With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

<p>During the COVID pandemic, this used-car seller thrived as supply-chain problems made new cars hard to find; today business is booming as inflation makes new cars hard to afford. Carvana sold nearly 600,000 cars in 2025 at healthy profit margins, and its revenue rose 49%, helping it leap ahead 94 spots on the Fortune 500.</p>

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-483-Carvana

Breaking into the <em>Fortune</em> 500 for the first time this year is online used car retailer, Carvana. The company is known for its multi-story, coin-operated car vending machines, where consumers pick up vehicles after finalizing their purchase.

This year's Fortune 500 marks the 66th running of the list.

This year's Fortune 500 marks the 65th running of the list.

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Founded by Ernest Garcia III, Ryan Keeton, and Ben Huston in 2012, Carvana set out to “change the way people buy cars.” The company operates an e-commerce platform for buying and selling used cars in the U.S. and, with its subsidiaries, offers related services including inspection and reconditioning, financing, and auction sites. Carvana debuted its distinctive car vending machine in Nashville in 2015, and now operates almost 40 of the glass towers showcasing its cars. Since launching in 2013, more than 4 million customers have chosen its automotive e-commerce experience to shop, sell, finance, and trade in vehicles entirely online.

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Q4 2024

Carvana (CVNA): Company Profile, Stock Price, News, Rankings

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Carvana

carvana

Quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Meg Kehan with Investor Relations. Please go ahead.

Thank you, Nick. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's fourth quarter and full-year 2025 earnings conference call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.carvana.com. The fourth quarter shareholder letter is also posted on the IR website. Additionally, we posted a set of supplemental financial tables for Q4, which can be found on the Events and Presentations page of our IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer, and Mark Jenkins, Chief Financial Officer.

Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meanings of federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results, that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ materially from forward-looking statements can be found in the Risk Factors section of Carvana's most recent Form 10-K. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial metrics.

Unless otherwise specified, all references to GPU and SG&A will be to the non-GAAP metrics, and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our shareholder letter issued today. With that said, I'd like to turn the call over to Ernie Garcia. Ernie?

Thanks, Meg, and thanks, everyone, for joining the call. 2025 was another incredible year for Carvana. There are many useful ways to describe the progress that we've made, but one approach I return to each year is starting with the graphs at the beginning of our shareholder letter. I find that useful because they provide a simple visual view of the big picture, and the big picture story is clear and meaningful. The first observation from the graphs is that both volume and financial performance are moving up into the right rapidly. This is only possible if you offer customers something that is sufficiently different and desirable that it causes them to break habit, and if the business model itself is sufficiently different and efficient, that enables qualitatively different results.

When we went public, we wrote that our mission was to change the way people buy and sell cars, and the graphs show that we have built a customer value proposition and a business model with the power to do it. Having a great customer offering is the single most important thing. We have it, and we are making it better every year. Looking at the year in our current position, there are three key takeaways in our minds. One, we are getting better and more differentiated as we get bigger. In the last 12 months, we increased customer selection by 20,000 cars. 20,000. We are delivering cars to our customers a full day faster. We have put more cars closer to our customers, leading to $60 average savings on shipping fees for our customers.

We have reduced the interest rates our customers pay on their loans by about 1% relative to benchmark on average. We've made the transaction simple and straightforward enough that many of our customers can confidently make it all the way to the vehicle handoff without ever speaking to a person at Carvana. And customers are telling us they love it, with NPS at multi-year highs. That's a lot of progress we made in a year, where we also improved our EBITDA margin by 100 basis points. Lots of good things have to be true to make all that possible, and those things are hard to replicate. Two, we are making rapid progress toward our goals. With every step, our path to our current goal of 3 million retail units a year and 13.5% adjusted EBITDA margin becomes clearer, and this year was a big step.

We estimate that fixed cost leverage alone will be worth about 2 points of Adjusted EBITDA margin over time. We're making rapid progress in fundamental gains. That is, lowering variable costs and increasing the efficiency of variable monetization, which gives us more fuel to hit our financial goals and to keep providing additional value to our customers over time. On units, we grew by 43% in 2025, meaning that the compounding annual growth rates necessary to hit our 2030-2035 retail unit goal are now 38% and 18% respectively. With the quality of our customer offering and the positive feedback in our business, we believe there is plenty of fuel to get us to our 3 million unit goal and beyond. But we have a lot of work to do, and to keep scaling our operational machine to handle all that volume.

