EPS of $0.58 increased by 81.3% from previous year
Gross margin of 11.1%
Net income of 89.87M
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CarMax Inc (0HTQ.L) QQ4 2025 Results — Revenue Growth with Margin Pressure and Heavy Leverage in a Volatile Used-Vehicle Environment
Executive Summary
CarMax reported QQ4 2025 revenue of $6.00 billion, up 6.69% year-over-year, reflecting a resilient demand backdrop for used vehicles. Gross profit was $668 million with a gross margin near 10% (ratiosInfo suggests 9.97%), while operating income remained negative at around -$99.6 million, signaling ongoing margin pressure despite top-line strength. Net income totaled $89.9 million, aided by a substantial contribution from total other income and expenses of about $218 million, resulting in an after-tax margin of roughly 1.5% and an EPS of $0.58. EBITDA stood at $220.0 million, underscoring that earnings quality is driven by non-operating items and lease of financing activities rather than core operating profitability.
Cash generation remained positive from operations at $146.4 million, with free cash flow around $18.8 million for the quarter. The balance sheet shows substantial leverage: total debt of $19.22 billion against cash and cash equivalents of about $247 million, yielding a net debt position near $18.98 billion and a debt-to-capitalization of roughly 75.7%. Liquidity metrics remained adequate (current ratio ~2.31), but the heavy debt burden elevates sensitivity to interest rates and financing costs.
Looking ahead, the QQ4 results imply a dichotomy: the revenue engine remains solid in a stable or improving used-vehicle demand environment, yet profitability and free cash flow generation are constrained by elevated interest costs and working-capital demands linked to inventory. Management commentary (where available in transcripts) typically focuses on inventory optimization, cost discipline, and auto-financing opportunities; in the absence of a formal forward guidance in the provided data, investors should monitor used-vehicle price trends, financing spreads, inventory levels, and the trajectory of wholesale channel dynamics as the principal drivers of earnings quality in 2026.
Key Performance Indicators
Revenue
6.00B
QoQ: -3.54% | YoY:6.69%
Gross Profit
667.89M
11.13% margin
QoQ: -1.44% | YoY:28.24%
Operating Income
-99.55M
QoQ: -70.00% | YoY:32.95%
Net Income
89.87M
QoQ: -28.36% | YoY:78.77%
EPS
0.58
QoQ: -27.50% | YoY:81.25%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $6.003 billion in QQ4 2025, YoY +6.69%, QoQ -3.54% (periods data indicate seasonal/volatility effects in the quarter).
Gross Profit: $668 million, YoY +28.24%, QoQ -1.44%. Gross margin approximately 9.97% (ratiosInfo) to 11.13% based on gross profit and revenue figures.
Operating Income: -$99.6 million, YoY improvement vs prior periods but still negative; operating margin around -1.66% (ratio -0.0166).
Net Income: $89.9 million, YoY +78.77%, QoQ -28.36%; net margin ≈ 1.50%.
EPS: $0.58, YoY +81.25%, QoQ -27.50%.
Financial Highlights
Revenue and profitability:
- Revenue: $6.003 billion in QQ4 2025, YoY +6.69%, QoQ -3.54% (periods data indicate seasonal/volatility effects in the quarter).
- Gross Profit: $668 million, YoY +28.24%, QoQ -1.44%. Gross margin approximately 9.97% (ratiosInfo) to 11.13% based on gross profit and revenue figures.
- Operating Income: -$99.6 million, YoY improvement vs prior periods but still negative; operating margin around -1.66% (ratio -0.0166).
- Net Income: $89.9 million, YoY +78.77%, QoQ -28.36%; net margin ≈ 1.50%.
- EPS: $0.58, YoY +81.25%, QoQ -27.50%.
- EBITDA: $220.0 million, EBITDA margin ≈ 3.66% (EBITDA / revenue).
Liquidity and cash flow:
- Net cash from operating activities: $146.4 million; capital expenditures: $127.6 million; free cash flow: $18.8 million.
- Cash and cash equivalents: $246.96 million; total debt: $19.22 billion; net debt ≈ $18.98 billion.
- Cash flow takeaway: Positive operating cash flow supported by non-operating items, but working capital movements (inventory build) and interest expense pressure on profitability constrain free cash flow conversion.
Balance sheet health and leverage:
- Total assets: ~$27.404 billion; total liabilities: ~$21.161 billion; total stockholders’ equity: ~$6.243 billion.
- Long-term debt: ~$18.619 billion; total debt: ~$19.222 billion; debt-to-capitalization ≈ 75.7%; debt-to-equity ≈ 3.11.
- Liquidity: Current ratio ≈ 2.31; quick ratio ≈ 0.52; cash ratio ≈ 0.37.
- Working capital dynamics: Accounts receivable ~$188.7 million, inventory ~$3.934 billion; inventory turnover implied by ratios around 1.37x; CCC ≈ 52 days, highlighting inventory- and receivables-heavy operating cycle.
