ACV Auctions' Q1 Earnings Show Resilience Amid Growth Investments

ACV Auctions (ACVA) delivered a strong Q1 2025 report, with revenue surging 25% year-over-year to $182.7 million and its operating loss narrowing to $14.4 million. The results, alongside reaffirmed full-year guidance, suggest the used vehicle marketplace leader is navigating macroeconomic headwinds while investing in long-term growth.

Revenue Growth Outperforms Expectations

ACV’s top-line performance was a standout. Revenue hit $182.7 million, surpassing analyst estimates and marking its fastest growth in over two years. The jump was fueled by a 28% rise in marketplace and service revenue to $165.9 million, driven by expanding dealer networks and commercial partnerships. Marketplace gross merchandise volume (GMV) also rose 13% to $2.6 billion, underscoring demand for its wholesale platform.

The company’s Q2 revenue guidance of $193–$198 million implies further momentum, with full-year projections of $765–$785 million remaining intact. This confidence is bolstered by market share gains: unit volumes grew 19% to 208,025, reflecting a strategy focused on dealer retention and new partnerships.

Margin Improvements Amid Persistent Losses

While ACV remains unprofitable under GAAP accounting, its operating loss shrank by 36% year-over-year to $14.4 million. This improvement reflects better cost discipline, including a 50% drop in bad debt expenses and a narrowed net loss to $14.8 million. Non-GAAP metrics were even stronger: adjusted EBITDA jumped to $13.9 million—a 32% beat—while non-GAAP net income turned positive at $7 million.

The stock’s 9.7% aftermarket pop to $17.23 post-earnings highlights investor optimism. However, the company’s $2.68 billion market cap still lags its $5.6 billion peak in late 2021, suggesting skepticism about its path to sustained profitability.

Strategic Bets and Risks Ahead

ACV is pouring resources into artificial intelligence (AI) tools to enhance pricing accuracy, streamline inspections, and improve dealer tools. These investments aim to deepen its competitive moat against rivals like Carvana and Copart. CEO George Chamoun emphasized that AI could “redefine the used vehicle valuation process,” potentially boosting margins and unit volumes.

Yet challenges loom. The company cited “flat dealer wholesale volumes in 2025” due to macroeconomic pressures and market saturation risks. While ACV’s execution has been strong, the used car market’s cyclical nature—sensitive to interest rates and consumer confidence—could test its growth trajectory.

Valuation and Investor Takeaway

ACV trades at just 3.5x its 2025 revenue midpoint of $775 million, a steep discount to peers. Analysts’ $16–$28 price targets reflect divided sentiment: bulls see it as a turnaround story, while bears worry about execution risks and profitability timelines.

The key question is whether ACV can convert its top-line growth into GAAP profits. Full-year 2025 guidance calls for a GAAP net loss of $50–60 million—a $100 million improvement from 2024’s $157 million loss—while EBITDA is projected to hit $70 million. If achieved, this would mark meaningful progress toward sustainability.

Conclusion: A Stock for the Patient Growth Investor

ACV’s Q1 results highlight its ability to grow revenue while reducing losses, but profitability remains distant. The stock’s post-earnings rally suggests investors are betting on execution, with AI investments and dealer network expansion as key catalysts.

With revenue growth at 25% and EBITDA expanding, ACV appears to be on track to meet its 2025 targets. However, risks like market saturation and macroeconomic volatility linger. For investors willing to bet on ACV’s long-term platform dominance, the stock’s low valuation offers potential upside—if management can deliver the promised margin improvements.

As the company edges closer to breakeven, the next 12 months will be critical in determining whether ACV can sustain its growth story or face the headwinds of an uncertain used vehicle market.