Carvana outlines 3 million unit sales goal in 5–10 years as profitability and automation drive expansion

Earnings Call Insights: Carvana Co. (CVNA) Q3 2025

MANAGEMENT VIEW

* CEO Ernest Garcia described Q3 as “another incredible quarter for Carvana,” emphasizing that the company remains “the most profitable and fastest-growing automotive retailer.” Garcia highlighted profit margins more than double the industry average and growth exceeding 40% while the rest of the industry remains “approximately flat.” He reiterated the company's ambition: “Q3 was another large step on the path to achieving our current goal of selling 3 million cars at a 13.5% adjusted EBITDA margin in the next 5 to 10 years.”
* Garcia noted strategic initiatives including a 50% year-over-year increase in inventory selection, with inventory turn time “approximately flat,” and 15 ADESA locations now offering expanded reconditioning capacity, reducing customer delivery time by a day over the past five quarters. He also discussed the Phoenix market pilot, where “40% of customers in Phoenix are now getting same or next-day delivery compared to 10%...nationwide.”
* Garcia outlined the growing role of automation, stating, “More than 30% of retail customers now complete the entire process without any interaction with the customer advocate until their delivery or pickup appointment. For customers selling their car to us, this number is more than 60%.”
* CFO Mark Jenkins stated, “We set new records for retail units sold, revenue, adjusted EBITDA and GAAP operating income. And for the first time, our annual revenue run rate exceeded $20 million, a significant milestone pointing toward the long-term scale of our business.” Jenkins reported retail units sold at 155,941 and revenue at $5.647 billion for Q3.
* Jenkins noted Carvana’s expansion of loan sale partnerships, including upsizing the Ally agreement to $6 billion through October 2027, and two new agreements totaling $8 billion, formalizing existing relationships and providing defined volume expectations.

OUTLOOK

* Jenkins stated, “Looking toward the fourth quarter, we expect the following as long as the environment remains stable. Retail units sold above 150,000, and adjusted EBITDA at or above the high end of our previously communicated range of $2 billion to $2.2 billion for the full year 2025.”
* Management expects sequential changes in retail GPU, wholesale GPU, and other GPU in a similar range to last year, and advertising expense in Q4 to be similar to or slightly higher than Q3.

FINANCIAL RESULTS

* Carvana reported retail units sold at 155,941, an increase of 44%, and revenue of $5.647 billion, an increase of 55%.
* Net income was $263 million, with net income margin at 4.7%. GAAP operating income reached $552 million, and adjusted EBITDA was $637 million with a margin of 11.3%.
* Jenkins highlighted a reduction in SG&A expense per retail unit sold by $319, driven by operational efficiencies and leveraging overhead expenses. Carvana operations portion of SG&A expense decreased by $96 per retail unit sold, and the overhead portion decreased by $314 per retail unit sold.
* The company retired $559 million of 2028 senior secured notes and $98 million of 2025 senior unsecured notes, bringing total corporate debt retired in 2024 and 2025 to $1.2 billion. Carvana reported $2.1 billion in cash and a net debt to trailing 12-month adjusted EBITDA ratio of 1.5x.

Q&A

* Sharon Zackfia, William Blair: Asked about subprime loan performance and the timing of formalizing new loan agreements. Jenkins replied, “Our 2024 and 2025 loan originations are performing extremely well, both in an absolute sense and relative to industry comparables...the outside validation of having Ally upsized from $4 billion to $6 billion...are great validation of the strength that we're seeing.”
* Marvin Fong, BTIG: Inquired about the uptick in OpEx per unit and retail GPU guidance. Jenkins explained, “It stepped up a little bit sequentially. But overall there, the trend is down, and we expect to drive that down further over time.” Regarding GPU, Jenkins cited seasonality, “typically, it involves higher depreciation rates, both in the retail and wholesale markets.”
* Rajat Gupta, JPMorgan: Asked if Q4 unit guidance signals a change in seasonality. Garcia responded, “I think it’s largely more of the same...we continue to see extremely strong growth. You saw it this quarter. We expect that heading into Q4 and into next year.”
* Daniela Haigian, Morgan Stanley: Asked about competition from new entrants and capital intensity. Garcia responded, “We try to focus less on any given competitor...today, 98.5% of used cars...are sold by traditional retailers.” On capital needs for expansion, Garcia stated, “We’ve got several years here of hard work to make sure that we get to the $3 million and the 13.5 million. But I think there’s no question that there’s opportunity beyond that.”

SENTIMENT ANALYSIS

* Analysts’ tone was generally neutral to slightly positive, with questions probing sustainability of growth, cost controls, and competitive positioning. There was mild skepticism around seasonality and capital investments, but no overtly negative sentiment.
* Management maintained a confident and upbeat tone in both prepared remarks and Q&A, frequently emphasizing the rarity and sustainability of their performance. Garcia repeatedly highlighted structural advantages and automation as key differentiators, and Jenkins emphasized operational and financial discipline.
* Compared to the previous quarter, management’s confidence remained high, with a more pronounced focus on foundational technological improvements and scalability. Analyst tone was consistent, focused on operational details and sustainability of margins.

QUARTER-OVER-QUARTER COMPARISON

* Q3 saw a notable jump in retail units sold and revenue compared to Q2. The guidance language shifted from projecting sequential growth to specifying a unit threshold for Q4.
* Management reiterated the 3 million units and 13.5% margin goal, but placed greater emphasis on automation, operational leverage, and the expanding digital experience.
* Analyst focus moved toward questions about the impact of automation, competitive threats from new entrants, and the sustainability of operational efficiencies.
* Compared to Q2, there was increased discussion of formalizing loan agreements and scaling same-day delivery pilots, reflecting a maturing business model.

RISKS AND CONCERNS

* Jenkins acknowledged industry-wide underperformance in 2022–2023 loan cohorts, but stated current originations are “performing strongly.”
* Garcia noted potential macroeconomic uncertainty and the need to prioritize opportunities amid evolving technology and customer preferences.
* Analyst questions highlighted concerns about seasonality, costs tied to operational improvements, and competitive risks from new entrants, though management expressed confidence in their structural advantages.

FINAL TAKEAWAY

Carvana’s management reiterated their ambitious goal of selling 3 million cars per year at a 13.5% adjusted EBITDA margin within the next decade, highlighting record growth, improved profitability, and expanding operational capabilities. The company’s focus on automation, operational leverage, and formalized financial partnerships, along with disciplined cost management and strong liquidity, positions it for continued aggressive growth and market share gains, as echoed in both prepared statements and responses to analyst inquiries.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cvna/earnings/transcripts]

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