Carvana posted impressive first-quarter results, surpassing Wall Street expectations with record sales and profitability, driven by stronger-than-anticipated industry demand and heightened consumer activity amid concerns over potential price hikes related to automotive tariffs. The company reported earnings per share of $1.51, far exceeding the projected 67 cents, and revenue of $4.23 billion versus the expected $3.98 billion.
CEO and co-founder Ernie Garcia downplayed the long-term impact of new vehicle tariffs, indicating only minor fluctuations in demand that have since stabilized. Although the 25% tariffs on imported vehicles and parts do not directly impact the used car sector, Garcia acknowledged that rising new car prices could influence the used vehicle market. He noted that an increase in new car pricing might raise used car prices to a lesser extent, potentially resulting in a shift in consumer preference toward used vehicles — a trend that would likely benefit Carvana.
Recent market data from Cox Automotive indicated that used vehicle prices surged last month to their highest point since October 2023, suggesting growing consumer urgency ahead of potential tariff-related price increases. This momentum has worked in Carvana’s favor, contributing to a 46% year-over-year increase in vehicle sales, totaling nearly 134,000 units for the quarter.
The company also reported net income of $373 million, operating income of $394 million, and adjusted EBITDA of $488 million. Net income included approximately $158 million related to positive changes in the fair value of warrants to acquire common stock of Root, Carvana’s auto insurance partner. Revenue jumped 38% year-over-year from $3.06 billion to $4.23 billion, marking significant growth as the company continues to rebound from pandemic-era challenges.
Carvana provided optimistic second-quarter guidance, projecting continued sequential growth in both retail unit sales and adjusted EBITDA. The company also revealed a bold long-term management objective: to achieve 3 million retail vehicle sales annually at a 13.5% adjusted EBITDA margin within five to ten years.
Garcia expressed confidence in achieving these targets, emphasizing a focus on scaling operations and enhancing the customer experience while maintaining reasonable margins. After facing financial pressures in recent years, including a near-bankruptcy scenario during the pandemic due to inventory mismanagement, Carvana’s turnaround strategy has gained traction. The company’s stock has risen approximately 27% year-to-date, reflecting renewed investor confidence and operational stability.
READ MORE: