Carvana, the online used-car retailer known for its car vending machines and splashy advertising campaigns, suffered a dramatic fall from grace on February 18, 2026. After posting record sales growth for the fourth quarter and full year, the company’s stock plunged by as much as 24% in after-hours trading—a drop not seen since late 2022—following an earnings report that missed Wall Street’s profit expectations and left investors with more questions than answers about the road ahead.
According to Dow Jones, Carvana’s shares closed at $361.53 on the day, marking a 27% gain over the past year. But that rally came to a screeching halt after the company revealed its fourth-quarter numbers. Shares tumbled to $280.40 in post-market trading, representing a loss of 22%. Other outlets, including TTNews and The Wall Street Journal, reported similar figures, with the drop ranging from 21% to 24% depending on the timing and source.
The trigger? Despite notching a stunning 58% jump in revenue—rising to $5.6 billion from $3.55 billion a year earlier and handily beating analysts’ forecast of $5.27 billion—Carvana’s profits failed to keep pace. The company posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $511 million. That’s a hefty sum, but not enough for Wall Street: analysts polled by FactSet were looking for $540.5 million, while the average estimate cited by TTNews was $536 million. In the world of high-growth tech and retail, missing the mark on profitability—even by a relatively small margin—can send investors scrambling for the exits.
Carvana’s management attributed the shortfall to higher-than-expected operating costs, particularly in reconditioning vehicles and non-vehicle expenses. The company has been aggressively expanding its vehicle reconditioning network and buying up new-car dealerships. These moves helped fuel a 43% surge in used car sales, matching the robust pace set in the third quarter, but also weighed on margins. As TTNews noted, Carvana’s EBITDA margin declined by a full percentage point compared to the previous year.
Gross profit per vehicle at retail, a closely watched industry metric, fell by $255 to $3,076 per car. The company had warned investors late last year that reconditioning costs would be on the rise, and those costs are expected to remain elevated in the current quarter. While sales volumes are up, the cost of getting each car ready for customers is eating into profits.
Net income for the quarter came in at $951 million, but that figure was flattered by a one-time valuation allowance on deferred tax assets. Stripping out that and a loss from warrants in online insurer Root Inc., Carvana’s net income was $333 million. Interestingly, loan sales accounted for a whopping 95% of that profit, highlighting just how much the company relies on financing as a revenue stream.
Carvana’s CEO and co-founder, Ernest Garcia III, addressed shareholders in a letter, stating, "The company expects it will continue growing sales and EBITDA this year," but stopped short of providing any specific financial guidance. Instead, the company reiterated its familiar goals: sell more cars, grow adjusted profits, improve customer experience, and become a more efficient operator. If that sounds like déjà vu, it’s because, as The Wall Street Journal pointed out, these are roughly the same targets Carvana set last year.
That lack of clarity about the future—what The Wall Street Journal called a "murky forecast"—didn’t sit well with investors. After a year of record-breaking sales, many were hoping for a bold new roadmap or at least some concrete numbers to anchor their expectations. Instead, they got a familiar refrain and a warning that costs would remain high.
Carvana’s recent winning streak had sent its stock to all-time highs, peaking at $478 in January. But cracks began to show when short seller Gotham City Research questioned some of the company’s related-party transactions and, without proof, accused Carvana of inflating its earnings. While those allegations haven’t been substantiated, they contributed to a sense of unease around the company’s financial practices and future prospects.
The company isn’t standing still, though. It set retail sales records for both the quarter and the year, thanks in part to robust investments in its reconditioning network and a high-profile advertising blitz. Carvana’s TV spots have featured actor Jon Hamm and a web sales tool powered by an AI version of NBA legend Shaquille O’Neal—a move that’s certainly caught the public’s attention, if not always their wallets.
Looking ahead, Carvana has ambitious plans for 2026. The company intends to add reconditioning capacity at up to eight of its ADESA vehicle auction sites and build new vehicle repair facilities at even more locations. Construction is slated to begin in the second quarter, with production launches expected in early 2027. These investments are designed to help Carvana scale up operations, improve efficiency, and—hopefully—boost margins over time.
Yet, as TTNews and others have observed, scaling a business as complex as online used-car retailing is no easy feat. The mix of rapid growth, rising costs, and investor skepticism makes for a volatile cocktail. While Carvana’s sales trajectory remains impressive, the company must prove it can turn those sales into sustainable profits without letting costs spiral out of control.
It’s also worth noting the broader context: the used-car market has been red-hot in recent years, with supply chain disruptions and strong consumer demand pushing up prices and volumes. Carvana has ridden that wave skillfully, but as the market normalizes, the company could face stiffer headwinds. Investors are watching closely to see if Carvana can maintain its momentum—and its margins—when the tide inevitably turns.
For now, Carvana’s leadership is sticking to its script: more cars, better customer service, and greater efficiency. Whether that’s enough to win back Wall Street’s confidence remains to be seen. As the dust settles from this week’s earnings shock, the company’s next moves will be scrutinized like never before.
Carvana’s story is a classic case of high expectations meeting harsh reality. The company has proven it can grow at a breakneck pace, but the challenge now is to do so profitably—and transparently. Investors, customers, and competitors alike will be watching every twist and turn on this unpredictable ride.