CPRT · Q2 2026 Earnings

Neutral

Copart

Reported February 19, 2026

30-second summary

Copart's December quarter revenue declined 3.6% YoY to $1.12B headline but grew 1.3% excluding the 49,000+ catastrophic vehicles from prior-year hurricanes Helene/Milton — the bearish headline is largely a CAT-comparison artifact. The more telling cuts: XCAT global insurance units -4.1% (vs. headline -9.3%), XCAT US insurance units -4.8% (vs. -10.7%), and XCAT US insurance ASPs +9% (vs. +6% reported). GAAP EPS landed at $0.36 vs. $0.40 YoY (-10%), with operating margin at 34.7% (-190bps YoY vs. Q2 FY25's 36.6%; the steeper -264bps QoQ compression from Q1's 37.3% reflects seasonal mix and a $6.8M international VAT one-timer). The quarter's genuine pivot: Copart initiated buybacks, repurchasing 13M+ shares for $500M+ fiscal YTD ($218M through Jan 31 per cash flow statement) — a clean break from the long-running organic-first, cash-accumulating posture. Management leaned harder than ever on structural total-loss-frequency (15.6% in 2015 → 23.1% in 2025) and "record ASPs," but the underlying XCAT operating trajectory is decelerating, not collapsing.

Headline numbers

EPS

Q2 FY2026

$0.36

Revenue

Q2 FY2026

$1.12B

-3.6% YoY

Gross margin

Q2 FY2026

44.0%

Operating margin

Q2 FY2026

34.7%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$1.12B	-3.6%	$1.16B	-2.9%
EPS	$0.36	—	$0.41	-12.2%
Gross margin	44.0%	—	46.5%	-255bps
Operating margin	34.7%	—	37.3%	-264bps

Guidance

No forward guidance provided this quarter; unable to assess guidance changes.

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026
Service Revenues	$952.1M
Vehicle Sales	$169.6M

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	YoY
United States	$0.922B	-5.5%
International	$0.2B	+6.1%
Gross Margin	43.95%	—
Operating Margin	34.66%	—

Management tone

Q3 FY2025: Secular thesis defended → Q4 FY2025: Cyclical headwinds owned → Q1 FY2026: ASP durability defended → Q2 FY2026: Structural marketplace moat plus the first capital-return action in years.

The "cyclical vs. secular" debate continues to lean cyclical, with explicit acknowledgment of multi-quarter persistence. Jeff again framed coverage erosion ("consumers paring back their coverage by foregoing collision coverage, raising their deductibles") as "more cyclical than secular" while conceding "these trends have continued in our most recent quarter." That is the first time management has acknowledged coverage erosion as multi-quarter persistent rather than transient — even as they hold the cyclical interpretation.

Total loss frequency disclosure was actually enhanced this quarter, not retired. Jeff disclosed a specific Q4 CY2025 US TLF of 24.2% (+10bps YoY despite the prior year including Helene/Milton CAT effects), in addition to the 10-year arc (15.6% → 23.1%). Both the trailing-quarter cadence and the long-term frame were provided — the opposite of last quarter's worry that disclosure would fade.

"Liquidity begets liquidity" is the marketplace-moat throughline. Jeff explicitly framed the self-reinforcing loop: "the fact that our auctions continue to drive strong returns and price discovery yields further growth by bringing new sellers to our platform." This is structural-moat language, supported by record XCAT ASPs of +9% and outperformance vs. Mannheim indices.

The competitive frame shifted from price to "delivered economic outcomes." Jeff's Q&A response to Jefferies — "we are increasingly competing on the basis of delivered economic outcomes" (selling prices, cycle times, fees) rather than just price — is new framing. It implies competitors are using price (rebates, discounts) and Copart is countering with a full-stack value claim. The CDS +5% YoY datapoint was offered as proof the strategy works.

Buybacks marked a meaningful capital-allocation pivot. After years of organic-only, cash-accumulating posture, Copart began open-market repurchases in Q2 and is continuing under a 10b5-1 plan through February. Fiscal YTD: 13M+ shares for $500M+ (with $218M settled through Jan 31 per cash flow statement). Jeff characterized this as "opportunistic" given valuation and rate inputs, declined to commit to a specific cadence, but explicitly placed buybacks (alongside historical Dutch tenders) in the standing toolkit.

