effectively to the current environment.

Okay. Got you. And then second question, Josh, if I could ask one about PROPEL. If we think about the target of greater than 50% EPS growth from '25 through '29, so simple math is going to say, okay, 2025 adjusted EPS, I think, was whatever it was, $2.25, I think. That would say 2029 EPS should be at a worst-case greater than $3.38, $3.40, somewhere in that range. I guess with 2026 EPS now taking a pretty significant step backwards just because of fuel, is it fair to kind of assume that you guys feel pretty comfortable that you'll be able to absorb pretty much higher fuel prices over a longer period of time? Am I kind of thinking about that the right way?

Yes, I think that's right. Over a longer period of time, we'll take what the world has and we'll perform in any environment at the end of the day. So clearly, we'd be performing better if fuel was back at $60, $70, but we don't plan our lives around a world where fuel stays at $60 to $70. That's why our focus forever, and will continue to be forever, is use less because whatever the price is, if we use less, we do better. And if you think about our trajectory on our consumption, if you look at the per unit consumption decreases that we've had across the fleet, if you go back to where we were in 2019 versus where we are in 2026, we're saving this year alone about $650 million. If you go back just to 2023 and you look at where we are today, that alone is $250 million, thanks to the consumption savings that we are hyper-focused on and we'll continue to do that.

Our next question is coming from Matthew Boss of JPMorgan.

Great. So Josh, maybe could you elaborate on the curve and your comments on bookings well into 2028? Maybe if you could just speak to pricing power or areas of opportunity that you see across the portfolio today.

I want to make sure I understand your question. So can you say it a different way?

Yes. Maybe if you could just elaborate on the strength on further out bookings. I think you cited well into 2028 and just where you see the greatest areas of pricing power across the portfolio. And I know we've talked about your portfolio approach and how that separates you from some of your peers in the industry.

Yes, I believe the answer is affirmative. We've observed our brands showing a positive trajectory overall, especially in extending the booking period. It's nearly consistent that people are booking well in advance. Everyone has been seizing the opportunity to offer sales with more lead time, which enhances sales and helps manage booking patterns. I wouldn't say it's significantly different from what we've done in the past; it's more about evolving. We have invested in tools that assist us in performing better in this area. Additionally, we've hired many talented individuals in recent years who are leading revenue management teams and driving innovation. Overall, we're becoming a more mainstream product. Our loyal customers appreciate the value we provide and understand the importance of booking early to secure what they desire for their vacations. We've been focusing on the fundamentals alongside our global teams to advance these brands. When we discuss bookings, we're not just considering this quarter or the entire year; we're examining our targets for 2027 and 2028, although I won’t disclose those targets. We're focused on how far we can go and ensuring we strike the right balance. We don't want everything to be 100% booked on day one when we launch sales. There is a blend of art and science involved, but everyone has been diligently working to optimize revenue.

As I said in the prepared remarks, our PROPEL model and the 16% was built off moderate yield growth and low single-digit cost growth. And there's clearly, as Josh talked about, further out bookings and the revenue management, and I won't repeat all the things he said. There's clearly upside opportunity on both the revenue and the onboard areas to drive the ROIC even higher than 16%. That's not a cap; it's just a target for 2029 and beyond.

The next question is coming from Xian Siew of BNP Paribas.

Can you discuss the guidance for the second quarter? You achieved 2.7% net yield growth in the first quarter, but the guidance for the second quarter is 2%. What are the reasons for this potential decline, considering that demand appears to be quite strong?

Honestly, our yield guidance for the first quarter was below 2%. We made it clear that as we assessed the rest of the year, we kept our outlook fairly consistent despite various circumstances. Each period has its own variations depending on factors like dry docks and the specific days that bookings and sailings occur. However, we believe that 2% reflects our current position, and we always aim to surpass that.

Okay. Great. And then maybe just on the follow-up for longer-term outlook for net yield, you kind of mentioned moderate yield growth. Could you maybe talk about what do you think is the biggest kind of drivers within that? How do we think about the building blocks, if it's the ship kind of revamps, the islands? Like, what do you think is kind of the biggest kind of drivers within that?

