CarGurus outlines 12%–15% Q4 marketplace revenue growth as AI-powered products fuel adoption

Earnings Call Insights: CarGurus (CARG) Q3 2025

MANAGEMENT VIEW

* Jason Trevisan, CEO, reported "double-digit year-over-year Marketplace revenue growth while also expanding profitability across our U.S. and international businesses." He highlighted that Marketplace revenue and adjusted EBITDA both finished above the midpoint of guidance, citing "focused investment to drive sustainable top line growth and disciplined execution of our strategic priorities."
* Trevisan stated that Marketplace revenue grew approximately 14% year-over-year, with Marketplace adjusted EBITDA up 18% over the same period. Growth was attributed to "continued expansion in [CarSID], led by dealer upgrades to higher tiers, broader adoption of our add-on products, like-for-like price increases and higher lead quantity and quality." The company added 1,989 net new dealers globally year-over-year.
* International revenue increased 27% year-over-year, supported by performance in Canada and the U.K.
* Trevisan announced the launch of PriceVantage, a machine learning-based pricing tool, with early beta results showing a "5x improvement in turn time compared to their top 5 competitors on CarGurus."
* Trevisan indicated that the company is expanding its platform with software and data products spanning "inventory, marketing, conversion and data," aiming to tap into an additional $4 billion U.S. dealer spend on software and data products.
* The CEO also detailed enhancements to the consumer journey with CG Discover, a Gen AI-powered shopping assistant, and Dealership Mode, which provides real-time support to shoppers visiting dealership lots.
* Trevisan emphasized that AI is "foundational to CarGurus" and continues to drive efficiency and innovation internally, with "engineering productivity... risen by nearly 25% in the past year through the use of AI coding tools and code review agents." The CEO reported that 91% of employees use AI weekly.
* Trevisan stated, "In Q3, we delivered strong revenue growth, healthy margins and disciplined execution."

OUTLOOK

* Trevisan stated, "We expect our fourth quarter Marketplace revenue to be in the range of $236 million to $241 million, up between 12% and 15% year-over-year, respectively." Full year Marketplace revenue is projected at $902 million to $907 million, or 13–14% year-over-year growth.
* Fourth quarter non-GAAP Marketplace adjusted EBITDA is expected to be $83 million to $91 million, up 5% to 15% year-over-year; full year Marketplace adjusted EBITDA is expected to be $313 million to $321 million, or 18–21% year-over-year growth.
* Trevisan added, "The midpoint of our Q4 guidance implies a full year Marketplace EBITDA margin of approximately 35%."
* Fourth quarter non-GAAP consolidated earnings per share is expected to be in the range of $0.61 to $0.67, and full year consolidated earnings per share is projected at $2.19 to $2.25.

FINANCIAL RESULTS

* Consolidated revenue for the third quarter was $239 million, up 3% year-over-year. Marketplace revenue was $232 million, up 14% year-over-year. U.S. [CarSID] grew 8% year-over-year with 1,182 paying U.S. dealers added year-over-year.
* International revenue grew 27% year-over-year with international [CarSID] up 15% year-over-year.
* Non-GAAP gross profit was $214 million, up 11% year-over-year, and non-GAAP gross margin was 90%.
* Adjusted EBITDA was $79 million, up 21% year-over-year. Marketplace adjusted EBITDA grew 18% year-over-year to approximately $82 million.
* The company incurred $3.8 million in one-time cash restructuring charges related to the CarOffer wind down and expects remaining cash restructuring charges of $2 million in the fourth quarter.
* Non-GAAP diluted earnings per share attributable to common stockholders was $0.57 for the third quarter, up $0.13 or 30% year-over-year.
* Cash and cash equivalents ended the quarter at $179 million, with a decrease of $52 million from the prior quarter driven by $111 million in share repurchases.

