Online dealer Carvana posted another in a string of company firsts, achieving a profit on record revenue in Q3 2025 despite a cooling down in the used-car market.
Carvana posted $5.65 billion in revenue, up 55% year-over-year and up from its previous record of $4.84 billion set the previous quarter. The company sold 156,000 vehicles, another record.
Carvana reported net income of $263 million, up $115 million y-o-y, though down from $308 million in Q2.
During an earnings call with investors, Carvana CEO Ernie Garcia III boasted that Carvana had profit margins more than two times the industry average and unit sales growth above 40% when other public retailers have been nearly flat.
“We remain the most profitable and fastest-growing automotive retailer,” Garcia said. “These data points are exciting in isolation. Achieving them simultaneously is rare and points to an exceptional future.”
Industrywide, used car wholesale sales were down slightly from Q2 and y-o-y, according to a study by Manheim, and Carvana felt it.
Gross profits per unit were down for both Carvana’s retail and wholesale businesses, which the company attributed to an expected drop off after tariff scares drove an outsized group of buyers to car lots in hopes of avoiding higher prices.
“We attribute that to some effects from the late March auto tariff announcements,” Carvana CFO Mark Jenkins said during a call with investors. “I think on the contrary, Q3 was a bit of a softer depreciation quarter on a year-over-year basis. I think we would attribute that almost an offset to the Q2 strength.”
Decline in per-unit profits was also due to an increase in advertising. After Carvana’s brush with bankruptcy in 2023, the company pared down its business and focused on efficiency, cutting out advertising almost entirely.
In the last few quarters, it has recharged its marketing efforts. Advertising expenses increased by $139 per car sold in Q3, with expectations for Q4 spending to be equal or slightly higher.
That effort goes to one of three pillars of Carvana’s strategy: building understanding, awareness and trust. During a period of explosive growth and inadequate staffing during the pandemic, Carvana was the subject of lawsuits and state enforcement actions due to registration and titling problems (see here and here).
Improved registration processes are part of a R&D project that uses Phoenix as a test market.
Thanks to this project, 40% of customers in Phoenix receive their cars within a day of buying them online, versus a national average of 10%.
Phoenix is also a test market for more efficient finance verifications, vehicle staging, delivery scheduling systems, and staffing models, the company said.
