Carvana (CVNA): A Record Quarter the Market Hated | Q2 2026

Carvana Co. (CVNA) Q2 2026 — Record retail units 197,325 (+37.7%), record revenue $7.376B (+52.4%) vs ~$7.04B expected, record gross profit $1.384B, record GAAP operating income $680M, record net income $513M (7.0% margin) and record adjusted EBITDA $769M. Diluted EPS $0.42 vs ~$0.41. But adjusted EBITDA margin FELL to 10.4% from 12.4%, and FY26 adjusted EBITDA guidance of $2.7-3.0B implies a second half BELOW the first. The stock fell 7.4% to $61.44 (down 15% intraday). Do the guidance arithmetic nobody did. Carvana earned $672M of adjusted EBITDA in Q1 and $769M in Q2 - $1.441B already banked. The full-year guide of $2.7-3.0B leaves $1.259-1.559B for H2, a midpoint of $1.409B, BELOW what is already earned - while management guided Q3 retail units sequentially HIGHER. More cars, less profit. The Street was far above this: Deutsche Bank $3.0-3.2B, Morgan Stanley $4.45B. Where did the margin go? Total GPU fell $412 to $7,014, but retail GPU was fine at $3,547 (-2% YoY, +12% vs Q1). The decline is the Other line - finance and ancillary - down to $2,666. Management's own words: Other GPU was lower due to increasing benchmark rates because they followed the market on retail pricing but kept customer-facing interest rates stable. Translation: rates rose, Carvana declined to reprice the customer, and the gain it books on selling the loan absorbed it. Part of 38% unit growth was bought with finance margin. That Other line is 38% of total gross profit, and 1H gain on loan sales was $703M against $918M of net income. THE CALL: HOLD (3/5, GREAT MACHINE, DEMANDING PRICE) — base-case value ~$55.0 vs ~$61.43 today. KEY METRICS: - Retail units 197,325 +37.7%; wholesale units 105,052 +44.4%; industry was DOWN YoY - Revenue $7.376B +52.4% (retail $5.507B +61.7%, wholesale $1.343B, other $526M) - Gross profit $1.384B +30.1%; GAAP operating income $680M vs $511M - Net income $513M (+$205M), 7.0% margin; adj EBITDA $769M, margin 10.4% vs 12.4% - EPS basic $0.43 / diluted $0.42; 719M Class A + 381M Class B; 1.127B as-converted - Total GPU $7,014 (-$412, -5.5%); non-GAAP $7,125 (-$455) - Retail GPU $3,547 (-2.4% YoY, +12% vs Q1 $3,165); wholesale GPU $801 (-13%) - Other GPU $2,666 (-7.1%) - the entire GPU shortfall; 38% of total gross profit - SG&A $704M; SG&A/unit $3,568 vs $3,846 (-7.2%); non-GAAP $3,228 vs $3,385 - 1H26 gain on loan sales $703M vs $918M of 1H net income (77%) - Ally MPSA amended Jul 27, 2026 to $8.0B of purchases to Jul 2027; fixed pools to $12B - Finance receivables held for sale $921M; beneficial interests in securitisations $502M - Cash $2.630B; total debt $5.236B; net debt $2.606B; total liquidity $7.024B - Tax receivable agreement $2.130B ($1.645B to related parties); deferred tax asset $2.968B - 1H26 operating cash flow $345M less $102M capex = ~$243M FCF on $918M net income (26%) - Related-party other revenue $117M of $526M (22%), principally DriveTime - ADESA: 3 sites integrated in Q2 (19 total); capacity 1.5M units built out, land for 3M - FY26 guide adj EBITDA $2.7-3.0B vs $2.24B in 2025; Q3 retail units sequentially higher - Guide implies H2 adj EBITDA $1.259-1.559B vs $1.441B already earned in H1 - Our DCF: bear $24 / base $52 / bull $80 at 10%; base is $64 at 9% and $44 at 11% What to watch: Bull trigger: Other GPU stabilising above ~$2,800 while units still compound 30%+. That combination proves the growth is not being bought with finance margin and is the cleanest quality-of-earnings test on this company; add a Q3 that convincingly beats the implied H2 guide and evidence the first full ADESA buildout is on schedule for early 2027, and fair value moves toward $75. Bear confirmation: a second guide implying a sequential profit step-down while units rise; total GPU breaking below ~$6,700; or worsening terms on loan sales - watch securitisation pricing and whether retained beneficial interests climb faster than originations. We would be a real buyer nearer $46 (~15x FY27E EBITDA). Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.