Efficiency and valuation indicators:
- Gross margin and operating margin trends indicate margin compression despite revenue growth; valuation metrics imply a premium despite mixed profitability (e.g., P/E ~35x, P/B ~2.0x, P/S ~2.1x) in the context of a highly leveraged balance sheet.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.00B
6.69%
-3.54%
Gross Profit
667.89M
28.24%
-1.44%
Operating Income
-99.55M
32.95%
-70.00%
Net Income
89.87M
78.77%
-28.36%
EPS
0.58
81.25%
-27.50%
Key Financial Ratios
currentRatio
2.31
grossProfitMargin
9.97%
operatingProfitMargin
-1.27%
netProfitMargin
1.5%
returnOnAssets
0.33%
returnOnEquity
1.44%
debtEquityRatio
3.11
operatingCashFlowPerShare
$0.95
freeCashFlowPerShare
$0.12
priceToBookRatio
2.03
priceEarningsRatio
35.29
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: The earnings transcript data is not provided in the input. As a result, the following highlights synthesize from the reported results and typical management discussion themes that accompany QQ4 releases. If a transcript becomes available, these themes should be updated with direct management quotes and precise guidance.
- Strategy and capital allocation: Expectations around inventory optimization, capex discipline, and balance-sheet management given the heavy leverage. Investors should watch any management commentary on inventory levels, days-on-hand, and wholesale channel dynamics.
- Operations and efficiency: Emphasis on managing operating costs (SG&A) and optimizing the CarMax Auto Finance portfolio to support bottom-line resilience amid margin pressure.
- Market conditions: Used-vehicle demand and pricing environment, including wholesale/retail price realization and financing spreads, are key drivers of quarterly volatility and longer-term earnings quality.
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Forward Guidance
There is no explicit forward guidance provided in the QQ4 2025 data. Based on the results and the surrounding context, the key forward-looking considerations are:
- Revenue trajectory: With a YoY revenue rise of approximately 6.7% in Q4 2025, continued demand for used vehicles could support top-line growth if inventory normalization and pricing remain favorable.
- Margin normalization risk: The operating margin remains negative (-1.66%), underscoring continued margin pressure from cost of sales, SG&A, and financing costs. Any improvement in gross margin (through better mix, pricing power, or cost controls) would be a meaningful driver of profits.
- Leverage and financing costs: A debt-heavy balance sheet (~$18.6B long-term debt) makes earnings highly sensitive to interest rates. Investors should monitor debt levels, refinancing activity, and potential leverage mitigation actions.
- Inventory and working capital: Inventory levels and days-on-hand drive working capital and cash flow. Optimizing inventory turnover and reducing embedded working-capital pressures are critical for FCF growth.
- Auto Finance and non-operating income: The sizable impact of total other income of ~$218M on net income suggests non-operating drivers can materially affect quarterly results. Any shift in other income components (e.g., impairments, gains from financing activities) should be watched closely.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0HTQ.L Focus
11.13%
-1.27%
1.44%
35.29%
0QZX.L
23.20%
8.99%
5.34%
10.60%
0JSY.L
24.80%
6.93%
1.78%
33.56%
0L8B.L
48.20%
47.00%
8.66%
22.51%
0LWG.L
25.20%
8.96%
0.83%
63.07%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Qualitative and quantitative signals present a cautious-but-not-dismissed investment stance. Revenue growth in QQ4 2025 demonstrates continued demand for used vehicles, but the margin structure remains fragile due to high leverage and elevated financing costs. The company generates positive EBITDA and operating cash flow, yet net income is heavily influenced by non-operating items. Investors should weigh CarMax's strategic potential (Auto Finance leverage, online/offline channel expansion, and cost discipline) against the burden of debt service and inventory-driven capital requirements. A constructive view would require evidence of margin stabilization or improvement, ongoing deleveraging, and a broader efficiency program that reduces reliance on non-operating income to drive earnings. In the near term, monitor changes in used-vehicle pricing, inventory levels, financing spreads, and debt refinancings as key catalysts.
Key Investment Factors
Growth Potential
Potential for revenue growth driven by stable used-vehicle demand, expansion of financing activities through CarMax Auto Finance, and selective optimization of store footprint combined with enhanced online sales integration. Improvement in gross margins through better product mix and cost controls could enable a path to positive operating profitability.
Profitability Risk
Key risks include sustained high leverage and servicing costs, interest-rate sensitivity, continued margin compression, inventory cycle volatility, and competition from online marketplaces and traditional dealers. External macro factors impacting used-vehicle prices and consumer credit conditions could materially affect results.
Financial Position
Balance sheet remains asset-heavy with long-term debt; liquidity is adequate on a relative basis but debt burden remains the primary structural risk. Cash generation is currently modest after capex and working-capital movements; sustained deleveraging would be a meaningful positive catalyst.
SWOT Analysis
Strengths
Large, well-known used-vehicle retailer network with scale effects
Integrated CarMax Auto Finance platform enabling financing solutions