Carvana Growth Cools as Margins Keep Expanding
Carvana posted a record $680 million in quarterly operating income even as retail unit growth slowed for a third straight quarter.
Carvana (CVNA) reported second-quarter revenue of $7.376 billion, up 52% from a year earlier, as the online used-car retailer's operating income climbed to a record $680 million, up $169 million from the same period last year.
The results extended a pattern that has defined Carvana's last three quarters: unit growth is decelerating from an unusually high base while profitability keeps grinding higher. Retail unit sales rose 38% year over year to 197,325 vehicles, down from 40% growth in the first quarter and 44% in the third quarter of 2024. Revenue growth told a similar story, holding at roughly 52% in the first and second quarters after running at 55% in the third quarter of last year.
Net income rose to $513 million, a 7.0% margin, up from 6.4% a year earlier and improved sequentially from 6.3% in the first quarter and 4.7% in the third quarter of 2024. That climb came even as adjusted EBITDA margin fell to 10.4% from 12.4% a year ago, matching the first quarter's 10.4% but down from 11.3% in the third quarter of 2024. The divergence was notable because the prior two quarters' net income had been dented by warrant fair-value charges of $42 million and $120 million, respectively; the second quarter carried no comparable charge, making the margin gain look cleaner than the improvement it followed.
Gross profit per unit fell $412 year over year to $7,014 on a GAAP basis, which was attributed to a mix shift: higher retail gross profit per unit, aided by industry-wide pricing effects following new FTC dealer-fee disclosure rules, was offset by weaker profitability in its other revenue lines as benchmark interest rates rose. That per-unit figure still improved $231 sequentially from the first quarter's $6,783, suggesting the mix pressure eased somewhat quarter over quarter.
Wholesale unit sales, sold mostly through Carvana's ADESA auction network, grew 44.4% year over year to 105,052 vehicles, outpacing retail growth, but wholesale gross profit per unit fell 13.0% as per-unit wholesale revenue slipped 1.1%. Integrated ADESA production sites had grown to 19 locations from 15 as of the third quarter of 2024, with construction under way on its first full ADESA buildout, expected to begin producing vehicles in early 2027.
Selling, general and administrative expense continued its steady sequential climb in dollar terms, rising from $551 million in the second quarter of last year to $595 million, $627 million, $690 million and now $704 million over the past five quarters, even as the company describes its SG&A per retail unit as a record low.
Carvana raised its full-year 2025 adjusted EBITDA guidance to a range of $2.7 billion to $3.0 billion, up from $2.24 billion in actual 2024 results and above the prior year's guide of hitting or exceeding the high end of $2.0 billion to $2.2 billion. For the third quarter, the company guided only to a sequential increase in retail units sold, a softer signal than the specific target of more than 150,000 units it had set for the fourth quarter of 2024.
A UP-C reorganization lifted its full conversion diluted share count to 1.127 billion shares from 226 million in the first quarter, with Class A shares outstanding jumping to roughly 718 million to 740 million from about 143 million to 148 million on a weighted-average basis. The change affects per-share comparability but does not reflect any shift in underlying operations.