CarGurus, Inc.

CarGurus is a multinational automotive platform established in 2006, aiming to enhance trust and transparency in car shopping. The company operates as the number one visited automotive shopping site in the U.S. ¹ and boasts the largest selection of inventory and network of dealers ². CarGurus' core business model revolves around a two-sided marketplace connecting car shoppers with an extensive network of dealers, generating revenue primarily from dealer subscription fees, advertising from auto manufacturers and other brand advertisers, and partnerships with financing services companies. The company's platform supports consumers through research, consideration, and purchase phases, while providing dealers with high-quality leads, marketing reach, software solutions, and data-driven insights.

During the first three quarters of 2025, CarGurus operated with two reportable segments: U.S. Marketplace and Digital Wholesale. However, on August 6, 2025, the Board of Directors decided to wind down CarOffer, LLC, including its Dealer-to-Dealer and Instant Max Cash Offer products, due to their reduced effectiveness in a volatile pricing environment ⁴. This wind-down was completed by December 31, 2025, leading CarGurus to report its financial results as a single reportable segment starting in the fourth quarter of 2025 ⁵. The company will now focus on AI-powered inventory intelligence through its insights platform and consumer vehicle sourcing via Sell My Car, rather than facilitating transactions directly ⁶.

CarGurus offers a comprehensive suite of products and services. For consumers, the platform provides research tools including expert reviews, side-by-side comparisons, user-generated content, and verified dealer ratings. During the consideration phase, AI-powered conversational search, proprietary Deal Ratings based on Instant Market Value (IMV) ⁷, and new car price information help consumers assess value. The purchase stage is supported by Digital Deal, allowing online initiation of vehicle purchases, and Dealership Mode, which provides on-the-lot support through the CarGurus app with VIN-level pricing and ratings.

Dealer products are organized around Inventory, Marketing, Conversion, and Data. Inventory solutions include Sell My Car, which generates trade-in leads for dealers through recurring monthly subscription fees ⁸, IMV Scan for quick VIN data access, and PriceVantage, an advanced pricing software powered by machine learning, also generating recurring subscription fees ⁹. Marketing offerings include tiered Listings subscription packages (Restricted, Enhanced, Featured+, Featured Priority+) providing varying levels of visibility, leads, and tools, priced monthly, quarterly, semiannually, or annually based on inventory size and region. Additional marketing products include Highlight for showcasing inventory in featured slots, Audience Targeting for reaching car shoppers on other platforms, New Car Exposure for promoting new inventory in used car searches, and Geo Expansion for extending geographic reach for home delivery services.

Conversion products aim to move shoppers from interest to purchase, including Digital Deal, Pre-Qualified Leads through lending partners, LeadAI for scoring leads, and Performance Partners for strategic consulting to national and high-value dealer accounts. Data offerings, accessible through the Dealer Dashboard for applicable Listings subscribers, provide insights such as Acquisition Insights for identifying in-market inventory, Next Best Deal Rating for price reduction guidance, Maximize Margin for identifying price increase opportunities, and Merchandising Insights for improving listing performance. The company also offers auto manufacturer and other advertiser products, including Brand Reinforcement, Category Sponsorship, Automobile Segment Exclusivity, and Consumer Segment Exposure. Internationally, CarGurus operates marketplaces in the U.K. and Canada, with PistonHeads in the U.K. serving automotive enthusiasts with listings and editorial content, and Autolist in the U.S. as a mobile-first automotive marketplace.

For the fiscal year ended December 31, 2025, CarGurus reported total revenue of $906.980 million ¹⁰, an increase of 14% from $798.044 million ¹¹ in 2024. Gross profit for 2025 was $841.513 million ¹², resulting in a gross margin of approximately 92.8% ¹³. Operating income from continuing operations was $244.445 million ¹⁴, representing an operating margin of approximately 26.9% ¹⁵. Net income from continuing operations was $196.742 million ¹⁶, with basic EPS from continuing operations of $1.99 ¹⁷ and diluted EPS from continuing operations of $1.96 ¹⁸. Consolidated net income was $155.903 million ¹⁹, with basic consolidated EPS of $1.58 ²⁰ and diluted consolidated EPS of $1.55 ²¹. Net cash provided by operating activities was $295.280 million ²². As of December 31, 2025, cash and cash equivalents stood at $190.518 million ²³. The company had no long-term debt outstanding ²⁴.

