Carnival (CCL 0.80%) went from a full stop to full speed ahead, and the result was, as you might expect, a dramatic improvement in its business performance. But what happens now that the cruise line is at the top of its game?

Here's what's happened and why 2026 could be a much less impressive year for Carnival.

What does Carnival do?

Carnival operates nine branded cruise lines, including its namesake brand. It is one of the largest cruise ship owners and operators on the planet. Cruise lines have two main sources of revenue. The first is the fares passengers pay to get on the boat. The second is the spending they do while on the ship.

Image source: Getty Images.

The cruise ships Carnival operates are like floating resorts. You pay for a room, and then you pay for all the other stuff you want to do. Some food and entertainment are included in the cruise cost, but plenty of add-ons are available.

That said, Carnival doesn't see a dime of income if its ships aren't running. And that's exactly what happened during the early stages of the coronavirus pandemic. Cruise ship passengers are always at some risk of catching contagious diseases, but the risks presented by COVID-19 were so extreme that governments shut down the industry. The last few years have seen impressive business performance from Carnival because of that shutdown.

Data by YCharts.

Now what?

The chart above shows the trailing-12-month revenues and earnings per share for Carnival. It tells the story pretty clearly. Revenues fell to zero and then recovered. Earnings fell deep into the red and then recovered. In fact, the inflation coming out of the pandemic has actually helped out here because the cost of other vacations, such as trips to amusement parks, have increased to the point where cruises look like a relative bargain.

At this point, Carnival's 2025 cruises are fairly well booked, so this should be another decent year. But two problems are likely to start showing up more clearly in 2026.

First, the rebound from zero revenue seems to have largely played out. Further improvement will require continued strong execution. For example, revenue rose to a record level in the first quarter of 2025. But the year-over-year rise was dramatically smaller than in the first quarter of 2024. The boom years are likely over, and continuing to move the needle will be much harder from here.

Second, Carnival added a significant number of new ships leading up to 2024. More ships mean more ability to increase revenue. And new ships often bring renewed interest from customers, too. Between 2025 and 2028, there won't be nearly as many new ships, so this growth lever won't be as powerful. Price increases (for both the cruise and onboard spending) will still improve the top line of the income statement, but they may keep some customers away.

Carnival is shifting gears to debt reduction

There is a silver lining in all of this, however. Carnival took on debt after the pandemic. Buying ships is costly, and so is paying to maintain a business that isn't generating any revenue. The pullback on new ships will allow the company to more quickly reduce its leverage. That is a good thing, and falling interest costs should help the company's bottom line.

That said, Carnival's top line in 2026 could be far less exciting than it has been recently. And emotional investors may see that as a big negative, even as Carnival works to improve its balance sheet. If you own Carnival or are looking at the stock, remember that the growth coming out of the pandemic was an anomaly.