Online auto marketplace CarGurus (NASDAQ: CARG) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 7% year on year to $234 million. On the other hand, next quarter’s revenue guidance of $230.5 million was less impressive, coming in 3% below analysts’ estimates. Its non-GAAP profit of $0.57 per share was 4.4% above analysts’ consensus estimates.

Is now the time to buy CARG? Find out in our full research report (it’s free).

StockStory’s Take

CarGurus’ second quarter results were met with a negative market reaction, despite the company delivering revenue and non-GAAP profit that surpassed Wall Street expectations. Management pointed to strong performance in its core Marketplace segment, highlighting international gains and robust dealer adoption of data-driven tools. CEO Jason Trevisan cited a 14% year-over-year increase in Marketplace revenue and growing dealer engagement with analytics offerings as key drivers. However, the company’s decision to wind down its CarOffer transactions business—citing persistent market volatility and structural limitations—emerged as a focal point, introducing both operational and financial adjustments this quarter.

Looking ahead, CarGurus’ guidance reflects a shift toward its higher-margin Marketplace business, with management acknowledging the uncertain macroeconomic environment facing both dealers and consumers. CEO Jason Trevisan noted that while used inventory is slowly recovering, elevated prices and lingering uncertainty around tariffs and interest rates remain challenges. The company is emphasizing investments in data-driven dealer solutions and international expansion, but Trevisan was cautious about the external outlook, stating, “I think the macro will remain somewhat uncertain for a while.” Marketplace-focused innovation and operational discipline will be central themes as CarGurus navigates the remainder of the year.

Key Insights from Management’s Remarks

Management attributed Q2's performance to increased Marketplace engagement, international expansion, and the strategic exit from the CarOffer transactions business, which is expected to enhance focus on scalable, high-margin solutions.

• Marketplace engagement up: Dealer adoption of CarGurus’ analytics tools continued to rise, with nearly 18,500 subscribed to Next Best Deal Rating and significant growth in more specialized reports. This engagement is driving higher retention and increased wallet share among dealers.

• International segment momentum: Revenue in Canada and the U.K. grew 28% year over year, supported by a multiyear partnership with AutoCanada and CarGurus becoming the most downloaded automotive app in the U.K. The company attributes this international strength to increased dealer adoption and improved lead volume.

• CarOffer wind down: The company decided to exit the CarOffer instant trade transaction business after determining the model was unsustainable in a volatile pricing environment. Management will retain and integrate CarOffer’s technology and analytics into the broader Marketplace platform, focusing on sourcing intelligence and predictive analytics.

• Product innovation: New launches, such as VIN-level targeting and New Car Advantage, are designed to offer dealers greater control over inventory promotion and pricing. Early results from New Car Advantage show increased visibility and lead generation for new vehicle listings.

• Digital retail progress: The Digital Deal platform now accounts for over 27% of dealer email leads, with adoption reaching 12,000 dealers globally. Enhanced features, including financing integration and app improvements, are supporting deeper consumer engagement and higher-quality leads for dealers.

Drivers of Future Performance

CarGurus expects future performance to hinge on Marketplace expansion, international growth, and increased dealer adoption of data-driven solutions, but acknowledges macroeconomic and industry headwinds.

• Marketplace and product focus: The wind down of CarOffer means the company will concentrate resources on its Marketplace segment, where management sees substantial opportunity for increased dealer penetration and cross-selling of analytics products. The pipeline includes new features and reports aimed at deepening dealer engagement.

• International growth and partnerships: Management identifies continued expansion in Canada and the U.K. as a driver, leveraging recent partnerships and growing brand presence. The company plans to stay focused on these markets, citing significant untapped enterprise value and dealer satisfaction.

• Macroeconomic and industry risks: Persistent uncertainty around tariffs, interest rates, and used vehicle pricing could impact both consumer demand and dealer budgets. Management highlighted that while inventory is improving, it remains below pre-pandemic levels, and competitive pressures (including new entrants like Amazon) add complexity to the outlook.

Catalysts in Upcoming Quarters

Over the next quarters, the StockStory team will monitor (1) progress on Marketplace product adoption and deeper dealer engagement, (2) further international expansion, particularly in Canada and the U.K., and (3) the company’s ability to execute on its sourcing intelligence and predictive analytics strategy now that CarOffer has been wound down. Shifts in the macroeconomic landscape and competitive responses will also be key indicators for tracking CarGurus’ trajectory.

CarGurus currently trades at $29, down from $31.41 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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