Carvana Stuns Wall Street With Record Earnings Surge

Carvana, the Arizona-based online used-car retailer best known for its towering car vending machines, has pulled off what many on Wall Street are calling the most dramatic corporate turnaround of the decade. On February 18, 2026, the company reported its fourth-quarter and full-year 2025 financial results, stunning analysts and investors alike with a performance that seemed unthinkable just a few years ago. The numbers weren’t just good—they blew past even the most optimistic forecasts, signaling a new era for both Carvana and the broader automotive retail industry. For the fourth quarter of 2025, Carvana delivered a diluted earnings per share (EPS) of $4.22, nearly four times the consensus Wall Street estimate of $1.13, according to Market Minute and TipRanks. Revenue for the quarter reached $5.6 billion, also exceeding expectations and underscoring the company’s ability to scale its operations efficiently. This wasn’t a flash in the pan either; the results capped a record-breaking year in which Carvana sold 596,641 retail units—a staggering 43% year-over-year growth in volume, despite a used car market marked by high interest rates and economic uncertainty. “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,” said Carvana CEO Ernie Garcia III in the company’s earnings release, as reported by TipRanks. So, how did Carvana pull off this transformation? The story begins in 2023, when the company was teetering on the edge of insolvency. Facing a punishing industry downturn, Carvana executed a complex debt restructuring that provided an $878 million one-time gain, buying itself time but leaving open questions about its long-term viability. In 2024, the focus shifted to profitable growth, leveraging the infrastructure gained from its 2022 acquisition of ADESA, a move that allowed Carvana to streamline its reconditioning and logistics processes. The results of these efforts became clear in 2025. Carvana posted an industry-leading 9.1% Adjusted EBITDA margin in the fourth quarter, propelled by AI-enabled customer tools and a sophisticated national logistics network that slashed selling, general, and administrative (SG&A) expenses per unit. According to Market Minute, these operational improvements allowed Carvana to reach a scale “few thought possible” during the industry’s recent struggles. But the company’s turnaround is about more than just numbers. Carvana’s success has sent shockwaves through the automotive retail landscape, putting pressure on traditional players to adapt or risk being left behind. CarMax, once the undisputed king of used car retail, saw its retail unit volumes decline by approximately 8% in 2025 and is now undergoing a leadership transition and a $150 million cost-cutting initiative. Meanwhile, AutoNation managed to keep its vehicle sales flat but leaned heavily into high-margin parts and service segments, with its after-sales division hitting record profitability. “For pure-play retailers who rely solely on used vehicle sales and financing, Carvana’s aggressive expansion and superior unit economics present an existential threat to their traditional lot-based business models,” Market Minute observed. The message is clear: digital-first efficiency is no longer just a buzzword—it’s a survival strategy. Carvana’s rise also mirrors broader trends in how Americans buy cars. As of early 2026, about 20% of all car buyers now prefer a fully online transaction, a sharp increase from single-digit percentages just five years ago. The global automotive e-commerce market has ballooned to $116.2 billion, and Carvana is riding this wave with gusto. The company is also positioning itself as a leader in the used electric vehicle (EV) market, with used EVs now representing 11% of the total market. Carvana’s centralized inventory model allows it to move these specialized vehicles more efficiently than many local dealers can manage. Perhaps most ambitious is Carvana’s reaffirmed long-term goal: selling 3 million units per year. Hitting nearly 600,000 units in 2025 is a milestone, but reaching the 3-million-unit target would require capturing roughly 8-10% of the entire U.S. used car market. This signals that Carvana no longer sees itself as a disruptive upstart but as an eventual dominant force in what is now an $800 billion industry. However, the road ahead isn’t without its bumps. The expiration of Carvana’s Payment-In-Kind (PIK) interest period in early 2026 means the company will have to start making significant cash interest payments—a legacy of its 2023 debt restructuring. This new challenge will test whether Carvana can maintain its impressive EPS and growth while managing higher cash outflows. At the same time, the company has announced a strategic partnership with a major national logistics firm, aiming to reduce delivery times by an additional 30% in 2026. If successful, this could further cement Carvana’s reputation for operational excellence. Despite the blowout earnings, Carvana’s stock (CVNA) experienced a wild ride. Immediately after the results were announced, shares plunged 23%, a move analysts attributed to the company’s failure to provide concrete guidance for the first quarter of 2026. Still, Carvana’s management did offer a full-year outlook, projecting “significant growth in both retail units sold and Adjusted EBITDA in full year 2026,” assuming a stable economic environment. The stock had already doubled in 2025 before the recent pullback, and as of the article date, Carvana enjoys a consensus Strong Buy rating among 17 Wall Street analysts, with an average price target of $497.81—implying 37% upside from current levels, according to TipRanks. What’s driving the persistent demand for used vehicles? Analysts point to a combination of inflation and the impacts of tariffs, which have made new vehicles less affordable for many Americans. Used vehicle loan interest rates often exceeded 10% throughout 2025, yet consumers continued to flock to Carvana’s digital storefront, drawn by its convenience and transparent pricing. Looking further ahead, industry watchers are curious to see whether Carvana can sustain its momentum as it transitions from rapid growth to a more mature, cash-generating phase. The company’s next moves—potentially including pivots into commercial fleet management or expanded third-party marketplace services—could provide new avenues for growth as it marches toward its ambitious 3-million-unit goal. Ultimately, the February 18, 2026, earnings call marked a transformative moment for Carvana and its investors. The $4.22 EPS beat wasn’t just a win for the quarter; it was a validation of the company’s vertically integrated, tech-driven approach to automotive retail. While challenges remain, particularly in managing cash interest obligations and maintaining growth in a stabilizing market, Carvana has shown that its “vending machine” model is no longer a novelty—it’s the new gold standard. As the dust settles, one thing is clear: Carvana’s journey from near-insolvency to industry powerhouse is a testament to bold strategy, relentless execution, and the power of digital transformation in even the most traditional sectors. Investors and competitors alike will be watching closely as the company navigates its next chapter.