That brings us to point number three. We have the infrastructure to scale, and we just need to execute. The most operationally intensive part of our business is vehicle reconditioning. Continuing to scale reconditioning quickly, cost efficiently, and at high quality has been, currently is, and for the foreseeable future, will be a central focus. We have a better foundation to scale reconditioning effectively than we have ever had in the past. We already own the real estate for 3 million units per year. We've already made the investments in the facilities to produce 1.5 million cars per year.

Our systems that manage the entire process flow through our reconditioning centers are more capable and robust than they have ever been, and we have more locations that are capable of reconditioning cars, 34 as of today, than we have ever had, meaning we can scale hiring and production faster because of access to more people in more geographies. But it's still hard work, and we still have significant room to continue to push more of the complexity of managing cars through these locations into systems, with the goals of continually improving consistency across locations and of making scaling easier. The team is up for the challenge. The Carvana future is bright. The experiences we deliver to our customers are exceptional and getting better all the time. The scale of our opportunity is enormous and the financial opportunity is clear to see.

We have a team that has proven that we can tackle the difficult technology and operational challenges that are in front of us and turn them into moats that are behind us. The march continues. Mark?

Thank you, Ernie, and thank you all for joining us today. Unless otherwise noted, all comparisons will be on a year-over-year basis. 2025 was an exceptional year for Carvana. We entered the year focused on three key objectives. One, delivering significant growth in retail units sold and Adjusted EBITDA. Two, driving fundamental gains in unit economics and customer experience, and three, developing foundational capabilities. By these measures, 2025 was a resounding success. In full-year 2025, we grew retail units sold by 43% to a record 596,641. We integrated 10 additional ADESA locations. We expanded our digital auction capabilities nationwide.

We reached multi-year highs on customer Net Promoter Score, and we increased Adjusted EBITDA margin to a record 11%, again, making us the fastest-growing and most profitable company in our industry. Moving to the fourth quarter, retail units sold totaled 163,522 in Q4, an increase of 43% and a new company record. Revenue was $5.603 billion, an increase of 58%. Revenue growth exceeded retail units sold growth primarily due to traditional gross revenue treatment for certain vehicles acquired from a large retail marketplace partner. Consistent with past quarters, our growth in the fourth quarter was driven by our three long-term drivers of growth, a continuously improving customer offering, increasing awareness, understanding, and trust, and increasing inventory selection and other benefits of scale.

The fourth quarter marked our 8th consecutive quarter of industry-leading retail unit growth and unit economics. Non-GAAP retail GPU decreased by $255, primarily driven by higher non-vehicle costs, lower shipping distances flowing through to customers in the form of lower shipping fees, and higher retail depreciation rates. Non-GAAP wholesale GPU decreased by $148, primarily driven by faster growth in retail units sold than wholesale marketplace units.

Non-GAAP other GPU increased by $49, primarily driven by improvements in cost of funds and higher finance and VSC attach rates, partially offset by our decision to give back to customers in the form of lower interest rates. Since our last reporting, we again expanded our loan sale platform by entering into a fourth loan purchase agreement with a long-standing loan partner for up to $4 billion of loan purchases through December 2027. This brings the total of our new partner loan purchase agreements to $12 billion over the next two years, in addition to $6 billion with Ally through October 2026. Q4 was another strong quarter for levering SG&A expenses.

Our 43% growth in retail units sold led to a $340 reduction in non-GAAP SG&A expense per retail unit sold, including a $57 reduction in operations expenses and a $3,344 reduction in overhead expenses. Advertising expense increased by $83 per retail unit sold as we continue to invest in building awareness, understanding, and trust of our customer offering. With approximately 1.6% market share of the used vehicle retail market, compared to approximately 20% e-commerce adoption in non-automotive retail verticals, we believe we are in the early days of customer awareness and adoption of our model. We continue to see opportunities for significant SG&A expense leverage over time and as we scale, driven by both continued improvements in operational expenses as well as leverage in the fixed components of our cost structure.

Net income was $951 million, an increase of $792 million. Net income was positively impacted by a non-cash benefit of $618 million, including a net non-cash tax benefit of $685 million, partially offset by a $67 million reduction in the fair value of warrants. Net income margin was 17.0%, an increase from 4.5%. Adjusted EBITDA was $511 million, an increase of $152 million, and a new Q4 record. Adjusted EBITDA margin was 9.1%, a decrease from 10.1%, primarily driven by increased retail revenue per unit, resulting from the traditional gross revenue treatment mentioned previously.

