CarMax Q2 Earnings Dip 28% Amidst Revenue Decline

TL;DR

**CarMax's quarterly earnings are a red flag, signaling a tough road ahead despite a six-month cash flow boost.**

AI Summary

CarMax (KMX) reported a significant decline in net earnings for the three months ended August 31, 2025, falling to $95.378 million, a 28.18% decrease from $132.809 million in the prior year period. Diluted EPS also dropped to $0.64 from $0.85. Net sales and operating revenues decreased by 5.97% to $6.595 billion from $7.014 billion, primarily driven by a 7.16% reduction in used vehicle sales to $5.271 billion. CarMax Auto Finance income also saw a decline of 11.20% to $102.638 million. Despite these declines, gross profit as a percentage of net sales remained relatively stable at 10.9% compared to 10.8%. For the six months ended August 31, 2025, net earnings increased by 7.19% to $305.759 million, and diluted EPS rose to $2.02 from $1.82, largely due to a significant increase in net cash provided by operating activities, which more than doubled to $1.085 billion from $501.414 million in the prior year. Inventory decreased by 20.09% to $3.150 billion from $3.935 billion as of February 28, 2025, indicating a more efficient inventory management or reduced sales volume.

Why It Matters

This filing reveals a mixed picture for CarMax, with a notable quarterly earnings decline but stronger six-month performance driven by operational cash flow. For investors, the 7.16% drop in used vehicle sales and 11.20% decrease in CarMax Auto Finance income for the quarter signals potential headwinds in consumer demand and financing profitability, which are core to KMX's business model. Employees might face pressure if sales continue to soften, impacting incentives or job security. Customers could see continued competitive pricing as CarMax navigates a challenging used car market, potentially benefiting from lower prices or more attractive financing offers. In the broader market, CarMax's performance is a bellwether for the used car industry, and its struggles could indicate a wider slowdown, impacting competitors like Lithia Motors and AutoNation.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant 28.18% decline in net earnings and 7.16% drop in used vehicle sales for the three months ended August 31, 2025. While the six-month net earnings increased by 7.19%, the quarterly performance indicates potential weakening demand and profitability challenges, especially with CarMax Auto Finance income decreasing by 11.20%. The decrease in inventory by 20.09% could be a sign of reduced sales expectations or a more cautious approach to stocking.

Analyst Insight

Investors should closely monitor CarMax's upcoming quarterly reports for sustained trends in used vehicle sales and CarMax Auto Finance performance. Consider a 'hold' position, as the mixed results (quarterly decline vs. six-month improvement in cash flow) suggest uncertainty. Look for signs of stabilization in consumer demand and improvements in financing margins before considering a bullish stance.

Financial Highlights

revenue

$6.595B

net Income

$95.378M

eps

$0.64

gross Margin

10.9%

cash Position

$540.374M

revenue Growth

-6.0%

Revenue Breakdown

Key Numbers

• $95.378M — Net Earnings (Q2 2025) (28.18% decrease from $132.809M in Q2 2024)
• $6.595B — Net Sales and Operating Revenues (Q2 2025) (5.97% decrease from $7.014B in Q2 2024)
• $5.271B — Used Vehicle Sales (Q2 2025) (7.16% decrease from $5.677B in Q2 2024)
• $102.638M — CarMax Auto Finance Income (Q2 2025) (11.20% decrease from $115.580M in Q2 2024)
• $305.759M — Net Earnings (Six Months 2025) (7.19% increase from $285.249M in Six Months 2024)
• $1.085B — Net Cash Provided by Operating Activities (Six Months 2025) (Increased from $501.414M in Six Months 2024)
• $3.150B — Inventory (August 31, 2025) (20.09% decrease from $3.935B as of February 28, 2025)
• $0.64 — Diluted EPS (Q2 2025) (Decreased from $0.85 in Q2 2024)
• $2.02 — Diluted EPS (Six Months 2025) (Increased from $1.82 in Six Months 2024)
• 146,845,043 — Common Stock Shares Outstanding (As of September 24, 2025)

Key Players & Entities

• CARMAX INC (company) — registrant
• KMX (company) — trading symbol
• CarMax Sales Operations (company) — reportable segment
• CarMax Auto Finance (company) — reportable segment
• New York Stock Exchange (regulator) — exchange where common stock is registered
• Financial Accounting Standards Board (regulator) — issued accounting pronouncements
• ASU 2025-05 (regulator) — accounting pronouncement related to credit losses
• ASU 2025-06 (regulator) — accounting pronouncement related to internal-use software costs
• Bloomberg (company) — publisher
• SEC (regulator) — filing authority