Comparing 2025 to 2024, revenue increased by $108.936 million ²⁵, or 14% ²⁶, primarily driven by growth in Quarterly Average Revenue per Subscribing Dealer (QARSD) due to new dealer acquisitions, subscription tier upgrades, broader adoption of add-on products, and price increases for existing dealers. Advertising revenue also increased due to higher advertiser spend ²⁷. Cost of revenue decreased by $4.880 million ²⁸, or 7% ²⁹, mainly due to a $9.8 million ³⁰ decrease in impairment related to the end of the CG Buy Online pilot in 2024, partially offset by a $2.7 million ³¹ increase in data center and hosting costs and a $2.0 million ³² increase in external advertising campaign provisioning. Sales and marketing expense increased by $33.434 million ³³, or 11% ³⁴, primarily due to a $24.1 million ³⁵ increase in advertising and marketing for brand awareness and performance marketing, and a $4.4 million ³⁶ increase in personnel expenses. Product, technology, and development expense decreased by $0.731 million ³⁷, or 1% ³⁸, mainly due to a $3.2 million ³⁹ decrease from increased capitalized website development and a $2.1 million ⁴⁰ decrease in lease-related costs, partially offset by increases in consulting and personnel expenses. General and administrative expense decreased by $1.803 million ⁴¹, or 2% ⁴², primarily due to a $7.9 million ⁴³ decrease in stock-based compensation, offset by increases in professional services, payment processing, and indirect tax expenses. Impairment expense decreased by $11.258 million ⁴⁴, or 96% ⁴⁵, due to the absence of the $7.0 million ⁴⁶ CG Buy Online pilot impairment and $4.7 million ⁴⁷ Addison, Texas lease impairment recognized in 2024. Depreciation and amortization expense increased by $6.876 million ⁴⁸, or 75% ⁴⁹, mainly due to assets placed into service in 2024 related to the 1001 Boylston Street lease. Total other income, net decreased by $2.850 million ⁵⁰, or 25% ⁵¹, primarily due to a $3.0 million ⁵² decrease in interest income from lower interest rates and cash balances. Provision for income taxes increased by $16.443 million ⁵³, or 41% ⁵⁴, driven by increased profitability, partially offset by higher windfall tax benefits on share-based compensation and a reduction in Massachusetts state taxes.

During 2025, CarGurus completed the wind-down of CarOffer, LLC, which was considered abandoned for accounting purposes as of December 31, 2025 ⁵⁵. This strategic reassessment led to a shift in focus towards AI-powered inventory intelligence and consumer vehicle sourcing through Sell My Car, moving away from facilitating transactions directly ⁵⁶. The company incurred total expenditures of $13.3 million ⁵⁷ related to the wind-down, all of which were cash expenditures ⁵⁸. Of this, $5.4 million ⁵⁹ was for one-time restructuring costs, including severance and contract termination charges.

CarGurus expects to fund share repurchases under the 2026 Share Repurchase Program through cash on hand and cash generated from operations ⁶⁰. The company believes its existing sources of liquidity, including access to the 2022 Revolver, will be sufficient to fund operations for at least the next 12 months from the filing date of this Annual Report ⁶¹. Future capital requirements will depend on revenue, expenses related to sales and marketing, product, technology, and development efforts, activity under the 2026 Share Repurchase Program, and investments in international markets ⁶².

