CarGurus, Inc. (CARG) Q3 2025 Earnings Summary

Executive Summary

Strong quarter: Marketplace revenue grew 14% YoY to $231.7M; total revenue rose 3% to $238.7M; GAAP net income nearly doubled to $44.7M; non-GAAP adjusted EBITDA was $78.7M (33% margin). CarGurus beat S&P consensus on revenue ($238.7M vs $234.9M*) and EPS ($0.57 vs $0.55*). Marketplace EBITDA was $82.4M (36% margin), above guidance midpoint .
Mix improvement and cost discipline expanded gross margin to 89% vs 79% a year ago; Marketplace adjusted EBITDA margin improved ~120 bps YoY to 36%, modestly lower QoQ given higher product/marketing investments .
Product innovation accelerated: launched Price Vantage (AI-driven pricing), Dealership Mode (in-dealership app activation), and expanded CG Discover (GenAI shopping assistant), all with strong early engagement metrics that support dealer ROI and higher-intent consumer actions .
Guidance: Initiated Q4 and FY25 guidance calling for 12–15% Q4 Marketplace revenue growth ($236–$241M) and FY25 Marketplace revenue of $902–$907M; Q4 Marketplace EBITDA of $83–$91M and FY25 Marketplace EBITDA of $313–$321M; Q4/FY non-GAAP EPS of $0.61–$0.67 / $2.19–$2.25 .

What Went Well and What Went Wrong

What Went Well

Marketplace outperformance with double-digit YoY growth and margin expansion; Marketplace revenue $231.7M (+14% YoY) and Marketplace adjusted EBITDA $82.4M (+18% YoY) above guidance midpoint; consolidated gross margin 89% (+1,055 bps YoY) .
Product momentum and AI leverage: Price Vantage delivered 5x better turn-time than competitors among engaged beta dealers; price-drop recs drove 68% median increase in daily VDP views; 77% of recs met/exceeded predicted sales velocity .
Consumer and dealer engagement rising: CG Discover traffic nearly tripled QoQ, leads up 3.3x with VDP-to-Lead conversion +6,000 bps; Dealership Mode 56% click-in for users seeing the nav item; Digital Deal surpassed 12,500 dealers and over 1M enabled listings with 45% YoY growth in high-value actions .

What Went Wrong

Digital Wholesale materially down: segment revenue fell to $7.0M (-74% YoY) with operating loss of $(9.4)M as transactions ceased post August wind-down decision; management reiterated Digital Wholesale revenue will not persist going forward .
Sequential margin headwind from growth investments: Marketplace adjusted EBITDA margin declined slightly QoQ due to investments in product innovation and higher S&M, though YoY still expanded ~120 bps .
Reported traffic metrics to face measurement headwinds: cookie consent changes will reduce reported uniques/sessions (a measurement shift rather than a demand change), introducing potential investor confusion on reported traffic KPIs .

Financial Results

Headline P&L vs prior periods and S&P consensus

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenue ($M)	$225.2	$234.0	$238.7
Revenue Consensus* ($M)	$226.6*	$232.7*	$234.9*
GAAP Gross Margin %	89%	87%	89%
Non-GAAP Adjusted EBITDA ($M)	$66.3	$77.3	$78.7
Adjusted EBITDA Margin %	29%	33%	33%
GAAP Net Income ($M)	$39.0	$22.3	$44.7
Diluted EPS ($)	$0.37	$0.22	$0.45
Primary EPS Consensus* ($)	$0.436*	$0.546*	$0.549*

Notes: Q3 beats: revenue ($238.7M vs $234.9M*) and EPS ($0.57 non-GAAP vs $0.55* consensus; GAAP diluted $0.45). Company-reported non-GAAP diluted EPS was $0.57 . Values with asterisks are from S&P Global.

