Online auto marketplace CarGurus (NASDAQ:CARG) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 4.3% year on year to $225.2 million. The company expects next quarter’s revenue to be around $232 million, close to analysts’ estimates. Its non-GAAP profit of $0.46 per share was 5.5% above analysts’ consensus estimates.
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CarGurus (CARG) Q1 CY2025 Highlights:
- Revenue: $225.2 million vs analyst estimates of $226.2 million (4.3% year-on-year growth, in line)
- Adjusted EPS: $0.46 vs analyst estimates of $0.44 (5.5% beat)
- Revenue Guidance for Q2 CY2025 is $232 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q2 CY2025 is $0.55 at the midpoint, above analyst estimates of $0.45
- EBITDA guidance for Q2 CY2025 is $75.5 million at the midpoint, above analyst estimates of $65.68 million
- Operating Margin: 20.3%, up from 12.2% in the same quarter last year
- Paying Dealers: 32,372, up 1,197 year on year
- Market Capitalization: $3.17 billion
StockStory’s Take
CarGurus’ first quarter results were shaped by ongoing expansion in its core marketplace business, with management emphasizing growth in both dealer count and the adoption of value-added products. CEO Jason Trevisan detailed how enhancements to dealer tools, such as VIN-level targeting and broader use of data-driven insights, led to more granular inventory control and improved lead quality for dealers. International markets also contributed, with the company reporting strong adoption and increased dealer engagement in Canada and the U.K. President Sam Zales pointed to a double-digit uptick in OEM (original equipment manufacturer) advertising revenue, attributed to increased consumer traffic and the platform’s positioning among auto shoppers. Management acknowledged that gains in marketplace operations were partially offset by ongoing challenges in the digital wholesale segment, which remains subject to structural and operational headwinds.
Looking ahead, CarGurus’ guidance for the next quarter is underpinned by expectations of continued marketplace growth and targeted investments in product innovation and marketing. CEO Jason Trevisan stated that the company plans to “reinvest behind that momentum, particularly in marketing, international product innovation,” rather than maximizing near-term margin expansion, aiming to deepen engagement with both consumers and dealers. Management cautioned that the macro environment—especially ongoing tariff uncertainty—could impact ad spending and dealer sentiment, but emphasized that strong lead quality and dealer data tools position CarGurus well to navigate volatility. The company is also conducting a strategic review of its digital wholesale business, with Trevisan indicating that “shifts in market conditions may influence the exit rate” for growth in the second half of the year, and that changes to the CarOffer business model are being considered to improve profitability and scalability.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to robust marketplace adoption, product enhancements, and international expansion, while also discussing operational challenges in its wholesale business.
- Marketplace product adoption: New features such as VIN-level targeting and expanded Dealer Data Insights tools enabled dealers to better manage inventory and optimize pricing, leading to higher lead conversion rates and increased engagement across the platform.
- International growth momentum: The company saw 20% year-over-year revenue growth internationally, driven by increased dealer adoption and strong brand engagement, with CarGurus cited as the most downloaded auto app in Canada for the quarter.
- OEM advertising strength: Double-digit gains in OEM advertising revenue were supported by annual upfront commitments and increased consumer traffic, reinforcing CarGurus' value proposition to manufacturers.
- Digital wholesale headwinds: Transaction volume in the digital wholesale (CarOffer) segment declined, with management citing both operational inefficiencies and platform rigidity as factors. A strategic review is underway to identify more sustainable revenue models.
- Dealer network expansion: CarGurus added nearly 1,200 net new global dealers year-over-year, with a focus on long-term contracts and deeper dealer engagement, reflecting increased reliance on the platform despite macroeconomic uncertainty.
Drivers of Future Performance
Management expects investment in product development and marketing to support marketplace growth, while the wholesale segment undergoes strategic review and faces industry uncertainty.
- Continued product innovation: CarGurus is prioritizing new AI-driven features and tools aimed at streamlining the dealer workflow and improving the consumer shopping journey, which management believes will help retain and attract both dealers and shoppers.
- Wholesale business restructuring: The company is reassessing its digital wholesale model (CarOffer) to address operational challenges and adapt to market volatility, with the possibility of significant changes to improve long-term profitability.
- Macroeconomic and industry risks: Ongoing uncertainty around tariffs and consumer sentiment may influence OEM ad spending and dealer investment, introducing volatility to revenue streams, particularly in the second half of the year.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the success of ongoing product innovation and its effect on dealer retention and revenue per dealer, (2) signals of stabilization or improvement in the digital wholesale segment as strategic changes are implemented, and (3) the resilience of OEM advertising and dealer demand in the face of macroeconomic and tariff-related uncertainties. Execution in international markets and the ability to maintain margin expansion will also be key areas of focus.
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