Carvana Co. reported fourth‑quarter 2025 revenue of $5.603 billion, a 58% year‑over‑year increase driven by a 43% rise in retail units sold to 163,522. The surge in sales was largely supported by a mix shift toward higher‑priced vehicles and a tighter used‑car supply that allowed the company to command a 4.2% rise in average selling price to $25,415.5.
The company posted diluted earnings per share of $4.22, a substantial beat over the $1.13 consensus estimate. The EPS outperformance was largely attributable to a $685 million tax benefit from the release of a valuation allowance on deferred tax assets, which inflated net income. In contrast, adjusted EBITDA fell to $511 million, missing the consensus range of $536–$539 million and representing a 9.1% margin—down from 10.1% in Q4 2024 and 11.0% for the full year 2025. The margin contraction reflects higher depreciation rates and increased reconditioning costs as the company expands its inventory and integrates new sites.
Gross profit per unit declined by $255 year‑over‑year to $3,076, a trend that mirrors the rise in reconditioning expenses. Management explained that the cost increase stems from rapid expansion, new site integration, and a shift toward lower‑quality inventory, all of which raise the cost of preparing vehicles for sale. The GPU decline signals pressure on per‑vehicle profitability and suggests that the company’s scale advantage is being eroded by higher operating costs.
Management reiterated its 2026 guidance, projecting sequential growth in retail units sold and adjusted EBITDA for the first quarter of 2026. The company also reaffirmed its long‑term objective of selling 3 million retail units a year and achieving a 13.5% adjusted EBITDA margin by 2030‑2035, stating: "We remain firmly on track to our goal of selling 3 million retail units a year at a 13.5% Adjusted EBITDA margin by 2030 to 2035."
Investors focused on the adjusted EBITDA miss and margin compression, raising concerns about the sustainability of profitability as reconditioning costs rise and gross profit per unit declines. The market reaction underscored the importance of maintaining operational leverage and cost discipline in a high‑valuation environment, even as revenue and unit growth remain strong.
In summary, Carvana’s Q4 2025 results demonstrate robust top‑line growth and a record number of retail units sold, but the company faces headwinds from higher reconditioning costs and a decline in gross profit per unit. The EPS beat is largely a one‑time tax benefit, while the adjusted EBITDA miss and margin contraction signal that profitability pressures are intensifying. Management’s guidance remains optimistic, but the company must address cost growth to sustain its long‑term margin targets.
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