What Carvana (CVNA) Said on Its Q3 Earnings Call

Key Points

• Carvana delivered record Q3 results: Retail unit sales rose 39% year over year to 217,385, revenue increased 42% to $8.04 billion, and adjusted EBITDA reached a record $800 million. Net income climbed to $483 million despite a $53 million one-time debt-redemption expense.
• Growth remains strong, but margins face pressure. Management cited customer-experience improvements, greater inventory selection and scale, while adjusted EBITDA margin fell to 10% because of higher-priced vehicle mix and lower customer financing rates. Inventory availability remains a capacity constraint.
• Carvana strengthened its outlook and balance sheet: It expects fourth-quarter unit sales to rise sequentially and 2026 adjusted EBITDA toward the high end of its $2.7 billion–$3.0 billion range. Refinancing $1.7 billion of debt is expected to reduce annual interest expense by about $45 million, and the company plans to emphasize GAAP operating income and net income beginning in 2027.

Carvana NYSE: CVNA reported record third-quarter results as retail unit sales, revenue, gross profit, operating income and adjusted EBITDA all reached new highs. Management said the company remains focused on building a business capable of selling 3 million vehicles annually while reaching a 13.5% adjusted EBITDA margin.

Retail units sold rose 39% year over year to 217,385, while revenue increased 42% to $8.04 billion, according to Chief Financial Officer Mark Jenkins. The company’s annualized retail sales pace reached about 870,000 units, more than double its run rate two years ago, Chief Executive Officer Ernie Garcia said.

Carvana generated net income of $483 million, up $220 million from a year earlier, and reported net income margin of 6%, compared with 4.7% in the prior-year period. The result included a one-time $53 million pretax expense tied to the early redemption of senior secured notes.

Adjusted EBITDA rose $163 million to a record $800 million, though adjusted EBITDA margin declined to 10% from 11.3%. Jenkins attributed the margin decline primarily to a mix shift toward higher-priced vehicles and the company’s decision to provide customers with lower interest rates relative to benchmark rates.

Growth, profitability and customer experience

Garcia said Carvana has delivered approximately 40% growth for eight consecutive quarters despite what he described as a flat automotive retail industry. He said the company’s margins have remained roughly twice the industry average for 10 straight quarters.

The CEO also pointed to improvements in the customer experience, including a nine-point increase in net promoter score over the past two years and delivery times that are two days faster. Carvana has lowered the interest rates paid by customers by more than 100 basis points, Garcia said, while simplifying the purchase process.

Despite its growth, Garcia said Carvana holds just over 2% of the used-vehicle market and about 1.5% of the overall automotive market, leaving what he characterized as substantial remaining opportunity.

Jenkins said unit growth was supported by an improving customer offering, growing consumer awareness and trust, and the benefits of larger inventory selection and scale. The company produced more than 200,000 vehicles during the quarter for the first time, setting a record for reconditioned vehicle production.

However, management said it wants inventory availability to grow faster. While Carvana slightly outproduced retail unit sales in the third quarter, Jenkins said the growth rate of vehicles immediately available on the website remains below the company’s sales growth rate. Garcia said the company would add thousands more reconditioned vehicles immediately if it could do so, but increasing capacity requires continued work in its inspection and reconditioning centers.

Costs, financing and balance sheet

Non-GAAP retail gross profit per unit increased $85 year over year, driven primarily by wider spreads between retail and wholesale vehicle prices. That benefit was partly offset by higher non-vehicle costs, including inbound fuel costs.

Non-GAAP wholesale gross profit per unit declined $196, largely because retail unit growth outpaced growth in wholesale gross profit. Non-GAAP other gross profit per unit fell $299, reflecting lower customer interest rates relative to benchmarks and rising benchmark rates, partly offset by higher average amounts financed and hedging gains.

Jenkins said Carvana began passing through some increases in benchmark rates to customers during the recent rising-rate environment, though not necessarily in full and sometimes with a delay. He distinguished those moves from the company’s strategic decision in late 2025 to share some of its financing-related gains with customers through lower rates.

Selling, general and administrative expense per retail unit was approximately flat. Operations expense rose $109 per unit, primarily due to fuel and logistics costs, while overhead expense declined $159 per unit as growth leveraged fixed costs. Advertising expense increased $45 per unit as Carvana continued to invest in awareness and consumer trust.

Management said it sees longer-term leverage opportunities across overhead, advertising and operations. Jenkins said advertising expense could become more efficient over time as Carvana expands selection, delivery speed and awareness, noting that more mature markets have historically produced lower advertising expense per unit.

During the quarter, Carvana refinanced the remaining $1.7 billion of senior secured notes due in 2030 with a senior secured term loan B. Jenkins said the transaction is expected to reduce annual interest expense by approximately $45 million. Net debt to trailing 12-month adjusted EBITDA stood at 0.8 times, while trailing 12-month adjusted EBITDA-to-interest expense reached 6.9 times.

Outlook and strategic initiatives

For the fourth quarter, Carvana expects a sequential increase in retail units sold and anticipates full-year 2026 adjusted EBITDA toward the higher end of its previously stated $2.7 billion to $3.0 billion range, provided the operating environment remains stable.

Garcia said the company expects its vertically integrated structure, technology systems and data to position it well for artificial intelligence and “agentic commerce,” in which software agents may help consumers search, compare and transact. He said Carvana’s digital system can provide information on vehicles, trade-ins, financing and delivery through its technology infrastructure, potentially reducing friction in the vehicle-buying process.

The company also highlighted early work with Stellantis new-car dealerships as evidence of the potential value of its operating platform, technology and infrastructure. Garcia said the initiative remains early and that Carvana has more to learn.

On industry pricing transparency, Garcia said clearer disclosure of dealer documentation fees and required add-ons could help consumers compare offers more easily. He said Carvana believes such transparency is favorable to its model, though he added that it is difficult to isolate the direct effect in the company’s results.

Beginning in 2027, Carvana plans to place greater emphasis on GAAP operating income and net income rather than adjusted EBITDA. Jenkins said the shift reflects the company’s increased GAAP profitability and represents a natural evolution for a larger, more profitable business.

About Carvana (NYSE:CVNA)

Carvana Co NYSE: CVNA is an online automotive retailer that sells used vehicles through its digital platform. Customers can browse vehicles, review detailed descriptions and vehicle history information, arrange financing, complete transactions online and choose home delivery or pickup at a Carvana location.

The company also provides vehicle trade-in services and offers related products, including vehicle protection plans and other automotive services. Carvana is known for its automated, glass-enclosed vehicle vending machines, which provide an alternative pickup experience in select markets.

Founded in 2012 and headquartered in Tempe, Arizona, Carvana began operations as an online used-car retailer in 2013 and went public in 2017.

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