CarMax's fiscal Q2 (Jun–Aug 2026): used-car units up 13.8% and EPS up 81% to $1.16 as lower prices per car drove volume and CAF loan-loss charges fell, helped by an easy comparison and one-off gains.
Revenue
$7.9B
+19.5% YoY
Net income
$165M
+73.3% YoY
Diluted EPS
$1.16
+81.3% YoY
This period vs a year ago
Same period last year
This period
Revenue▲+19.5%
≈$6.6B
$7.9B
Net income▲+73.3%
≈$95M
$165M
Diluted EPS▲+81.3%
≈$0.64
$1.16
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
CarMax sold 14% more used cars by cutting its profit per car, and lower loan-loss charges did the rest
CarMax, the largest US used-car retailer, reported its fiscal second quarter (June 1 – August 31, 2026) with revenue up 19.5% to $7.88 billion and net earnings up 73.3% to $165.3 million, or $1.16 per diluted share versus $0.64 a year ago. The engine was volume: used-car unit sales rose 13.8% to 227,391, after management deliberately priced cars more cheaply. That price cut shows up as $111 less gross profit per used car, but the extra cars more than made up for it. Earnings got a second lift from CarMax Auto Finance (CAF), its in-house lender, where the charge set aside for expected bad loans fell by $28.8 million.
About the period label: CarMax's fiscal year ends in late February, so this is the second quarter of its fiscal 2027. We file it as Q2 2026 because the three months it covers all fall in calendar 2026 and CarMax itself calls it its second quarter.
At a glance
Used units +13.8% (comparable stores +13.0%). A big jump, but against a weak base: the same quarter last year saw comparable-store units fall 6.3%.
Used gross profit per unit $2,105, down $111. This is the price CarMax paid for the volume. Management says the cut was smaller than the up-to-$200 it had flagged last quarter.
EPS $1.16, up 81.3%. About $0.16 of that came from two items that won't repeat every quarter (a gain on selling loans and gains on equity investments) and some from a smaller share count, but underlying earnings still rose sharply.
Key figures
Metric
Q2 FY2027 (Jun–Aug 2026)
Q2 FY2026 (Jun–Aug 2025)
YoY Change
Net sales and operating revenues
$7,877.9M
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$6,594.7M
+19.5%
Gross profit
$799.5M
$717.7M
+11.4%
Gross margin
10.1%
10.9%
-0.8 pts
Pre-tax margin (earnings before income taxes / revenue)
2.8%
1.9%
+0.9 pts
Net earnings
$165.3M
$95.4M
+73.3%
Diluted EPS
$1.16
$0.64
+81.3%
Used vehicle unit sales
227,391
199,729
+13.8%
Comparable-store used units
+13.0%
-6.3%
—
Average used retail selling price
$27,623
$25,993
+6.3%
Used gross profit per unit
$2,105
$2,216
-5.0%
Wholesale units
160,344
138,302
+15.9%
Wholesale gross profit per unit
$858
$993
-13.6%
SG&A per total unit sold
$1,621
$1,778
-8.8%
CAF income
$135.6M
$102.6M
+32.1%
CAF provision for loan losses
$113.4M
$142.2M
-20.3%
CAF total interest margin (% of avg. loans)
6.6%
6.6%
flat
CAF annualized net credit losses
2.25%
2.56%
-0.31 pts
CarMax does not report an "operating income" line (its finance arm's interest costs sit inside CAF income), so pre-tax margin is the closest company-wide profitability measure the income statement supports.
Takeaway: CarMax has switched from protecting profit per car to chasing volume, and this quarter it worked: giving up $111 per used car bought 27,662 extra sales, and used-car gross profit dollars rose 8.1%. But management itself credits half of the sales lift to a regulatory change (the FTC pushing dealers to include fees in advertised prices), and the comparison quarter was unusually weak, so the next two quarters will show how much of the volume is CarMax's own doing.
Retail: volume up, margin per car down
Used-vehicle revenue rose 19.7% to $6.31 billion: 13.8% more cars at a 6.3% higher average price (about $1,600 more per car). The 10-Q attributes the higher price to higher vehicle acquisition costs and a mix shift toward newer used cars, describing "the growing segment of higher income consumers purchasing later model used vehicles, while demand among lower income consumers for older vehicles remained steady."
On why sales jumped, the filing is unusually candid. It cites "more competitive vehicle pricing" from better pricing algorithms and passing reconditioning savings on to customers, and also "enhanced FTC regulatory focus that brought greater transparency to advertised vehicle pricing industry-wide by requiring fees to be included in the price." CarMax has long used no-haggle, all-in prices, so rivals having to show their fees up front makes its prices look relatively better. Management says sales were "impacted equally" by its own actions and the FTC effect.
Gross profit per unit (what CarMax keeps on each car after the cost of buying and reconditioning it) fell to $2,105 from $2,216, which the filing ties to "the continuation of pricing actions implemented to drive unit sales growth." Because volume grew faster than the margin shrank, total used-car gross profit still rose 8.1% to $478.6 million.
Two other gross-profit lines matter:
Wholesale (older, high-mileage trade-ins sold to dealers at CarMax auctions): units rose 15.9%, but profit per unit fell $135 to $858, so wholesale gross profit was essentially flat (+0.2%).
Other gross profit (mainly extended protection plans, or EPP — extended warranties and gap insurance sold with the car — plus service): up 33.1% to $183.3 million. EPP revenue rose 23.0% on more cars sold and higher margins from a redesigned product being rolled out nationally.
