So much for AI troubles - Car Group posts record revenue and profit

CAR Group has delivered record revenue and profit in FY26, with strong international growth helping the classifieds giant shrug off concerns about potential disruption from AI.

Revenue rose 6% to $1.3 billion, while profit climbed 14% to $314 million. Australia grew 7%, but the real strength came offshore, with North America up 12%, Asia up 15% and Latin America up 19%.

Management expects that momentum to continue, guiding to 11–14% revenue growth in FY27.

So, with its international businesses firing and AI fears yet to dent growth, does the recent weakness in CAR Group’s share price represent an opportunity? I spoke to Auscap's Will Mumford to find out. 

CAR FY26 RESULTS

• Adjusted revenue up 12% to $1.25bn vs $1.27bn ests (2% miss)
• Adjusted EBITDA up 12% to $700m vs $701.2m ests (in line)
• Adjusted NPAT up 11% to $407.2m vs $405.5m ests (in line)
• Final dividend up 5% to 43.5 cps (30% franked, record 14 September, payable 12 October)
• Full-year dividend up 8% to 86 cps vs. Morgans' ests of 87.5 cps (1.7% miss)
• FY27 guidance for revenue growth of 11-14%, adjusted EBITDA growth of 10-13% and adjusted NPAT growth of 9-12%

Do you currently hold Car Group and what do you rate it?

We have owned CAR Group for many years and we continue to rate it as a BUY. 

We’re very positive on the medium to long term earnings outlook for the business and we think its valuation remains compelling.

What mattered most from the result?

We thought the result was impressive, with the company delivering strong earnings growth despite macroeconomic headwinds late in the half in some of its end markets, namely Australia and South Korea. The US market has also been experiencing multiple years of tough economic conditions, but management noted they were happy with their lead indicators and are seeing some evidence that market conditions are close to a bottom.

All key financial metrics were broadly in line with our expectations. The earnings growth was driven by strong revenue growth, with management successfully balancing strong earnings growth with continued investment in growth initiatives. 

New product development is healthy and the company gave commentary that AI was accelerating the speed with which the company is able to bring new initiatives to market. Management also articulated a number of new product initiatives across each region to enhance the value of their ecosystems, enhance the group’s moat and ultimately drive earnings growth over the coming years.

How do those outcomes affect the outlook?

Our outlook for earnings growth and the health of the business over the medium term remains positive.

One factor to call out is that CAR is leveraging its proprietary data and the higher product development cadence that AI now enables to improve the value of its marketplace to dealers, private sellers and end-consumers. These initiatives include various adjacent software offerings to improve dealer profitability, as well as features for private buyers such as a more personalised search experience and enhanced safety features for payment and transaction execution. Importantly, CAR’s AI engine is model interchangeable, so the group is never locked into one provider.

On top of these initiatives, management also pointed to large market share opportunities in Brazil, a geographic expansion for its US marine vertical and continued media advertising opportunities as drivers of medium-term earnings growth.

What should investors be watching from here?

We want to see CAR Group continue to balance the delivery of attractive earnings growth with ongoing investment that ensures that the group’s competitive position remains strong and earnings growth remains sustainable. 

To that extent, we focus on the operational metrics by region to evaluate the health of the business units.

What could you be wrong about?

One area of focus for the market has been the potential for AI disruption of CAR Group. 

Our current view is that CAR Group’s moat is difficult to replicate given their audience lead relative to their nearest peers in each market they operate in. 

Their audience lead in Australia and the US actually expanded in the half, from 6.4x to 6.6x in Australia and 3.0x to 3.7x in the US. We continue to monitor CAR’s reinvestment into its offering, the operational metrics relating to the health of each marketplace, such as audience and lead trends, as well as the percentage of CAR Group’s traffic that comes from AI Assistants.