GAAP operating income was $424 million or 83% of Adjusted EBITDA, an increase of $164 million and a new Q4 record. 2025 was a strong year for our balance sheet. We ended 2025 with $2.3 billion of cash and equivalents, retired $709 million of corporate notes, and reduced our net debt to trailing twelve-month Adjusted EBITDA ratio to 1.3x, our strongest financial position ever. As discussed in prior quarters, we remain committed to driving toward investment-grade quality credit ratios over time. In 2026, we plan to maintain our three key objectives from 2025, while placing additional weight on driving significant profitable growth at scale.

Looking forward, assuming the environment remains stable, we expect significant growth in both retail units sold and Adjusted EBITDA in full year 2026. Including a sequential increase in both retail units sold and Adjusted EBITDA in Q1 2026. In conclusion, Q4 represented another strong quarter, closing out our best year in company history. We remain excited about progressing toward our goals of becoming the largest and most profitable auto retailer and buying and selling millions of cars. Thanks for your attention. We'll now take questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. You may rejoin the queue for additional questions. The first question will come from Sharon Zackfia with William Blair. Please go ahead.

Hi, thanks for taking the question. I guess I wanted to kind of double-click on the reconditioning dynamics. So if you could maybe talk about kind of the challenges you're facing as you're growing at this rapid pace, which is certainly hard to keep up with. And I think in the shareholder letter, you mentioned something like, you know, if you got all of the locations to the top quartile, you'd get a $220 benefit per car. You know, what is a reasonable timeline to kind of move that bell curve to the right? And do you see the opportunity for GPU to be flat or up for the full year? Thanks.

Yeah. So first, I would say I think that team's done an incredible job for a long time, and we've been obviously working hard to scale that part of the business. I think, as we've said before, as a general matter, I think for any operational business, oftentimes the most difficult parts are the parts where you're moving the most people and things, and for us, that's reconditioning centers, and so that tends to be the most difficult area to scale. I think in addition to, you know, growing at 43%, supporting unit growth of 43% and also growing our inventory last year, that team also has been hard at work opening these additional integration sites, which is great because it lays the foundation for additional growth in the future.

And then I think in Q4, I think there's no question that our expenses were a little higher than we would have liked there. And I think that is partially the result of these additional sites kind of having a single line instead of multiple lines, and there being some extra costs that flow through there as a result. I think it's also partially a result of as we kind of spread out, we had some newer managers, and I think a trend that we've seen is locations that have managers that have been around for longer tend to perform a bit better. And so I think those are addressable issues.

I think many of you have been to many tours inside of, inside of our inspection centers and seen all the work that we've done in Carli to make that process as automated as possible. I think we've got some opportunities to also make the management of those processes more automated. And I think that those capabilities are kind of focused more on lifting the floor of performance instead of raising the ceiling. I think a lot of what we've done so far has been about raising the ceiling. So I think we've got opportunities. I think we've got a very clear plan.

I think this is one of those things where I think sometimes if you take a little step backwards, it kind of fires you up, and my strong guess is we'll be in a better spot in 3-6 months than we would have been otherwise. I think that team is fired up and ready to go, and you know, no one's excited about taking a little backward step there. So we're focused on it. I do not think it'll have long-term implications. I think we'll react to it very positively as we have to many other similar things in the past, and I think we'll get right back at it.

Thanks for that. I guess as a follow-up, I know you have your AI brain, I think, as well in the shareholder letter, and it seems to me you would be maybe the most uniquely poised to benefit from what's happening in AI. Can you talk about what the early kind of nascent uses are that you're implementing AI to do, and then if you're seeing anything in the competitive set or if it's just, you know, business as usual there? Thanks.

Sure. Well, I mean, I think if we start with things that are visible to investors, I think we put some stats in there. You know, we have 30% of our retail customers now go through the entire process without talking to a person until they get the car. We have 60% of our customers that are selling cars to us go through the process without talking to anyone until they drop off their car. That's only possible because of the systems that we've built and those systems being intuitive and automated and straightforward. And I think a major set of tools that contributes to that is Sebastian and other tools that emerge from that AI brain.

So I think that's a very clear place where we're getting more scalable, where we're reducing costs, and I think very importantly, where we're improving customer experience. Those customers that go through the experience in that way have a higher NPS than customers that call us. And I think that also speaks to the power of those systems. So I think that's an area where it's very apparent, I think, even from the outside looking in. And we've been focused on that for several years, and I think you'll continue to get better all the time. I think if you look at other parts of the business, including just the speed at which we're developing new products, that continues to get better all the time.