AI escalated from productivity to "critical long-term competitive differentiator." Jeff made an unusually direct competitive claim: "We have by a healthy margin the most robust and experienced bench of technology talent in the industry," citing ~1,000 full-time engineers across North America, Europe, and Asia. Explicit competitive talent claims are rare from this management.

Recurring themes management leaned on this quarter:

Long-term structural growth in total loss frequency (15.6% in 2015 to 23.1% in 2025)Pricing power and record ASPs despite volume headwindsLiquidity and marketplace network effects as sustainable competitive moatAI deployment as productivity driver and future value creation leverCyclical consumer coverage pullback offsetting structural frequency gainsInternational non-insurance growth diversification

Risks management surfaced:

Consumer pullback in auto insurance coverage (collision and deductible reduction)Differential growth rates and policy shifts across insurance carrier partnersSofter overall claims activity in near termCommercial consignment volume decline due to higher rental customer repair activityOne-time international VAT expense accrual ($6.8 million)

Q&A highlights

Bob Labick · CJS Securities

What macro factors and industry conditions should be monitored to see changes in claims frequency and earned car miles that would drive industry volumes back to growth, excluding total loss frequency?

Management explained that the auto insurance industry has cyclicality driven by premium growth/contraction. Carriers recently received rate approval after lagging cost inflation, resulting in healthier income statements but compromised growth. As carriers reinvest in growth through marketing and competitive rates, and as consumers feel less economic pain, growth should return. Consumers have also reduced insurance coverage, which the data shows.

Rate increases took years to pass through after underlying cost inflationCarriers now have healthier income statements but compromised growthConsumers have pared back insurance coverageCyclicality in premium growth and combined ratios expected to normalize

Craig Kennison · Baird

How does management frame land capacity needs over 1, 5, and 10-year periods, accounting for faster cycle times and market share dynamics?

Management indicated they are in a strong land position today versus a decade ago due to disciplined investment of several hundred million dollars per year. They have dedicated catastrophic facilities and idle land for storms. While faster cycle times improve land efficiency, they anticipate continued disciplined investments in land to ensure adequate positioning 10 years forward. They acknowledged land acquisition has long lead times requiring margin for flexibility.

Invested several hundreds of millions per year in land over the past decadeDedicated catastrophic facilities exist with many hundreds of acres of idle landApril 2016 20-20-20 initiative: 20 facilities acquired/expanded in 20 monthsLand acquisition and development require long lead time planning

Brett Jordan · Jefferies

Is the market becoming more price competitive? Are competitors rebating or discounting, and what explains Copart's differential unit growth versus competitors?

Management stated that differential insurance industry growth rates can explain market share shifts without account movements. The industry has always been price competitive, but Copart increasingly competes on delivered economic outcomes (selling prices, cycle times, and fees) rather than just price. Data empirically bears out that the returns generated dwarf other pricing differences. CDS grew 5% year-over-year in unit volumes, with continued user base expansion.

CDS unit volume growth: +5% year-over-yearCompeting on economic outcomes rather than price aloneVehicle selling price is the primary economic driver, followed by cycle times, then feesEmpirical data shows superior returns versus competitors on full stack P&L

John Healy · North Coast Research

What are updated thoughts on accident frequency and ADAS technology's impact? What does the business really grow in the next 3-5 years given volume headwinds?

Management reiterated that accident frequency has historically declined due to improving vehicle safety technologies (ABS, traction control, forward autonomous braking, lane departure warning). There was one anomaly from 2013-2016 due to smartphone proliferation. Management believes total loss frequency will continue to offset declining accident frequency, supporting long-term growth. The algebra remains unchanged: while accident frequency declines, total loss vehicles will grow due to increased total loss frequency.

Accident frequency has historically declined year-over-year (except 2013-2016 anomaly due to smartphone use)Safety technologies: ABS, traction control, forward autonomous braking, lane departure warning, rear camerasTotal loss frequency growth will offset accident frequency declinesRisk homeostasis thesis: drivers tolerate more risk as technology improves

Josh Botwell · J.P. Morgan

Has de-emphasizing low-value units from underinsured/uninsured channels led to additional volume pressure relative to broader salvage industry? Also, how has PurpleWave heavy equipment expansion performed and why hasn't Copart pursued more M&A in the consolidating heavy equipment sector?

