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CARVANA CO. (CVNA) Q2 2025 Earnings Summary

Executive Summary

  • Record quarter: Revenue $4.840B (+42% YoY), retail units 143,280 (+41% YoY), Net income $308M (6.4% margin), GAAP operating income $511M (10.6% margin), Adjusted EBITDA $601M (12.4% margin) .
  • Results beat Wall Street: EPS $1.28 vs $1.14*; revenue $4.84B vs $4.59B*; Adjusted EBITDA $601M vs $555M*; strong incremental margins and operating leverage sustained (“~85% of adj. EBITDA converted to GAAP OI”) . Values retrieved from S&P Global.
  • Guidance: expects sequential increase in Q3 retail units and FY25 Adjusted EBITDA of $2.0–$2.2B, up from $1.38B in FY24; retail revenue per unit to increase in Q3 given contract changes and mix .
  • Stock reaction catalysts: continued industry-leading growth/profit, explicit FY25 adj. EBITDA range, positive commentary on scale benefits and ADESA integrations (12 sites integrated) .

What Went Well and What Went Wrong

What Went Well

  • Record profitability across metrics with operating leverage: GAAP operating margin 10.6%, Net income margin 6.4%, Adjusted EBITDA margin 12.4%; “we converted approximately 85% of adjusted EBITDA into GAAP operating income in Q2” .
  • Efficiency gains and selection expansion: operations expense per retail unit $1,549 (incl. ~$300 warranty), delivery times down 0.7 days YoY, inbound transport miles −20%, outbound −10%, selection up ~50% YoY .
  • Strategic integration: 12 ADESA integrations; inventory pools to 30 (+50% YoY); digital auction ADESA Clear expanded to 47 locations .

What Went Wrong

  • Other GPU declined sequentially due to lower origination interest rates (partly offset by higher finance attachment rates/loan sizes and higher loan principal sold-to-originated ratio) .
  • Non-GAAP wholesale GPU decreased YoY by ~$85; advertising spend increased $29M (+$44 per retail unit) with larger increase expected in Q3 to build awareness/trust .
  • Net income impacted by mark-to-market: negative $35M from Root warrants (0.7% margin headwind) .

Financial Results

Summary vs prior quarters (sequential trajectory)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($B)$3.547 $4.232 $4.840
GAAP Operating Income ($M)$260 $394 $511
Net Income ($M)$159 $373 $308
Diluted EPS ($)$0.56 $1.51 $1.28
Adjusted EBITDA ($M)$359 $488 $601
Adjusted EBITDA Margin (%)10.1% 11.5% 12.4%
GAAP Operating Margin (%)7.3% [calc: 260/3547] 9.3% 10.6%
Net Income Margin (%)4.5% 8.8% 6.4%

Year-over-year (Q2 2025 vs Q2 2024)

MetricQ2 2024Q2 2025
Revenue ($B)$3.410 $4.840
Retail Units (000s)101.44 143.28
Net Income ($M)$48 $308
Net Income Margin (%)1.4% 6.4%
Adjusted EBITDA ($M)$355 $601
Adjusted EBITDA Margin (%)10.4% 12.4%

Segment breakdown (Q2 2025)

SegmentRevenue ($M)Gross Profit ($M)
Retail vehicle sales, net$3,405 $521
Wholesale sales & revenues$1,024 $132
Other sales & revenues$411 $411
Total$4,840 $1,064

KPIs

KPIQ1 2025Q2 2025
Retail units sold133,898 143,280
Wholesale vehicle unit sales63,454 72,770
Total gross profit per retail unit ($)$6,938 $7,426
Total SG&A per retail unit, non-GAAP ($)$3,495 $3,385
Operations expense per retail unit ($)$1,658 $1,549 (incl. ~$300 warranty)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Retail units soldQ3 2025Expect growth trajectory; Q2 sequential increase guided Sequential increase vs Q2 Maintained upward trajectory
Adjusted EBITDAFY 2025Significant growth expected (no numerical range) $2.0–$2.2B (non-GAAP) Initiated numeric range
Retail revenue per retail unitQ3 2025N/AIncrease expected (contract structure shift + higher ASP mix) Raised
Advertising spendQ3 2025N/ALarger sequential increase vs Q2 Raised
CapexFY 2025~$140M; 10–12 ADESA integrations No update in Q2; ADESA integrations continue (12 total integrated to date) Maintained plan
Effective tax rateFY 2025~22% (Carvana Co., incl. TRA) No update provided in Q2 [—]Maintained
GAAP interest expenseFY 2025~$520M (incl. $182M PIK) No update provided in Q2 [—]Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/technology initiatives“Sebastian” AI usage nearly tripled; NPS highs; streamlined self-service Reinforced tech-driven efficiency and high-quality adj. EBITDA Early AI applications in customer care and document processing to improve efficiency Building, early deployment expanding
Supply chain/logisticsAvg. delivery times down ~20% YoY; logistics network optimized Continued efficiency; lower reconditioning/inbound costs Inbound miles −20%, outbound −10%, delivery times −0.7 days YoY Improving
Tariffs/macroNoted tariff impacts in risk disclosures Tariff environment monitored ~$100 positive Retail GPU impact from late-March tariff announcements; demand pull-forward in April Transitory boost absorbed
Inventory selectionNational pooled inventory ~53k units Record selection; path to scale Selection +50% YoY; 30 inventory pools; ASP mix shift to higher-priced vehicles Expanding breadth
ADESA integrations6 integrated sites; plan to integrate more Unlocking “Megasites”; objective to scale capacity 12 ADESA sites integrated; Clear auction at 47 locations Scaling integrations
Operating leverageAdj. EBITDA margin 10.1% (FY); per-unit SG&A reduced Operating income ~80% of adj. EBITDA “~85% adj. EBITDA → GAAP OI”; adj. EBITDA margin 12.4% Strengthening

