Carvana Q3 2026: record 217,385 cars sold (+39%), but profit per car fell $365 as loan margins thinned

Carvana sold 217,385 used cars to retail customers in the quarter ended September 30, 2026, up 39.4% from 155,941 a year earlier. It was the company's first quarter above 200,000 and its eighth in a row of roughly 40% unit growth, while, according to the shareholder letter, the wider used-car market was roughly flat. Revenue rose 42.4% to $8.04 billion. Net income attributable to Carvana Co. nearly doubled to $289 million ($0.39 per diluted Class A share) from $151 million ($0.21).

The doubling in profit is less than it looks. Operating income, the profit from running the business, rose a more modest 29.3% to $714 million, and most of the extra gain below that line came from a $154 million charge in last year's quarter that did not recur. Carvana also earned $365 less gross profit on each car it sold, mainly because it kept the interest rates on its customer loans low while its own funding costs rose.

Key metrics

For the nine months, revenue was $21.85 billion (+48.4%), retail units 602,103 (+39.0%), net income attributable to Carvana Co. $849 million (vs. $550 million), diluted EPS $1.15 (vs. $0.76) and Adjusted EBITDA $2.24 billion (vs. $1.73 billion).

Compared with Q2 2026, units rose 10.2% (from 197,325) and revenue 9.0% (from $7.38 billion), but diluted EPS slipped to $0.39 from $0.42 because of the $53 million debt-redemption loss described below.

Takeaway: Carvana's growth is all volume. It sold 39% more cars but earned less on each one: GPU fell $365 and Adjusted EBITDA per car fell to $3,680 from $4,085. Carvana blames the lower GPU mainly on a deliberate choice to keep customer loan rates low against rising benchmarks, and on wholesale profit not keeping pace; it separately estimates that higher fuel prices and rising rates cost about $200 per car across its unit economics. That trade is working for market share, but it means profit is now growing at roughly two-thirds the pace of unit sales.

Where the profit per car comes from

Carvana measures its business by gross profit per retail unit (GPU): all the gross profit earned around a car sale, divided by retail cars sold. It has three parts:

Retail GPU rose. The 10-Q credits the higher retail revenue per car to "overall appreciation in the retail market" (used-car prices went up) and to fewer partner "retail marketplace" cars, which can be booked as a net fee rather than the full price. The shareholder letter adds that the gap between retail and wholesale prices widened.

"Other" GPU had the largest decline. When Carvana writes a car loan it sells it, to Ally under a forward-flow agreement, to other buyers in fixed pools, or to investors through securitizations (loans packaged into bonds). The gain on those sales rose 15.1% to $381 million from $331 million, far slower than units. On our arithmetic that is about $1,750 per retail car, down from about $2,120. The 10-Q attributes the dollar growth to more loans sold, "partially offset by lower loan sale spreads." The letter says the fall in total GPU was "primarily driven by our decision to give back to customers in the form of lower rates on their loans relative to benchmark rates," cut by more than 1 percentage point relative to benchmarks over two years. Service-contract commissions from DriveTime rose to $125 million from $91 million, partly offsetting the squeeze.

Wholesale GPU fell because wholesale profit ($154 million, +14.1%) grew much more slowly than retail units, as the letter puts it, and because ADESA auction (wholesale marketplace) gross profit declined. Profit per wholesale car fell $70 to $963.

Total GPU was about flat against Q2 ($7,014), so the deterioration is a year-over-year story rather than a new drop this quarter.

Costs: overhead per car falls less than before

Selling, general and administrative expenses (SG&A: staff, advertising, delivery, IT and similar overhead) rose 35.3% to $805 million. Per car, SG&A fell to $3,703 from $3,816 a year ago, but it rose from $3,568 in Q2. On the company's non-GAAP basis (excluding depreciation and stock-based pay) it was $3,413, essentially flat year over year ($3,418) and up from $3,228 in Q2.

The components show why:

Advertising rose 49% year over year and 26% from Q2, faster than units. Logistics rose 58%, and the 10-Q lists fuel among the drivers. Compensation, by contrast, grew 22%, well below unit growth. So the overhead savings that carried profit growth in earlier quarters have mostly stopped for now.

