Carvana (CVNA) Q3 2026 earnings review
Carvana sells a record 217,000 cars, but per-car profit falls
Carvana sold a record number of cars and lifted its full-year profit target, even as profit per vehicle declined. The online used-car retailer delivered 217,385 retail vehicles, up 39% from a year ago, and expects another quarterly increase in the fourth quarter. Chief executive Ernie Garcia pointed full-year operating profit before depreciation and one-offs to the top end of the $2.7 billion to $3.0 billion plan, which by our math leaves about $684 million for the fourth quarter.
| Retail cars sold | 217,385 +39.4% from a year ago |
|---|---|
| Revenue | $8.04B +42.4% from a year ago |
| Gross profit per retail car | $6,997 down $365 from a year ago |
| Full-year profit outlook | Raised to high end of $2.7B–$3.0B range |
⚖️ Verdict: 🟢 Bullish
The story got better because fourth-quarter unit growth and the raised full-year outlook removed fears of a second-half stall. Inventory on the balance sheet grew 49% from a year ago, giving the company the cars it needs to keep taking market share. One caution: gross profit per car fell $365 from a year ago on lower buyer loan rates and higher fuel costs, and management plans to stop giving quarterly or annual financial targets in 2027.
The question now is whether falling profit per car is a temporary choice to win buyers or a barrier to its 12.5% operating margin goal. Either efficiency gains soon lift loan and retail margins, or rising shipping costs and loan-rate cuts keep unit profits flat. Fourth-quarter gross profit per car will provide the last reading before annual targets end.
🐂 Bull Case
Car Sales Topped 200,000 as Inventory Caught Up
Carvana, the online used-car retailer, wants its vehicle selection to grow fast enough to feed buyer demand. In the third quarter, the company sold 217,385 retail cars, up 39.4% from a year ago and 10.2% above the second quarter. That sequential jump beat the 8% third-quarter average of the past two years because the company expanded its vehicle inventory on the balance sheet by 49.2% from a year ago to $3.46 billion.
Total revenue rose 42.4% to $8.04 billion. That sits 3 percentage points above unit growth, down from a 14.7-point gap last quarter, because the company lapped an accounting change on partner cars that had inflated earlier sales figures. What to watch: total website units in the quarterly filing. Rising selection on the website would show that inventory growth is finally outpacing car sales.
Carvana Lifted Its Full-Year Profit Target
Three months ago, Carvana's full-year target for Adjusted EBITDA, which is operating profit before depreciation, share-based pay and one-offs, pointed to a flat second half. In the third quarter, the auto retailer generated $800 million on that measure and $714 million in standard operating income. Management now expects full-year Adjusted EBITDA at the "higher end of our previously communicated range of $2.7 to $3.0 billion".
By our math, using $2.93 billion as the middle of that upper half leaves about $684 million for the fourth quarter, or 33.9% growth from a year ago. Overhead expenses fell by 0.5 percentage points of revenue to 10.0% as the business scaled. What to watch: fourth-quarter operating income against that implied $684 million figure. A result above $759 million would push the full year past $3.0 billion.
ADESA Reconditioning Sites Reached 21
To reach its multi-year goal of selling 3 million cars a year, the US company converts wholesale auction lots it bought from ADESA into inspection and reconditioning centers. During the third quarter, Carvana added retail production lines to two more ADESA locations, bringing the total to 21 integrated sites. It also started building two full reconditioning centers, so three full buildouts are now under construction to open in 2027.
With five sites added so far in 2026, the retailer is on track to hit its full-year target of six to eight integrations. Its existing facilities can already prepare 1.5 million cars a year, or nearly twice its current annualized pace of 870,000 units. What to watch: the start of vehicle production at the first full ADESA buildout in early 2027. On-time completion would validate the expansion schedule.
🐻 Bear Case
Profit Per Car Fell for a Fourth Quarter
"In the last two years, we have doubled the number of customers we serve while continuing to lead the industry in unit economics," chief executive Ernie Garcia said. Gross profit per unit (GPU), which measures what the company makes on each retail car from the vehicle, wholesale auctions and buyer loans, tells a tougher story. Standard GPU fell $365 from a year ago to $6,997, while cost of sales rose 1.4 percentage points of revenue.
- Total GPU excluding one-offs: $7,093, down $410 from a year ago
- Other GPU (mostly loan sales and warranties): $2,733, down $307 from a year ago
- Wholesale GPU per retail car: $708, down $158 from a year ago
- Adjusted EBITDA per retail unit: $3,680, down $405 from a year ago
Carvana attributed the drop to "our decision to give back to customers in the form of lower rates on their loans relative to benchmark rates", cutting loan rates by more than 1 percentage point over two years. Even if deliberate, lower profit per car has now reduced Adjusted EBITDA per unit for four straight quarters and pushed the margin down 1.3 percentage points to 10.0%. What to watch: fourth-quarter Other GPU. Another drop would show that rate cuts still outweigh efficiency gains.