Segment breakdown (Revenue and Operating Income)

Metric	Q1 2025	Q2 2025	Q3 2025
U.S. Marketplace Revenue ($M)	$195.2	$202.7	$210.4
Digital Wholesale Revenue ($M)	$12.9	$12.0	$7.0
Other Revenue ($M)	$17.0	$19.3	$21.2
U.S. Marketplace Op. Income ($M)	$49.8	$58.8	$61.0
Digital Wholesale Op. Income ($M)	$(5.8)	$(37.0)	$(9.4)
Other Op. Income ($M)	$1.8	$3.1	$3.1

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
U.S. Paying Dealers	25,153	25,478	25,743
International Paying Dealers	7,219	7,617	7,930
Total Paying Dealers	32,372	33,095	33,673
U.S. QARSD ($)	7,369	7,533	7,742
International QARSD ($)	2,073	2,309	2,375
Consolidated QARSD ($)	6,173	6,349	6,492

Non-GAAP highlights: Q3 GAAP gross margin 89% (vs 79% in Q3’24), non-GAAP gross margin 90%; non-GAAP net income $56.4M (diluted $0.57) vs $46.2M in Q3’24 (diluted $0.44) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance / Actual	Change
Marketplace Revenue	Q3 2025	$228M–$233M (Aug 7)	Actual: $238.7M	Beat prior guide
Non-GAAP Marketplace Adj. EBITDA	Q3 2025	$76.5M–$84.5M (Aug 7)	Actual: $82.4M	In range; above midpoint
Non-GAAP EPS	Q3 2025	$0.50–$0.58 (Aug 7)	Actual: $0.57	High end of guide
Marketplace Revenue	Q4 2025	—	$236M–$241M	Initiated
Non-GAAP Marketplace Adj. EBITDA	Q4 2025	—	$83M–$91M	Initiated
Non-GAAP EPS	Q4 2025	—	$0.61–$0.67	Initiated
Marketplace Revenue	FY 2025	—	$902M–$907M	Initiated
Non-GAAP Marketplace Adj. EBITDA	FY 2025	—	$313M–$321M	Initiated
Non-GAAP EPS	FY 2025	—	$2.19–$2.25	Initiated

Additional assumptions: Q4 diluted shares ~97M; FY ~101M . Guidance reflects ~$1M quarterly CarOffer costs absorbed in Marketplace; expect discontinued ops classification in Q4 .

Earnings Call Themes & Trends

Topic	Q1 2025	Q2 2025	Q3 2025	Trend
AI/Technology	Launched CG Discover; users spend 2x more time; app now >30% of leads; dealer data insights adoption rising .	Continued Discover expansion; Dealer app DAUs +71% YoY; predictive insights at CarOffer .	Expanded Discover to homepage/app; Dealership Mode launched; Price Vantage launched with strong beta results .	Accelerating productization of AI across consumer and dealer workflows
Digital Deal	11k+ dealers; nearly 1M listings; embedded financing and appointments; >25% of dealer email leads via Digital Deal .	12k dealers; 27% of dealer email leads via Digital Deal; financing leads up; high-value actions growing .	12.5k+ dealers; >1M listings; 45% YoY growth in high-value actions; expect ~30% of DD email leads by YE .	Sustained growth and deeper funnel intent signals
International	Revenue +20% YoY; ROI advantage surveys in CA/UK .	Revenue +28% YoY; AutoCanada win; strong app engagement .	Revenue +27% YoY; International CarSID +15% .	Strong share gains; runway for CarSID and pricing
Macro/Tariffs	Monitoring volatility; flight to quality benefits leader .	Still uncertain; used inventory up, consumer sentiment down; dealers consolidating spend .	Similar read; inventory +10% YoY; better to market smart than price cut .	Stable narrative of resilience with subscription model
Wholesale/CarOffer	Strategic assessment under way .	Decision to wind down; impairments; detailed cost framework .	Wind-down underway; Digital Wholesale revenue effectively ceasing .	Exit of transactions; retain insights tech

Management Commentary

“We delivered another quarter of strong Marketplace revenue growth… product innovation is driving measurable ROI … fueled solid growth in both our U.S. and international businesses.” — Jason Trevisan, CEO .
“Price Vantage … the only used vehicle pricing solution powered by real-time consumer demand … Early beta: 5X improvement in turn-time vs top five competitors; 68% median increase in daily VDP views; 77% of recommendations met/exceeded predicted sales velocity.” .
“CG Discover … leads have grown 3.3X … VDP-to-Lead conversion is 6,000 basis points higher than standard.” .
“Dealership Mode … 56% of consumers who see it in the app navigation have clicked into the experience … over half opted into push notifications.” .
“We expect to meet the discontinued operations criteria in the fourth quarter … midpoint of our Q4 guidance implies a full year marketplace EBITDA margin of approximately 35%.” .