I think there's been a couple material step changes up in the quality of these different tools, and we're seeing internally, those step changes start to flow through the business, and, and we're getting things done faster. I think that is still relatively early. I mean, the last year has been a massive step up in the quality of these tools, and I think the last three to six months has been another very large step up in the quality of these tools.

But we do believe that we're fundamentally extremely well positioned to benefit from these things because we have a big deterministic system that's vertically integrated, that has access to all the information, and that brain has every system feeding it, so we can give customers very simple answers to any questions they've got in really any software interface that we choose to put on top of it. We think that's very powerful. And then I think, you know, importantly, to try to, you know, discuss, you know, a relative negative as something that I think is a long-term positive. I think even the discussion today is, what does AI mean for, you know, different companies in the long term?

I think, you know, we're sitting here talking about the realities of our business, including financing and logistics and reconditioning and these difficult operational things. I think that, you know, those are other areas of the business that are very important to deliver a great customer experience, and those are areas that are, you know, not subject to AI disruption in the immediate term. So we think that we're positioned to benefit in a major way. We think that competitively, we're incredibly well positioned compared to the rest of our industry, and we think that our business itself is also positioned to be, you know, an AI winner and not something that is disrupted by AI. So our view is the sum of all that is very positive, and we remain excited.

The next question will come from Jeff Lick with Stephens. Please go ahead.

Good afternoon. Thanks for taking my question, and congrats on a nice quarter and a great year.

You know, I was just wondering, Ernie and Mark, can you talk about, you know, the environment, though, at least the depreciation environment's actually kind of reversed a little bit in Q1 so far. So I was wondering if maybe you could just, you know, talk about, and you highlighted in the, the letter that you expect a sequential improvement. But, you know, maybe if you can just talk about the, you know, the puts and takes in the path of travel for GPU, not only in Q1, but for 2026.

Sure. Yeah, I could take that one. So, you know, Ernie hit pretty well on some of the cost dynamics of Q4. We do expect those cost dynamics to play out in Q1 as well, and do expect, you know, our non-vehicle costs to be up on a year-over-year basis in Q1. Despite that, we expect a sequential increase in retail GPU in Q1. So we expect to overcome those cost headwinds and demonstrate a sequential increase. You know, beyond that, you know, I don't have too much commentary to give. I think we'll, you know, we'll see how the year progresses. Obviously, you know, we've had a lot of success driving strong GP Retail GPUs for a long period of time.

And, you know, that's just one of the many places where we've demonstrated a lot of success over time, including, obviously, the significant growth, but in addition to that, you know, very significant growth throughout the income statement, including Adjusted EBITDA, operating income and net income. So, you know, our goal in 2026 is to have another great year, to have another year we drive very significant, top and bottom line growth, and that's what we're going to be focused on.

Awesome. I'll let someone else ask a question. Thanks very much. That's the way, 2026.

The next question will come from Daniela Haigian with Morgan Stanley. Please go ahead.

Great. Thanks for taking the question. First one, you might have addressed a bit with the retail GPU commentary, but overall, on EBITDA, the variably-adjusted EBITDA margin decelerated down to 7% this quarter. Is this a one-off decline? How should investors be thinking about this metric longer term, and is the pace of growth needed to reach that longer-term target, the 18%-38% CAGR, like you mentioned, Ernie, is that supportive of incremental margin expansion? Thanks.

Sure. So I think maybe the first thing I would say on the beginning point is, I think revenue changes play a very big role in that calculation. I think if you look year-over-year, we moved away from marketplace units, and that meant we moved to more traditional kind of gross revenue accounting on a number of units. If you look at EBITDA dollars per unit instead, in Q4, I believe they were down by about $14 year-over-year, which is, you know, first order flat. So I think, you know, calcs kind of on EBITDA dollars, I think would look significantly different. I think looking forward, you know, we feel like we gave you a little bit of a walk.

I think you can see where our margins are today. We clearly have significant fixed costs to leverage. We clearly have significant fundamental gains throughout the business. You can see those showing up in our expense line items. I think, you know, we remain very excited by the progress that we're seeing in operational expense, despite the fact that we're passing value back to customers in faster delivery times and other ways that do have some cost. So I think we've still got a lot of room for that. So we feel like the path to 13.5 is very straightforward, and not only is it straightforward, we think that there's clearly significant additional gains that can be made and handed back to customers along the way.