FAQ

Risk Factors

• Competition and Market Saturation [high — market]: The used vehicle market is highly fragmented and competitive. CarMax faces competition from traditional dealerships, online retailers, and private sellers. A significant increase in competition or a downturn in the overall used vehicle market could negatively impact sales volume and pricing power.
• Inventory Management and Valuation [medium — operational]: CarMax's ability to manage its large inventory effectively is crucial. A 20.09% decrease in inventory to $3.150 billion as of August 31, 2025, from $3.935 billion as of February 28, 2025, suggests either improved efficiency or reduced sales volume. Inaccurate inventory valuation or an inability to sell vehicles at desired margins can lead to significant financial losses.
• Reliance on CarMax Auto Finance (CAF) [medium — financial]: CAF income declined 11.20% to $102.638 million. While still a significant contributor, a continued decline in CAF income, potentially due to rising interest rates or increased credit risk, could impact overall profitability.
• Regulatory Compliance [medium — regulatory]: The automotive retail industry is subject to various federal, state, and local regulations, including those related to consumer protection, environmental standards, and advertising. Non-compliance can result in fines, legal actions, and reputational damage.
• Technology and Cybersecurity [medium — operational]: CarMax relies heavily on its technology infrastructure for its omni-channel experience. Disruptions due to system failures, cyberattacks, or data breaches could severely impact operations and customer trust.
• Economic Conditions [high — market]: Consumer spending on big-ticket items like vehicles is sensitive to macroeconomic factors such as inflation, interest rates, and employment levels. A recessionary environment could lead to reduced demand for used vehicles.

Industry Context

The used vehicle retail market remains highly competitive and sensitive to economic conditions. While CarMax benefits from its scale and omni-channel approach, it faces pressure from both traditional dealerships and online-only competitors. Inventory management and the ability to offer attractive financing are critical success factors in this environment.

Regulatory Implications

CarMax operates under a complex web of regulations governing consumer protection, financing, and advertising. Any changes in these regulations, or increased enforcement, could impact operational costs and compliance requirements. The company's reliance on financing also makes it susceptible to changes in lending regulations.

What Investors Should Do

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Key Dates

• 2025-08-31: End of Second Quarter 2025 — Reported net earnings of $95.378 million, a 28.18% decrease year-over-year, and net sales of $6.595 billion, down 5.97%.
• 2025-02-28: End of Fiscal Year 2025 — Inventory stood at $3.935 billion prior to the reported decrease.
• 2024-08-31: End of Second Quarter 2024 — Reported net earnings of $132.809 million and net sales of $7.014 billion.

Glossary

CarMax Auto Finance (CAF)

CarMax's in-house financing arm that provides loans to customers purchasing vehicles from the company. (CAF income is a significant component of CarMax's overall earnings, and its performance is closely watched.)

Diluted EPS

Earnings per share calculated after accounting for all potential dilutive common shares, such as stock options and convertible securities. (Provides a more conservative measure of profitability on a per-share basis.)

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. (CarMax's gross profit margin remained stable at 10.9% for Q2 2025, indicating consistent pricing and cost management relative to sales.)

Omni-channel

A retail strategy that integrates online and physical store experiences to provide a seamless customer journey. (CarMax emphasizes its omni-channel capabilities as a key differentiator in the market.)

Year-Over-Year Comparison

Compared to the prior year period, CarMax reported a significant 28.18% decrease in net earnings for the three months ended August 31, 2025, alongside a 5.97% decline in net sales. This contrasts with a positive trend for the six-month period, which saw a 7.19% increase in net earnings, largely driven by a more than doubling of net cash provided by operating activities. Gross profit margin remained stable, but CarMax Auto Finance income saw a notable decrease, and inventory levels were significantly reduced.

Key Financial Figures

• $0.50 — ember 24, 2025 Common Stock, par value $0.50 146,845,043 Page 1 CARMAX, INC. AND
• $507,286 — nt, net of allowance for loan losses of $507,286 and $458,730 as of August 31, 2025 and
• $458,730 — lowance for loan losses of $507,286 and $458,730 as of August 31, 2025 and February 28,
• $2,138,883 — ent, net of accumulated depreciation of $2,138,883 and $2,014,563 as of August 31, 2025 an
• $2,014,563 — umulated depreciation of $2,138,883 and $2,014,563 as of August 31, 2025 and February 28,

Filing Documents

• kmx-20250831.htm (10-Q) — 1780KB
• q2fy26ex311.htm (EX-31.1) — 10KB
• q2fy26ex312.htm (EX-31.2) — 10KB
• q2fy26ex321.htm (EX-32.1) — 6KB
• q2fy26ex322.htm (EX-32.2) — 7KB
• kmx-20250831_g1.jpg (GRAPHIC) — 25KB
• kmx-20250831_g2.jpg (GRAPHIC) — 16KB
• kmx-20250831_g3.jpg (GRAPHIC) — 38KB
• kmx-20250831_g4.jpg (GRAPHIC) — 21KB
• 0001170010-25-000118.txt ( ) — 9535KB
• kmx-20250831.xsd (EX-101.SCH) — 64KB
• kmx-20250831_cal.xml (EX-101.CAL) — 71KB
• kmx-20250831_def.xml (EX-101.DEF) — 319KB
• kmx-20250831_lab.xml (EX-101.LAB) — 673KB
• kmx-20250831_pre.xml (EX-101.PRE) — 483KB
• kmx-20250831_htm.xml (XML) — 1684KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Consolidated Statements of Earnings (Unaudited) – Three and Six Months Ended August 31, 2025 and 2024 3 Consolidated Statements of Comprehensive Income (Unaudited) – Three and Six Months Ended August 31, 2025 and 2024 4 Consolidated Balance Sheets (Unaudited) – August 31, 2025 and February 28, 2025 5 Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended August 31, 2025 and 2024 6 Consolidated Statements of Shareholders' Equity (Unaudited) – Three and Six Months Ended August 31, 2025 and 2024 7

