Carvana expects full-year 2026 adjusted EBITDA in the higher end of $2.7B-$3.0B range as it targets 3M units and 13.5% margin

• CEO Ernest Garcia said the company remains focused on “building the machine to deliver 3 million units per year and 13.5% adjusted EBITDA margin,” adding, “This is our first quarter with over 200,000 sales.”
• CEO Garcia highlighted scale and profitability milestones, including, “Our run rate is now 870,000, double what it was just 2 years ago,” and “This was also our first quarter with $8 billion of revenue.”
• CEO Garcia described macro pressures, stating results came “despite the pressures of growth and an imperfect backdrop of increasing interest rates and gas prices,” while also emphasizing market share positioning: “we still have just over 2% of used market share and 1.5% share overall.”
• CEO Garcia pointed to early platform monetization beyond core used retail, saying, “Our early success with Stellantis new cars is a clear demonstration of the platform value of Carvana’s operations, technology, brand and infrastructure.”
• CFO Mark Jenkins said, “Q3 was another strong quarter for Carvana,” citing records across “retail units sold, revenue, gross profit, GAAP operating income and adjusted EBITDA,” and reported retail units sold of 217,385 and revenue of $8.04 billion.
• CFO Jenkins described key cost/mix drivers, including that “Operations expense increased $109 per retail unit sold, primarily due to higher fuel and logistics costs,” and that this was “more than offset by a $159 per retail unit sold reduction in overhead expense.”

Outlook

• CFO Mark Jenkins guided, “Looking forward, we expect the following as long as the environment remains stable: a sequential increase in retail units sold and adjusted EBITDA in the higher end of our previously communicated range of $2.7 billion to $3.0 billion for the full year 2026.”
• Management did not provide a new numeric range beyond the previously communicated full-year adjusted EBITDA range, but characterized expected 2026 performance as toward “the higher end” of that range.

Financial Results

• CFO Mark Jenkins reported net income of $483 million, noting net income was “negatively impacted by a one-time $53 million pretax expense related to the early redemption of senior secured notes.”
• CFO Jenkins reported adjusted EBITDA of $800 million and said adjusted EBITDA margin was 10%, adding the margin decline was “primarily driven by selling a mix of higher-priced vehicles and giving back to customers in other GPU.”
• CFO Jenkins reported GAAP operating income of $714 million, describing it as “89% of adjusted EBITDA.”
• CFO Jenkins said the company refinanced “the remaining $1.7 billion of senior secured notes due 2030” into a Term Loan B, citing “approximately $45 million of annual interest expense savings,” and added that net leverage and coverage metrics reached new records, including “net debt to trailing 12-month adjusted EBITDA ratio of 0.8x” and “trailing 12-month adjusted EBITDA to interest expense ratio of 6.9x.”

Q&A

• Marvin Fong, BTIG: asked how Carvana is managing “other GPU and the interest rate environment” into Q4; CFO Jenkins said Carvana chose in late 2025 to “pass back some of the fundamental gains… to customers in the form of lower customer interest rates relative to benchmark rates,” and in a rising-rate environment the company generally passes benchmark increases through, “with… delays or lag times.”
• Marvin Fong, BTIG: asked about retail GPU and progress on inefficiencies; CFO Jenkins said inbound fuel costs pressured non-vehicle costs, but added the company is “pleased with… gains… in reconditioning efficiency,” and noted production milestones including “first quarter producing more than 200,000 units.”
• Daniela Haigian, Morgan Stanley: asked where SG&A leverage opportunity is largest; CFO Jenkins pointed to leverage “in every area,” including overhead, longer-term advertising leverage as markets mature, and operations leverage over time “driven by AI and by scale and logistics network density.”
• Daniela Haigian, Morgan Stanley: asked CEO about “agentic AI” opportunity; CEO Ernest Garcia said agentic AI could “reduce digital friction to 0,” and argued the company’s selection and deterministic platform make it well positioned versus dealer processes that retain “physical friction.”
• Michael Baker, D.A. Davidson: asked what Carvana must invest in for agentic discovery/search; CEO Garcia said the company must ensure cars are “readily available” and “pushing out data,” but added, “there’s really not a lot of fundamental things that we need to change” given its API-driven, deterministic systems.
• John Healy, Northcoast Research: asked about FTC dynamics; CEO Garcia said the changes help consumers compare offers by bringing “all the information forward,” and added whether benefits show up in units or margin is “largely a choice,” constrained by supply chain scaling.
• Sharon Zackfia, William Blair: asked about inefficiencies from “full ADESA conversions”; CFO Jenkins said new facilities can run “higher costs” during ramp and highlighted management and systems work to integrate sites efficiently, including AI-enabled manager visibility tools.
• Rajat Gupta, JPMorgan: asked about margin expansion/EBIT per unit; CEO Garcia framed the path to “13.5% EBITDA margin,” noting Q3 impacts from gas and rates “to the tune of about $200 per unit,” while stating, “We can see our way very clearly to 13.5%.”
• Michael McGovern, BofA: asked about “agentic risk” in financing; CEO Garcia said the “comparative static” view suggests more price discovery, but stressed market evolution and said Carvana’s vertical integration supports “better models” and more efficient pricing.
• Michael McGovern, BofA: asked about shifting 2027 reporting emphasis; CFO Jenkins said, “As we become more profitable on a GAAP basis, I think the value of adjusted EBITDA goes down,” and said the company expects to focus more on “operating income” and “net income.”
• Brian Nagel, Oppenheimer: asked whether a reemerging competitor is impacting Carvana; CEO Garcia said it is “very hard… to tease out” individual competitor impacts and added, “We have not seen anything in particular… that we believe has had any notable impact on our results.”
• Ronald Josey, Citi: asked about inventory mix and advertising in light of NPS; CEO Garcia said the team made progress but would “very happily convert cash to more reconditioned cars,” while CFO Jenkins reiterated the growth algorithm and said advertising remains important to “increasing awareness, understanding and trust.”

