CarMax (KMX) Q2 Earnings: How Key Metrics Compare to Wall Street Estimates

CarMax (KMX) reported Q2 FY25 revenue of $6.59 billion and EPS of $0.64, significantly missing analyst consensus estimates of $7.05 billion and $1.03, respectively. Revenue declined 6% year-over-year, while EPS fell from $0.85, marking a 37.86% surprise miss. This underperformance was primarily driven by a 7.1% year-over-year decline in comparable store used vehicle sales, substantially worse than the 1.5% estimated increase, alongside lower average selling prices and gross profit per unit for used vehicles, signaling continued challenges in its core market.

Analysis

CarMax (KMX) reported a significantly weak quarter, with substantial misses on both top and bottom-line estimates. Revenue for the quarter ended August 2025 was $6.59 billion, a 6% year-over-year decline and a 6.52% miss against the consensus estimate of $7.05 billion. More alarmingly, EPS came in at $0.64, a stark drop from $0.85 in the prior year and a -37.86% negative surprise versus the $1.03 analyst consensus. The underperformance is rooted in the company's core used vehicle segment, highlighted by a dramatic -7.1% year-over-year decline in comparable store used vehicle sales, which stands in sharp contrast to the anticipated 1.5% growth. This volume deterioration was compounded by weaker unit economics, as both average selling prices for used vehicles ($25.99k vs. $26.29k estimate) and gross profit per used unit ($2,216 vs. $2,294 estimate) fell short of expectations. Weakness was also evident in ancillary revenue streams, with extended protection plan revenues missing forecasts and third-party finance fees turning negative at -$0.8 million, a -157.1% year-over-year change that points to significant pressure in its financing operations. A minor bright spot was the wholesale vehicle segment, where gross profit per unit of $993 surpassed the $957.55 estimate, but this was insufficient to offset the pervasive weakness in the much larger retail business.

Key Decisions for Investors

• Given the magnitude of the earnings miss and the severe -7.1% contraction in comparable store sales, investors should prepare for significant downward pressure on KMX and reconsider the viability of any bullish thesis in the near term.
• It is critical to monitor future reports for any stabilization in comparable store sales and gross profit per used unit, as a turnaround in these core metrics is essential before considering a long position.
• The unexpected negative turn in third-party finance fees and weakness in other ancillary revenues represent a material risk, suggesting investors should apply a higher discount to CarMax's entire business model, not just its vehicle sales operations.