Carvana Co (NYSE:CVNA) reported fourth-quarter earnings that presented a stark dichotomy: headline revenue that significantly surpassed analyst expectations, but a bottom-line profit that, despite massive growth, fell short of Wall Street's forecasts. The market's reaction was swift and severe, with shares plummeting over 13% in after-hours trading following the announcement.
Record Revenue and Profit Growth
The online used car retailer delivered what it termed "record" results for both the fourth quarter and the full 2025 fiscal year. The company's core growth metrics showed remarkable strength, driven by continued consumer adoption of its digital buying model.
Key Q4 2025 Highlights:
- Retail Units Sold: 163,522 vehicles, a 43% increase year-over-year.
- Total Revenue: $5.60 billion, a 58% jump compared to Q4 2024.
- GAAP Net Income: $951 million, resulting in a net income margin of 17.0%.
- Adjusted EBITDA: $511 million, with a margin of 9.1%.
For the full year 2025, Carvana sold nearly 597,000 retail units, generating over $20.3 billion in revenue. Founder and CEO Ernie Garcia emphasized the company's progress, stating the results demonstrate "the powerful positive feedback our model generates as we grow." The company also reiterated its long-term goal of selling 3 million units annually at a 13.5% Adjusted EBITDA margin by 2030-2035.
The EPS and Revenue Miss: A Tale of Two Metrics
Despite the robust growth, the market focused on the divergence between revenue performance and profitability relative to expectations.
- Revenue Beat: Carvana's Q4 revenue of $5.60 billion comfortably exceeded the analyst consensus estimate of approximately $5.36 billion. This represents a significant beat and underscores strong consumer demand and execution on sales volume.
- EPS Miss: The company reported Non-GAAP earnings per share (EPS) of $4.22 for the quarter. While this is a substantial increase from the prior year, it fell well short of the Wall Street estimate of $1.13. This discrepancy appears to be the primary driver behind the negative market reaction, as it suggests profitability did not scale as aggressively as analysts had anticipated alongside the revenue surge. Commentary from the company noted that net income was impacted by non-cash items, including a benefit from a release of a valuation allowance and charges related to changes in the fair value of warrants.
Market Reaction and Forward Outlook
The steep after-hours decline of nearly 14% indicates investor disappointment, likely centered on the profit miss and concerns over operating costs, as hinted at in recent news headlines. The sell-off reflects a market that was pricing in even stronger bottom-line leverage from Carvana's rapid growth.
Looking ahead, Carvana provided a qualitative outlook, expecting "significant growth in both retail units sold and Adjusted EBITDA" for the full year 2026. It also anticipates a sequential increase in both metrics for the first quarter of 2026, assuming a stable environment. This forward commentary aligns directionally with analyst expectations, which project Q1 2026 revenue of approximately $5.9 billion and full-year 2026 sales nearing $26.0 billion.
Conclusion
Carvana's fourth-quarter report solidifies its position as a high-growth disruptor in the used car market, with revenue accelerating past expectations. However, the quarter also highlights the challenges of scaling profitability at the pace demanded by the market. The significant EPS miss, despite strong absolute profit growth, has triggered a reassessment of the stock's valuation in the near term. Investors will now watch closely to see if the company can better align its impressive top-line growth with bottom-line execution in the coming quarters.
For a detailed breakdown of Carvana's historical earnings and future analyst estimates, you can view more information here.
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