CarMax (KMX) Q2 2027: EPS Jumps 81% on Used-Car…

CarMax (NYSE: KMX) posted fiscal second-quarter EPS of $1.16, up 81% and well above the $0.73 consensus. Revenue rose 19% and buybacks are set to resume.

Q2 diluted EPS was $1.16, up 81.3% from a year earlier, against a consensus estimate of about $0.73.
Revenue rose 19.5% to $7.88 billion as comparable-store used unit sales grew 13.0%.
Share repurchases, paused in Q2, are to resume at a modest level in Q3, with $1.31 billion of authorization remaining.

Lead

CarMax shares rose roughly 6% to 8% on Tuesday, September 30, 2026, after the used-vehicle retailer reported fiscal second-quarter results that cleared Wall Street forecasts by a wide margin. The company, reporting for the quarter ended August 31, earned $165.3 million, or $1.16 per diluted share, compared with $0.64 a year earlier. Premarket trading put the stock near $60, close to the top of its 52-week range of $30.26 to $65.28. The report came a year after a weak second quarter that had driven the shares sharply lower.

What Did CarMax Report for the Second Quarter?

CarMax reported net earnings of $165.3 million and revenue of $7.88 billion, up 19.5% from a year earlier. Six-month earnings reached $350.9 million, or $2.47 per share, up 22.3%.

Volume drove the top line. The company sold 387,735 used vehicles in total, up 14.7%. Retail used units rose 13.8% to 227,391, and wholesale units rose 15.9% to 160,344. Retail average selling price increased 6.3% to $27,623.

Gross profit grew 11.4% to $799.5 million, a slower pace than revenue. Gross profit per retail used unit fell $111 to $2,105, and wholesale gross profit per unit fell $135 to $858. The company traded some unit margin for volume, consistent with its stated focus on pricing competitiveness.

Why Did CarMax Earnings Beat Estimates So Widely?

The beat came from volume growth combined with cost discipline and better credit performance at its finance arm. Selling, general and administrative expenses rose only 4.6% to $628.6 million, while unit sales rose nearly 15%. SG&A per unit fell $157, or 8.8%, to $1,621. The company reiterated that it is on track for $200 million in SG&A exit-rate savings by the end of fiscal 2027.

CarMax Auto Finance also contributed. CAF income rose 32.1% to $135.6 million, and the provision for loan losses fell $28.8 million to $113.4 million. CAF financed 40.9% of units on a three-day payoff-adjusted basis. Tier 2 penetration reached 22% of Tier 2 volume, up from 10% a year earlier. The weighted average contract rate was 11.8%, up 60 basis points.

Other gross profit, which includes finance-related and service revenue, rose 33.1% to $183.3 million.

How Is the Market Reacting to the CarMax Results?

Shares of KMX rose about 6% to 8% as investors responded to the size of the earnings beat, the return to double-digit comparable sales growth and the capital return signal. Premarket trading showed a gain of about 6.2%, with the stock near $60. The shares had fallen sharply after the prior year's second-quarter report, so Tuesday's move partly reverses that decline.

The reaction also reflects the contrast with last year's quarter. Comparable-store used unit growth of 13.0% marks a reversal for a retailer that had been losing share in a soft used-car market.

What Does the Buyback Resumption Mean?

CarMax repurchased no shares in the second quarter and said it plans to resume repurchases at a modest level in the fiscal third quarter. The company has $1.31 billion remaining on its authorization. The word "modest" signals that the company is balancing capital returns against funding for CAF receivables growth, which rises with higher financed volume.

The pause had been a sign of caution after the weak prior-year results. Its end suggests management has more confidence in earnings and in the credit quality of its loan book.

Strategic Context: The Shift into GEAR Plan

CEO Keith Barr attributed the results to "solid execution and early progress" against the Shift into GEAR strategy. The plan rests on four pillars: Great Offering, Easy Experience, Add Value and Run Lean. Digital tools now touch 81% of retail sales, with 68% of sales omni-channel and 13% completed fully online.

The company did not issue formal forward guidance. It has scheduled a strategic update for November 3, 2026, where investors will look for detail on pricing, CAF expansion and cost targets.

What Comes Next for CarMax?

The next test is whether CarMax can hold double-digit unit growth while unit margins stay below last year's level. Gross profit per retail unit fell by $111, so earnings growth depends on continued volume and lower operating costs per unit. The resumed buyback and the November 3 strategic update are the next dated catalysts.

Credit is the main variable. Tier 2 lending has expanded sharply, and the average contract rate is rising. A rise in loan losses would weigh on CAF income, which has been a major source of profit growth.

Outlook

CarMax has moved from a weak fiscal second quarter a year ago to an 81% jump in EPS, a 19.5% rise in revenue and a restart of share repurchases. Volume growth and lower costs per unit drove the result, while unit margins narrowed. The November 3 strategic update is the next milestone for the Shift into GEAR plan.

Mentioned tickers: KMX