CarGurus Inc (NASDAQ:CARG) Reports Mixed Q3 2025 Results, Beats on Earnings but Misses on Revenue

CarGurus Inc (NASDAQ:CARG) reported third-quarter 2025 financial results that delivered a mixed performance relative to analyst expectations, driving significant after-hours stock movement. The automotive marketplace platform surpassed earnings estimates but fell slightly short on revenue projections, while providing forward guidance that signals continued strength in its core business operations.

Earnings and Revenue Performance

The company's Q3 2025 results revealed nuanced performance across key financial metrics:

• Revenue: $238.7 million, representing 3.2% year-over-year growth but slightly below analyst estimates of $239.8 million
• Non-GAAP EPS: $0.57 per share, exceeding analyst projections of $0.55 per share
• Marketplace Revenue: $231.7 million, growing 14% year-over-year and exceeding guidance midpoints
• Non-GAAP Marketplace Adjusted EBITDA: $82.4 million, increasing 18% year-over-year

While total revenue missed consensus estimates by approximately 0.5%, the company's core marketplace business demonstrated robust growth and profitability. The stronger-than-expected earnings performance suggests effective cost management and operational efficiency despite the top-line shortfall.

Market Reaction and Price Action

Investors responded positively to the earnings release, with the stock rising approximately 2.6% in after-hours trading following the announcement. This upward movement appears to reflect investor focus on the earnings beat and strong guidance rather than the modest revenue miss. The positive after-hours performance contrasts with the stock's recent trends, which saw declines of approximately 2.9% over the past week and 8.5% over the past two weeks leading into the earnings report.

Business Segment Performance

The earnings release highlighted several key operational achievements:

• Dealer Growth: Total paying dealers increased 6% year-over-year to 33,673, with international dealers growing 11%
• Monetization Improvement: Quarterly Average Revenue per Subscribing Dealer (QARSD) increased 8% to $6,492
• Capital Return: The company repurchased $111 million worth of shares in Q3, bringing total buybacks to 23% of shares outstanding since the program's initiation in December 2022
• Product Innovation: Continued advancement of AI-powered solutions including PriceVantage, Dealership Mode, and CG Discover

Forward Guidance and Outlook

CarGurus provided fourth-quarter and full-year 2025 guidance that generally aligns with or exceeds analyst expectations:

• Q4 2025 Marketplace Revenue Guidance: $236-241 million (midpoint: $238.5 million) compared to analyst estimates of $237.1 million
• Full-Year 2025 Marketplace Revenue Guidance: $902-907 million
• Q4 2025 Non-GAAP EPS Guidance: $0.61-0.67 per share

The company's guidance suggests confidence in maintaining marketplace revenue growth momentum while continuing to generate strong profitability from its core operations.

Financial Health and Capital Allocation

The company maintained a solid financial position with $178.8 million in cash and cash equivalents, though this represents a decrease from prior periods, partially attributable to the aggressive share repurchase program. The commitment to returning capital to shareholders through buybacks demonstrates management's confidence in the company's cash generation capabilities and valuation.

Strategic Positioning

CEO Jason Trevisan emphasized the company's progress in dealer adoption of data-driven tools and product innovation across inventory, pricing, marketing, and data intelligence functions. The results suggest CarGurus is successfully executing its strategy to deepen customer relationships and expand its service offerings to dealerships despite challenges in certain business segments.

For detailed earnings estimates and future projections, view the complete earnings analysis for CARG.

Disclaimer: This article presents financial information for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any particular security or investment strategy. Readers should conduct their own research and consult with a qualified financial advisor before making investment decisions.