Online new and used car marketplace Cars.com (NYSE:CARS) fell short of the market’s revenue expectations in Q1 CY2025, with sales flat year on year at $179 million. Its non-GAAP profit of $0.37 per share was 24.7% below analysts’ consensus estimates.
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Cars.com (CARS) Q1 CY2025 Highlights:
- Revenue: $179 million vs analyst estimates of $180.2 million (flat year on year, 0.6% miss)
- Adjusted EPS: $0.37 vs analyst expectations of $0.49 (24.7% miss)
- Adjusted EBITDA: $50.72 million vs analyst estimates of $47.48 million (28.3% margin, 6.8% beat)
- Operating Margin: 3.6%, down from 7.1% in the same quarter last year
- Dealer Customers: 19,250, in line with the same quarter last year
- Market Capitalization: $652.8 million
StockStory’s Take
Cars.com’s first quarter was shaped by shifting industry conditions and the company’s efforts to strengthen its marketplace and solutions portfolio. CEO Alex Vetter noted that “our platform strategy, which combines the leading and scaled consumer marketplace with dealer software tools, has been key to our diversified growth.” Management highlighted gains in dealer count, robust consumer traffic—reaching a record 29 million monthly unique visitors—and expanding adoption of tools like AccuTrade and Dealer Club. CFO Sonia Jain pointed out that cost controls and operational discipline helped adjusted EBITDA margin exceed expectations despite flat year-over-year revenue.
Looking ahead, Cars.com is prioritizing product adoption and platform enhancements to capitalize on growing consumer interest and evolving dealer needs. Management suspended full-year revenue guidance due to uncertain OEM media spend, citing ongoing tariff-driven volatility. Vetter explained, “the signals that we’re getting give us less certainty on their commitment.” The company remains focused on growth initiatives such as further integration of AccuTrade and Dealer Club, website product expansion, and delivering value through data-driven marketplace improvements. Jain added, “we expect Q2 revenue to be up year over year and quarter over quarter,” but cautioned that visibility into the timing and magnitude of advertising spend is limited.
Key Insights from Management’s Remarks
Management attributed first quarter outcomes to strong consumer engagement, new product adoption by dealers, and disciplined cost management, while acknowledging near-term challenges from evolving OEM and dealer media spending.
- Consumer demand and marketplace momentum: Cars.com saw a surge in shopper activity, with 70 million total visits and a record 29 million monthly unique visitors. Tariff-related uncertainty drove consumers to seek deals and browse a wider inventory, benefiting the platform’s traffic and engagement.
- Dealer solutions adoption: Adoption of digital tools, particularly AccuTrade (for vehicle appraisals) and Dealer Club (a dealer-to-dealer auction platform), accelerated as dealers looked for alternative ways to source used inventory. AccuTrade appraisals rose 16% quarter over quarter, and Dealer Club users nearly doubled transaction volume from February to March.
- OEM and media spending headwinds: While OEM business grew 6% year over year, management noted that several automakers and franchise dealers have shifted their advertising commitments to a month-to-month basis, impacting visibility and planning for Cars.com’s media revenue.
- Operational efficiency and cost discipline: The company maintained flat adjusted operating expenses year over year, despite targeted headcount reductions and integration costs related to Dealer Club. Lower-than-expected integration costs contributed to exceeding adjusted EBITDA margin expectations.
- Independent dealer momentum: Cars.com gained market share among independent dealers, responding to consumer demand for more affordable used vehicles. Management cited this as a driver of sequential dealer count growth in February and March.
Drivers of Future Performance
Management expects future results to be driven by the pace of product adoption, consumer engagement trends, and the timing of OEM and dealer advertising decisions.
- Tariff-driven volatility: Ongoing uncertainty around automotive tariffs is causing OEMs and dealers to shift advertising and marketing spend to shorter commitments. Management believes this could impact the timing of media revenue, with OEM clients moving to month-to-month spending until market conditions stabilize.
- Growth in solutions and subscriptions: Expansion of AccuTrade, Dealer Club, and website solutions is expected to drive dealer count and average revenue per dealer. Cars.com aims to cross-sell and upsell these products, leveraging recent product enhancements and integration to boost adoption rates and long-term retention.
- Cost management and margin targets: The company is reaffirming full-year adjusted EBITDA margin targets of 29-31%, focusing on disciplined investment in product innovation and platform improvements. Management highlighted ongoing efforts to control operating expenses and optimize organizational structure in response to market headwinds.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the pace of product adoption in AccuTrade and Dealer Club, (2) stabilization or growth in OEM and dealer media commitments as tariff-driven uncertainty evolves, and (3) continued consumer engagement metrics such as unique visitor growth. Progress on operational efficiency and successful renegotiation of website agreements will also be key indicators.
Cars.com currently trades at a forward EV/EBITDA ratio of 3.1×. At this valuation, is it a buy or sell post earnings? Find out in our full research report (it’s free).
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