Hertz's Q3 2025: Contradictions Emerge on Fleet Strategy, Pricing, and Margins

Date of Call: November 4, 2025

Financials Results

• Revenue: $2.5 billion (Q3 2025)
• Operating Margin: Adjusted corporate EBITDA margin 8% (Q3 2025)

Guidance:

• Q4: transaction days expected to be close to flat year-over-year with total fleet down just under 5% and heightened recall impact on utilization.
• Q4: DOE per day expected down ~5% primarily due to a 2024 insurance true-up; ex-true-up DOE would be down ~1–2%.
• Q4: expect net DPU to rise slightly to $280–$285/month and updated Q4 EBITDA margin guidance is negative low- to mid-single digits (vendor outages ~$10–$20M impact).
• 2026: run-rate net DPU expected well below $300; target 3%–6% EBITDA margin; transaction days mid-single-digit growth; fleet growth smaller; airport ~GDP-like, off-airport mid-to-high single digits, mobility 10%–20%; path to $1B EBITDA in 2027.

Business Commentary:

• Revenue and Earnings Performance:
• Hertz Global Holdings reported $2.5 billion in revenue for Q3 2025, delivering adjusted corporate EBITDA of $190 million, a $350 million improvement year-over-year, with positive EPS for the first time in 2 years.

• The improvement was driven by disciplined fleet management, revenue optimization, and rigorous cost control, as well as favorable macroeconomic conditions.

• Fleet Restructuring and Utilization:

• Hertz completed its transformative fleet refresh, achieving a record high utilization rate of 84% since 2018, despite a 2% recall impact on the U.S. fleet.

• This was due to strategic fleet planning and improved process management, aligning capacity with demand and reducing out-of-service units.

• Car Sales and Fleet Strategy:

• The company's car sales business, transformed from a fleet rotation mechanism, achieved a nearly 50% conversion rate of rent-to-buy customers to buyers.

• This success was driven by leveraging the company's used car factory-like model and incorporating digital retail channels like Amazon Autos and a full-service e-commerce site.

• Customer Satisfaction and Experience:

• Hertz's North American Net Promoter Score improved by nearly 50% year-over-year, indicating a significant improvement in customer satisfaction.
• This was a result of enhanced customer experience initiatives, including improved employee training and technology integration for smoother rental experiences.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "$2.5 billion in revenue and adjusted corporate EBITDA of $190 million, a $350 million year-over-year improvement and positive EPS for the first time in 2 years." Record utilization above 84% and North American NPS up nearly 50% year-over-year; leadership emphasizes disciplined fleet refresh, buy/hold/sell strategy and scaled car-sales/e-commerce initiatives.

Q&A:

• Question from Chris Woronka (Deutsche Bank AG): Gil, you've talked -- and this is back in the prepared comments, you talked about kind of becoming this -- I think you said value-creating mobility platform. Can you maybe unpack a little bit for us what that kind of means in practice and what the platform includes and maybe how, I guess, in your mind, creates value beyond the traditional and core rental business?
  Response: Hertz will remain focused on rent-a-car but expand into four strategic pillars—rent-a-car, fleet (car sales), service, and mobility—leveraging scale, e-commerce (Amazon/Cox), rent-to-buy (70% conversion) and its service footprint to capture higher margin retail and mobility revenue streams.

• Question from Chris Woronka (Deutsche Bank AG): Okay. I appreciate all the details there, Gil. Very helpful. As a follow-up, I think we understand the gist of the strategy that's now well underway, which is rightsized fleet, newer cars, very high utilization. I think one of the things that maybe comes with that slightly smaller vehicle size, smaller purchase price, maybe less maintenance, et cetera. But the question is, are the economics on that -- on those, I'm going to call it, smaller vehicle footprint. Are the economics so much better because you would appear to be giving up a little bit of RPD and pricing on an absolute basis. And I'm curious as to whether that's just the customer mix or utilization, maybe it's rideshare or new accounts, whether it's corporate or leisure. Maybe you can just kind of give us a little tour of like how customer mix and things like that and maintenance and operating expenses are, I guess, accretive from smaller vehicles.
  Response: Mix is dynamic and optimized to local demand; model year 2026 buys met price and volume targets, keep DPU below targets and enable a shorter-hold strategy that improves unit economics via lower maintenance and stronger retail resale.

