Online auto marketplace CarGurus (NASDAQ:CARG) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 5.5% year on year to $241.1 million. Guidance for next quarter’s revenue was better than expected at $243 million at the midpoint, 1.7% above analysts’ estimates. Its GAAP profit of $0.51 per share was 3.2% below analysts’ consensus estimates.

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Revenue: $241.1 million vs analyst estimates of $239.2 million (5.5% year-on-year growth, 0.8% beat)

EPS (GAAP): $0.51 vs analyst expectations of $0.53 (3.2% miss)

Adjusted EBITDA: $88.47 billion vs analyst estimates of $87.28 million (36,694% margin, significant beat)

Revenue Guidance for Q1 CY2026 is $243 million at the midpoint, above analyst estimates of $238.9 million

EBITDA guidance for Q1 CY2026 is $76 million at the midpoint, below analyst estimates of $78.33 million

Operating Margin: 28.7%, up from 23.3% in the same quarter last year

Free Cash Flow Margin: 31.7%, up from 26.8% in the previous quarter

Paying Dealers: 34,409, up 2,399 year on year

Market Capitalization: $2.70 billion

“2025 was a pivotal year for CarGurus as we delivered strong financial performance while expanding our products and use cases across both dealer workflows and the consumer journey,” said Jason Trevisan, Chief Executive Officer at CarGurus.

Bringing transparency to a sometimes opaque process, CarGurus (NASDAQ:CARG) is a digital marketplace where auto dealers can connect with potential customers and where car buyers can browse, purchase, and obtain financing.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. CarGurus’s demand was weak over the last three years as its sales fell at a 17.2% annual rate. This wasn’t a great result, but there are still things to like about CarGurus.

This quarter, CarGurus reported year-on-year revenue growth of 5.5%, and its $241.1 million of revenue exceeded Wall Street’s estimates by 0.8%. Company management is currently guiding for a 7.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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As an online marketplace, CarGurus generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Over the last two years, CarGurus’s paying dealers, a key performance metric for the company, increased by 3.6% annually to 34,409 in the latest quarter. This growth rate lags behind the hottest consumer internet applications. If CarGurus wants to accelerate growth, it likely needs to engage users more effectively with its existing offerings or innovate with new products.

In Q4, CarGurus added 2,399 paying dealers, leading to 7.5% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.

Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and CarGurus’s take rate, or "cut", on each order.

CarGurus’s ARPU fell over the last two years, averaging 2.2% annual declines. This isn’t great when combined with its weaker paying dealers performance. If CarGurus tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether user growth would be sustainable.

This quarter, CarGurus’s ARPU clocked in at $6,616. It grew by 7.7% year on year, mirroring the performance of its paying dealers.

We were impressed by how significantly CarGurus blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed. Overall, this print had some key positives. Investors were likely hoping for more, and shares traded down 1.9% to $27.90 immediately after reporting.

So should you invest in CarGurus right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.