Q&A

* Christopher Pierce, Needham & Company, asked about the statistic that "25% of CarGurus dealers only pay for CarGurus." Trevisan responded, "We have seen... dealers use fewer and fewer marketplaces -- marketplace partners...it's gone from about an average of using 3 to using under 2, around 1.8."
* Pierce inquired about ROI on Digital Deal and potential for pricing power. Samuel Zales, COO, explained, "You've seen that we've got 12,500 customers now on the program. It is packaged into one of our premium tiers. So the dealers who get access to Digital Deal have to pay more."
* Marvin Fong, BTIG, asked about international [CarSID] growth and pricing strategy. Zales noted, "We're keeping our prices at a lower level because we are winning more and more customers...our goal there is to say, let's be smart about pricing. Let's price to the value that we're offering to our dealers."
* Vincent Kardos, Jefferies, asked about the growth algorithm between rooftops and [CarSID]. Trevisan replied, "When we grow rooftops much faster, that's a natural math-based headwind...this past quarter, [CarSID] was up about 8% year-over-year. Rooftops were up about 5%."
* Jamesmichael Sherman-Lewis, Citigroup, asked about CG Discover's impact and investment areas for 2026. Trevisan described Discover as "a new experience...getting great traction," and noted ongoing AI-centric investment.
* Ryan James Powell, B. Riley Securities, asked about Dealership Mode and CG Discover. Trevisan emphasized, "It's giving us a lot of information about who actually goes to the dealership...it helps us and it helps the dealer, frankly, probably more than us, understand what other cars a consumer is interested in to compare."
* Rajat Gupta, JPMorgan, inquired about industry backdrop and dealer sentiment. Trevisan stated, "We are the largest marketplace with dealers consolidating spend...we're, I think, even more immune and sound."

SENTIMENT ANALYSIS

* Analysts focused on growth levers, pricing power, competitive positioning, and international expansion, showing a neutral to slightly positive tone, with persistent questions about pricing strategy and product adoption.
* Management maintained a confident and optimistic tone during both prepared remarks and Q&A, frequently referencing strong execution and measurable results. Trevisan repeatedly emphasized the company's leadership and innovation, stating, "we believe our growing product suite positions CarGurus as an intelligence-driven partner."
* Compared to the previous quarter, analyst sentiment remained steady with continued interest in growth metrics, while management's confidence in product innovation and international expansion appeared more pronounced.

QUARTER-OVER-QUARTER COMPARISON

* Marketplace revenue growth remained stable at 14% year-over-year, consistent with the previous quarter. International revenue growth was 27% in Q3 versus 28% in Q2. U.S. [CarSID] growth moderated to 8% from 9% in Q2, while international [CarSID] growth was 15% in Q3, down from 19% in Q2.
* Marketplace adjusted EBITDA increased 18% in Q3 compared to 31% in Q2, with ongoing investments in product innovation and higher sales and marketing expenses highlighted.
* Guidance for Q4 Marketplace revenue (12–15% growth) was maintained in line with prior guidance language centered on double-digit growth exit rates.
* The company continued to focus on AI-centric innovation and announced new product launches, such as PriceVantage and Dealership Mode, signaling an evolution from add-on features to differentiated software solutions.
* Analysts’ focus remained on growth drivers, pricing power, and international expansion, while management’s tone exhibited greater emphasis on product innovation and operational efficiency.

RISKS AND CONCERNS

* Management cautioned that "as we implement changes to comply with cookie consent regulations across markets, reported uniques and sessions are expected to decline as some users do not opt into tracking," highlighting a change in traffic measurement.
* The wind-down of CarOffer is ongoing, with expected restructuring charges between $5 million and $6 million, and a total wind-down charge range revised to $13 million to $15 million.
* Trevisan noted macro risks such as "consumer sentiment down, interest rates still elevated, pricing not having come down and inventory up," which may impact dealers' profit margins.

FINAL TAKEAWAY

CarGurus closed Q3 2025 with double-digit marketplace revenue growth and robust international performance, propelled by the launch of new AI-driven products like PriceVantage and ongoing expansion in software and data solutions for dealers. With Q4 marketplace revenue guidance set at $236 million to $241 million and continued focus on innovation and operational efficiency, management remains confident in its ability to drive long-term growth and deepen both dealer and consumer engagement.

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

MORE ON CARGURUS

* CarGurus, Inc. (CARG) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4839864-cargurus-inc-carg-q3-2025-earnings-call-transcript]
* CarGurus, Inc. (CARG) Presents At Goldman Sachs Communicopia + Technology Conference 2025 (Transcript) [https://seekingalpha.com/article/4820573-cargurus-inc-carg-presents-at-goldman-sachs-communicopia-technology-conference-2025]
* CarGurus: Upgrade To Buy As The Equity Story Is Now A Lot Cleaner And Better [https://seekingalpha.com/article/4812533-cargurus-upgrade-to-buy-as-the-equity-story-is-now-a-lot-cleaner-and-better]
* CarGurus Non-GAAP EPS of $0.57 beats by $0.02, revenue of $238.7M beats by $3.82M [https://seekingalpha.com/news/4517842-cargurus-non-gaap-eps-of-0_57-beats-by-0_02-revenue-of-238_7m-beats-by-3_82m]
* CarGurus Q3 2025 Earnings Preview [https://seekingalpha.com/news/4516110-cargurus-q3-2025-earnings-preview]