Management clarified that low-value units (under $1,000) are junk/non-drivable vehicles. Underinsured/uninsured vehicles likely end up in impound yards or with drivers and flow through alternative channels (cash for cars, impound yards). On PurpleWave, management noted crypto/blockchain industry uncertainty caused medium-term paralysis and friction in the heavy equipment market. Copart has grown heavy equipment organically and maintains a high bar for M&A, preferring organic growth to build durable value rather than just territory.

Low-value units are under $1,000 pre-accident value (junk/non-drivable)Uninsured/underinsured vehicles flow through impound yards, cash for cars, and fragmented consumer channelsPurpleWave growth outpaces industry generally despite crypto/blockchain uncertainty headwindsM&A accounted for tiny percentage of enterprise value over 10 years

Answers to last quarter's watch list

Whether total revenue growth turns negative. Mixed. Reported revenue -3.6% but XCAT revenue +1.3%. The headline crossed zero but the underlying trajectory remains slightly positive once the prior-year CAT comp is normalized. The "structural re-rating" warning is not yet confirmed by XCAT data. Status: Mixed — XCAT decelerating, not negative

Total loss frequency print. Resolved positively (on disclosure). Management disclosed a specific Q4 CY25 US TLF of 24.2% (+10bps YoY despite the prior year benefiting from Helene/Milton CAT effects) in addition to the 10-year arc. The trailing-quarter cadence was not retired as feared. Status: Resolved with full disclosure

Cash deployment action, not commentary. Resolved with action. Copart initiated open-market buybacks in Q2, repurchasing 13M+ shares for $500M+ fiscal YTD ($218M settled through Jan 31). This is a clean break from the prior pattern of inaction and represents the first meaningful capital return in years. The action was paired with Jeff's explicit framing that buybacks belong in the standing toolkit.

Resolved positively

ASP durability without unit growth. Resolved positively on XCAT basis. US insurance ASPs grew 6% reported / 9% XCAT — XCAT pricing is essentially flat vs. Q1's +8.4%. The pricing offset is intact once CAT is normalized; the headline deceleration is a CAT-comp artifact, not a pricing engine failure. Status: Resolved positively (XCAT basis)

Whether management retires more disclosure. No. Management actually expanded TLF disclosure (specific Q4 CY25 print plus 10-year arc) and provided both reported and XCAT cuts on units, ASPs, and revenue across US and international segments.

Resolved positively

Logistics cost reduction quantification. No quantified program (headcount, footprint, route optimization, savings target) was introduced this quarter. The Q1 language remained aspirational.

Continue monitoring

What to watch into next quarter

Whether XCAT revenue growth holds positive. Q2 XCAT +1.3% vs. Q1 +0.7%. The CAT-comp distortion eases materially in Q3 (Helene/Milton fell in Q2 FY25). If XCAT growth re-accelerates as the comp normalizes, the bearish headline narrative is fully discredited; if XCAT stays flat to negative on a clean comp, the structural concern returns.

Operating margin YoY trajectory. Q2 FY26 34.7% vs. Q2 FY25 36.6% (-190bps YoY). The QoQ compression reflects seasonality and the $6.8M VAT one-timer; the YoY delta is the cleaner read. Watch whether Q3 narrows the YoY gap.

Q1 CY26 total loss frequency print. Management disclosed Q4 CY25 at 24.2%. Continued disclosure of trailing-quarter TLF would confirm the disclosure pattern is durable.

US insurance ASP growth rate, XCAT basis. XCAT ASPs grew 9% — essentially flat vs. Q1's +8.4%. A meaningful XCAT deceleration would signal the pricing engine is finally weakening on a normalized basis.

Pace and structure of buybacks. $500M+ fiscal YTD is meaningful but small relative to $5.1B cash. Watch whether Q3 sees continued open-market activity, a sized program announcement, or a Dutch tender. The cadence chosen signals how durable the capital-return pivot is.

CDS volume growth. Called out at +5% this quarter as the non-insurance growth datapoint. CDS deceleration would weaken the diversification narrative.

Commercial consignment (BlueCar) recovery. -11.8% units this quarter on softer rental dispositions; watch whether rental customers normalize.

Sources

Copart Q2 FY2026 press release (filed February 19, 2026): https://www.sec.gov/Archives/edgar/data/900075/000119312526059440/cprt-ex99_1.htm
Copart Q2 FY2026 earnings call (management prepared remarks and Q&A)
Tapebrief Q1 FY2026, Q4 FY2025, and Q3 FY2025 CPRT briefs (prior-quarter trend context and watch list)

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