Carvana Co. (CVNA) experienced a significant stock decline on Thursday following the release of its mixed fourth-quarter results. While the company reported a substantial increase in revenue, its profits fell short of expectations.
The online used-car retailer announced revenue of $5.60 billion, surpassing the Bloomberg consensus estimate of $5.27 billion and representing a 58% year-over-year increase. Retail units sold reached 163,522, also beating the expected 157,226 units and growing 58% compared to the previous year.
However, Carvana's adjusted EBITDA came in at $511 million, below the anticipated $535.7 million. Its adjusted EBITDA margin was 10.1%, missing the expectation of 10.4%.
The company's shares dropped more than 15% in premarket trading, after having plunged as much as 20% following the Wednesday evening earnings release.
Carvana provided a somewhat ambiguous performance outlook, withholding specific guidance for the first quarter.
In a letter to shareholders, Carvana CEO Ernie Garcia III stated, "Looking ahead, assuming a stable market environment, Carvana anticipates significant growth for full-year 2026 in both retail units sold and adjusted EBITDA, with both metrics expected to improve sequentially in the first quarter of 2026."
Wall Street had previously projected first-quarter adjusted EBITDA of $671 million and retail unit sales of 175,478 vehicles for the company.
Garcia noted that fourth-quarter results were impacted by increased vehicle reconditioning costs, which are expected to remain elevated in the first quarter. Nevertheless, the company forecasts an improvement in profit per vehicle.
He further added, "We are the fastest-growing and most profitable car retailer. The path to achieving 3 million units sold annually and a 13.5% adjusted EBITDA margin by 2030 to 2035 is very clear."
Carvana's stock has faced continued pressure this year. In January, short-selling firm Gotham City Research accused the company of insufficiently disclosing related-party earnings from DriveTime, alleging this artificially inflated profits and causing a sharp stock decline. DriveTime is a private used-car retailer and subprime auto lender controlled by the father of Carvana's CEO, Ernie Garcia Jr.
The short-seller claimed these earnings led Carvana to overstate its profits by approximately $1 billion in 2023 and 2024. Carvana has denied the allegations presented in the report.