I think our goal has been, remains, and always will be, to try to make progress across all areas of the business, rapidly and simultaneously. So we're going to, you know, we're going to try to always push, you know, all those numbers up. Our EBITDA margin, our EBITDA dollars, our growth, our customer experience. And I think that's where our priorities come in. We got to then try to figure out what are our priorities, and we got to pick projects that push us in the right directions. And so we try to communicate that clearly to investors as well, as in the same way that we communicate it internally. But the opportunity is clearly there.

I think, in terms of the opportunity, the way we're thinking about the business, nothing has changed, I mean, really, since we started the business. It's just a function of how well we execute at any point in time. The opportunity is there, and if we execute well, we'll go get it, and we'll get it all simultaneously.

Thank you. That's helpful color. My follow-up is, I guess, the question on everyone's minds here. I just want to give you an opportunity to clarify some concerns around the related party transactions. Does Carvana sell loans to related parties? Do the related parties originate loans for cars sold on Carvana? I think if you look at the 10-K, you might have some answers there, but just any messages for investors on that topic here?

Sure. The answer there is very simple. All of our related party transactions are disclosed in our financial statements. As a specific matter, we do not sell loans to related parties, and have not done so for all of the years from 2017 through 2025. Recent short reports that suggest otherwise are inaccurate. We have checked every single detail of those short reports to ensure that all of our reporting is entirely accurate, and definitively say that those reports are 100% inaccurate. So I think that we feel, you know, very strongly about that. We don't sell loans to related parties. We disclose our related party transactions, and there's no ambiguity about that.

Then maybe a friendly request to investors out there. If we have another short report during a quiet period at the end of the year, just maybe think back to the last couple of years and recognize the pattern.

The next question will come from Brian Nagel with Oppenheimer. Please go ahead.

Hey, good afternoon. Thanks for taking the questions. So my first question, and I think this goes back to Sharon's question at the, you know, the beginning of the Q&A session. But, you know, if you're looking at these, the reconditioning cost dynamic here in the fourth quarter. So I guess what I want to ask, you know, that was more of a challenge for Carvana in the fourth quarter. What changed? You know, why did that become a more challenging here in Q4 than it had been in Q3 or prior quarters?

Sure. I mean, what I would say is I think that the most important answer, honestly, there's no unique dynamic that instantaneously changed. I think the execution of that team has been exceptional for a very long time, and we haven't spoken about this much, but I think we've been continually over time discussing the fact that, you know, if you look back over the last 10 years, the areas where we've run into more issues over time tend to be in reconditioning because it is fundamentally a very hard operational problem. And so I think, you know, we try to set people up for that possibility because I think it, you know, wherever there's operational complexity, there's room for variation. I think that will remain true forever.

Like I said, I think that team is gonna... I really do believe that in six months, we're going to be in a better spot than we would have been if we didn't have a fourth quarter miss. I think the dynamics are straightforward. I think, you know, they're as described. We've opened a lot of facilities. We've grown quickly. We were growing inventory quickly in the fourth quarter. We were hiring new managers and kind of moving around some management layers to put us in a position to continue to grow quickly. I think there were moving pieces and sometimes that leads to a little backsliding, but they're fired up.

I mean, you know, just small anecdote, one of the corporate team members who runs that team, I was on the phone with this morning at 6:00 A.M. when he was driving out to Tucson to go work on it. They're very aware that, you know, we had a little miss, and they don't like it, and my strong guess is we're gonna end up in a good spot quickly.

That's helpful. Thanks for that. My second question is also on the retail GPU. You called out, you know, is your positioning inventory better? You know, you're seeing, as you indicated, that, you know, your shipping fees now are declining. So, I mean, clearly, that's a positive for the business. It's very much a positive for, you know, the consumer dynamic. But, you know, as we're looking at the financials, how should we think about that? Because it's, you know, that I guess that's, you know, that to some extent undermines the one driver of GPU, but there should be benefits either in sales or your SG&A, correct?

Sure. Yes, I think the simplest way to think about that is year-over-year, by positioning cars closer to customers, our logistics expenses were reduced by about $60, and our shipping fees were reduced by about $60, basically making it kind of a break even from our perspective, but making it $60 better for our customers. I think, you know, we talk about fundamental gains, and I think that that's a fundamental gain that emerges from basically scaling, where there's just kind of cost savings in the system. And then I think the question is, if we want to keep the menu of options of equivalent economic quality, you know, as the previous year to our customers, then we would basically have the ability to raise shipping costs for any given distance.

