Key Highlights

  • Revenue grew 15% in the March quarter, the loss-making wholesale division that dogged it for three years no longer exists, and cash fell by almost two-thirds in a quarter as management bought back stock.
  • The latest disclosure is the quarterly report for the three months, filed on 7 May.
  • The traffic claim holds up on the company's own evidence, with a caveat.
  • For 2026 CarGurus expects revenue growth of 10% to 13% and an adjusted EBITDA margin 150 to 250 basis points below 2025's 35%.

A traffic crown, a shrinking share count and a guidance step-down

That capitalises the Nasdaq-listed marketplace operator at roughly US$3.2bn on the 90.2 million shares in its latest quarterly report.

It approaches its next results with an unusual set of facts. Revenue grew 15% in the March quarter, the loss-making wholesale division that dogged it for three years no longer exists, and cash fell by almost two-thirds in a quarter as management bought back stock.

It also carries a claim worth testing. CarGurus (NASDAQ:CARG) describes itself in SEC filings as "the No. 1 visited automotive shopping site in the U.S." The footnote matters as much as the sentence.

What the company does

CarGurus runs online marketplaces connecting used and new car shoppers with dealers in the United States, the United Kingdom, where it also owns the PistonHeads site, and Canada.

Money comes from three places: recurring dealer subscriptions for tiered listings packages and tools such as PriceVantage; display advertising sold to vehicle manufacturers; and fees from lending partners when consumers pre-qualify for finance.

Two operating measures follow: the number of paying dealers, and quarterly average revenue per subscribing dealer, or QARSD, average spend per dealer per quarter, which rises when CarGurus sells higher tiers or add-ons into its existing base.

The 2025 annual report names Autotrader.com, CARFAX.com, Cars.com and TrueCar.com as principal rivals, alongside Carvana.com and Amazon, which has begun selling vehicles with manufacturers.

Latest financial and operating performance

The latest disclosure is the quarterly report for the three months, filed on 7 May. Revenue was US$243.6m, up 14.8%: United States revenue rose 12.7% to US$220.0m, international revenue 38.6% to US$23.6m.

Gross profit of US$224.6m equated to a 92% margin. Operating expenses of US$184.5m included US$19.2m of impairments, chiefly against right-of-use lease assets, pushing operating income down to US$40.1m from US$50.7m.

Net income from continuing operations was US$32.2m, or US$0.34 a diluted share, against US$42.1m. Adjusted EBITDA, which adds back depreciation, US$13.3m of share-based pay and the impairments, was US$80.2m, a 33% margin and above guidance. Free cash flow was US$63.2m.

Total paying dealers reached 34,596, up 7%: 26,116 in the United States, up only 4%, and 8,480 internationally, up 17%. US QARSD was US$7,996, up 9%, and international QARSD US$2,468, up 19%.

For 2025 as a whole, continuing-operations revenue was US$907.0m, up 14%, net income US$196.7m and free cash flow US$266.0m, at a 35% adjusted EBITDA margin.

The balance sheet is unlevered but thinner. Cash stood at US$72.0m on 31 March, down from US$190.5m at the year end, with nothing drawn on a revolver maturing in September 2027.

The catalyst: CarOffer is gone, and so is a quarter of the share count

The board approved winding down CarOffer, the dealer-to-dealer wholesale platform. It was abandoned for accounting purposes and is now a discontinued operation, at a wind-down cost of US$13.3m including US$5.4m of restructuring.

The logic is in the comparatives. Discontinued operations lost US$70.4m in 2023, US$107.8m in 2024 and US$40.8m in 2025. Removing that drag is why consolidated net income jumped from US$21.0m in 2024 to US$155.9m in 2025 on 14% revenue growth.

The second lever is capital return. It repurchased US$350m of stock in 2025 and US$175m in the March quarter alone - 5,341,712 shares at an average US$32.76. Basic weighted-average shares fell to 94.1m from 103.1m, and cumulative buybacks since December 2022 represent 29% of shares outstanding.

That pace is aggressive for a company holding US$72m of cash, and works only if free cash flow keeps arriving at 2025 levels.

The bull case

The traffic claim holds up on the company's own evidence, with a caveat. The footnote cites Similarweb's Traffic and Engagement Report for the first quarter of 2026 in the United States, measured against Cars.com, Autotrader.com, TrueCar.com and CARFAX.com listings, a ranking against four named rivals rather than every car-shopping destination online, though those are the direct competitors.

Audience advantage translates into pricing power. US dealer numbers grew 4% while US QARSD grew 9%, so most American growth came from selling more to existing customers, higher-quality growth than headcount expansion.

International is the genuine surprise: revenue up 39% and QARSD up 19% from a small base, with the UK and Canada following the US playbook several years behind.

The bear case and the risks

First, the guidance. For 2026 CarGurus expects revenue growth of 10% to 13% and an adjusted EBITDA margin 150 to 250 basis points below 2025's 35%. After a year of more than 300 basis points of expansion, that is a deliberate step down, and March-quarter sales and marketing spending rose 17%.

Second, dealer contracts are short. The annual report states most carry "one-month committed terms" with no obligation beyond that, and warns that dealers who "fail to attribute consumer connections or sales to our platform" may cancel. With US dealer count growing 4%, churn is not hypothetical.

Third, search risk is now explicit. The company warns that search engines increasingly provide "AI-generated answers for users, which could result in our websites not being displayed prominently or at all", and that consumers may shop for cars through chatbots instead.

Fourth, governance: founder and executive chair Langley Steinert controls a majority of voting power through Class B stock and, the filings acknowledge, could control the company's actions in ways that conflict with other stockholders' interests.

What investors should watch next

Second-quarter results are the immediate event; aggregated market data lists, though CarGurus had filed no confirming announcement as at 31 July. Guidance is revenue of US$247.0m to US$252.0m.

US paying dealer count is the most informative number: a return to mid-single-digit growth would show the audience advantage still wins accounts; a stall would confirm growth depends entirely on price.

Then the adjusted EBITDA margin against its guided decline, and international QARSD, still under a third of the US level.

Finally the buyback: with roughly US$75m left on the 2026 authorisation and US$72m of cash, repeating 2025's pace would need a fresh authorisation or the undrawn revolver.

Investor takeaway

CarGurus has done the hard part. The wholesale experiment that consumed more than US$200m of losses in three years is closed, the remaining marketplace earns 92% gross margins and turned 26% of first-quarter revenue into free cash flow, and its traffic leadership is documented in filings rather than asserted.

The open question is whether that attention becomes faster growth or simply more expensive growth. Management's 2026 guidance answers honestly: slower revenue expansion and lower margins as it spends to defend the platform. Meanwhile the share count keeps falling, flattering per-share figures regardless.

What remains is a business with a clear competitive position, no debt, thin cash, decelerating growth and a disclosed exposure to how artificial intelligence reshapes car shopping.

This article is for informational purposes only and does not constitute investment advice or a recommendation to buy, sell, or hold any security. Share prices can rise or fall, and past performance does not guarantee future results. Investors should conduct independent research and consult a licensed financial adviser before making investment decisions.