Cars.com NYSE: CARS reported second-quarter revenue growth and higher profitability as marketplace subscription gains offset a decline in OEM and national advertising revenue, while management reaffirmed its full-year outlook.
Revenue for the quarter totaled $179.9 million, up 1% from a year earlier and within the company’s guidance range. Dealer revenue increased 3% year over year, supported by more than 7% growth in marketplace revenue. That growth more than offset an 18% decline in OEM and national revenue, which fell by $3 million from the prior-year period.
CEO Toby Hartmann said the marketplace performance reflected the company’s strategy of building a more interconnected platform spanning its consumer marketplace, dealer websites and appraisal products. “Marketplace subscribers rebounded to their highest level since 2023, and marketplace ARPD reached an all-time high,” Hartmann said, referring to average revenue per dealer.
Margins Expand as Costs Decline
Cars.com generated adjusted EBITDA of $53 million in the second quarter, up 4% year over year. Adjusted EBITDA margin expanded nearly 100 basis points to 29.4%, exceeding the high end of the company’s guidance range for a second consecutive quarter.
Net income rose to $14.3 million, or $0.25 per diluted share, from $7 million, or $0.11 per diluted share, a year earlier. Adjusted net income was $28.7 million, or $0.51 per diluted share, compared with $26.4 million, or $0.41 per diluted share, in the prior-year quarter.
Operating expenses declined 7% to $152.1 million. CFO Sonia Jain said the decline was driven primarily by the full amortization of customer lists associated with the company’s 2017 spinoff, as well as lower compensation expense. Adjusted operating expenses fell 6% to $144.3 million.
Product and technology expense declined by $2.7 million on a reported basis, while marketing and sales expense increased by roughly $2.7 million as the company invested in targeted marketing. General and administrative expense fell by $3.5 million, including the elimination of a direct-to-consumer earn-out accrual and lower compensation costs.
Focus Shifts Toward Higher-Intent Marketplace Traffic
Management said the company has intentionally reduced emphasis on lower-quality website traffic in favor of attracting and converting higher-intent shoppers. While traffic and unique visitors declined year over year in the second quarter, Hartmann said lead conversion increased by double digits and performance marketing cost per lead improved during the quarter.
“We are intentionally shifting to prioritize the value delivery versus the pure audience reach,” Hartmann said during the question-and-answer session. He added that the company is directing more performance marketing toward lower-funnel activity while continuing to invest in brand positioning.
Cars.com said roughly 60% of its traffic remained organic. Hartmann said search-engine-optimization declines appeared to have bottomed in late 2025, while direct traffic, the company’s largest organic channel, increased year over year during the first half of 2026.
The company also expanded use of its Carson AI shopping assistant across additional marketplace surfaces. About 20% of active Cars.com searchers now engage with Carson, according to Hartmann. Users of the tool were four times more likely to submit a lead and accounted for nearly 30% of total leads submitted in June.
Product Integration and Dealer Tools
Cars.com launched Dealer Verified Listings in June, integrating elements of its AccuTrade appraisal business into the consumer marketplace. The feature allows participating dealers to display current vehicle condition reports on listings, providing what the company described as a consumer-facing trust signal based on vehicle inspections rather than a traditional historical vehicle report.
The program is currently available to existing AccuTrade customers, with an expansion to marketplace customers planned for the fourth quarter. Hartmann said the company is initially gathering feedback from a subset of AccuTrade dealers before making the capability available more broadly.
Jain said the company’s Premium Plus marketplace package was its fastest-growing marketplace offering during the quarter. Cars.com continues to target a 15% adoption rate for Premium Plus by the end of 2026. She said penetration was at or close to double digits, without providing a more specific figure.
Management also plans to apply its marketplace product-development approach to its Dealer Inspire websites business, where unit counts declined from a year earlier. Hartmann said the company expects to add marketplace capabilities, including personalization, Carson AI features and connected data insights, to dealer websites during the third and fourth quarters. He said the company is focusing on product innovation and packaging rather than website unit-volume expansion, with a goal of returning the business to growth over the next two to three quarters.
Cash Flow, Buybacks and Outlook
For the first half of 2026, Cars.com generated $55.6 million of operating cash flow and $43.5 million of free cash flow, compared with $41.8 million of free cash flow a year earlier. The company repurchased 6.2 million shares for $57 million year to date and said it had bought back and retired more than 10% of shares outstanding since the start of the year.
Debt outstanding stood at $450 million as of June 30, following a $5 million debt payment during the quarter. Total liquidity was $333.3 million.
For the third quarter, Cars.com expects revenue growth ranging from flat to 2% year over year and adjusted EBITDA margin between 28.5% and 29.5%. The company reaffirmed its full-year 2026 outlook for revenue growth of flat to 2% and adjusted EBITDA margin of 29% to 30%.
Jain said OEM and national revenue was expected to grow sequentially in the third quarter following stronger performance in July and additional spending commitments for the remainder of the year.
About Cars.com (NYSE:CARS)
Cars.com operates as a leading online automotive marketplace in the United States, connecting car shoppers with new and used vehicle listings from dealerships and private sellers. The platform enables consumers to research makes and models, compare prices, read expert and user reviews, and access tools such as TrueCost to estimate ownership expenses over time. Through its website and mobile applications, Cars.com aims to simplify the car-buying process by aggregating detailed vehicle data, payment calculators, and dealership ratings into a single user-friendly experience.
On the dealer side, Cars.com provides a suite of marketing and lead-generation services designed to help automotive retailers reach potential buyers and manage their online presence.
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