Well, I don't think if we're going to quantify, the biggest drivers are not going to be the revamps. I don't think the biggest drivers are going to be the destinations. I think they're going to absolutely be accretive, but those are fairly isolated ship-by-ship things that are going to be nicely supportive of the yield growth. What's really going to drive us forward is incremental improvement in the commercial space, right, in the marketing, in the revenue management, in utilization of technology that we're already utilizing to be better at lead generation, better at conversion, better at personalization, better at driving earlier engagement with booked guests so that they are booking not just the ticket, but the packages and bundles and all the experiences that we have to offer onboard. So the good thing is, if you think about where we are now versus where we were when I was kind of talking about this stuff three years ago, I think we've got a track record of leaning into those things and getting better every day. And not only do we have, I think, just an amazing team and amazing leaders, many of whom are new versus where we were three years ago, but the technology advancements to supercharge this only are going in one direction. So I think that's really where the broad-based improvements are going to be, which then get bolstered by the investments we've been making in the destinations and will continue to do so. And as you said, the refurbishments.

Our next question is coming from Brandt Montour of Barclays.

Congratulations on getting the buyback announcement today. I have a question on technology to kind of stay with that thread, Josh. How do you think about the opportunity to do more direct integrations with AI and LLM companies out there that do travel? And just given sort of the inherent complexity of the cruise product for most first-time cruisers, does that have the potential to fundamentally change the way consumers find their way to cruises?

I believe we are already experiencing this shift due to the number of people using platforms like ChatGPT, Gemini, and Claude. Our approach to interacting with guests and directing them to our websites or trade partners is evolving. Our teams have been working to optimize our presence in these AI engines, moving away from just relying on traditional search engines like Google. However, the cruise industry may see this transition occur more slowly compared to sectors like retail, where finding information is more straightforward. Our business is more complex; we're not just a commodity but rather an experience. While I believe we'll eventually adapt to these changes, it may take longer than for other retail experiences. Furthermore, travel agents remain a vital part of our operations, and I don't foresee that changing soon. They excel at introducing new customers to our offerings and are also adapting to the AI landscape to improve their services. Overall, I believe this development will benefit everyone in the industry.

That's really helpful thoughts there. A different question would be on the longer-term targets. You just gave a great rundown, Josh, of how you think you're going to be able to drive yield growth. But honing in on your ship orders, three years ago, I think we all kind of thought that you would see lower ship orders, one to two per year. You're doing one per year. It looks like you guys are doubling down on that for the next period of time. When you take this model out, obviously your fleet age will start to stand out against peers. I want to know if you think that the industry has changed or your business has changed to the point that it doesn't matter as much anymore?

For those on the call who experienced the AIDA ship from the AIDA Evolution program, it's impressive how an 18-year-old ship can look and feel like it's just a year old when well maintained. Therefore, I don't believe that aging ships will hinder our ability to execute our revenue strategy. I have always believed that with careful capacity growth, we can concentrate on enhancing the core business and there's a lot of potential for that. While new builds are beneficial, we have 96 ships, which are far more significant in the big picture. Our focus will remain on maintaining this fleet effectively while gradually introducing new capacity. That said, I believe this approach is effective and will continue to be so. These ships are long-term assets that people enjoy, and some of our best yields and customer satisfaction scores come from our older vessels.

Our next question is coming from Trey Bowers of Wells Fargo.

Thanks for the color earlier in the call about what you guys are kind of seeing in the Med and Europe given the conflict, but it seems like we could take out of that, that maybe some of the non-European trends, are they coming in even better than you might have expected? And maybe in that, could you just break down kind of what you're seeing in the Caribbean and maybe Alaska?

First thing I'd say is it is early days, right? We're literally a few weeks into something that has been completely unexpected, and it's working its way through the global backdrop. So yes, Caribbean's been a bit stronger. Alaska has been strong and it continues to be strong. We've been very pleased for a very long time about how Alaska for 2026 was shaping up. I'd be saying the same thing if we were having a call at the end of February. And with respect to Europe, I mean, we are very well booked in Europe to begin with. And so like I said, we had been pushing to really produce a good occupancy advantage and we did that. There is absolutely not the pace that we would have expected over the last few weeks versus a world where this wasn't happening in the backdrop, but not to an extent that there's much to talk about, just an extent that, yes, things have shifted a little bit here and there. And I have no idea how it's going to play out. Now cards on the table. I don't know. So we'll have to see how this develops, and we'll respond accordingly.

Yes, fair. And I have to ask, David, when we go through these periods of fuel spikes like this, and when and if things settle down, does this kind of maybe reintroduce the idea of just trying to smooth fuel prices a little bit through reintroducing a hedging program at some point?