Sentiment Analysis

• Analysts’ tone was slightly positive, often congratulatory but probing on financing sensitivity, other GPU stability, advertising intensity, facility ramp costs, and whether agentic AI could increase rate competition.
• Management tone was positive and confident in long-term targets, with CEO Garcia stating, “If we keep building the machine, good things are going to keep happening,” while also acknowledging operational constraints around scaling reconditioning and supply chain.
• Versus the prior quarter’s heavier emphasis on recon “bumps” and inventory catching up, management messaging in Q3 leaned more toward platform scalability and external tailwinds (FTC transparency and agentic commerce), while still pointing to fuel/logistics and rates as near-term pressures.

Quarter-over-Quarter Comparison

• Q3 emphasized new scale milestones (“over 200,000 sales” and “$8 billion of revenue”) and a stronger balance-sheet action (refinancing and cited annual interest savings), while Q2 focused more on regional inventory-production correlation and the unwind of a revenue-comparison distortion from “traditional gross revenue treatment.”
• Guidance language tightened in Q3 toward placement “in the higher end” of the prior full-year adjusted EBITDA range; Q2 introduced the full-year adjusted EBITDA range and paired it with a Q3 sequential unit-growth expectation.
• Q3 introduced a clearer communications shift toward GAAP profitability metrics for 2027, with CFO Jenkins calling it “a natural step in our evolution as a company.”
• Analyst questioning in Q3 concentrated on other GPU/benchmark rates, SG&A leverage, agentic AI implications, and facility scaling; Q2 questions were more centered on reconditioning recovery progress, FTC-driven pricing algorithm adjustments, and inventory availability constraints.

Risks and Concerns

• CFO Mark Jenkins said rising benchmark rates and the decision to lower customer interest rates relative to benchmarks reduced other GPU, and also cited “higher fuel and logistics costs” driving higher operations expense per unit.
• CEO Ernest Garcia highlighted execution risk in scaling physical operations, repeatedly linking growth to supply-chain scale, including that the company would like to “scale the supply chain as quickly as possible.”
• Management noted one-time refinancing-related costs, with CFO Jenkins citing the “one-time $53 million pretax expense” tied to early redemption of notes, while presenting refinancing as strengthening credit ratios.

Final Takeaway

Management characterized Q3 as another step toward its long-term targets of 3 million units per year and a 13.5% adjusted EBITDA margin, pointing to record quarterly scale, continued profitability, and balance-sheet refinancing that it said improved credit metrics and reduced annual interest expense. Looking forward, management reiterated expectations for sequential unit and adjusted EBITDA increases and described full-year 2026 adjusted EBITDA as trending toward the higher end of its $2.7 billion to $3.0 billion range, while acknowledging near-term pressure from fuel/logistics costs and a rising-rate environment alongside ongoing supply-chain scaling priorities.

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