On August 6, Cars.com (NYSE:CARS) reported second-quarter results for the period ended June 30, and the two headline numbers tell almost opposite stories. Revenue climbed just 1% year over year to $179.9 million, landing right in line with guidance. Net income, though, jumped 103% to $14.3 million from $7 million a year earlier, and diluted earnings per share more than doubled to $0.25. When profit grows this much faster than sales, the real story usually sits underneath the top line.
Marketplace Finally Picks Up Steam
The engine behind that profit jump was Marketplace revenue, which grew more than 7% year over year, the fastest pace since 2021. Subscription-based Dealer revenue rose 3% to $163.3 million, driven by improved value delivery to dealers and a small lift in dealer count, even as media product revenue slipped. Marketplace dealer customers grew 2% year over year, marking four straight quarters of subscriber growth in that segment. Monthly average revenue per dealer reached $2,500, up 3% year over year. The company also launched Dealer Verified Listings during the quarter, a feature that adds inspection details and pricing context directly to vehicle listings for shoppers.
On the cost side, total operating expenses fell 7% year over year to $152.1 million, helped by lower depreciation and amortization along with a partial quarter of savings tied to cost reduction moves made in April. That discipline pushed Adjusted EBITDA margin to 29.4%, above the high end of management’s own 28% to 29% guidance range. Cars.com also kept buying back stock, retiring 6.2 million shares for $57 million through the first half of 2026, more than 10% of shares outstanding at the start of the year.
Traffic Keeps Sliding Fast
The numbers behind that Marketplace strength come with a trade-off: fewer people are showing up. Average monthly unique visitors fell 14% year over year to 22.8 million, and total traffic dropped 12% to 143 million visits. Management frames this as a deliberate shift toward quality over quantity, one that produced year-to-date growth in lead volume, but a double-digit drop in visitors is still a double-digit drop. Overall dealer count slipped slightly year over year to 19,343, as weaker demand for Solutions products offset the Marketplace gains.
OEM and National revenue fell 18% year over year to $13.6 million, continuing a decline management says it already expected, and total revenue growth landed at just 1%. That means most of this quarter’s profit improvement came from cutting costs and buying back shares rather than from selling more. Cars.com carried $450 million in total debt as of June 30, against just $33.3 million in cash, leaning on $300 million of revolver capacity for its $333.3 million in total liquidity. Free cash flow for the first six months of the year was $43.5 million, only modestly ahead of the $41.8 million generated a year earlier.
A Cheap Stock Wall Street Doubts
Hedge fund ownership in Cars.com fell from 30 funds to 26 in the most recent quarter, a signal that institutional conviction is thinning even as profits improved. Short interest sits at 14.69% of the float, a level that points to a substantial bear camp positioned against the stock. Yet shares trade at a forward P/E of just 5.08 as of September 8, a multiple that assumes almost no growth ahead. That combination sets up a stock priced for skepticism that hedge funds themselves seem to be walking away from.
The Real Question For Cars.com
Cars.com’s second quarter shows a company converting operating discipline and Marketplace momentum into real profit growth, even while its audience shrinks and OEM advertising keeps fading. Whether that trade keeps working depends on Marketplace revenue and dealer subscriber gains outrunning the traffic slide long enough to lift total revenue growth meaningfully above 1%. If the visitor declines eventually drag down lead volume, the strategy management is calling a win could instead start eating into the dealer value it’s built on.
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