We would keep shipping costs flat, you know, year-over-year on average, and we would see, you know, lower costs and, and the same revenue. If we choose to leave the shipping cost menu the same, then we effectively pass through those cost savings straight to our customers, and, and that's the election that we made. You know, we think over time, that there's a lot of value to, to sharing that value with our customers and just continuing to separate the offering that we have.

I think, you know, today, you can see in our financial performance and our growth in our NPS, we are dramatically separated from, you know, the outside industry offering, but we want to continue to separate, and we think that the more that we separate, the louder, you know, customer support becomes and the more quickly we can take over, you know, more of the market, which is absolutely our aim. So I think we try to be thoughtful about where that money goes, but that's an area where we got better as a business and customers benefited.

The next question will come from Rajat Gupta with JPMorgan. Please go ahead.

Well, great. Thanks for taking the question. Just one clarification. You know, when you're seeing profitable growth for 2026, is it fair to assume that, you know, the dollar unit should expand in 2026 versus 2025? Just want to clarify if that is the message. And I have a follow-up.

Sure. I mean, I think, I think what we're trying to communicate there is subtle, and I think what we're trying to communicate is kind of similar to the way that we're discussing it internally. You know, in the letter, we talked about doing full buildouts of ADESA locations, for example. I think, you know, in market ops, you know, we're making subtle choices to operate at slightly lower utilization, you know, which happened in Q3 and in Q4 of 2025, but results in faster delivery times because we think that the math of that is good. Those are some areas where we're making, you know, some subtle, some subtle changes, either in CapEx or in kind of transitioning away from fundamental gains and towards supporting growth at higher scales....

Those are not big moves. So I think what we're trying to communicate is, we had those three priorities from last year. This year, we're leading a touch into growth. The other two priorities remain the same. Our goal is always gonna be to make as much progress we simultaneously can, across all, you know, parts of the transaction. We don't think these are necessarily trade-offs. The trade-off is in our focus and where our priority is, more than anything else. We think that there's room to get better at everything all the time, and we'll work hard to do it. And of course, it'll be hard, like everything that matters is.

Understood. Maybe, like, a little more of a high-level question. I mean, you've, you've tried to be as vertically integrated as possible on, on everything that occurs pre-sale. Is it, is it -- when is the right time to start getting more vertically integrated on the post-sale side? You know, maybe around loan servicing. I mean, I'm sure at some point, you know, servicing cars, you know, with some of the franchise acquisitions you're doing, comes on board. You know, just curious around your thoughts on that and the timing. Thanks.

Sure. I think you can see from the sum of our choices over a long period of time, that we're big believers in vertical integration, both because of the economic benefits and because of the customer experience simplification. So I think as a general matter, we are believers in that, and I think that belief is deep, and so it'll probably show up in lots of choices over a long period of time. I think in the immediate moment, we're now at a place where our contribution margins are very, very high.

And I think we have—we've also put, you know, some data in the—in the shareholder letter that talks about, you know, 70% of our customers reference, you know, a recommendation from a friend or family member mattering when they when they buy a car from us. And that, you know, the majority of our customers, three-quarters, are recommending us to multiple people after buying from us. I think those are the sorts of things that tell us that there's a lot of value, not just kind of in the math, from scaling. You know, the math is very clear because the contribution margins are very high, so that just shows up immediately.

But also, in just kind of laying the foundations for long-term secular growth in our market share, because we're delivering great experiences to people that they're gonna tell their friends and family about for a long time. I think those survey results are very consistent with individual conversations. If you talk to a customer, you obviously get lots of stories, but the standard story that I feel like I hear is, "Yeah, I kinda knew what Carvana was. I knew about your vending machines. I knew you guys were innovative. I didn't really know what that meant. I went to your website, checked it out.

You know, before I knew it, I had bought a car, and then I was almost nervous that I messed up, and it got delivered, and, you know, the advocate that delivered it was great, and, and then I felt so much better, and I was super excited, and I told my friends about it. And to me, that's, that's, like, a very simple story, but that's just the way that actual growth happens. And so, you know, we're gonna focus on trying to take the machine that we've got right now, growing it, delivering more experiences like that, that cause people to talk. And we think that that's gonna pay us back, and, and we will always be looking at, you know, foundational capabilities, would kind of be, like, the broad bucket that we use, that, that would discuss additional vertical integration.

