Sep 29, 2026 earnings call — Shift into GEAR strategy and growth update
Earnings per share grew 81% year-over-year to $1.16.
Revenue $7.9B (est $7.1B) · EPS $1.16 (est $0.73)
Key quotes
"Last quarter, I introduced our strategy for growth built around 4 pillars that place the customer at the center of everything we do and that are designed to meaningfully improve how we operate at scale and support consistently strong performance."
"We did this by continuing to drive efficiencies in reconditioning, dynamically managing GPUs and then passing savings on to customers."
"During the second quarter, CarMax Auto Finance originated $2.3 billion, resulting in sales penetration of 40.9% net of 3-day payoffs versus 42.6% last year."
Analyst Q&A 11
Why GPU came in stronger
Q (Daniela Haigian · Morgan Stanley): They asked why GPU came in stronger this quarter and whether the strength came from COGS per unit efficiencies or from FTC/retail-wholesale spreads. They also asked how CarMax's omnichannel and brand work with agentic AI.
A: Management said they came in better than prior outlook and now expect the year to be below a $200 decrease year-over-year. They credited a balance of demand, margins and efficiency gains, including a new part selection tool and warranty changes that supported sales. They also said FTC enforcement is a tailwind and that CarMax has an AI center of excellence and expects AI to help consumers without greatly hurting used-car transactions.
"Yes, we've been really pleased that we've been able to come in better than our previous outlook on GPU, certainly now expecting the year to be below a $200 decrease year-over-year." — Enrique Mayor-Mora (CFO)
Can price cuts be self-funded?
Q (Rajat Gupta · JPMorgan): He asked if seasonality or macro would change comps for the rest of the year. He then asked if the business can self-fund price competitiveness once you lap the December price cuts.
A: They said the consumer looks resilient and CarMax's competitive pricing and brand helped drive the strong comps. Management said they captured the back-half outlook in their prepared remarks and see momentum, and they intend to self-fund GPU investments in FY '28. For this fiscal year they expect GPU to be lower, less than a $200 year-over-year decrease, with decreases in Q3 and Q4 as signaled.
"So I would expect GPUs for this year as a whole and by quarter to be down year-over-year in support of driving sales." — Enrique Mayor-Mora (CFO)
EPP uplift and pricing sustainability
Q (Jeffrey Lick · Stephens): He asked to unpack the stronger-than-expected EPP gain and where it came from. He also asked how confident they are that dynamic pricing and other moves will sustain comps while holding GPU.
A: Management said EPP execution met expectations driven by product redesign and new products like wheel, tire and dent, and that the stores have sold it well during rollout. They reiterated full-year incremental EPP guidance and note the quarter was stronger while rollout continues nationally. On pricing, they said Shift into GEAR aims for sustainable growth, they are improving pricing algorithms monthly, and they are confident they can maintain competitive pricing and positive comps.
"I would say that we were very pleased on the execution as a whole in terms of EPP and the incremental margin we're seeing from product redesign from our new product, wheel, tire and dent, all of that is in line with our expectations." — Enrique Mayor-Mora (CFO)
Removing friction in digital journey
Q (Craig Kennison · Baird): He asked for examples of how CarMax is removing friction in the digital customer journey to improve conversion.
A: They said they sharpened the car details page, surface what customers search for, show monthly payments, and remove steps from the purchase process. They simplified how EPP is presented so customers self-serve the right offerings. They also noted hiring a new Chief Digital and Customer Officer to own and improve the customer journey.
"So it's really understanding everything from search all the way through transaction and then how we communicate with customers, just make it easier to do business with us." — Keith Barr (CEO)
Why not cut GPU more; inventory focus
Q (David Bellinger · Mizuho): He asked why they are not being more aggressive lowering GPU and whether there is optionality to push GPU down later. He also asked if inventory levels can be compressed to reduce depreciation and boost GPU.
A: They said the strategy is to self-fund price competitiveness by finding efficiencies in COGS, logistics and other areas rather than immediately cutting margins. Inventory productivity is a clear focus: they want to turn inventory faster, reduce unproductive transfers and holds, and make transfers more productive. Management said they are testing how holds and transfers affect sales as part of the Shift into GEAR work.
