Carvana $CVNA ( ▼ 4.5% ) took a sharp hit after reporting fourth-quarter results that fell short on profitability, even as revenue and vehicle sales beat expectations. Investors focused on the earnings miss, sending shares tumbling despite signs that demand for used cars remains strong.
Adjusted EBITDA came in at $511 million, missing the roughly $535.7 million analysts expected. That disappointment outweighed solid revenue of $5.6 billion, which topped forecasts of $5.27 billion. In short, Carvana sold plenty of cars, just not as profitably as Wall Street wanted.
Sales surge, margins shrink
The company delivered 163,522 vehicles to retail customers during the quarter, a 43% jump from a year ago and close to rival CarMax $KMX ( ▼ 3.64% ) , which sold 169,557 vehicles in its latest period. That narrowing gap signals Carvana is still gaining scale in the competitive used-car market.
But profitability per vehicle moved in the wrong direction. Retail gross profit per unit fell to $3,076, down 7.7% year over year. Management blamed higher-than-expected reconditioning costs, lower shipping fee revenue, rising non-vehicle expenses, and industrywide depreciation trends for squeezing margins.
Cost pressures aren’t going away yet
The company warned that elevated reconditioning costs will likely persist into the first quarter, though it expects profits per vehicle to improve sequentially. Carvana also projected “significant growth” in both retail units sold and adjusted EBITDA for the upcoming quarter and the full year, signaling confidence that the setback is temporary rather than structural.
Whether investors buy that story will depend on execution. Growth without margin expansion is a tough sell, especially after a major rally in the stock.
Short-seller drama adds fuel to the volatility
Carvana’s decline comes amid heightened scrutiny. Shares had already fallen about 24% from a record closing high in January following a report from short seller Gotham City that questioned the company’s accounting practices. Carvana pushed back, calling the claims inaccurate and intentionally misleading.
The result is a stock caught between two competing narratives: a rapidly growing used-car powerhouse versus a business struggling to translate that growth into durable profits. For now, the market is siding with caution.