Higher Rates and Fuel Cut Per-Car Profit
Carvana earns 39% of its gross profit from its Other segment, where it sells customer auto loans to outside investors, and it runs its own fleet of delivery trucks. In the third quarter, the company said "elevated fuel prices and rapidly rising benchmark interest rates" reduced its unit economics by about $200 per car. Benchmark rates rise faster than the rates buyers pay, which squeezes the gain when Carvana sells the loans.
At the same time, delivery and transport costs inside overhead jumped 58.1% from a year ago to $68 million, outpacing the 39.4% rise in retail cars sold. Advertising spending also rose 49.0% to $152 million. What to watch: delivery and transport expense per retail car next quarter. A further rise above $313 per unit would mean fuel and shipping costs are eating into scale savings.
Risks this quarter didn't answer
Three standing concerns about inventory selection, new-car dealerships and related-party ties received no new breakdown in the shareholder letter.
- Website vehicle selection: the letter omitted period-end website units, which live in the quarterly filing's operating metrics table.
- New-car dealerships: Carvana highlighted selling new cars from its seven Stellantis stores, but gave no unit sales, revenue or profit figures for a fourth straight quarter.
- Related-party reliance: Other revenue from companies tied to the controlling Garcia family rose 38.7% to $129 million, and $1.65 billion of the $2.13 billion tax agreement liability remains owed to related parties.
👓 Other Themes
Carvana Will Stop Giving Quarterly Outlooks
Beginning in 2027, Carvana will "shift our primary reporting focus from our historical Non-GAAP metrics to their GAAP counterparts", converting its 2030–2035 goal to 3 million cars at a 12.5% standard operating margin instead of a 13.5% Adjusted EBITDA margin. Starting on the fourth-quarter call, the company also said "we do not plan to provide quarterly or annual financial outlooks", leaving investors with multi-year targets only.
💲 Other KPIs
Free cash flow — operating cash flow minus property and equipment purchases — rose 60.5% from a year ago to $491 million in the third quarter by our math, up from $187 million in the second quarter. Nine-month operating cash flow reached $900 million despite spending $1.03 billion to expand vehicle inventory.
Net debt — total debt minus cash and restricted cash — fell to $2.06 billion by our math, down from $2.49 billion at the end of June and $2.69 billion at year-end 2025. Carvana redeemed senior notes due 2030 early, recording a $53 million debt extinguishment loss while lowering net interest expense by 21.6% from a year ago to $98 million.
Weighted-average diluted Class A shares stood at 739.9 million, up 1.2% from 731.4 million a year ago and unchanged from the second quarter. Including full conversion of limited-liability-company units held by controlling insiders, total shares outstanding would be 1.127 billion.
🔮 Guidance
Raised. Management narrowed its full-year plan for operating profit before depreciation and one-offs to the upper half of its $2.7 billion to $3.0 billion range. By our math, using $2.93 billion as the middle of that upper half leaves about $684 million for Q4, up 33.9% from a year ago but down 14.5% from Q3 on winter seasonality. Carvana beat its full-year profit plan in both 2024 and 2025.
New. The online retailer plans for fourth-quarter retail car sales to exceed the third quarter's 217,385 units, as long as the macro environment remains stable. Because the fourth quarter is seasonally softer for used-car buyers, any sequential rise from the third quarter requires market share gains and puts full-year volume above 819,000 cars by our math, up at least 37.3% from 2025.
❓ Key Questions
Why stop giving quarterly and annual financial plans in 2027?
Dropping short-term targets just as profit per car has fallen for four straight quarters removes the main benchmark investors use to judge whether loan-rate cuts and fuel headwinds are temporary.
How many cars were listed on the website at quarter-end?
Balance-sheet inventory grew 49% in dollar terms, but higher vehicle prices explain part of that rise; only the website unit count shows whether selection caught up with 39% unit sales growth.
What are the seven Stellantis new-car dealerships contributing in units?
Management highlighted the new-car storefront as proof its platform can expand into new categories, yet it has given no unit volume, revenue or gross profit numbers for four quarters.
When will efficiency gains stop going into lower buyer loan rates?
Carvana cut loan rates by over 1 percentage point relative to benchmarks over two years, which pulled Other gross profit per car down $307 from a year ago and kept margins below its 2030 target.