Executive Summary
CarMax delivered a solid first-quarter performance for fiscal 2026, underscored by durable top-line momentum, expanding profitability, and a clear strategic path toward full-spectrum financing and omni-channel leadership. Revenue rose 6% year over year to $7.55 billion, while gross profit grew 13% to $893.6 million, supported by a record retail gross profit per used unit and ongoing SG&A leverage. The results reflect continued strength in both retail and wholesale channels, a robust CAF platform, and meaningful utilization of AI to drive efficiency and customer experience across the funnel. Management reiterated a disciplined approach to capital allocation, highlighted by a doubling of share repurchases to $200 million in the quarter and a substantial remaining buyback authorization of roughly $1.74 billion, signaling confidence in the earnings model and long-term profitability trajectory.
Strategically, CarMax is advancing its full-spectrum lending and off-balance sheet funding initiatives to accelerate CAF penetration while mitigating risk. The company announced a targeted CAF penetration expansion from roughly 42-43% toward the mid-50s over time, supported by off-balance sheet facilities, including a held-for-sale loan pool and potential additional funding levers. Management also signaled an intent to launch a new marketing campaign to showcase the omnichannel advantages, leveraging AI (e.g., Sky virtual assistant) to boost containment, customer experience, and operational efficiency. While macro headwinds such as tariffs and consumer sentiment remain a consideration, CarMax has demonstrated an earnings growth model capable of delivering high-teens EPS CAGR in a mid-single-digit unit growth scenario. Investors should monitor CAF credit performance, off-balance sheet funding timing, and the durability of SG&A leverage as volume levels evolve through the balance of the year.
Key Performance Indicators
QoQ: 335.04% | YoY:2 183.18%
QoQ: 134.11% | YoY:38.01%
QoQ: 137.93% | YoY:42.27%
Key Insights
Revenue: $7.546B, up 6.09% YoY; QoQ +25.71%. Gross profit: $893.6M, up 13.0% YoY; QoQ +33.80%. Gross margin: 11.84%. Operating income: $234.0M, up 2,183% YoY; QoQ +335%. Net income: $210.4M, +38.0% YoY; QoQ +134.11%. EPS (diluted): $1.38, +42.27% YoY; QoQ +137.93%. Retail unit sales +9% YoY; used unit comps +8.1%; Average selling price (Retail): $26,100, down ~ $400 YoY. Retail gross profit per used unit: $2,407, +$60 YoY (record). Wholesale gross profit per unit: $1,047, down modestly despite v...
Financial Highlights
Revenue: $7.546B, up 6.09% YoY; QoQ +25.71%. Gross profit: $893.6M, up 13.0% YoY; QoQ +33.80%. Gross margin: 11.84%. Operating income: $234.0M, up 2,183% YoY; QoQ +335%. Net income: $210.4M, +38.0% YoY; QoQ +134.11%. EPS (diluted): $1.38, +42.27% YoY; QoQ +137.93%. Retail unit sales +9% YoY; used unit comps +8.1%; Average selling price (Retail): $26,100, down ~ $400 YoY. Retail gross profit per used unit: $2,407, +$60 YoY (record). Wholesale gross profit per unit: $1,047, down modestly despite volume gains. CAF origination: >$2.3B; sales penetration 41.8% net of three-day payoffs; net interest margin 6.5%, +30 bps. Provision for loan losses: $102M; reserve balance: $474M or 2.76% of managed receivables (excluding held-for-sale loans). Cash flow: Net cash from operating activities $299.5M; free cash flow $162.8M; capex $136.7M; net change in cash +$28.9M; cash at end: $989.2M; total debt: $17.92B; net debt: $17.66B. Balance sheet highlights: cash and equivalents $262.8M; inventory $3.624B; total assets $27.39B; total liabilities $21.10B; stockholders’ equity $6.29B. Capital allocation: Share repurchases ~3.0M shares for ~$200M; repurchase authorization ≈$1.74B remaining. Off-balance sheet CAF funding: held-for-sale loan pool of $632M principal; anticipated gain upon ABS close; potential additional off-balance sheet funding levers under evaluation. Management commentary highlights a strong omni-channel value proposition, AI-driven efficiency gains, and a pending marketing campaign to broaden consumer awareness of CarMax’s multichannel capabilities.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
7.55B |
6.09% |
25.71% |
| Gross Profit |
893.62M |
23.12% |
33.80% |
| Operating Income |
233.98M |
2 183.18% |
335.04% |
| Net Income |
