CarMax reported a resilient QQ3 2025 with revenue of $6.223 billion, up 1% year over year, driven by higher unit volumes across retail and wholesale, and continued expansion of their omni-channel platform. Despite robust top-line growth and a meaningful improvement in gross profit, operating income remained negative at -$58.6 million, yielding an operating margin of -0.94%. Net income reached $125.4 million or $0.81 per share (diluted), supported by CAF contributions, while the company continued to deleverage SG&A, achieving double-digit EPS growth for the quarter. Management emphasized that the business is transitioning from an investment phase to leveraging capabilities for sustainable growth, aided by the omni-channel experience and cost efficiencies.
The quarter highlighted several structural trends: (1) strong omni-channel adoption and conversion improvements across online, in-store, and agent-assisted channels; (2) CAF momentum with $1.9 billion originations and a 6.2% net interest margin, supported by a more normalized loan loss provision; (3) cost-out initiatives targeting approximately $200 per total unit in GPUs, with roughly half realized to-date (roughly $100 in reconditioning and $100 in logistics), all of which are being deployed to protect margins and support price competitiveness. The outlook remains constructive, with management signaling that Q4 comps should be stronger than QQ3 and full-year SG&A leverage on gross profit remains a priority. The investment thesis hinges on continued top-line growth from the diversified model, disciplined expense management, and the scalable CAF platform, albeit with elevated leverage and working-capital sensitivity in the near term.