I think the opportunities there are straightforward. I think you can see many of them, and you listed... I'm sure you could think of more if you sat here and thought about them for a second. We see them, too, but we're trying to be focused on what's most important at any given point in time, because we think prioritization matters a lot, and right now, it's the priorities we outlined for you.

Understood. Thanks for all the color. Good luck.

The next question will come from Joe Spak with UBS. Please go ahead.

Thanks so much. I'm curious if you could comment on your feelings about what your customers are saying about affordability. I know you invested a little bit into rates and financing to sort of help this quarter. Curious to sort of see what the reaction to that was, and you know, if you know, maybe more is needed, or if there's anything else you could do, whether it's longer terms or whatnot. And somewhat related, you know, there's you know, a lot of EVs coming back at some you know, I think, going at some attractive rates at auction, and I'm curious whether you think that that's an opportunity to you know, plug the hole, so to speak, at the lower end of the market.

Sure. I think that's a big question. I mean, I think, there's no question affordability is always an issue, and we would always love for cars to be less expensive. And I think that it's always helpful when we can find pockets where, you know, we can give customers an offering that's better. I think, you know, we're in a market that I think, in aggregate is has relatively low elasticities. And what I mean by that is, if you look at kind of aggregate used car sales across a long period of time, you tend to see, you know, used car sales that are relatively flat over very long periods of time, across different economic environments and affordability environments and everything else.

So we think the thing that we can most impact is the quality of our offering relative to the rest of the market. And to do that, you know, that's kind of that term fundamental gain that we throw around a lot. It's, you know, how do we lower our cost to give customers the same experience, or get more efficient with our, with our revenues? I think, you know, you brought up lowering rates by a point. That's a... I mean, that's a big move, and I think if you look at our GPU, you know, year-over-year, you're gonna see that approximately flat. That's pretty impressive, right? So how does that happen? How do we lower rates for our customers by about a point, have our GPU that's flat?

We built, you know, better systems and processes that led to higher attach, and we lowered our underlying cost of funds by bringing on additional partners and getting more efficient in the way that we're structuring transactions, and then that meant value for our customers. So, I think when we can get fundamentally better and when we're in the position that we're in, where we're already performing so well relative to the industry economically, we're in a position to share with customers.

And then, you know, the benefit of that is that that creates affordability for them and separates us further from the economic quality of the outside offering and drives long-term growth. So I think that's what we're going to be really focused on, is just trying to continually get better ourselves. And as it relates to EVs or any other segment that would allow us to try to plug some affordability gaps, we're always paying very close attention to all those things. But as a general matter, things that are easy will get very quickly competed away.

So if EV prices drop to a place where they're, you know, sufficiently desirable to many customers, they're solving the affordability problem. My at least expectation would be that many dealers will realize that and want to buy those EVs, you know, at the same time. I think we are probably a little bit better positioned because we've got a customer base that is more likely to desire an EV. But the hard thing that we can do is make the business better and more efficient. And when the business is better and more efficient, we have money to share with our customers that other people don't have to share, and that makes us different, and so that's generally what we're focused on.

Super, super helpful. Second question is really housekeeping. I want to apologize if I missed this in any of the prepared remarks, but can you just briefly touch on what happened with tax? It looks like there was some release, and now there's a deferred tax asset and a related tax receivable liability on the balance sheet.

Sure, I can hit that, and then there will be more details available on the IR website as well, that hopefully will be helpful. But the key facts there are, we have an Up-C corporate structure. The Up-C corporate structure generates significant tax assets when LLC units are exchanged into common shares. And we've had those changes happening over a number of years, so we've generated very significant tax assets as a result of that. Up until the fourth quarter, we've had a full valuation allowance against those tax assets, but with the realization, you know, of, you know, sustained profitability, we've now released that valuation allowance, leading to the significant deferred tax benefit in Q4.

The other thing I should note is that the tax benefits from the Up-C structure are shared between pre-IPO LLC unit holders and, you know, Carvana common shareholders. And so the tax liability, relief is, effectively reflects the portion of the tax benefit that are shared with LLC unit holders. The remainder of that benefit then flows through to, Carvana common shareholders. That was more than $600 million, so a nice win for shareholders in Q4 with, you know, those tax assets now being reflected in net income.

The next question will come from Chris Pierce with Needham. Please go ahead.