• Question from Christopher Stathoulopoulos (Susquehanna Financial Group, LLLP): On the outlook for the sub-300 DPU for next year, I want to understand the moving pieces here. So it sounds like this vehicle recall is perhaps going to spill into early part of next year. The '26 vehicle purchases seem to be largely in place. And so what other work needs to be done, I guess, with respect to mix and mileage to confidently secure that sub-300 number?
  Response: The buy-right/hold-right/sell-right fleet strategy, strong 2026 purchase pricing/volume and disciplined channel management (including growth of Hertz car sales and F&I capture) underpin confidence in sustaining run-rate DPU well below $300.

• Question from Ian Zaffino (Oppenheimer & Co. Inc.): I was just wondering if you could maybe just give us a little bit of color on just the quarter in general as far as what have you seen from international inbounds or corporate? And also maybe any markets that have been particularly strong or particularly weak? I know you referenced the government shutdown. Was that specifically D.C. area or anything else going on there?
  Response: Q3 demand meaningfully improved versus Q2 (July onward); corporate turned positive by October, inbound improved but remains down low-single-digits y/y, and government-related demand fell sharply in November due to the federal situation.

• Question from Ian Zaffino (Oppenheimer & Co. Inc.): Okay. And then just maybe as a follow-up, can you talk about the strategy of -- as you go more off-prem, is that insurance replacement? Is that other? How do we think about maybe the competitive dynamics there? And what you kind of expect as far as metrics, whether vis-a-vis what they would look like on-prem versus off-prem?
  Response: Off-airport is a less cyclical, large market driven by replacement, direct retail and partnerships; Hertz is commercializing it to drive durable demand and diversify RPD/RPU, complementing airport business.

• Question from Stephanie Benjamin Moore (Jefferies LLC): Great. I wanted to touch on the early -- kind of early view on 2026, particularly the margin commentary. Very helpful to have the range that you provided. But given you guys have made tremendous steps forward in your own execution, it does remain a pretty volatile underlying market in general. Maybe just talk about what we would need to see to either hit the high end of that margin range or on the other side, if it ended up coming at the lower end of the range? And how do you kind of balance between actions that are more within your control and then again, the uncertainty of an underlying environment?
  Response: Internal levers—scale expansion in off-airport/mobility, continued revenue-management gains, DOE savings and materially increasing cars sold through Hertz car sales (targeting >75–80% flow-through)—drive upside to the 3%–6% 2026 margin range; external pricing cycles determine market variance.

• Question from Stephanie Benjamin Moore (Jefferies LLC): Great. That's very helpful. And then I just wanted to follow up to your point on the incremental growth for next year. Could you maybe talk about how much net fleet CapEx you would expect to meet those plans? And then secondly, as you're thinking about this overall net fleet itself, maybe talk a little bit about how the 2026 purchases are shaping up and how we should think about in terms of the fleet mix for 2026 versus 2025?
  Response: Expected incremental net fleet CapEx about $100–$150 million; >80% of 2026 purchases are procured, price/volume targets met, and fleet mix may shift modestly toward slightly larger/richer trims where local economics justify it.

• Question from Dan Levy (Barclays Bank PLC): I wanted to ask about the plans to grow the fleet next year. And specifically in light of the comments in your deck that some of the underlying RPD pressure is still being driven by market pricing pressure. So question is, do you think that fleet levels are rightsized in the industry? Or is there excess fleet? And how do you think the market will absorb your plans to grow fleet? How can you ensure that you will have positive RPD when expanding your fleet next year?
  Response: We view sizing by segment: airport will grow roughly GDP-like (not chasing share), while off-airport and mobility can grow faster; disciplined, market-level fleet increases plus revenue-management should preserve RPD.

• Question from Dan Levy (Barclays Bank PLC): Okay. Great. As a follow-up, I wanted to just ask about the utilization in the quarter. And maybe you can just unpack, and I see the commentary here in the deck, but it was -- it seems like close to a quarterly record. Just how sustainable is that? And what type of utilization can we expect into next year?
  Response: Record utilization resulted from operational process improvements and better demand generation; there's further upside, though recalls create short-term headwinds, and faster retail sales (shorter time-to-sale) will raise total utilization over time.