Notes to Consolidated Financial Statements (Unaudited) 9

Notes to Consolidated Financial Statements (Unaudited) 9

Management's Discussion and Analysis of Financial Condition and

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27

Quantitative and Qualitative Disclosures About Market Risk 43

Item 3. Quantitative and Qualitative Disclosures About Market Risk 43

Controls and Procedures 43

Item 4. Controls and Procedures 43

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings 44

Item 1. Legal Proceedings 44

Risk Factors 44

Item 1A. Risk Factors 44

Unregistered Sales of Equity Securities and Use of Proceeds 44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44

Exhibits 45

Item 6. Exhibits 45 SIGNATURES 46 Page 2

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS CARMAX, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) Three Months Ended August 31 Six Months Ended August 31 (In thousands except per share data) 2025 % (1) 2024 % (1) 2025 % (1) 2024 % (1) SALES AND OPERATING REVENUES: Used vehicle sales $ 5,270,712 79.9 $ 5,677,081 80.9 $ 11,374,152 80.4 $ 11,354,557 80.4 Wholesale vehicle sales 1,149,568 17.4 1,154,465 16.5 2,402,306 17.0 2,410,904 17.1 Other sales and revenues 174,404 2.6 181,983 2.6 364,767 2.6 361,465 2.6 NET SALES AND OPERATING REVENUES 6,594,684 100.0 7,013,529 100.0 14,141,225 100.0 14,126,926 100.0 COST OF SALES: Used vehicle cost of sales 4,828,095 73.2 5,198,315 74.1 10,377,352 73.4 10,380,294 73.5 Wholesale vehicle cost of sales 1,012,248 15.3 1,016,590 14.5 2,108,415 14.9 2,115,901 15.0 Other cost of sales 36,675 0.6 38,157 0.5 44,169 0.3 78,369 0.6 TOTAL COST OF SALES 5,877,018 89.1 6,253,062 89.2 12,529,936 88.6 12,574,564 89.0 GROSS PROFIT 717,666 10.9 760,467 10.8 1,611,289 11.4 1,552,362 11.0 CARMAX AUTO FINANCE INCOME 102,638 1.6 115,580 1.6 244,288 1.7 262,550 1.9 Selling, general and administrative expenses 601,093 9.1 610,562 8.7 1,260,736 8.9 1,249,140 8.8 Depreciation and amortization 67,285 1.0 63,901 0.9 133,024 0.9 125,770 0.9 Interest expense 28,453 0.4 27,021 0.4 55,523 0.4 58,383 0.4 Other income ( 3,624 ) ( 0.1 ) ( 3,281 ) — ( 3,933 ) — ( 2,865 ) — Earnings before income taxes 127,097 1.9 177,844 2.5 410,227 2.9 384,484 2.7 Income tax provision 31,719 0.5 45,035 0.6 104,468 0.7 99,235 0.7 NET EARNINGS $ 95,378 1.4 $ 132,809 1.9 $ 305,759 2.2 $ 285,249 2.0 WEIGHTED AVERAGE COMMON SHARES: Basic 149,291 155,866 150,714 156,513 Diluted 149,637 156,526 151,122 157,116 NET EARNINGS PER SHARE: Basic $ 0.64 $ 0.85 $ 2.03 $ 1.82 Diluted $ 0.64 $ 0.85 $ 2.02 $ 1.82 (1) Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding. See accompanying notes t

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements ( Unaudited ) 1. Background Business. CarMax, Inc. ("we," "our," "us," "CarMax" and "the company"), including its wholly owned subsidiaries, is the nation's largest retailer of used vehicles. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance ("CAF"). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides financing to customers buying retail vehicles from CarMax. The company operates in two operating segments, CarMax Sales Operations and CAF, both of which are reportable segments. The chief executive officer, who serves as the company's chief operating decision maker ("CODM"), reviews the performance of our CarMax Sales Operations segment at the gross profit level, the components of which are presented within the consolidated statements of earnings. The CODM uses gross profit to assess financial performance, monitor forecasted versus actual results and adjust pricing strategy. The required segment information related to our CAF segment is presented in Note 3. Additionally, asset information by segment is not utilized for purposes of assessing performance or allocating resources and, as a result, such information has not been presented. We deliver an unrivaled customer experience by offering a broad selection of quality used vehicles and related products and services at competitive, no-haggle prices using a customer-friendly sales process. Our omni-channel experience provides a common platform across all of CarMax that leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a seamless combination of both. Our associates, stores, technology and digital capabilities seamlessly tied together enable us to provide the most cu