What's Behind Carvana's Record Adjusted EBITDA Margin in Q2?

Used vehicle e-retailer Carvana Inc. CVNA delivered a record adjusted EBITDA margin of 12.4% in the second quarter of 2025. In fact, it is currently the most profitable publicly listed auto retailer in terms of adjusted EBITDA margin. By comparison, adjusted EBITDA margins of close peers such as Lithia Motors LAD and AutoNation AN are only in the mid-single digits.

This highlights how far Carvana has come in turning its business profitable. Tighter operations, cost discipline and the benefits of vertical integration are giving its margins a boost.

A major driver of the margin expansion was operational efficiency. Carvana managed to increase non-GAAP retail gross profit per unit by $195 in Q2 while also cutting SG&A expenses per unit by $460. This combination lifted per-unit profitability significantly, reflecting the company’s ability to do more with less as it scales. Cost optimization has played a key role. By lowering expenses tied to vehicle reconditioning, transportation and financing, Carvana offset the impact of higher advertising spending, which rose $29 million as it pushed harder on brand awareness.

The company’s vertically integrated model also continues to pay off. By maintaining control over inventory, logistics and customer touchpoints, Carvana reduces dependence on third parties and keeps margins less exposed to outside shocks. This model, paired with a digital-first approach, has enabled Carvana to support strong growth at scale. Retail units sold jumped 41% year over year to 143,280.

Importantly, Carvana is converting about 85% of adjusted EBITDA into GAAP operating income. Reflecting this momentum, the company raised its full-year adjusted EBITDA forecast to a range of $2 billion to $2.2 billion, up from $1.38 billion last year.

In essence, Carvana’s record margin in Q2 underscores a successful strategy built on efficiency, cost control and integration. The company is not only scaling profitably but also setting itself up for sustained growth in the competitive e-commerce auto retail market.

The Zacks Rundown on Carvana

Shares of CVNA have jumped 69% year to date, handily outperforming the industry. Meanwhile, shares of AutoNation have gained 24%, while those of Lithia Motors declined 14% over the same timeframe.

From a valuation perspective, Carvana appears overvalued. It has a Value Score of D. Going by its price/sales ratio, the company is trading at a forward sales multiple of 3.35, higher than its industry’s 0.23. In contrast, AutoNation and Lithia Motors trade at just 0.3X and 0.2X, respectively.

See how the Zacks Consensus Estimate for CVNA’s earnings has been revised over the past 60 days.

Carvana stock currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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This article originally published on Zacks Investment Research (zacks.com).

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