Shares of online used-car retailer Carvana fell sharply in after-hours trading on Wednesday after the company issued full-year earnings guidance that came in below Wall Street expectations, overshadowing record second-quarter financial results.
Carvana's stock dropped more than 20% immediately following the earnings release before recovering some losses. Shares were still down about 10% ahead of the company's earnings call with analysts.
The company forecast 2026 adjusted EBITDA of $2.7 billion to $3.0 billion, below several analyst estimates. Deutsche Bank had projected earnings between $3.0 billion and $3.2 billion, while Morgan Stanley expected $4.45 billion.
Despite the cautious outlook, Carvana exceeded analysts' expectations for both revenue and earnings during the second quarter.
The company reported earnings per share of 42 cents, slightly above analysts' estimate of 41 cents, while revenue rose to $7.38 billion, surpassing the consensus forecast of $6.91 billion.
Carvana also posted net income of $513 million for the quarter, an increase of $205 million from the same period last year.
Vehicle sales climbed 38% year over year to 197,325 units between April and June, marking another record quarter for the online automotive retailer.
However, investors focused on weaker profitability metrics. Gross profit per unit (GPU), a key performance indicator for the used-car industry, declined about 6% from a year earlier and fell short of some analyst expectations.
The company's latest guidance suggests a relatively stable second half of the year, with adjusted EBITDA expected to range between $1.3 billion and $1.6 billion during the final six months of 2026.
Even at the lower end of the forecast, Carvana would exceed its previous annual adjusted EBITDA record of $2.2 billion, achieved in 2025.
For the first half of 2026, the company generated $1.4 billion in adjusted EBITDA, including a record $769 million in the second quarter.
Carvana said it expects retail vehicle sales to increase sequentially in the third quarter as it continues expanding its automotive retail operations.
The company has also broadened its business by adding new vehicle sales through Stellantis franchised dealerships, although it did not disclose a breakdown of used and new vehicle sales during the quarter.
Chief Executive Officer Ernie Garcia said the company remains focused on long-term expansion, highlighting Carvana's improving operating model and growing customer base.
Garcia reiterated the company's long-term objective of selling 3 million vehicles annually while achieving an adjusted EBITDA margin of 13.5% between 2030 and 2035.
Carvana's adjusted EBITDA margin stood at 10.4% during the second quarter, down 2 percentage points from a year earlier as the company continued investing in growth initiatives.
With an estimated 2% share of the U.S. used-car retail market and roughly 1.5% of the overall automotive retail market, Carvana said significant opportunities remain for future expansion despite near-term investor concerns over its earnings outlook.
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