A major growth vector for CarGurus is its continued investment in developing products that incorporate AI ⁶³. The company has made, and intends to continue making, significant investments in this area. For example, CG Discover, a GenAI-powered shopping assistant, interprets natural-language shopper intent, engages in interactive dialogue, and dynamically surfaces relevant vehicles from the marketplace ⁶⁴. This AI-powered tool complements proprietary pricing and algorithms to help consumers assess value and trade-offs ⁶⁵. The company's focus on technology and analytics will enable smarter sourcing and pricing decisions ⁶⁶.

Another growth area is the continued delivery of AI-powered inventory intelligence through its insights platform and enabling consumer vehicle sourcing at scale through Sell My Car ⁶⁷. Sell My Car allows consumers to sell their cars and dealers to make tailored trade-in offers, generating valuable trade-in leads for their business ⁶⁸. Dealers pay recurring monthly subscription fees for this service ⁶⁹. The company's PriceVantage product, an advanced pricing software powered by machine learning, leverages real-time consumer demand to guide smarter pricing decisions, incorporating VIN-level activity, turn-time predictions, lead potential, market days' supply, and visibility into comparable listings ⁷⁰.

Operationally, CarGurus expects product, technology, and development expense to increase from quarter to quarter as it invests in additional engineering resources to develop innovative new solutions and make improvements to its existing platform ⁷¹. General and administrative expense is also expected to increase as the business scales ⁷². The company anticipates that its investments in current products may become less productive over time, requiring more focus on developing new products for revenue growth ⁷³.

Regarding capital allocation, the Board of Directors authorized the 2026 Share Repurchase Program in February 2026, allowing the company to purchase up to $250.0 million ⁷⁴ of its Class A common stock, with an expiration date of December 31, 2026 ⁷⁵. The company expects to fund these repurchases through cash on hand and cash generated from operations ⁷⁶. CarGurus has never declared or paid any cash dividends on its common stock and anticipates retaining future earnings to fund business development and growth, not paying cash dividends in the foreseeable future ⁷⁷.

Management explicitly flagged several structural headwinds and execution risks to the growth plan. The company's success depends on its continued innovation to provide useful products for consumers and dealers, and a failure to capture expected benefits from product investments could negatively impact financial results ⁷⁸. There is no guarantee that innovations like PriceVantage, Dealership Mode, Discover, or Sell My Car, or future products, will increase engagement, achieve market acceptance, create additional revenue, or become profitable ⁷⁹. The development of AI features incurs significant costs, and there is no guarantee of success, with potential for increased cybersecurity and data protection risks, reputational harm, operational risks, or legal liability ⁸⁰. Uncertainty in AI regulatory landscape, along with new or enhanced governmental scrutiny, could negatively impact the business ⁸¹. Revenue from new products is typically unpredictable and may have lower gross margins, lower retention rates, and higher marketing and sales costs than existing products ⁸².

Geographic, regulatory, or macro factors identified as constraints include the less familiar competitive environments in the U.K. and Canada, where the company has incurred losses in prior periods and may again in the future ⁸³. Competitors in these international markets may be more established or offer services that create dealer dependence, impeding CarGurus' operations and potential growth ⁸⁴. The business is subject to risks related to the larger automotive industry ecosystem, with decreases in consumer demand potentially reducing the number of consumers using the platform ⁸⁵. Negative trends such as energy costs, availability and cost of credit, increased interest rates, inflation, and reductions in consumer confidence could adversely affect automobile purchases ⁸⁶. Vehicle affordability is becoming more challenging due to elevated pricing, rising finance costs, and increasing auto insurance rates ⁸⁷.