210.38M |
38.01% |
134.11% |
| EPS |
1.38 |
42.27% |
137.93% |
Management Commentary
Theme: Strategy and growth - Bill Nash emphasized the strength of CarMax's earnings growth model anchored in a best-in-class omni-channel experience, diversity of business, and execution discipline. Quote: “our best-in-class omni-channel experience, diversity of our business, and a sharp focus on execution.” (Bill Nash)
Theme: Operational efficiency and AI - Enrique Mayor-Mora highlighted AI-enabled efficiency gains across operations, including Sky AI improving containment by 30% and productivity gains in customer experience. Quote: “Sky, our AI-powered virtual assistant, realized a 30% improvement in containment rate.” (Enrique Mayor-Mora)
Theme: Capital allocation and shareholder value - The company doubled its share repurchase pace to ~3 million shares for $200M in Q1, with a goal of omni cost neutrality. Quote: “We doubled the pace of our share repurchases, and we achieved 42% EPS growth.” (Bill Nash)
Theme: CAF expansion and risk management - Jon Daniels and Enrique discussed full-spectrum lending and the off-balance sheet funding strategy, including a held-for-sale pool to reduce reserves and unlock funding flexibility. Quote: “This additional funding lever, as well as other off-balance sheet funding vehicles under consideration, will provide CarMax with significant flexibility, allowing us to mitigate risk while focusing on our growth plan.” (Jon Daniels)
Theme: Marketing and consumer awareness - The team signaled a new marketing campaign to showcase the omnichannel capabilities and the value of shopping across online, in-store, or a mix. Quote: “we’re excited to launch a new marketing campaign later in the summer that will bring our omnichannel experience and our digital capabilities to the forefront for a broad set of consumers.” (Enrique Mayor-Mora/Bill Nash)
Theme: Market conditions and commentary on tariffs - Management noted tariff-related volatility and price dynamics as partial drivers of quarterly results, with expectations of continued volume growth and market share gains. Quote: “the quarter started off strong … we saw an uptick at the end of the quarter when there was speculation about the tariffs.” (Bill Nash)
our best-in-class omni-channel experience, diversity of our business, and a sharp focus on execution.
— Bill Nash
Sky, our AI-powered virtual assistant, realized a 30% improvement in containment rate.
— Enrique Mayor-Mora
Forward Guidance
Guidance approach: CarMax does not provide formal quarterly earnings guidance but outlines a strategic earnings objective. Management states the earnings model is designed to deliver a high-teens CAGR in EPS when retail unit growth is in the mid-single digits. This implies a long-run framework where the company aims to sustain double-digit EPS growth even as unit volumes grow moderately. Near-term drivers include: (1) omni-channel cost neutrality achieved across key metrics for FY2026; (2) continued SG&A leverage from higher gross profit, with SG&A as a percentage of gross profit improving; (3) expansion of CAF through full-spectrum lending and off-balance sheet funding to accelerate penetration while managing risk; (4) continued AI-driven efficiency in sales, service, and CX operations; and (5) marketing investments to broaden consumer awareness of multichannel capabilities. Management also signaled service margin improvement in the first half of the year and flat total marketing spend on a per-unit basis for the full year, suggesting a disciplined margin expansion path.
Assessment: The stated high-teens EPS CAGR target contingent on mid-single-digit unit growth appears achievable given Q1 results, the trajectory of CAF penetration, and ongoing SG&A efficiency. Risks include macro headwinds (tariffs, consumer confidence, unemployment), potential variance in CAF credit performance, and execution risk around off-balance sheet funding timing. Key watchpoints for investors: (i) CAF loan performance in subsequent quarters and the cadence of reserve adjustments; (ii) the pace and mix of CAF penetration toward the 50% mark and the timing of off-balance sheet transactions; (iii) the durability of omni-channel cost neutrality as volumes fluctuate; (iv) the effectiveness and ROI of the summer marketing campaign and AI initiatives.