Online auto marketplace CarGurus (NASDAQ:CARG) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 3.2% year on year to $238.7 million. Guidance for next quarter’s revenue was better than expected at $238.5 million at the midpoint, 0.6% above analysts’ estimates. Its non-GAAP profit of $0.57 per share was 3.7% above analysts’ consensus estimates.
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CarGurus (CARG) Q3 CY2025 Highlights:
- Revenue: $238.7 million vs analyst estimates of $235 million (3.2% year-on-year growth, 1.6% beat)
- Adjusted EPS: $0.57 vs analyst estimates of $0.55 (3.7% beat)
- Adjusted EBITDA: $78.67 million vs analyst estimates of $76.39 million (33% margin, 3% beat)
- Revenue Guidance for Q4 CY2025 is $238.5 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q4 CY2025 is $0.64 at the midpoint, above analyst estimates of $0.61
- EBITDA guidance for Q4 CY2025 is $87 million at the midpoint, above analyst estimates of $84.27 million
- Operating Margin: 22.9%, up from 11.9% in the same quarter last year
- Paying Dealers: 33,673, up 1,989 year on year
- Market Capitalization: $3.18 billion
StockStory’s Take
CarGurus delivered results for Q3 that met Wall Street’s revenue and profit expectations, reflecting the company’s continued expansion of its marketplace platform and dealer network. Management credited the quarter’s performance to robust adoption of new software solutions, dealer upgrades to premium product tiers, and a growing international presence, particularly in Canada and the U.K. CEO Jason Trevisan emphasized, “Marketplace revenue and Marketplace EBITDA both finished above the midpoint of our guidance range, reflecting focused investment to drive sustainable top line growth and disciplined execution of our strategic priorities.” The company’s decision to wind down its CarOffer business allowed for a clearer focus on its core marketplace operations and contributed to improved operating margins year over year.
Looking ahead, CarGurus’ guidance is shaped by ongoing investment in AI-driven product innovation, deeper integration of software across dealer workflows, and efforts to broaden international market penetration. Management highlighted the scaling of new offerings like PriceVantage and CG Discover as key to future performance, aiming to capture greater dealer wallet share and drive more efficient transactions. CFO Sam Zales stated, “That success reinforces our confidence to continue growing our investments in new, primarily AI-centric innovation across our dealer and consumer product suites that we believe will drive long-term growth.” While management is optimistic about sustaining double-digit growth rates, they acknowledged that macroeconomic headwinds and changing consumer sentiment could influence results in the coming quarters.
Key Insights from Management’s Remarks
Management linked Q3 performance to strong execution in premium product adoption, international dealer growth, and the rollout of advanced AI tools for dealers and consumers.
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Premium tier adoption: Dealers increasingly upgraded to higher service tiers, leading to broader usage of add-on products and supporting higher average order sizes. Management pointed to more dealers signing long-term contracts as evidence of the value provided by recent innovations.
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International expansion: Revenue from Canada and the U.K. grew rapidly, with 807 net new international dealers added year over year. CarGurus attributed success to competitive pricing and improvements in lead quality, helping capture market share from entrenched incumbents.
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AI-driven product launches: The introduction of PriceVantage, a machine learning-powered pricing tool, and CG Discover, an AI-based shopping assistant, improved both dealer efficiency and consumer engagement. Early results from PriceVantage showed participating dealers experienced significantly faster inventory turnover compared to peers.
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Wind-down of CarOffer business: Discontinuing the CarOffer transactions business allowed CarGurus to focus resources on its higher-margin marketplace and software offerings. This shift also reduced operational losses and streamlined the company’s financial profile.
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Dealer and consumer engagement: Enhanced features—such as Dealership Mode and expanded Digital Deal capabilities—created a more seamless online-to-offline experience. Management reported that high-value actions like financing applications and appointment scheduling, which are facilitated through these tools, have contributed to higher lead conversion rates.
Drivers of Future Performance
CarGurus expects continued revenue and margin growth, supported by AI product adoption, international expansion, and deeper dealer integration, but remains attentive to macroeconomic risks.
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Expansion of AI and software suite: Management is prioritizing the rollout of products like PriceVantage and CG Discover to capture a greater portion of the $4 billion dealer software and data market. These tools aim to boost dealer profitability and drive measurable ROI, which the company believes will accelerate adoption and wallet share capture.
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International market growth strategies: The company plans to maintain competitive pricing in new markets to win dealer share before gradually increasing prices. Management sees significant runway in international markets, where adoption of premium products and upselling opportunities remain less mature than in the U.S.
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Macroeconomic and industry headwinds: The company acknowledged risks including elevated interest rates, weakening consumer sentiment, and dealer profit pressures. Management believes CarGurus’ subscription-based model and broad dealer network provide some resilience, but these factors could still affect overall transaction volumes and advertising budgets.
Catalysts in Upcoming Quarters
In the coming quarters, StockStory analysts will monitor (1) the adoption and revenue impact from new AI-driven dealer tools like PriceVantage and CG Discover, (2) the pace of international dealer additions and shifts in pricing strategies, and (3) further improvements in digital lead conversion and consumer engagement via features like Dealership Mode and Digital Deal. Continued progress on integrating AI into both consumer and dealer workflows will be a key signpost for future growth.
CarGurus currently trades at $33.34, in line with $33.13 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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