What the headline numbers hide

• The EPS jump is mostly a comparison effect. Last year's Q3 carried $154 million of "other expense," chiefly a $120 million drop in the value of Carvana's warrants in Root (its insurance partner) and a $40 million tax receivable agreement expense. This year that line was $11 million. Against that, this quarter took a $53 million loss on debt extinguishment for redeeming $1.66 billion of 2030 Senior Secured Notes at $1.71 billion (including a $50 million premium). Setting both aside, pre-tax income rose 44% ($616 million vs. $427 million), not the reported 113% ($552 million vs. $259 million).
• Taxes now work the other way. The effective tax rate was 12.5% versus -1.5% a year ago, because Carvana released the valuation allowance on its deferred tax assets in Q4 2025 and now books a normal tax charge. That trims the reported gain, but not by enough to offset the warrant comparison.
• Interest savings are real and recurring. Net interest expense fell $27 million to $98 million after the 2028 and 2030 notes were retired and replaced partly with a cheaper floating-rate $1.66 billion Term Loan B. Its balance was $1.639 billion at quarter-end.
• Cash conversion is good. Operating cash flow was $900 million for nine months; subtracting the first half's $345 million gives about $555 million for the quarter (our arithmetic), above total net income of $483 million, even after inventory grew. Vehicle inventory was $3.46 billion versus $2.41 billion at year-end (+43.5%), roughly in step with sales growth.
• No buybacks or dividends, and slight dilution. Diluted weighted-average Class A shares rose 1.2% to 739.9 million. Counting all exchangeable LLC units, the letter says there would be 1.127 billion Class A shares. The listed Carvana Co. holds only part of the operating partnership; $194 million of the $483 million total profit belonged to outside unitholders.

On balance the quarter is flattered: diluted EPS rose 86%, but pre-tax income excluding the prior-year $154 million warrant/TRA charge and this year's $53 million redemption loss rose 44%, and operating income rose 29%.

Did last time's read hold up?

Our Q2 report flagged three things. Management promised a sequential rise in Q3 units, and it delivered: 217,385, up 10.2% from 197,325. We said "other" GPU would stay under pressure if benchmark rates kept rising. It did: $2,733 per car, $307 below a year ago, though slightly above Q2's $2,666. We expected the 2030-note refinancing and continued SG&A leverage to cushion that. The refinancing happened and cut interest expense, but SG&A per car rose from Q2 as advertising and fuel-driven logistics costs climbed. We also noted that only $1.2 billion of Ally capacity was left. That was resolved: on July 27 Ally raised its commitment to up to $8.0 billion through July 26, 2027, with $6.0 billion unused at September 30.

Balance sheet and capacity

Cash was $3.05 billion (up from $2.33 billion at December 31), and Carvana puts total liquidity resources, which also count undrawn credit lines and room to borrow more, at $7.50 billion. Long-term debt was $4.87 billion plus $283 million due within a year. In the quarter Carvana integrated retail reconditioning at two more ADESA auction sites (21 in total) and began two more full buildouts; three are under construction and expected to start production in 2027. It says its current footprint can handle about 1.5 million retail units a year when fully built out, against a current run rate of about 870,000. Average monthly unique visitors rose 21.2% to 23.8 million, and cars listed on the site rose 29.9% to 87,370.

Outlook

Management expects, "as long as the environment remains stable":

• a sequential increase in retail units sold in Q4, and
• full-year 2026 Adjusted EBITDA in the higher end of the $2.7–3.0 billion range it gave earlier.

Two changes to reporting matter for anyone following the stock. From the Q4 2026 earnings call, Carvana will stop giving quarterly or annual financial outlooks. In 2027 it will lead with GAAP figures (operating income, net income) instead of Adjusted EBITDA, and restate its mid-term goal as 3 million retail units a year at a 12.5% GAAP operating margin between 2030 and 2035, which it calls equivalent to the earlier 13.5% Adjusted EBITDA target.

Our read: demand is not the constraint. Units grew 39% in a flat market and site traffic rose 21%. The questions are profit per car and overhead. The Q4 guidance implies Adjusted EBITDA of roughly $0.61–0.76 billion (our arithmetic), well above Q4 2025's roughly $0.51 billion but below Q3. If benchmark rates and fuel stay high, GPU stays near $7,000 and margin growth has to come from SG&A, which went the wrong way this quarter. The 2027 switch to GAAP targets is a plus for readers: GAAP operating margin was 8.9% this quarter, so the 12.5% goal shows plainly how far there is to go. The end of formal guidance means fewer checkpoints from 2027.