Carvana’s record quarterly results top Wall Street expectations

DETROIT — Carvana’s first-quarter results easily topped Wall Street’s expectations as the company reported record sales driven by higher-than-expected industry demand amid fears of price increases due to automotive tariffs.

Carvana CEO and co-founder Ernie Garcia loosely addressed potential impacts of tariffs on the business, saying the company experienced “little gyrations” of demand that have since leveled off. He downplayed the idea that the levies would have any material impact on its business that the company can’t handle.

“I don’t think we have too much interesting there,” Garcia said Wednesday during the company’s quarterly call, adding that pricing may increase and could potentially be beneficial for used car sales.

While the tariffs of 25% on new imported vehicles and many parts do not directly impact used car sales, changes in new vehicle prices, production and demand affect the used car market.

“To the extent new car prices go up, I think generally that would also pull up used car prices, but less. I think that would likely drive a substitution into used, which we expect would be positive,” Garcia told CNBC’s “Squawk Box” Thursday. “I think the sum of that is unclear — how that adds up, and is that a net positive or negative for us.”

A closely watched barometer for used vehicle pricing jumped last month to its highest level since October 2023 as dealers and consumers rushed purchases amid fears of price hikes due to auto tariffs, Cox Automotive reported earlier Wednesday.

Here’s how the company performed in the first quarter, compared with average estimates compiled by LSEG:

Earnings per share: $1.51 vs. 67 cents expected
Revenue: $4.23 billion vs. $3.98 billion expected

The online used vehicle retailer reported a 46% increase in year-over-year sales during the first three months of the year to nearly 134,000 units. Carvana also reported records of net income of $373 million; adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $488 million; and operating income of $394 million.

The company said its net income benefitted from roughly from $158 million associated with positive changes in the fair value of its warrants to acquire common stock of Carvana partner Root auto insurance.

Revenue of $4.23 billion was up 38% year over year from $3.06 billion.

Carvana, which doesn’t typically provide detailed annual targets, on Wednesday also updated its long-term objectives and quarterly guidance.

Its second-quarter guidance includes a “sequential increase in both retail units sold and adjusted EBITDA,” while the new “management objective” is to sell 3 million retail units per year at an adjusted EBITDA margin of 13.5% within five to 10 years.

“We are incredibly well positioned for the path ahead and have very clear visibility to even stronger financial performance, much larger scales, and even better customer experiences,” Garcia said in a release.

Garcia told investors the goal is “very exciting and very achievable,” while noting that the company will prioritize “growth over margin within reasonable margin ranges.”

The company’s return to growth comes several years after concerns that Carvana was close to bankruptcy as it focused on growth and mismanaged inventories during the coronavirus pandemic in 2021 to 2022.

Since then, the company has benefitted from a years-long restructuring to lower costs and increase efficiency, including shares of the company increasing roughly 27% this year.