Yes. No, thank you. So listen, we think about that question all the time, regardless of the situation and circumstance when we talk about it. But at the moment, you know what we've done over the past decade, and we'll continue to evaluate and rethink it.

I lost a bet. It took us until 10:46 for someone to ask about fuel hedging.

Our next question is coming from Ben Chaiken of Mizuho.

Regarding free cash flow, the $14 billion is quite impressive. You mentioned it represents 40% of operating cash flow. Does that suggest that you view capital return and free cash flow as separate considerations? In other words, is capital return in any given year independent of the capital expenditures for that year? Additionally, concerning the expected buyback component of that $14 billion, will that be executed smoothly or will you take an opportunistic approach? I have one more follow-up.

Yes, we plan to approach stock buybacks opportunistically, and we've mentioned this several times. As Josh indicated, we are starting with $2.5 billion. Over this period, we anticipate $14 billion in shareholder returns, which will include additional stock buybacks. It's important to note that our capital expenditures are generally predictable, as we have established a plan for one ship per year from 2026 to 2029. Our non-newbuild capital expenditure also has a level of predictability, though we don’t know the exact amount each year; this year it is $2.4 billion. Consequently, we are able to return over 40% of cash from operations to shareholders. This return is a combination of reinvestment in the business, which amounts to $15 billion, with more than $14 billion going back to shareholders. This reflects our approach based on predictability.

Okay. I understand. David, in the past, you've mentioned that there are more costs within NCC this year compared to CapEx. Although you didn't specifically address it on this call, I believe you've mentioned it over the last 6 to 12 months. Have you thought about this further? Is 2026 an exception, or is the current allocation of costs between OpEx and CapEx the right approach to consider for this year and going forward?

Yes. You are talking about the dry dock expense, where I mentioned in December that total spending on dry dock was stable, but the cost allocations changed. This is something we need to evaluate each year based on accounting rules and what can be capitalized. So please stay tuned for our December guidance. We are just starting to work on the 2027 capital expenditure plan and dry dock schedule, so there is still a lot for us to assess before we can provide an answer.

Was there something unique that you're doing this year on the dry docks? I appreciate it moves year-to-year, but just to maybe double-click there.

Yes. There wasn't anything particularly unique. The total dry dock expense exceeded $1 billion across all the ships for the year. Even a slight movement of 1% or 2% between capital expenditures and expenses can affect the percentage increase of net cruise costs excluding fuel. In this case, there was just a couple of percent movement, which resulted in a 0.6% impact on the net cruise costs excluding fuel.

Our next question is coming from Conor Cunningham of Melius Research.

I understand that you're 85% booked for 2026, but regarding fuel recapture, does your pricing algorithm kick in for the remaining 15%? Additionally, do you have concerns about demand destruction since some of your competitors hedge and you do not? Does that create a disadvantage for you in terms of pricing?

Yes. In terms of how we manage our revenue, the price of fuel is mostly irrelevant, and immediate fluctuations are not a concern. We set our prices based on what the market can sustain and what our guests are willing to pay. If they are willing to pay $10 more due to fuel costs, they should be able to do so. There's a degree of separation here. However, when we plan our itineraries and handle long-term strategy, fuel prices are a significant factor in balancing revenue generation and our costs. Day-to-day, our focus is on maximizing profitability, and we're looking at $7 billion of EBITDA, so I don't perceive any disadvantage regarding fuel prices at any moment. People don’t perceive an advantage when we're unhedged and prices are low. This discussion tends to arise only when fuel prices rise. I want to reiterate that our focus on consumption is essential for the long-term trajectory of our business and earnings potential—using less is the best response to fuel prices. The savings of $650 million we anticipate this year from reduced consumption are more significant than the over $500 million impact we’re facing due to the fuel spike. That will remain our priority. I agree with what David mentioned; we will always stay vigilant, as circumstances can change, but our main focus for the long-term health of the business is to consume less.

I really appreciate that. I hate to bring up another question related to fuel, but if you consider your current pricing for fuel, it's noticeably below the current spot price and below the forward curve. I understand that it's difficult to predict how this will play out. Why do you use those numbers? Why not assume something higher and then if it turns out better, great? I'm curious about your current approach to marking oil.

We literally set our guidance on Monday and that was the curve on Monday. We rounded, but that was the curve on Monday. Since then it's gone up, it's gone down. It will continue to change. We tried to give you information so people can model whatever you believe or whatever is happening, but we just had to draw a line in the sand sometime and just move forward.

Yes, we gave you the sensitivity.

Well, if you know where it is next week, let me know.

Yes. If I know where it is next week, I'm retiring because I know the future and I can make a lot of money doing a lot of things. And I'm not the person that was betting on the prediction market in advance of all the stuff that's going on.

Our next question is coming from Chris Stathoulopoulos of SIG.

Josh, you've been in this seat now for a few years. You've navigated some difficult landscapes. I've always said with a lot of confidence and transparency. But one of your peers in the travel space is, I guess, giving some straight talk around what an extended period of elevated energy prices might mean. So you've gotten around Russia, Ukraine, tariffs, Liberation Day, other things. Walk us through, I guess, your plan. So in the short term, you're talking about lower consumption. Longer term though, if we're in a period of 16, 24 months of $100-plus oil, just how should we understand, I guess, internally? What are the areas of focus? How should we think about your ability to respond via pricing and perhaps changing itineraries and the like? Just want to understand, like, I guess the mid- to longer-term playbook in an extended or elevated energy cycle.

Sure. Yes. From a consumption perspective, we have both short-term and long-term goals. In the short term, there are still measures we can take to enhance our consumption savings by focusing on simple strategies, such as optimizing our sailing times to minimize fuel usage and effectively managing HVAC systems. There's considerable potential for us to be more focused in these areas. Looking at the long term, we definitely have the flexibility to adjust itineraries and decide the number of ports we visit under various future scenarios. We've been strategic about our fuel investments, especially regarding our Caribbean destinations. We aim to create a strategic advantage by connecting to fantastic locations close to our home ports. Projects like Celebration Key and the new pier at RelaxAway are very beneficial. Additionally, we have investments underway, having completed our first Service Power Package that significantly reduced consumption on the hotel side. We are excited about our plans for the second package and can accelerate it if necessary for additional savings. However, I can't fully address your question because I'm unsure how the future will unfold if fuel prices reach $110 and what that would imply. Nonetheless, I want to highlight that we have several advantages. Firstly, we still offer substantial value compared to land options, providing experiences at a lower price point. If people seek to maximize their spending, we offer excellent value. Secondly, our ships are conveniently accessible, as around 50% of our guests drive to their port of departure, which helps them avoid air travel costs. We will continue to navigate challenges as they arise, and I've demonstrated over the past several years our agility and creativity in overcoming significant obstacles to emerge stronger. Do you have one more question? This might be the last one, so go ahead.

I wanted to mention two things. First, we can calculate the implied EPS growth through 2029 based on the new guidance. Second, could you provide more details on how initiatives like YODA and AI are affecting pricing power? I understand there was a previous question about AI, but I've been receiving inquiries on whether AI might unbundle services and impact the pricing advantages you've had due to a frictionless purchasing experience. Additionally, I recall a chart in your SEA Change presentation from a few years back that indicated future capacity by brand, specifically mentioning Carnival Corp reaching over 30%. Are we anticipating a similar level for PROPEL by 2029? I realize there is a lot to unpack here, so perhaps you could focus on AI first.

I got to be honest with you, and I apologize. I didn't understand either question. So...

Could you discuss the moderate yield growth you've mentioned? In the past, you've highlighted YODA and how it sets your core operations apart. There have been some inquiries regarding AI, which might seem conflicting with that. Additionally, in your SEA Change slide, you presented future capacity by brand for 2026. I'm assuming that the forecast for fiscal year 2029 reflects a similar distribution of capacity by brand type.

Got it. So I mean, yes, I mean, more or less. I mean you've got the road map, right, which is really there's just effectively 2.5 ships in that period that are going to Carnival. So Carnival will be a bit heavier weighted in '29 versus where we are today because they're the only ones that have ships on order over this PROPEL period, and then we start introducing some for AIDA. And then obviously, we will order more ships for the 2030s. It will come at some point and we'll share that with you when there's something to share. But it's all going to be in the vein of intentionally measured capacity growth. So I apologize again for the delay in getting to the Q&A session, but I do appreciate the questions. And thanks to everybody for joining. Be safe, and we'll talk to you next quarter.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines at this time or log off the webcast and enjoy the rest of your day.