"We believe there's efficiencies to be had in the system where we don't necessarily need to go down that route as the first selection, if you will." — Enrique Mayor-Mora (CFO)
Customer cohorts and GPU in tough macro
Q (Joseph Spak · UBS): He asked for detail on traffic or conversion by customer income tiers and whether GPU would be used to drive growth if macro gets tougher.
A: They said they view customers by income cohorts and saw resiliency: even the lowest-income cohort had basically the same number of customers year-over-year, while higher cohorts grew. They noted they sold more newer, higher-priced vehicles this quarter and can manage inventory dynamically; they expect GPUs to be down a bit in Q3 and Q4 but aim to find efficiencies to protect GPU in future years.
"Even at our lowest income cohort, we basically have the same number of customers year-over-year." — Keith Barr (CEO)
Why GPUs down; dealer buys; diesel costs
Q (John Babcock · Barclays): He asked why GPUs are expected to be down in Q3 and Q4. He also asked why purchases from dealers have trended higher and how profitable dealer buys are versus customer buys. Finally, he asked how rising diesel and transport costs affect the business.
A: They said GPUs are being lowered this year to support sales while balancing demand, efficiencies and the FTC tailwind. Dealer buys rose due to Edmunds and the MaxOffer salesforce; buying directly from customers is the most profitable, auctions are least profitable, and dealer buys are in between. Diesel and transportation have increased costs but teams found efficiencies elsewhere to largely absorb that impact this quarter.
"The most profitable buy that we'll have is directly from a customer, right?" — Enrique Mayor-Mora (CFO)
Top-of-funnel vs conversion; CAF incrementality
Q (Scot Ciccarelli · Truist): He asked how much of the improved sales rate was from more top-of-funnel traffic versus better conversion. He also asked if increased Tier 2 CAF penetration was all incremental sales.
A: They said web traffic was down a couple points, but sales opportunities, engaged customers and conversion were up, meaning higher quality traffic. Marketing improved funnel efficiency to attract better customers. On Tier 2 CAF, management said it is not largely incremental sales—some incrementality exists, but they are opportunistically taking volume that otherwise would go to credit partners.
"So web traffic down, but overall kind of quality customers coming through the digital door and the physical door is up, and our conversion of those customers are up as well." — Enrique Mayor-Mora (CFO)
FTC enforcement effect on pricing
Q (Alexander Perry · BofA): He asked how FTC regulation could affect GPU profiles longer term, whether dealers will include doc fees in all-in pricing, how long the FTC tailwind might last, and what compliance looks like across the market.
A: They said FTC enforcement is a tailwind because CarMax already had more price transparency and that made their deals show up better on third-party sites. Management noted the Cars.com percentage of CarMax vehicles rated great deals more than doubled year-over-year this quarter. They said enforcement ramped around May, letters were sent in March, many in the industry are moving to comply, and some laggards remain.
"When you think about our competitive pricing overall versus the broader industry, the percentage of vehicles rated great deals on Cars.com for CarMax more than doubled this quarter compared to Q2 of the previous year." — Keith Barr (CEO)
Third-party sites, marketing, and rates
Q (Christopher Pierce · Needham): He asked how third-party sites tie into marketing and pricing and whether conversion from those sites is mainly about price. He also asked how rising rates affect consumers and at what point rates change buying behavior.
A: They said over 90% of customers start their search online, and customers use multiple sites before deciding; marketing focuses on SEO and GEO to attract the right customers and convert them. Pricing competitiveness and presence across channels matter for acquisition and conversion. On rates, they said prime customers may shift financing channels, CAF has the option to raise or lower rates to protect finance margin, and higher rates can be more binding for lower-credit consumers.
"What we think about is our research shows that 90-plus percent of customers start their search for a vehicle online." — Keith Barr (CEO)
GPU down timing clarification
Q (John Babcock · Barclays): He asked whether the GPUs being down in Q3 and Q4 was sequential or year-over-year.
A: They clarified that the GPU comparisons referenced are year-over-year. That means the expected decreases for Q3 and Q4 are versus the same quarters last year.