Carvana Co.

Carvana is growing about 40% a year, generating cash and cutting its cost of debt, but each car it sells now earns less than a year ago. In the third quarter, retail units rose 39% while operating income rose 29% to $714 million, so the operating margin slipped to 8.9% from 9.8%. Profit leans heavily on selling the car loans it originates. The $381 million gain on loan sales equals about 53% of operating income by my calculation, and that gain per car is shrinking. The balance sheet is no longer the risk: $3.05 billion of cash and no large debt maturity before June 2031.

• 217,385 retail units (+39.4%) and $8.04B of revenue (+42.4%), the first quarter above 200,000 units.
• Operating income was $714M vs $552M. Adjusted EBITDA (earnings before interest, taxes, depreciation, stock pay and certain other items) was $800M, with the margin at 10.0% vs 11.3%. Net income was $483M vs $263M, after a $53M loss on retiring debt.
• Total gross profit per retail unit was $6,997 vs $7,362; the loans-and-products ("other") portion fell to $2,733 from $3,040.
• On August 14 a $1.66B term loan (the benchmark lending rate SOFR plus 2.25 points, due 2033) refinanced the 9% 2030 secured notes, which were redeemed for $1.711B. Ally's loan-purchase commitment rose to up to $8.0B through July 26, 2027.
• The 2026 Adjusted EBITDA range of $2.7–3.0B was kept and pointed to its "higher end." From the Q4 2026 call onward, the company does not plan to give quarterly or annual outlooks.

Its findings, each with the evidence, the strongest counterpoint and what would prove it wrong:

• Growth is outrunning profit per car
• Loan sales carry the profit, and their margin is thinning
• Cash generation and the balance sheet are now a strength
• Q4 guidance implies another dip in profit per car, just as the outlook ends

Then its finances, the quality of its earnings, its management, the case for and against, and what to watch, its claims cited to the filings and checked against them.

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