Executive Summary
CarMax reported solid operating performance in QQ2 2025, with revenue of $7.013B and net income of $132.8M, delivering EPS of $0.85. The quarter marks a notable turning point in operating profitability, as operating income rose to $149.9M from a modest prior-quarter or year-ago trajectory, producing a positive margin (2.14%) despite a high debt burden. Gross margin stood at 10.84%, supported by a favorable product mix and cost discipline in selling, general, and administrative expenses. Cash flow performance remained robust, with operating cash flow of $619.1M and free cash flow of $509.9M, underscoring the company’s ability to fund working capital needs and capital expenditures while maintaining liquidity. Nevertheless, CarMax continues to carry a substantial leverage position (total debt around $19.21B and net debt ~ $18.68B) and a relatively tight liquidity liquidity buffer given a current ratio of 2.25 and quick ratio of 0.68. The balance sheet health is adequate to weather cyclical volatility, but the debt load and modest inventory turnover imply ongoing monitoring of debt deleveraging, working capital efficiency, and capital allocation strategy. From a market standpoint, the trailing four-quarter results reflect a mature, cash-generative model in a competitive used-vehicle environment, with upside potential tied to financing profitability, cost controls, and selective store and product mix optimization.
Key Performance Indicators
QoQ: 1 292.18% | YoY:-39.08%
QoQ: -12.88% | YoY:11.95%
QoQ: -12.37% | YoY:13.33%
Key Insights
Revenue: $7.013B; YoY change: -0.85%; QoQ change: -1.40%
Gross Profit: $760.5M; YoY +9.14%; QoQ +4.77%
Operating Income: $149.9M; YoY -39.08%; QoQ +1,292.18%
Net Income: $132.8M; YoY +11.95%; QoQ -12.88%
EPS (diluted): $0.85; YoY +13.33%; QoQ -12.37%
Gross Margin: 10.84%; Operating Margin: 2.14%; Net Margin: 1.89%
Depreciation & Amortization: $72.72M; Interest Expense: $240.02M
Cash Flow: Operating cash flow $619.1M; Free cash flow $509.9M; Capex $-109.2M
Balance Sheet: Total assets $27.30B;...
Financial Highlights
Revenue: $7.013B; YoY change: -0.85%; QoQ change: -1.40%
Gross Profit: $760.5M; YoY +9.14%; QoQ +4.77%
Operating Income: $149.9M; YoY -39.08%; QoQ +1,292.18%
Net Income: $132.8M; YoY +11.95%; QoQ -12.88%
EPS (diluted): $0.85; YoY +13.33%; QoQ -12.37%
Gross Margin: 10.84%; Operating Margin: 2.14%; Net Margin: 1.89%
Depreciation & Amortization: $72.72M; Interest Expense: $240.02M
Cash Flow: Operating cash flow $619.1M; Free cash flow $509.9M; Capex $-109.2M
Balance Sheet: Total assets $27.30B; Total liabilities $21.12B; Total equity $6.18B; Debt: $19.21B; Net debt: $18.68B
Liquidity: Current ratio 2.25; Quick ratio 0.68; Cash ratio 0.24
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
7.01B |
-0.85% |
-1.40% |
| Gross Profit |
760.47M |
9.14% |
4.77% |
| Operating Income |
149.91M |
-39.08% |
1 292.18% |
| Net Income |
132.81M |
11.95% |
-12.88% |
| EPS |
0.85 |
13.33% |
-12.37% |
Key Financial Ratios
operatingProfitMargin
3.55%
operatingCashFlowPerShare
$3.96
freeCashFlowPerShare
$3.26
Management Commentary
No earnings-call transcript data were provided in the available material. As a result, specific management quotes and theme-based highlights could not be sourced from the transcript. If you supply the call transcript, I can extract themes such as strategy execution, operating efficiency, financing strategy, and market commentary (e.g., pricing environment, supply/demand for used vehicles, and financing profitability).
Forward Guidance
No explicit forward guidance was included in the provided data. Given the current leverage and cash-generation profile, investors should monitor: (1) the trajectory of debt reduction and deleveraging progress, (2) inventory management efficiency and days of inventory outstanding, (3) financing spread and auto finance profitability through CarMax Auto Finance, (4) consumer demand trends in the used-vehicle market and pricing volatility, and (5) any store-optimization strategy or changes to the store footprint. A scenario-based view would consider modest revenue growth, margin stabilization, and gradual debt reduction as favorable outcomes versus ongoing leverage pressure in a rising-rate environment.