Online new and used car marketplace Cars.com (NYSE:CARS) met Wall Streets revenue expectations in Q3 CY2025, with sales up 1.1% year on year to $181.6 million. Its non-GAAP profit of $0.48 per share was in line with analysts’ consensus estimates.
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Cars.com (CARS) Q3 CY2025 Highlights:
- Revenue: $181.6 million vs analyst estimates of $181.4 million (1.1% year-on-year growth, in line)
- Adjusted EPS: $0.48 vs analyst estimates of $0.49 (in line)
- Adjusted EBITDA: $54.63 million vs analyst estimates of $53.51 million (30.1% margin, 2.1% beat)
- Operating Margin: 9.3%, up from 6.4% in the same quarter last year
- Dealer Customers: 19,526, up 271 year on year
- Market Capitalization: $669.4 million
StockStory’s Take
Cars.com’s third quarter was characterized by steady execution and positive customer momentum, with the market responding positively to the company’s results. Management pointed to the success of its dealer-focused initiatives, particularly the adoption of new marketplace packages and growth in dealer count, as key contributors. CEO Alex Vetter highlighted the company’s differentiated consumer audience and product suite, noting that “dealers consistently cite our unique consumer audience, data insights and differentiated product suite as key factors that are motivating them to join our platform.” The quarter also benefited from improvements in cost management and further adoption of AI-driven tools, which increased engagement among both consumers and dealers.
Looking ahead, management is focused on driving subscription growth, accelerating product adoption, and expanding its AI-powered platform to enhance user and dealer experiences. The company expects continued momentum from new marketplace tiers and broader use of features like Carson, its AI search assistant. CFO Sonia Jain emphasized that future results will depend on “continued execution of our growth initiatives, namely improved dealer count and product adoption and repackaging for marketplace and websites.” Management also noted some variability in OEM and national advertising spending, suggesting that discretionary media investment could fluctuate based on broader industry trends.
Key Insights from Management’s Remarks
Management attributed the quarter’s stable results to successful dealer acquisition, new product packaging, and investments in AI-driven platform enhancements, with the company navigating industry headwinds and focusing on subscription-based growth.
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Dealer count expansion: The company saw its dealer base grow for the third consecutive quarter, reaching the highest level in three years. Management attributed this to the appeal of its consumer audience, robust data insights, and a differentiated suite of products, with both franchise and independent dealers increasing their engagement with the platform.
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Marketplace repackaging impact: Cars.com launched new Premium and Premium Plus marketplace packages that bundle media products and features. Dealers using these higher-tier packages saw up to 14% more leads per listing, and dealer adoption of Premium Plus grew 50% month-over-month from September to October, supporting sequential ARPD (average revenue per dealer) growth.
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AI-powered product innovation: The launch of Carson, an AI-driven natural language search assistant, allowed users a more interactive experience and drove higher engagement, with AI users saving more vehicles and returning more frequently. Carson currently assists 15% of searches and is expected to be integrated into the company’s mobile app, a key driver of future conversion.
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AccuTrade and DealerClub traction: The company’s appraisal and wholesale solutions, AccuTrade and DealerClub, continued to scale, with AccuTrade surpassing 1 million quarterly appraisals and DealerClub’s active user base growing by nearly 40% quarter-over-quarter. These products are helping dealers access attractive late-model inventory and improve profitability.
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OEM and national revenue variability: While dealer revenue was strong, OEM and national advertising revenue declined 5% year-over-year due to temporary pullbacks from two large customers. Management indicated this was related to internal changes at the OEMs and remains confident in the segment’s ability to rebound as pipeline discussions for next year are positive.
Drivers of Future Performance
Management’s outlook centers on continued dealer and product growth, expanding AI-driven capabilities, and navigating variability in OEM advertising and broader auto industry trends.
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Dealer and subscription growth: Management expects ongoing dealer count expansion and increased adoption of higher-tier marketplace and website packages to drive future revenue. Upgrading and cross-selling to new and existing dealers are seen as key levers for lifting ARPD, bolstered by the positive response to marketplace repackaging.
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AI and product innovation: The company plans to further integrate AI-powered features, such as Carson, into its highest-converting channels like the mobile app. Enhanced analytics and new workflow tools for dealers are expected to deepen customer engagement and improve lead conversion, supporting Cars.com’s competitive positioning in a changing retail landscape.
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Variable OEM ad spending: Management noted that OEM and national advertising revenue may fluctuate in the coming quarters, driven by factors such as consumer demand shifts, inventory levels, and manufacturer incentives. The company remains focused on demonstrating its marketplace’s value to automakers to mitigate this variability and support long-term margin expansion.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely monitor (1) the pace of dealer subscription growth and further adoption of Premium and Premium Plus packages, (2) the rollout and impact of AI-driven features like Carson in the mobile app, and (3) trends in OEM and national advertising spending as automaker marketing budgets adjust. Progress on cross-selling and ARPD growth will also be important markers for Cars.com’s execution.
Cars.com currently trades at $11.08, up from $10.38 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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