Carmax 2026 Q1 Earnings Beats Expectations with Net Income Up 38%

Carmax (KMX) reported its fiscal 2026 Q1 earnings on Jun 26th, 2025. The company exceeded expectations with total revenue reaching $7.55 billion, an increase of 6% from the previous year, driven by strong retail and wholesale unit volumes. Carmax also raised its guidance for the next quarter, projecting a moderate increase in earnings per share to $1.04, reflecting solid operational efficiencies. Despite challenges such as fluctuating average selling prices, Carmax's strategic initiatives and digital capabilities continue to support its growth trajectory.

Revenue
Carmax reported a rise in total revenue for 2026 Q1, reaching $7.36 billion, up from $6.93 billion the previous year. The breakdown of segment revenues includes used vehicle sales contributing $6.10 billion, wholesale vehicle sales adding $1.25 billion, and other sales and revenues generating $190.36 million. Overall, the company's net sales and operating revenues totaled $7.55 billion, showcasing solid growth across its business segments.

Earnings/Net Income
Carmax's earnings per share jumped 42.3% to $1.38 in 2026 Q1 from $0.97 in 2025 Q1, demonstrating robust earnings growth. The company's net income increased by 38.0%, reaching $210.38 million compared to $152.44 million in the previous year, marking continued profitability. This performance highlights Carmax's strong operational resilience, as it has maintained profitability for over two decades in the corresponding fiscal quarter. The EPS indicates a favorable outcome.

Price Action
The stock price of Carmax has edged down 1.84% during the latest trading day, has climbed 3.64% during the most recent full trading week, and has climbed 7.07% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing Carmax shares when it misses revenue expectations and holding for 30 days resulted in a disappointing performance. This approach yielded a return of -21.77%, significantly underperforming the benchmark return of 93.10%. The strategy's excess return was -114.88%, with a compounded annual growth rate of -4.82%, failing to capitalize on market gains. Additionally, the strategy faced a high maximum drawdown of -68.65%, indicating considerable downside risk. The Sharpe ratio stood at -0.12, suggesting unfavorable risk-adjusted returns. This analysis underscores the challenges of this strategy in navigating market dynamics effectively.

CEO Commentary
Bill Nash, President and CEO of CarMax, highlighted the company's strong first quarter results, emphasizing a 42% increase in earnings per share and a 6% rise in total sales to $7.5 billion. He noted that growth drivers included robust retail and wholesale unit volumes, with retail unit sales up 9% and used unit comparable sales rising 8.1%. Nash pointed out the effectiveness of their omni-channel experience in enhancing customer engagement and satisfaction, while also acknowledging challenges such as fluctuations in average selling prices. He expressed optimism about the company’s ability to leverage its digital capabilities and strategic initiatives for sustained growth.

Guidance
CarMax expects continued growth with a target of $7.5 billion in total sales for the upcoming quarters, supported by ongoing investments in digital capabilities and infrastructure. The company aims for a moderate increase in earnings per share, projecting a target of approximately $1.04 for the second quarter of fiscal 2026, reflecting strong operational efficiencies and a focus on maintaining profitability amidst market fluctuations.

Additional News
CarMax has been actively enhancing its presence in the electric vehicle (EV) market. The company recently announced initiatives to improve the used EV buying experience, partnering with Recurrent for battery health assessments and Treehouse for home charger installations. CarMax launched an EV Hub for educational resources and added badges on its website for vehicles eligible for federal used EV tax credits. Additionally, CarMax renewed its front-of-jersey sponsorship with Richmond Ivy Soccer Club, showcasing its commitment to community involvement. CarMax has also expanded its stock repurchase activity, buying back $200 million in shares, reflecting confidence in future industry conditions.