CarMax’s second quarter results were well received by the market, as the company delivered sales and earnings growth in line with or above Wall Street expectations. Management credited this performance to strong demand across both retail and wholesale channels, gains in service profitability, and operational efficiencies in logistics and reconditioning. CEO Bill Nash highlighted, “This marks our fourth consecutive quarter of positive retail unit comps and double-digit year-over-year earnings per share growth.” Additionally, CarMax’s focus on sourcing vehicles, including record dealer purchases, and its ability to leverage SG&A expenses contributed to the quarter’s profitability.
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CarMax (KMX) Q2 CY2025 Highlights:
- Revenue: $7.55 billion vs analyst estimates of $7.57 billion (6.1% year-on-year growth, in line)
- Adjusted EPS: $1.38 vs analyst estimates of $1.18 (17.2% beat)
- Adjusted EBITDA: $399.1 million vs analyst estimates of $359.2 million (5.3% margin, 11.1% beat)
- Operating Margin: 4.1%, in line with the same quarter last year
- Locations: 250 at quarter end, up from 245 in the same quarter last year
- Same-Store Sales rose 6.6% year on year (-6.1% in the same quarter last year)
- Market Capitalization: $10.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions CarMax’s Q2 Earnings Call
- Brian Nagel (Oppenheimer) asked about the sustainability of recent sales acceleration and SG&A leverage. CEO Bill Nash emphasized ongoing operational improvements and expressed confidence in continued volume growth, while CFO Enrique Mayor-Mora detailed efforts to maintain cost discipline as sales expand.
- Scot Ciccarelli (Charisse) questioned how to interpret comp growth trends amid changing macro conditions and about the accounting treatment for non-prime loan sales. Nash explained that while multi-year stack metrics are useful, internal improvements and funding flexibility are the main drivers of outlook stability.
- Michael Montani (Evercore) inquired about the impact and strategy behind the upcoming marketing campaign and the company’s willingness to increase subprime lending. Nash outlined plans to boost omni-channel awareness, and Jon Daniels confirmed ongoing efforts to grow non-prime penetration.
- Chris Bottiglieri (BNP Paribas) probed the allowance for loan losses and whether economic factors like student loan debt are influencing credit performance. Daniels noted a modest impact from macroeconomic factors but stressed that most reserves relate to earlier loan vintages, with 2024 performance meeting expectations.
- Craig Kennison (Baird) asked about a slight decline in digital sales mix and the role of AI in marketing. Nash explained the decrease was seasonal but emphasized the increasing use of digital features in omni transactions and noted a shift toward “generative engine optimization” in marketing strategy.
Catalysts in Upcoming Quarters
Our analyst team will be watching (1) the effectiveness of CarMax’s new marketing campaign in increasing omni-channel sales, (2) progress in expanding non-prime auto finance and the execution of off-balance sheet funding, and (3) sustained improvements in operational efficiency through AI and process enhancements. Developments in consumer affordability and used vehicle demand will also be key indicators of future performance.
CarMax currently trades at $69.90, up from $64.32 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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