Contradiction Point 1

Fleet Strategy and Off-Airport Business Impact

It involves the company's approach to fleet management and the impact on off-airport business, which are critical elements of their operating strategy.

Can you explain what you mean by becoming a value-creating mobility platform? How does this generate value beyond the core rental business? - Chris Woronka(Deutsche Bank)

2025Q3: With an iconic brand, we're converting renters to buyers, increasing vehicle utilization, and leveraging digital retail channels. This strategy should create significant value by capturing more than $2,000 per vehicle in incremental margin. - Wayne West(CEO)

How do fleet adjustments affect higher-end or off-airport business? - Chris Woronka(Deutsche Bank)

2025Q1: We're pruning lower-margin business units, focusing on high RPD segments like our premium Hertz brand and airport operations. Off-airport and mobility segments are being cultivated for resilience and improved margins. - Sandeep Dube(CMO)

Contradiction Point 2

Revenue Management and Pricing Strategy

It involves the company's approach to revenue management and pricing strategy, which are crucial for revenue generation and competitive positioning.

Can you break down RPD by mix and market conditions? - Ryan Joseph Brinkman (JPMorgan Chase & Co)

2025Q3: RPD was down 2.2% in Q3, even as we were lapping the impact of our revenue management changes that we implemented early last year. - Wayne West(CEO)

Could you provide a breakdown of RPD by product mix and market conditions? - Chris Jon Woronka (Deutsche Bank AG)

2025Q2: RPD was down about 5% in Q2, but it would be about 2-3 points better when adjusted for fleet mix. - Sandeep Dube(CMO)

Contradiction Point 3

Fleet Strategy and Residual Values

It involves the company's fleet strategy and the management of residual values, which directly impacts financial performance and strategic planning.

Is a smaller vehicle footprint more economical due to lower maintenance and operating costs? - Chris Woronka(Deutsche Bank)

2025Q3: We're transforming our fleet into a competitive advantage with a focus on buy right, hold right, sell right strategy. - Wayne West(CEO)

How is over-fleeting impacting the market by pulling forward MY25 vehicles? How do retail and wholesale residual values compare, and which is stronger or weaker? - Ian Zaffino(Oppenheimer)

2025Q1: Positive residuals are impacting our industry due to supply chain disruptions and tariffs. Wholesale residual values have risen quicker than retail, supported by the MMR rental car index showing an 8% rise in April. - Gil West(CMO)

Contradiction Point 4

Pricing and Margin Expectations

It involves financial projections and expectations for pricing and margins, which are critical for investor confidence in Hertz's financial performance.

What would Hertz need to hit the high or low end of the 2026 margin range? - Stephanie Moore (Jefferies LLC, Research Division)

2025Q3: The 3% to 6% margin range for 2026 is influenced by scale and efficiency in off-airport and mobility segments, and DPU benefits from Hertz car sales. The potential for greater industry pricing or higher car sales distribution could drive the top end. - Scott Haralson(CFO)

Which businesses are you deemphasizing? - Chris Woronka (Deutsche Bank)

2024Q4: We now expect our full year 2023 EBITDA margin to be in that range of 3% to 6%. - Scott Haralson(CFO)

Contradiction Point 5

Fleet Strategy and RPD Focus

It involves the strategic direction of fleet management and the focus on RPD, which are crucial for Hertz's operational efficiency and profitability.

What steps are needed to achieve sub-300 DPU next year? - Christopher Stathoulopoulos (Susquehanna Financial Group, LLLP, Research Division)

2025Q3: Our end-to-end fleet strategy is effective in any environment. Model year '26 buys are at price and volume targets, sustaining our DPU strategy. The focus is on stable residuals, pricing, and effective channel management. DPU benefits are expected from Hertz car sales with significant growth potential. - Wayne West(CEO), Scott Haralson(CFO)

What is the target margin for the company in the medium to long-term? - Chris Woronka (Deutsche Bank)

2024Q4: Hertz plans to sweat its assets more effectively, leading to a smaller fleet size to capture the same demand. They aim for higher yield by focusing on durable demand and premium high RPD segments. - Sandeep Dube(Chief Commercial Officer)