Will Carvana's Q1 2026 retail unit sales grow at least 25% year-over-year?

The growth trajectory through FY2025 was consistently strong and accelerating — from +26% in Q1 to +43% in Q4. For Q1 2026 to fall below 25% growth would require a significant deceleration of roughly 18 percentage points from the most recent quarter's pace. While Q1 is seasonally weaker and reconditioning headwinds create margin pressure, the reconditioning issue is primarily a cost problem, not a volume constraint. With only ~40% capacity utilization and active hiring, Carvana has ample infrastructure to deliver 143,000+ units. The 25% threshold roughly matches Q1 2025's own growth rate, and the company has expanded significantly since then.

While the overall trajectory strongly favors YES, I give more weight to law-of-large-numbers effects and seasonal patterns. Q1 2025 was +26% — barely above the 25% threshold — and that was off a lower Q1 2024 base of 91,878. Now the base is 114,379, requiring 28,600+ incremental units to hit 143,000. The company added roughly 22,500 units YoY in Q1 2025; now needs 28,600+. This is a 27% increase in the absolute unit increment required. However, with 34 IRCs plus 10 ADESA locations (vs. fewer a year ago) and active hiring, the supply-side capacity exists. The main risk is demand-side: macro uncertainty, tariff impacts on consumer confidence, and whether used car demand holds in a potentially softer Q1.

The base rate is highly informative here: every single quarter of FY2025 exceeded 25% YoY growth, and the trend accelerated. For Q1 2026 to miss, growth would need to decelerate from 26-43% to below 25% — essentially reversing the entire momentum trend. Management's reconditioning headwind guidance is specifically about cost and margin, not about volume constraints; they did not guide for unit growth deceleration. The 1,505 open positions (50% reconditioning) suggest they are scaling capacity in anticipation of continued growth. Carvana's market share at ~1.6% means they are still in the early innings of structural market share gains from offline to online used car retail. The only scenario where this resolves NO is a macro shock or severe demand pullback in Q1, which is possible but not the base case.

The fundamental case for YES is strong: accelerating growth through FY2025, massive spare capacity, and tiny market share. However, I assign meaningful probability to NO due to several compounding risks. The reconditioning headwind management flagged with a '3-6 month resolution timeline' from Q4 earnings means Q1 2026 is squarely within the disruption window. If reconditioning bottlenecks limit throughput (not just increase cost), units could be constrained. Additionally, Q1 seasonal softness is real — Q1 2025's 114,379 was 30% below Q3 2025's 172,210 and 70% of Q4's 163,522. The 25% threshold is close enough to be genuinely uncertain given these compounding factors.

I weight the structural trajectory most heavily. Carvana's growth is not just cyclical recovery — it reflects a secular shift in used car retail toward e-commerce, where Carvana is the dominant pure-play. The company expanded from ~24 IRCs to 34 IRCs plus 10 ADESA locations during FY2025, directly increasing geographic coverage and throughput capacity. Each new IRC expands the addressable delivery radius and reduces logistics costs. This infrastructure investment has a lagged positive effect on units — vehicles sourced in Q4 2025 build-up can be sold in Q1 2026. The 25% bar is deliberately set below the recent trend, and Carvana would need to meaningfully underperform its own Q1 2025 growth rate (26%) to miss.

I take a more cautious view, weighting macro and execution risks more heavily. The used car market is sensitive to interest rates and consumer confidence, and 2026 tariff uncertainty could dampen discretionary spending on big-ticket items. While Carvana's growth has been impressive, the Q4 2025 EBITDA margin compression (9.1% vs. 10.1% YoY) is a warning sign — if management needs to choose between growth and profitability, they may moderate unit growth to protect margins. The reconditioning headwind is described as a '3-6 month resolution,' which at the longer end extends into late Q1 or Q2 2026. If throughput is actually constrained (not just more expensive), this could cap units below 143,000. Q1 2025's 26% growth barely cleared the 25% bar, and repeating that performance off a higher base is not guaranteed.

The growth trajectory is overwhelmingly favorable. Every quarter of FY2025 exceeded 25% growth, with the trend accelerating. Carvana has massive spare capacity at 40% utilization and is actively hiring. The 25% threshold is a relatively low bar given recent performance — it represents significant deceleration from the 43% Q4 pace. Market share at 1.6% means there is enormous room for continued growth. The reconditioning issue is a margin headwind, not a volume constraint. Seasonal softness is real but manageable given expanded infrastructure.

Strong growth momentum and expanded capacity favor YES. The 25% threshold is below every FY2025 quarterly growth rate, making it a relatively accessible target. However, the reconditioning headwind introduces some uncertainty about whether growth acceleration can be sustained. Q1 seasonal patterns and macro uncertainty warrant some discount from the most bullish estimates. The key insight is that 143,000 units represents a meaningful but achievable step-up from Q1 2025's 114,379.

The base case strongly supports YES. Carvana's growth trajectory has been accelerating, not decelerating — the most recent data point (Q4 at +43%) is the strongest. The company has invested heavily in infrastructure expansion and hiring, positioning for continued growth. The 25% threshold is well below recent trend growth. The primary risk is a macro-driven demand shock or reconditioning bottleneck that limits throughput, but these are tail scenarios rather than base cases. Management's long-term 3M unit target implies they are managing for sustained high growth.