Carvana (CVNA) Q3 2026 Earnings Call: Q&A Summary

Q: Marvin Fong with BTIG asked how the company is managing other GPU in the rising rate environment and if they are passing along the full increase in benchmarks.

A: Mark Jenkins explained that the company passes back fundamental gains to customers to improve their offering. In a rising rate environment, they generally pass benchmark rate increases to customers, though there can be delays.

Q: Marvin Fong with BTIG asked about the progress in catching up to inefficiencies that emerged in the fourth quarter of last year and the general outlook for retail GPU.

A: Mark Jenkins stated that retail GPU was strong, with retail-to-wholesale spreads up year-over-year. He noted that the company made gains in reconditioning efficiency and production capacity, producing over 200,000 units, but emphasized the need to continue increasing production capacity to match sales growth.

Q: Daniela Haigian with Morgan Stanley asked where the biggest opportunity for SG&A leverage is and how the company views the puts and takes with advertising and fuel costs.

A: Mark Jenkins noted that the company sees leverage opportunities across the stack, particularly in overhead and advertising over the long term. He acknowledged that operations expenses ticked up due to fuel and logistics, but expects long-term leverage through AI and scale.

Q: Daniela Haigian with Morgan Stanley asked about the opportunity for Carvana in agentic AI and how the business is positioned to capitalize on this shift.

A: Ernie Garcia explained that agentic AI reduces digital friction and pushes consumers toward digital transactions. He argued that Carvana's vertically integrated, deterministic system is well-positioned to provide a superior experience compared to competitors who lack their inventory and data integration.

Q: Bradley Erickson with RBC Capital Markets asked what to expect for gain on sale levels in the 7% range and how channels will perform.

A: Ernie Garcia stated that the company sees stability in absolute dollar terms for this line item and will continue to use different channels while seeking fundamental gains in finance flows.

Q: Bradley Erickson with RBC Capital Markets asked if future ABS deals should be expected to be upsized like the one completed during the quarter.

A: Ernie Garcia did not provide specific guidance on future deal sizes but emphasized the stability of the platform value and the company's ability to capture value while passing it back to customers.

Q: Michael Baker with D.A. Davidson asked what investments are needed to capitalize on agentic AI, given that competitors still appear in search results.

A: Ernie Garcia said the company needs to make cars readily available and push data to these bots. He noted that their underlying systems are already deterministic and API-ready, so they are well-positioned without needing fundamental changes to the business model.

Q: John Healy with Northcoast Research asked how the industry is evolving regarding FTC dynamics and if this benefits units or margins.

A: Ernie Garcia stated that FTC rules make it easier for consumers to compare offers, which benefits the company. He noted that they prefer this value to show up in unit growth, but it depends on their ability to scale the supply chain.

Q: John Healy with Northcoast Research asked if the franchise dealer model is opening doors for other manufacturers.

A: Ernie Garcia said they are seeing early indications of platform value with Stellantis, but it is very early in the game.

Q: Sharon Zackfia with William Blair asked if there are inefficiencies expected with ADESA conversions and what the learnings are for scaling.

A: Mark Jenkins explained that new facilities have higher costs initially, but the company has focused on management infrastructure and systems to improve efficiency.

Q: Sharon Zackfia with William Blair asked how the company handles the people side of scaling, such as training managers and mechanics.

A: Mark Jenkins stated that they are using AI to provide better real-time data to managers and are focused on training leaders before moving to new facilities.

Q: Rajat Gupta with JPMorgan asked if the company expects margin expansion starting in the fourth quarter.

A: Ernie Garcia said they have a clear path to 13.5% EBITDA margins and 12.5% operating income margins, and they are on a steady march toward these goals.

Q: Rajat Gupta with JPMorgan asked for more detail on the areas of increased advertising investment.

A: Ernie Garcia explained that they are testing various channels. He noted that inventory was growing slower than they liked, so they increased advertising to keep pressure on the business.

Q: Jeff Lick with Stephens asked why units accelerated 39.4% while the industry decelerated.

A: Ernie Garcia stated that growth is constrained by the ability to scale the supply chain, which is the biggest driver. He noted outsized growth in prime as they produce more expensive, later-model cars.

Q: Jeff Lick with Stephens asked how the company knows when advertising pressure is too much.

A: Ernie Garcia said it is an art, not a science, and they keep pressure on the business because it reveals areas that need improvement.

Q: Michael McGovern with Bank of America asked if agents could drive higher competition for financing and if the company's moat helps.

A: Ernie Garcia said that while agents might increase price discovery, financing is a value-added function. He noted that their vertically integrated model allows them to price more effectively and avoid risks.

Q: Michael McGovern with Bank of America asked why the company is changing reporting to focus on GAAP earnings and operating income.

A: Mark Jenkins explained that it is a natural evolution as the company becomes more profitable on a GAAP basis.

Q: Brian Nagel with Oppenheimer asked if the company is seeing a stronger competitor reemerging.

A: Ernie Garcia said they have not seen anything from competitors that has had a notable impact on their results.

Q: Brian Nagel with Oppenheimer asked if the FTC directive is an incremental driver of the business.

A: Ernie Garcia stated it is directionally better for the company, noting that they focus on fundamental gains and these tools reward that progress.

Q: Ron Josey with Citi asked about the status of inventory and how it drives conversion.

A: Ernie Garcia said they are making progress but would like to make faster progress, noting they outproduced sales in the quarter.

Q: Ron Josey with Citi asked how the 9-point NPS improvement changes the view on growth.

A: Mark Jenkins said they have a 3-part growth algorithm: improving customer offering, increasing awareness, and increasing selection, and they will continue to invest in advertising to tell their story.