Carvana Co (NYSE:CVNA) stock fell 8.34% (As on February 19, 11:31:43 AM UTC-4, Source: Google Finance) after the company posted fourth-quarter profit that fell short of Wall Street expectations, pressured by higher-than-anticipated costs. While demand for used cars has sustained, auto retailers are having to contend with the trickle-down effects from tariffs and inflation, which have led to higher reconditioning costs and heavy depreciation. Carvana said costs were squeezed by bigger-than-expected expenses tied to the inspection, repair and detailing of vehicles across several production sites during the quarter. Higher retail depreciation rates added further pressure on a per-unit basis. Net income was $951 million, up from $159 million a year earlier. The company’s net income benefited from the release of about $618 million in valuation allowance. The company achieved a net income margin of 17.0% and an operating margin of 7.6% for the quarter.

Moreover, total gross profit was $1.051 billion, an increase of 38% and the total gross profit per unit (“GPU”) was $6,427, a decrease of $244 for the quarter. In 2025, CVNA grew at 43% year-over-year. As a result, the annual growth rates required to achieve the goal are now 18% to 38%. In 2025, CVNA integrated 10 additional ADESA production locations, including one in Q4, bringing the total to 16 integrations since the company began the rollout in Q2 2024.

CVNA in the fourth quarter of FY25 has reported the adjusted earnings per share of $1.06, missing the analysts’ estimates for the adjusted earnings per share of $1.10. The company had reported the adjusted revenue growth of 58 percent to $5.60 billion in the fourth quarter of FY25, beating the analysts’ estimates for revenue of $5.27 billion, estimated per Bloomberg. Carvana said that retail units sold hit 163,522 compared with 157,226 estimated, a jump of 58%. Carvana reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $511 million vs $535.7 million expected, with an adjusted EBITDA margin of 10.1% missing estimates of 10.4%.

Looking forward, Carvana expects significant growth in both retail units sold and Adjusted EBITDA in full year 2026, including a sequential increase in both retail units sold and Adjusted EBITDA in Q1 2026, assuming the environment remains stable. Wall Street expected a Q1 adjusted EBITDA estimate of $671 million, with retail unit sales hitting 175,478. The company remain firmly on track to the goal of selling 3 million retail units a year at a 13.5% Adjusted EBITDA margin by 2030 to 2035.