What CarGurus (CARG) Said on Its Q3 Earnings Call

Key Points

• Q3 results grew: Revenue rose 12% year over year to $258 million, while adjusted EBITDA increased 9% to $89.7 million and non-GAAP EPS climbed 17% to $0.70.
• Dealer adoption strengthened: CarGurus added 251 U.S. dealers sequentially, and average revenue per subscribing dealer grew 7%, supported by add-on products and listing upgrades. The company also launched StockVantage, an AI-powered inventory tool.
• Q4 outlook and capital returns: CarGurus forecast Q4 revenue of $258.5 million to $263.5 million and authorized a new $250 million share repurchase program.

CarGurus NASDAQ: CARG reported 12% year-over-year revenue growth in the third quarter of 2026 as more dealers subscribed to its products, even as pressure on vehicle affordability and dealer margins continued to weigh on spending.

Revenue reached $258 million, at the high end of the company’s guidance range. Adjusted EBITDA rose 9% to $89.7 million, with a margin of roughly 35%, while non-GAAP earnings per diluted share increased 17% to $0.70.

Chief Executive Officer Jason Trevisan said the dealer environment had improved sequentially, but enthusiasm had not returned to 2025 levels, primarily because of margin pressure. He added that stretched consumer affordability and higher borrowing costs were contributing to deliberate dealer spending decisions.

Dealer Growth and New Products

CarGurus added a net 251 U.S. dealers sequentially, its strongest quarter for net additions this year. Its U.S. paying dealer base increased by 659 from a year earlier, while quarterly average revenue per subscribing dealer grew 7%, Chief Financial Officer Matt Mandel said.

Growth in that revenue measure came primarily from adoption of add-on products, followed by listings upgrades, Mandel said. The number of U.S. paying dealers subscribing to at least one product outside the company’s core listings tiers rose approximately 16% year over year.

President and Chief Operating Officer Sam Zales attributed the improvement in dealer additions to a slightly better macroeconomic environment and a broader product offering. He said international markets faced stronger pressures, including inflation, affordability challenges and interest rates. The company has also lost some international dealers as it held firm on pricing, he said.

CarGurus launched StockVantage during the week of the call. Trevisan said the product uses artificial intelligence and marketplace data to help dealers identify vehicles with promising retail potential, including through auction listings and consumer trade-ins.

Trevisan also highlighted the company’s VINMax marketing product, saying boosted listings received roughly 57% more leads per day and 67% more vehicle detail page views per day than comparable non-boosted listings. He said boosted vehicles were 85% more likely to sell without a price reduction than similar non-boosted vehicles.

AI Shopping Strategy

CarGurus is expanding its consumer-facing AI tools as shoppers increasingly encounter vehicle information through conversational platforms. Trevisan said unique usage of the company’s Guru shopping tool rose 24% sequentially in the third quarter, while usage of its Dealership Mode feature more than doubled from the second quarter.

Asked whether changes in search were affecting traffic, Trevisan said the company had not seen large language model search materially cannibalize its usual traffic. He said softer consumer demand was instead linked to factors including higher gas prices, higher interest rates and confusion related to pricing guidelines.

Trevisan acknowledged a potential attribution issue when shoppers discover a listing through an AI service but contact the dealer directly rather than submitting a lead through CarGurus. In that case, the dealer would not credit CarGurus for the lead, though indirect attribution might be possible through third parties, he said.

The company plans to develop Guru toward a more full-service automotive agent, initially focusing on research, information validation and helping shoppers narrow their choices. Trevisan said completing documents and financing would remain more human-supported.

Outlook and Share Repurchases

For the fourth quarter, CarGurus expects revenue of $258.5 million to $263.5 million, representing year-over-year growth of 7.2% to 9.3%. It forecast adjusted EBITDA of $93 million to $101 million and non-GAAP earnings of $0.73 to $0.79 per share.

For full-year 2026, the company expects revenue of $1.0115 billion to $1.0165 billion and adjusted EBITDA of $347.5 million to $355.5 million. Its non-GAAP earnings forecast is $2.66 to $2.72 per share.

Third-quarter adjusted EBITDA benefited from a $1.3 million favorable real estate tax reassessment, Trevisan said. The company generated $74 million in free cash flow and ended the quarter with $165 million in cash and cash equivalents.

Mandel said the board authorized a new $250 million share repurchase program effective November 4, 2026, through December 31, 2027. The company had $25 million remaining under its 2026 authorization at the end of the third quarter.

About CarGurus (NASDAQ:CARG)

CarGurus, Inc operates an online automotive marketplace that connects consumers with automobile dealers and private sellers. Its platform enables shoppers to search for new and used vehicles, compare listings, evaluate vehicle and dealer information, and contact sellers. CarGurus generates revenue primarily by providing dealers with digital listing, advertising and marketing products designed to help them reach potential buyers.

The company also offers tools intended to support automotive retailers' online operations, including inventory merchandising, lead generation and digital retailing capabilities.

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