CARVANA CO. Q3 FY2026 earnings call

• Record Growth & Scale: Achieved first quarter with over 200,000 sales; run rate is now 870,000 units (double that of two years ago) and $32 billion in revenue. Maintained position as fastest-growing automotive retailer with ~40% growth for eight consecutive quarters.
• Profitability Milestones: Delivered record Adjusted EBITDA of $800 million (run rate >$3 billion) and Net Income of $483 million. Margins remain approximately twice the industry average.
• Customer Experience Improvements: Net Promoter Score (NPS) improved by nine points over two years. Delivery times reduced by two days, and customer interest rates lowered by over 100 basis points relative to benchmarks.
• Operational 'Machine' Components: Focus on three pillars: Selection (driven by inspection/reconditioning centers), Speed (logistics/delivery network), and Experience (customer care). Production capacity hit a record >200,000 units in Q3, slightly outgrowing sales.
• Vertical Integration & Stellantis: Early success with Stellantis New Cars demonstrates the scalability of Carvana’s platform. The vertically integrated model creates a capable, scaled infrastructure for future expansion.
• Balance Sheet Strength: Refinanced $1.7 billion in senior secured notes, saving ~$45 million annually in interest. Net debt to trailing 12-month Adjusted EBITDA ratio improved to 0.8x; Adjusted EBITDA to interest expense ratio reached 6.9x.

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., Retail vs. Wholesale) in terms of absolute revenue contribution percentages for the quarter. However, it highlights that Retail Units Sold were 217,385 (a new record, +39% YoY), driving Revenue of $8.04 billion (+42% YoY). Non-GAAP Retail Gross Profit Per Unit (GPU) increased by $85, while Non-GAAP Wholesale GPU decreased by $196 due to retail growth outpacing wholesale gross profit growth. Adjusted EBITDA was a record $800 million with a margin of 10%, and Net Income was $483 million.

• Q4 2026 Outlook: Expects sequential increase in retail units sold and Adjusted EBITDA.
• Full Year 2026 Guidance: Maintains full-year Adjusted EBITDA guidance at the higher end of the previously communicated range of $2.7 to $3.0 billion.
• Long-Term Goals: Reiterated commitment to scaling toward 3 million units per year and achieving a 13.5% Adjusted EBITDA margin.

• Macro Environment: Increasing interest rates and gas prices create pressure on costs and consumer affordability.
• Operational Scaling Challenges: Scaling physical operations (reconditioning centers, logistics) at high growth rates is difficult and requires significant hiring/training; inefficiencies can creep into the system.
• Cost Inflation: Rising fuel and logistics costs impacted operations expense per unit in Q3.
• One-Time Expenses: Early redemption of senior secured notes resulted in a $53 million pretax expense.
• Competitive Landscape: While Carvana holds only ~2% used market share, competition remains intense, though management believes their model is structurally superior.

Q: How are you managing Other GPU given rising benchmark rates and your strategy of passing back gains? / A: CFO Mark Jenkins explained that the decline was due to two factors: strategically passing back fundamental efficiency gains via lower customer rates (started late 2025) and responding to rising benchmark rates by passing those increases to customers. While there can be lag times, they have been passing through recent rate hikes, which offset some Other GPU despite rising benchmarks.

Q: What is the opportunity for Agentic AI, and how does Carvana position itself against competitors using it? / A: CEO Ernie Garcia stated Agentic AI reduces digital friction to near zero. Carvana’s vertical integration allows agents to instantly verify trade-ins, apply for credit, and schedule delivery in a deterministic flow. Unlike fragmented dealer networks where agents face physical friction and hidden fees, Carvana offers a seamless, transparent experience that rewards their fundamentally better supply chain and data structure.

Q: Where do you see the biggest opportunities for SG&A leverage over time? / A: Jenkins identified leverage in three areas: Overhead, driven by technology investments and scale; Advertising, noting that mature markets have lower ad spend per unit, suggesting long-term leverage as awareness grows; and Operations, where AI and logistics density should eventually reduce per-unit costs despite current fuel headwinds.

Q: Why did unit growth accelerate in Q3 despite a decelerating overall used car market? / A: Garcia attributed the acceleration primarily to supply chain constraints being alleviated. As production capacity grew (outproducing sales slightly), more inventory became available across various segments (prime, sub-prime, etc.). The key driver is their ability to scale the physical supply chain faster, unlocking latent demand that exists but was previously unmet due to inventory shortages.

Q: How will FTC changes regarding fee disclosure impact Carvana versus traditional dealers? / A: Garcia argued that FTC rules simplifying pricing (removing doc fees/add-ons) benefit Carvana because they reward 'fundamental' innovations (better value/efficiency) rather than 'presentation' innovations (hiding fees). Traditional dealers rely on opaque pricing structures that will become harder to maintain, whereas Carvana’s transparent model aligns with regulatory trends and consumer empowerment tools like AI agents.