Q&A Highlights

Consolidation and ROI: Dealers use fewer marketplace partners (from ~3 to ~1.8); CarGurus cites ROI leadership and potential pricing power tied to Digital Deal value .
International runway: Pricing held lower to build share; cited AutoCanada preferring CarGurus; International CarSID ~one-third of U.S. with multiple levers (upsell, cross-sell, lead growth) earlier-stage .
CarSID vs rooftops: CarSID +8% YoY; rooftops +5%; sum approximates Marketplace revenue growth; retention improving on product engagement .
Macro: Used inventory up ~10% YoY; consumer sentiment down; dealers consolidate spend with best-ROI partners; advertising budgets resilient for leader .
AI adoption & efficiency: ~80% of managed chat/text leads in October handled and closed by AI; 91% of employees use AI weekly; 40% reduction in outsourced team; engineering productivity +25% .

Estimates Context

Q3 2025: Revenue beat — $238.7M vs $234.9M consensus*; EPS beat — $0.57 vs $0.55 consensus* .
Q2 2025: Revenue in-line to modest beat — $234.0M vs $232.7M*; EPS beat — $0.57 vs $0.55* .
Q1 2025: Revenue slight miss — $225.2M vs $226.6M*; EPS beat — $0.46 vs $0.44* .
EBITDA note: S&P Global “EBITDA” actuals (Q3 $62.0M*, Q2 $64.1M*, Q1 $52.3M*) are below S&P consensus but are not directly comparable to company-reported non-GAAP Adjusted EBITDA ($78.7M in Q3). The company emphasizes Adjusted EBITDA and Marketplace Adjusted EBITDA for performance and guidance .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Core Marketplace flywheel remains strong: double-digit revenue growth, expanding margins, and net dealer adds for the seventh consecutive quarter; product-led monetization (AI/analytics) supports durable outperformance .
Innovation pipeline is tangible and ROI-accretive: Price Vantage, CG Discover, Dealership Mode, and New Car Exposure show early traction that should lift QARSD/CarSID and reinforce competitive moat .
Mix shift and wind-down of low-quality revenue: Digital Wholesale revenue/costs are being removed, clarifying earnings power of Marketplace; expect discontinued ops classification in Q4 .
Guidance implies continued healthy growth and profitability: Q4 Marketplace revenue +12–15% and FY Marketplace EBITDA margin ~35% midpoint; share count tailwind persists .
International optionality intact: 27% YoY revenue growth with pricing runway and adoption levers still early relative to U.S. .
Near-term trading: Expect positive bias on beats and product momentum; watch commentary on Q4 seasonality, sequential margin cadence (investment timing), and continued dealer adoption of new AI features .
Medium-term thesis: Intelligence-led platform expanding dealer wallet share beyond listings into software/data; sustained double-digit Marketplace growth with disciplined reinvestment supports premium multiple durability .

Appendix: Additional Data Points and Reconciliations

Q3 consolidated non-GAAP gross profit $214.0M (90% margin); GAAP gross profit $213.5M (89% margin) .
Q3 non-GAAP net income $56.4M; diluted non-GAAP EPS $0.57; shares diluted 99.7M .
Q3 cash from operations $71.2M; free cash flow $64.0M .
Share repurchases: $111M in Q3; ~$55M remaining authorization at 9/30/25 .

All company figures cited from CarGurus filings and earnings materials as referenced. Values marked with * are retrieved from S&P Global.