Costs: fixed overhead spread over more cars
SG&A (selling, general and administrative costs — salaries, rent, advertising, IT) rose 4.6% to $628.6 million, much slower than sales, so SG&A per vehicle sold fell 8.8% to $1,621. The dollar increase came mostly from incentive pay: the 10-Q says compensation rose $10.9 million because corporate bonuses were "significantly lower" a year ago, and that without this effect, compensation would have fallen $14.2 million on lower field and corporate payroll. Share-based compensation rose $6.7 million, tied to CarMax's stock price.
CarMax Auto Finance: profit up, but the loan book is shrinking
CAF income rose 32.1% to $135.6 million. The filing explains this as "primarily driven by a decrease in the provision for loan losses as well as the $16.6 million gain recognized on the sale of auto loans" (a non-prime securitization, where CarMax sold a pool of loans to investors).
Provision for loan losses — money set aside for loans expected to go bad — fell to $113.4 million from $142.2 million. Last year's charge was inflated by poor performance of loans made in 2022–2023, when car prices were high and borrowers were later squeezed by inflation. This year's provision "largely reflects our estimate of lifetime losses on new originations."
Credit quality improved: annualized net credit losses fell to 2.25% of average loans from 2.56%, and loans past due fell to 5.10% from 5.63%.
Interest margin — the gap between what CAF charges borrowers and what it pays to fund the loans, as a share of loans — held at 6.6%. The average customer rate rose to 11.8% from 11.2% as CAF lends more to "Tier 2" borrowers (lower-credit customers it used to refer to outside lenders).
The book got smaller: average loans outstanding fell $1.24 billion to $16.49 billion because of loan sales and weaker sales last fiscal year, so total interest margin dollars fell 5.7% to $273.9 million.
Fewer buyers used CAF: net penetration (the share of CarMax buyers financed by CAF) fell to 40.9% from 42.6%. The filing says Tier 2 growth "was more than offset by lower Tier 1 penetration as customers use alternate funding in response to increased rates."
What the headline numbers hide
About $0.16 of the $0.52 EPS gain came from non-recurring-type items. Other income jumped to $18.6 million from $3.6 million, "driven by unrealized gains recognized on equity investments," and CAF booked the $16.6 million loan-sale gain. Together that is roughly $31.5 million pre-tax, about $23 million after tax at the quarter's 25.9% tax rate. Stripping it out, EPS would be roughly $1.00 — still up about 55%, so the improvement is real, just smaller than the headline.
Buybacks helped, but modestly. Diluted shares were 4.8% lower (142.5 million vs 149.6 million) because of repurchases made last year; at last year's share count, EPS would have been about $1.10. The tax rate went the other way (25.9% vs 25.0%, from expiring stock options), trimming EPS slightly. Most of the gain came from operations.
The comparison is easy. Last year's second quarter had comparable-store used units down 6.3%. Over two years, used units are up only about 8%.
Less of CAF's improvement is lending growth than it looks. The loan book shrank and interest margin dollars fell; CAF income rose because loss charges fell and a pool of loans was sold at a gain.
The loss allowance is creeping up. Reserves rose to 3.07% of loans from 3.02% a year ago and 2.78% in February, which the filing attributes to "continued expansion in the Tier 2 credit space." More Tier 2 lending brings higher yields but also higher expected losses.
Cash flow is hard to read and not a red flag. First-half operating cash flow was $900.5 million versus net earnings of $350.9 million, but it included $579.9 million of proceeds from the loan sale, and CarMax's operating cash flow swings with loan balances anyway. Inventory fell 6.8% since February to $3.85 billion while sales rose, which is a healthy sign. CarMax also paid down $548.9 million of long-term debt in the half, clearing its revolving credit line.
Outlook
Management's own guidance in the 10-Q:
Used margin: full-year used gross profit per unit to fall by less than $200 versus last year, with year-over-year declines expected for the rest of the fiscal year.
CAF income: full fiscal 2027 "slightly lower than fiscal 2026," with interest margin around 6.5% for the rest of the year. Since first-half CAF income was $31.5 million above last year, this implies the second half falls short of last year's second half by more than that.
Costs: on track for $200 million of annualized SG&A savings by the end of fiscal 2027, with about half the benefit this year offset by the return of normal incentive pay. About $6 million of severance in Q3.
One-off charge ahead: terminating the pension plan will cost about $50 million pre-tax in Q3 and Q4 combined — roughly $0.35 per share before tax.
Capital return: share buybacks, paused since the fourth quarter of fiscal 2026, resume in Q3 "at a modest pace," as leverage has improved to the upper end of the target range. Capex is planned at about $400 million, down from $541 million.
EPP: margin per unit up $27 in the first half, on track for about $35 for the year; national rollout finishes in October 2026.
A strategy update ("Shift into GEAR") is scheduled for November 3, 2026.
Our read: CarMax's volume strategy is producing real unit growth and operating leverage — fixed costs per car fell nearly 9%. The quality of the beat is mixed: an easy comparison, an industry-wide pricing rule doing half the work by management's own estimate, and about a third of the EPS increase from investment and loan-sale gains. The things to watch next quarter are whether comparable-store units keep growing against a tougher base, whether the per-car margin cut stays inside the "less than $200" guide, and how much CAF's loss reserves rise as Tier 2 lending grows — the CAF guidance already points to a weaker second half for the finance arm, and the pension charge will weigh on reported EPS.