Management Commentary

  • “We were once again the fastest-growing and most profitable automotive retailer… for the first time… most profitable by GAAP Operating income and Net income dollars.” .
  • “We converted approximately 85% of adjusted EBITDA into GAAP operating income in Q2… expect GAAP operating income to grow faster than adjusted EBITDA over time.” .
  • “Operations expense per retail unit of $1,549… includes about $300 of warranty expense… delivering all services at such a low variable cost is a highly differentiated capability.” .
  • “We expect a sequential increase in retail units in Q3… and Adjusted EBITDA of $2.0 to $2.2 billion for the full year 2025.” .
  • “In April, we saw strong demand following the initial announcement of auto tariffs… transitory benefit positively impacted Q2 Retail GPU by ~$100.” .

Q&A Highlights

  • Incremental margins/operating leverage: Management emphasized strong incremental margins and long-term target of 13.5% adj. EBITDA at 3M units; focus on continued fundamental gains .
  • Financing platform strength: Vertical integration and data advantages enable robust APR/delinquency outcomes; better models with scale .
  • Capacity expansion cadence/capex: ADESA integrations are capex-light initially; broader buildouts may require ~$1B over years (inflation adjusted) to fully build ADESA sites .
  • Tariff impacts and pricing: April demand pull-forward boosted Retail GPU by ~$100; overall quarter stable after some week-to-week choppiness .
  • Marketing/awareness: Advertising to step up in Q3 to build awareness/understanding/trust; mix of direct and brand marketing tests underway .

Estimates Context

Carvana exceeded consensus in Q2 2025 across EPS, revenue, and Adjusted EBITDA.

MetricEstimateActual
EPS ($)1.14*1.28
Revenue ($B)4.59*4.84
Adjusted EBITDA ($M)555*601
  • Q1 2025 also beat estimates (EPS $1.53 actual vs $0.75*; revenue $4.232B actual vs $4.002B*; EBITDA $488M actual vs $437M*) . Values retrieved from S&P Global.
  • FY 2025 consensus: EPS 5.47*, revenue ~$19.92B*, EBITDA ~$2.26B*; management guided FY25 Adjusted EBITDA $2.0–$2.2B (non-GAAP) . Values retrieved from S&P Global.
  • Consensus recommendation text unavailable via S&P Global for this query.

Key Takeaways for Investors

  • Carvana’s Q2 print shows durable operating leverage and scale benefits; adj. EBITDA margin hit 12.4% with ~85% conversion to GAAP operating income, supporting quality of earnings .
  • Short-term: Expect sequential unit growth in Q3 and higher retail revenue per unit driven by contract structure changes and mix; near-term advertising step-up is a watch item as they invest in awareness .
  • Medium-term: ADESA integration (12 sites) and expanding inventory pools (30) reduce miles and delivery times, structurally lowering costs and improving customer experience .
  • Unit economics: Per-unit SG&A non-GAAP fell to $3,385; operations expense per unit down to $1,549 even with warranty, indicating room to reinvest in price/service without sacrificing margins .
  • Financing platform: Lower cost of funds and higher attachment rates underpin Other GPU; monitor sequential movements tied to origination rates and loan sale mix .
  • Non-GAAP adjustments: Root warrant mark-to-market was a $35M headwind this quarter; adj. metrics better reflect core operations, but warrant volatility remains a GAAP factor .
  • Execution risk: Continued ramp of ADESA sites and logistics scale are the operational bottlenecks to watch; management indicates plans are on track and utilization tailwinds to come .

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