Hey, sorry. Just, I hate to go back to this again because I know Adjusted EBITDA per unit is sort of what really matters, but can you just walk through a non-vehicle cost in an IRC? Because I'm thinking maybe you're less efficient, car takes longer to get on the website, depreciates more, but then in my head, I think that's a vehicle cost. So, like, is there, like, an example you can give to sort of kinda talk about what might have happened here and how, kind of, what you're doing to move past it?

Sure. Yeah, let me hit that. So by non-vehicle costs, we mean, not the acquisition cost of the vehicle, which is, you know, the largest portion of cost of sales. But then there's, you know, a number of other non-vehicle costs, like reconditioning and inbound transport being, you know, two primary examples. And so then just, you know, just to go back, I think Ernie hit this earlier in the call, but, recon costs in Q4, you know, were elevated. We expect them to be elevated in Q1. I think a lot of that is driven by the success that we've had adding new locations.

Ernie touched on these points, but, you know, I think our reconditioning team had an exceptional year in 2025, growing locations more than 40%, growing total production more than 40%. I think our total production growth in 2025 is one of the biggest years, I think, in the, in the history of our industry in terms of increasing overall production. So I think that that team had an exceptional year this year.

You know, in Q4, with the, you know, all the sites that we rolled out over the course of the year, costs were elevated, but we have a number of initiatives in place, and are placing an increased focus on ensuring that as we continue to scale production capacity at very high rates, that we're doing so efficiently and using software and technology as effectively as possible to make that process of scaling as efficient as we possibly can.

Okay, perfect. And then, I hate to call it topical because it's something we heard—haven't heard about for years, but it came up this morning. Can you just walk through title issues, different titling registrations across 48 states, maybe touch on the restart program? Sorta, I know that this, you know, affects a lot of deals, not just you guys, but maybe we hear about it more with you guys. I'd just kind of love to hear about just broadly what you can do there and sort of what your active restraints are, because, you know, you've got 48 states with 48 different systems.

Sure. I'll try to hit on that briefly. And if you're listening out there, yesterday, I passed a gentleman on the elevator that asked me to say Ratatouille, so this is, I think, my shot. But I think we've made tremendous progress in title registration. I think the reality is, as a bigger, automotive retailer with more attention. I think that, you know, in the post-COVID period, we probably got more negative attention for that than was warranted by the performance. I think our performance at that time was very similar to the performance of many other automotive retailers.

But regardless, I think that was one of those moments where, you know, you kind of get slapped around with a concept a little bit, and I think it made us much better. And I think today, we're at a place where approximately 99% of our packets are completed by deadline, which means that we're in a spot to get customers their title and registration work done, you know, quickly and on time.

From all accounts, unfortunately, there's not, like, super simple to find benchmarking data out there, but from all accounts, that makes us very likely best in class, despite the fact that we have a fundamentally harder problem because we're moving cars across state lines from many locations to give customers the selection that they benefit from on our website. So I think this has turned from, you know, an area that I think was complex and was maybe a relative area of weakness because we were taking on a more complex problem, to an area that I think is now another area where we shine and outperform the market. So I think that's something that we're proud of.

I think the teams that have worked on that, you know, that just heard your project called out. I think you have a lot to be proud of, and we have a lot to be grateful for. So I think that's another kind of great, bright spot in the Carvana story over the last couple of years.

The next question will come from Ron Josey with Citi. Please go ahead.

Great. Thanks for taking the question. Two-parter here. Maybe, Ernie, we'll start bigger picture on conversion rates. And, you know, we're seeing inventory grow, and we heard about passing on fundamental gains to customers with lower APRs and faster shipping or delivery time down by a day. Talk to us about just how conversion rates are trending here, the progress as you're working. I know you answered earlier on affordability, but just as you balance affordability with units sold and margins. So first one's on conversion rates, and then maybe, Mark, on guidance overall. Wondering, when you think about Q4, I think we talked about at least 150,000 units. We came in high single digits, maybe 9% better.

Wondering what drove the upside in 4Q here as we think about 1Q and the demand with, you know, tax refunds and seasonality. Thank you.

Sure. I'll hit briefly on conversion. I think conversion rates are something that we definitely kind of define what's the top and the bottom of the funnel, but I think regardless of what we're talking about, I think that we've tended to see over a multiyear period just continual improvement there. I think we're at a place now where we have a lot of website traffic, if we use that at the you know very top of the funnel. If we want to go even higher than that, if we say like aided awareness, I think we're at a place where there's quite a bit of aided awareness.

Carvana (CVNA) Q4 2025 Earnings Call Transcript

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