Carvana, the online used car retailer that has rapidly become a household name in the automotive sector, delivered a mixed bag of financial results for the fourth quarter of 2025, sending shockwaves through Wall Street and sparking heated debate among investors. The company’s latest earnings, revealed after the market closed on February 18, 2026, showcased impressive growth in revenue and unit sales, but also exposed cracks in profitability that led to a dramatic plunge in its share price.
According to Yahoo Finance, Carvana posted fourth-quarter revenue of $5.60 billion, a staggering 58% increase compared to the same period last year and well above the $5.27 billion estimated by analysts. This surge was fueled by retail unit sales of 163,522 vehicles, also up 58% year-over-year and beating Wall Street’s estimate of 157,226 units. CEO Ernie Garcia III, in his shareholder letter, described the achievement as a testament to Carvana’s disruptive business model, stating, “We are the fastest growing and most profitable automotive retailer. The path to selling 3 million cars per year at 13.5% Adjusted EBITDA margins by 2030-2035 is clear.”
Yet, beneath the surface of these record-breaking numbers, investors found reason for concern. Carvana reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $511 million for the quarter, missing the consensus estimate of $535.7 million and producing an adjusted EBITDA margin of 10.1%, slightly below the anticipated 10.4%. As reported by Benzinga, the margin was even lower than some analysts had hoped, coming in at 9.1% in their calculations, and it marked a sequential decline from previous quarters. This shortfall in profitability overshadowed the strong sales performance and sent Carvana’s stock tumbling more than 20% in after-hours trading, with shares closing at $283.88—a drop of 21.48% from the previous session.
“In 2025, Carvana grew 43% year-over-year, delivered record unit economics, and passed significant value back to customers through better selection, faster delivery times, and lower costs,” Garcia emphasized. “Achieving all of this at once is rare and speaks to the powerful positive feedback our model generates as we grow. Carvana is still very small relative to our opportunity, but with 5 million cumulative customer transactions and counting, we are actively changing the way people buy and sell cars.”
But the market’s reaction was swift and unforgiving. As CNBC noted, Carvana shares plunged about 15% in after-hours trading following the earnings release, with the shortfall in adjusted EBITDA cited as the primary culprit. The company’s vague outlook for the first quarter of 2026 did little to assuage investor anxiety. While Carvana projected “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, assuming the environment remains stable,” it stopped short of providing concrete guidance for the upcoming quarter. Wall Street had anticipated a Q1 adjusted EBITDA of $671 million and retail unit sales approaching 175,478, but Carvana’s lack of specificity left analysts guessing.
The earnings call, scheduled for the evening of February 18, was expected to shed more light on the company’s forward-looking plans. In his letter to shareholders, Garcia acknowledged that fourth-quarter results were impacted by higher reconditioning costs for vehicles—a trend that is expected to persist into the first quarter of 2026. However, he also projected that profit per unit would improve, suggesting that operational efficiencies may yet offset some of the rising expenses.
Carvana’s ambitions remain sky-high. The company reiterated its goal of selling 3 million cars per year at a 13.5% adjusted EBITDA margin by 2030-2035, a target that, if reached, would cement its status as a dominant force in the used car market. “We remain firmly on track to our goal,” Garcia declared, signaling confidence in the face of mounting scrutiny.
Still, the company’s recent troubles cannot be ignored. In January 2026, Carvana’s shares were rocked by a short-seller report from Gotham City Research, which alleged that the company had overstated its earnings by failing to fully disclose benefits received from DriveTime—a privately held used-car retailer and subprime lender owned by Ernie Garcia II, the CEO’s father. Gotham claimed these undisclosed benefits inflated Carvana’s earnings by approximately $1 billion in 2023 and 2024. Carvana has categorically denied the allegations, and according to Investopedia, JPMorgan analysts defended the company, stating that the short-seller report was based on a “significant misrepresentation of facts.” JPMorgan even raised its price target for Carvana to $510 from $490, expressing continued confidence in the company’s growth trajectory.
Despite these reassurances, investor sentiment has been fragile. As of February 18, Carvana shares had already fallen about 15% since the start of the year, a sharp reversal from the record highs achieved in January when the company joined the S&P 500 and analysts laid out bullish forecasts for its future. The combination of a disappointing earnings margin, lingering doubts over financial transparency, and uncertainty about near-term guidance created a perfect storm that sent the stock into a tailspin.
Analyst outlooks, however, remain largely optimistic. Of the 13 analysts tracked by Visible Alpha, 12 rate Carvana as a “buy,” with just one “hold” recommendation. Their mean price target of $500 suggests a potential upside of 40% from the current trading levels, underscoring the belief that Carvana’s business model and growth prospects still hold considerable promise. As Seeking Alpha and other financial outlets noted, the company’s ability to consistently exceed sales expectations has cemented its reputation as a formidable player in the used-car marketplace, even as questions about profitability and transparency linger.
For now, Carvana finds itself at a crossroads. The company’s rapid growth and ambitious vision have captivated investors and consumers alike, but the path forward will require deft management of costs, clear communication with stakeholders, and continued innovation in an increasingly competitive landscape. As the dust settles from the latest earnings shock, all eyes will be on Carvana’s next moves—and whether it can deliver on its bold promises while regaining the trust of a jittery market.