CarGurus 2025 Q1 Earnings Strong Performance as Net Income Jumps 83%

CarGurus (CARG) reported its fiscal 2025 Q1 earnings on May 8th, 2025. CarGurus beat expectations with an impressive net income increase of 83%, reflecting the company's strong performance. The company raised its guidance for the second quarter, anticipating total revenue between $222.0 million and $242.0 million, with non-GAAP adjusted EBITDA projected to range from $71.5 million to $79.5 million. This growth is driven by the expansion of its Marketplace business, focusing on data-driven solutions that enhance dealer profitability and consumer engagement.

Revenue

CarGurus reported a total revenue increase of 4.3% to $225.16 million in Q1 2025, compared to $215.80 million in Q1 2024. The segment revenues were detailed as follows: the Wholesale segment generated $7.75 million, while Climate Solutions Americas achieved a notable $2.57 billion. The Product segment brought in $5.18 million, whereas Climate Solutions Europe added $1.17 billion to the overall revenue. Climate Solutions Asia Pacific, Middle East & Africa contributed $826 million, and Climate Solutions Transportation added $651 million. Collectively, these segments amassed a total revenue of $5.22 billion.

Earnings/Net Income

CarGurus's earnings per share (EPS) surged 90% to $0.38 in Q1 2025, up from $0.20 in Q1 2024, signaling robust earnings performance. The company's net income significantly grew to $39.05 million, marking an 83.3% increase compared to $21.30 million in Q1 2024. This performance indicates positive financial health and stability.

Price Action

The stock price of CarGurus edged down 2.75% during the latest trading day, rose 0.18% over the most recent full trading week, and experienced an 8.50% increase month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing CarGurus shares following a quarterly revenue decline and holding for thirty days yielded a 24.76% return, significantly underperforming the benchmark's 92.56% return. Despite a compound annual growth rate (CAGR) of 4.54%, this strategy exhibited a maximum drawdown of -78.04% and a Sharpe ratio of 0.08, suggesting it involved high risk for moderate returns. This analysis highlights the volatility and potential pitfalls associated with investment approaches based on short-term revenue fluctuations, underscoring the importance of considering broader market trends and company fundamentals for more stable investment outcomes.

CEO Commentary

"Our strong momentum in our Marketplace business continued into 2025, which grew 13% year-over-year," said Jason Trevisan, Chief Executive Officer at CarGurus. He highlighted the company's focus on expanding data-driven solutions for dealers, enhancing the car shopping experience, and enabling more online transactions. Trevisan noted that these strategic initiatives have led to increased consumer and dealer engagement, contributing to market share expansion.

Guidance

For the second quarter of 2025, CarGurus expects total revenue between $222.0 million and $242.0 million, with marketplace revenue projected between $219.5 million and $224.5 million. Non-GAAP Adjusted EBITDA is anticipated to range from $71.5 million to $79.5 million, while non-GAAP earnings per share are expected to be between $0.52 and $0.58, assuming 100.0 million diluted weighted-average common shares outstanding.

Additional News

CarGurus recently made headlines with a substantial repurchase of $184.2 million worth of shares during Q1 2025, demonstrating confidence in its financial position and stock valuation. This buyback represents 6% of its outstanding capital, signaling a commitment to returning value to shareholders. Additionally, CarGurus released a report on automotive affordability, detailing the impact of tariffs on new car supply, consumer demand, and pricing trends. The report revealed a significant increase in new car retail sales due to impending tariffs, affecting inventory levels and pricing strategies. Furthermore, CarGurus has been focusing on expanding its online marketplace offerings and strengthening its dealer network, aligning with its strategic growth objectives for 2025.