ACVA Q2 Deep Dive: Margin Progress and Product Expansion Amid Market Headwinds

Online used car auction platform ACV Auctions (NASDAQ:ACVA) fell short of the market’s revenue expectations in Q2 CY2025, but sales rose 20.6% year on year to $193.7 million. Next quarter’s revenue guidance of $200.5 million underwhelmed, coming in 1.9% below analysts’ estimates. Its GAAP loss of $0.04 per share was $0.02 above analysts’ consensus estimates.

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StockStory’s Take

ACV Auctions faced a challenging second quarter, with results coming in below Wall Street’s revenue expectations and an 11.9% drop in share price following the report. Management attributed the performance to softer conversion rates late in the quarter, driven by dealers retaining more vehicles due to ongoing industry supply constraints. CEO George Chamoun acknowledged these headwinds and emphasized that, despite market deceleration, the company delivered meaningful margin expansion and continued to gain market share through strong execution in its dealer wholesale and value-added services businesses.

Looking ahead, management’s revised guidance reflects caution around persistent macroeconomic crosscurrents, including elevated trade retention and uncertainty in dealer wholesale volumes for the remainder of the year. Despite these challenges, ACV Auctions remains focused on expanding its technology suite, with investments in AI-driven products like Project Viper and guaranteed pricing tools expected to drive future differentiation. CFO Bill Zerella stated, “We are maintaining the midpoint of adjusted EBITDA guidance with a range of $68 million to $72 million, reflecting growth of approximately 150% year-over-year at the midpoint,” underscoring the company’s commitment to profitable growth.

Key Insights from Management’s Remarks

ACV Auctions’ management highlighted margin improvement and expanding dealer partnerships as key drivers of the quarter, while navigating volume pressure from industry-wide inventory trends.

• Dealer retention impacts volumes: The company experienced a unit growth headwind as dealers opted to hold onto more vehicles, reflecting broader industry supply shortages. Management explained this trend reduced conversion rates, particularly in the back half of the quarter, and directly affected auction volumes.
• Marketplace services growth: ACV Transport and ACV Capital both posted record results, with the latter achieving over 60% revenue growth. These services helped offset challenges in the core auction business and supported diversification of revenue streams.
• Cost discipline drives margins: Operating margin improved significantly year-over-year, with non-GAAP operating expense as a percentage of revenue decreasing by 300 basis points. Management credited ongoing expense optimization and scaling benefits for the margin gains.
• AI-powered product differentiation: The company expanded its AI-driven pricing and assurance solutions, including its no-reserve guarantee sale which reached 15% of units sold by quarter end. Management believes these offerings are boosting buyer engagement and will become a larger share of business over time.
• Early progress in commercial remarketing: ACV launched its first greenfield remarketing center in Houston and completed its initial commercial wholesale platform transactions. This step, while in early stages, is seen as an important long-term growth lever for entering the commercial market segment.

Drivers of Future Performance

Management anticipates ongoing macroeconomic uncertainty and dealer inventory behavior will shape near-term results, while prioritizing investments in technology and operational efficiency.

• Dealer inventory decisions remain pivotal: The company expects elevated trade retention rates and conservative dealership inventory management to continue affecting auction volumes. Management acknowledged that normal seasonal patterns could resume but flagged the risk of further volatility tied to tariffs and new car pricing.
• AI-driven product roadmap: Continued investment in AI-powered solutions like Project Viper, predictive pricing, and the expansion of guaranteed sales are expected to differentiate ACV’s platform and unlock new growth opportunities. However, management noted that significant revenue contributions from these initiatives are likely in future years rather than the near term.
• Margin expansion focus: Despite trimming revenue guidance, ACV is maintaining its adjusted EBITDA margin goals, supported by disciplined operational spending and ongoing efficiency efforts. Management remains committed to balancing technology investment with incremental margin gains.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of adoption for ACV’s AI-powered initiatives such as Project Viper and guaranteed pricing, (2) progress on greenfield commercial remarketing centers and market entry milestones, and (3) stabilization of dealer auction volumes amid evolving trade retention and inventory trends. Execution against these priorities will be crucial for validating management’s growth and margin targets.

ACV Auctions currently trades at $11.75, down from $13.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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