CarGurus faces material risks including substantial dependence on dealer relationships, with potential adverse effects if a significant number of dealers terminate subscriptions or if dealer closures/consolidations reduce demand ⁸⁸. Failure to maintain or increase paying dealers or subscription fees would materially affect financial results ⁸⁹. The inability to develop new products, adapt to new technologies, or achieve widespread consumer and dealer adoption could negatively impact the business, especially given significant investments in AI with no guarantee of success or profitability, and potential for increased cybersecurity risks, reputational harm, operational risks, or legal liability due to AI ⁹⁰. Reliance on internet search engines means a failure to appear prominently in search results, or changes in search engine methodologies (including AI-generated answers), could decline traffic and adversely affect the business ⁹¹. If dealers or other advertisers reduce spending, advertising revenue and financial results would be harmed ⁹². The business is subject to risks from the larger automotive industry ecosystem, including decreased consumer demand due to macroeconomic issues like increased interest rates, inflation, and reduced consumer confidence, which could materially affect revenue and financial condition ⁹³. Disputes regarding the accuracy of pricing and valuation products could harm reputation and lead to legal disputes ⁹⁴. Fraudulent or illegal activity in marketplaces could lead to legal liability, loss of customers, and harm to reputation ⁹⁵. Seasonality in the automotive industry, while not historically material, could become more influential as the platform scales ⁹⁶. Intellectual property disputes are costly to defend and could harm the business ⁹⁷, and failure to adequately protect intellectual property could also be detrimental ⁹⁸. Acquisitions carry inherent risks and integration failures could harm operating results ⁹⁹. Misappropriation of data by third parties, especially with evolving AI technologies, could reduce content value and harm competitive position ¹⁰⁰. Inability to maintain or grow relationships with data providers could create a less valuable shopping experience ¹⁰¹. Inaccuracies in key business metrics could harm reputation ¹⁰². Restrictions on consumer data collection due to privacy laws and browser changes could impact monetization and advertising efforts ¹⁰³. Cybersecurity risks and incidents, including those exacerbated by AI, could disrupt operations and expose the company to liabilities ¹⁰⁴. Reliance on third-party service providers and strategic partners means any failures or terminations could harm the business ¹⁰⁵. Significant service disruptions on websites or mobile applications could damage reputation and result in loss of consumers ¹⁰⁶. Adverse changes in tax laws, regulations, and interpretations, including sales tax liability for SaaS or digital services, could materially affect the effective tax rate and financial results ¹⁰⁷. International operations involve risks such as less familiar competitive environments, the need for significant resource investment with uncertain returns, and compliance with foreign laws and regulations ¹⁰⁸. Dependence on key personnel, especially those with AI expertise, means inability to retain or attract qualified employees could adversely affect business growth ¹⁰⁹. The complex and evolving regulatory framework, including local motor vehicle sales, advertising, brokering, consumer protection laws, and federal laws like the TCPA, could subject the company to claims, fines, or changes in business model ¹¹⁰. Antitrust and other laws could lead to costly litigation ¹¹¹. The need for additional capital if cash flows are insufficient, and the covenants and restrictions of the 2022 Revolver, could limit operational flexibility ¹¹². Fluctuations in operating results on a quarterly and annual basis are expected due to various factors, including macroeconomic issues ¹¹³. Events beyond control, such as natural disasters or public health crises, could negatively impact operations and financial results ¹¹⁴. Expectations relating to ESG considerations expose the company to potential liabilities and increased costs ¹¹⁵.

Management's message to shareholders emphasizes the company's evolution into a data- and intelligence-driven platform, supporting dealers across their workflows and empowering consumers throughout their shopping journey. They aim to deliver quality leads at high volume for dealer customers and provide the highest return on a dealer's investment ¹¹⁶. Management expects to fund share repurchases under the 2026 Share Repurchase Program, which authorizes purchases of up to $250.0 million ¹¹⁷ of Class A common stock with an expiration date of December 31, 2026 ¹¹⁸, through cash on hand and cash generated from operations ¹¹⁹. The company's strategic priorities include continuing to deliver AI-powered inventory intelligence through its insights platform and enabling consumer vehicle sourcing at scale through Sell My Car, focusing on technology and analytics for smarter sourcing and pricing decisions rather than facilitating transactions directly ¹²⁰. They also highlight the importance of continued innovation to provide products that make marketplaces, websites, and mobile applications useful for consumers and dealers, including features for vehicle listing, research, search, and transactional offerings ¹²¹.