Carvana, the online used car retailer that’s become a household name for its car vending machines and digital-first approach, delivered a rollercoaster of a fourth-quarter earnings report after the market closed on February 18, 2026. The numbers were eye-popping in some respects, but Wall Street’s reaction was swift and brutal, sending shares tumbling by more than 20% in after-hours trading. What happened, and what does it mean for the company’s future?
Let’s start with the headline figures. According to Yahoo Finance and Benzinga, Carvana posted fourth-quarter 2025 revenue of $5.60 billion, a 58% surge from the year before and well ahead of analyst estimates, which hovered around $5.27 billion. The company also reported selling 163,522 retail units—again, beating expectations and marking a 58% jump compared to the prior year. CEO Ernie Garcia III called 2025 a year of “record unit economics” and “significant value” passed back to customers through better selection, faster delivery, and lower costs.
But the story doesn’t end with top-line growth. In fact, that’s where the trouble starts. As 24/7 Wall St reports, investors were laser-focused on Carvana’s profitability metrics, particularly gross profit per unit (GPU) and adjusted EBITDA margin. And here, things looked less rosy. The company’s adjusted EBITDA for the quarter came in at $511 million, short of the $535.7 million Wall Street had hoped for, and the margin slipped to 10.1%—below the 10.4% consensus. The GPU, a closely watched measure of unit economics, dropped by $255 to $3,076, signaling that while Carvana was selling more cars, it was making less money on each one.
This margin compression didn’t go unnoticed. Shares of Carvana fell as much as 24% immediately after the results hit the tape, bottoming out at $275 before recovering slightly to $281, according to 24/7 Wall St and Benzinga. The reaction echoed a broader trend this earnings season, where investors have punished even the slightest hint of margin weakness, as seen with other large-cap companies like Cisco. Carvana, it seems, became the latest victim of this unforgiving market dynamic.
But why the sudden collapse in profitability? CEO Ernie Garcia pointed to higher reconditioning costs for vehicles and warned that such pressures would continue into the first quarter of 2026. In his shareholder letter, Garcia stated, “Looking forward, Carvana expects 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.” He added, “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.”
Despite these ambitious long-term goals, Carvana’s near-term guidance was vague at best. The company offered no specific estimates for Q1 2026, leaving analysts and investors to fill in the blanks. Wall Street had been expecting Q1 adjusted EBITDA of $671 million and retail unit sales of 175,478, but without concrete guidance, uncertainty reigned.
It wasn’t just the numbers that rattled the market. In late January, Carvana’s stock had already come under pressure after short seller Gotham City Research accused the company of inflating its earnings by roughly $1 billion in 2023 and 2024. The allegations centered on undisclosed benefits from DriveTime, a used-car retailer and subprime lender controlled by Ernie Garcia II—Carvana’s CEO’s father. Gotham City Research claimed these related-party transactions had artificially boosted Carvana’s results. Carvana denied the allegations, calling them “inaccurate and intentionally misleading,” but investors were looking for more than just a blanket denial. Transparency around these relationships and financial dealings remains a key concern for many on Wall Street.
Adding to the drama, Carvana’s own executives made headlines for their timing in early February. According to 24/7 Wall St, CFO Mark Jenkins and COO Benjamin Huston each sold over 13,000 shares at prices between $393 and $419—just two weeks before the earnings release. With shares now trading nearly 24% below those levels, the insider selling has only fueled skepticism among investors already wary of the company’s prospects.
Operationally, Carvana continues to tout its logistics and delivery capabilities as a competitive edge. CEO Ernie Garcia highlighted that 40% of Phoenix customers now receive same-day or next-day delivery, compared to just 10% nationwide. While this rapid delivery is a selling point, scaling it comes with a cost—a factor that may be contributing to the company’s margin struggles.
Looking back, Carvana’s third quarter of 2025 foreshadowed some of these challenges. The company had reported a revenue beat but missed on earnings per share, with non-GAAP retail GPU falling by $77 due to higher depreciation rates. Adjusted EBITDA margin slipped to 11.3% from 11.7% a year earlier. The Q3 miss broke a six-quarter streak of beating earnings estimates, and the stock fell sharply in the aftermath.
For now, Carvana’s management is sticking to its guns on long-term growth. The company reiterated its goal of selling 3 million retail units annually at a 13.5% adjusted EBITDA margin by 2030-2035. “We are actively changing the way people buy and sell cars,” Garcia said on the earnings call, emphasizing the company’s 5 million cumulative customer transactions as evidence of its growing market presence.
Still, the road ahead is anything but smooth. Carvana’s rapid growth is impressive, but investors want to see a clear path to sustainable profitability. With margin pressures mounting, insider selling raising eyebrows, and the cloud of fraud allegations still lingering, the company faces a crucial period of execution and transparency. Whether it can deliver on its lofty promises—or if it will remain stuck in the market’s penalty box—remains to be seen.
The coming quarters will test whether Carvana can not only grow, but do so profitably, and finally put its skeptics’ doubts to rest.