Copart, Inc. (NASDAQ: CPRT) announced financial results for its second fiscal quarter ended January 31, 2026, revealing a period of contraction across several key profitability metrics. The global vehicle auction leader reported that while it maintained a strong liquidity position, it faced headwinds in revenue and operating income compared to the same period in the previous year.
Financial Performance Overview
For the quarter, Copart generated total revenue of $1.12 billion, representing a 3.6% decrease from the prior year. Net income attributable to the company fell 9.5% to $350.7 million, while diluted earnings per share (EPS) settled at $0.36, down from $0.40 in the second quarter of fiscal 2025.
The following table summarizes the key year-over-year financial comparisons for the quarter:
| Metric (In thousands, except EPS) | Q2 FY2026 | Q2 FY2025 | % Change |
| Total Revenue | $1,121,674 | $1,163,316 | (3.6)% |
| Service Revenues | $952,051 | $991,281 | (4.0)% |
| Vehicle Sales | $169,623 | $172,035 | (1.4)% |
| Gross Profit | $492,812 | $525,553 | (6.2)% |
| Operating Income | $388,710 | $426,211 | (8.8)% |
| Net Income (Attributable to Copart) | $350,732 | $387,400 | (9.5)% |
| Diluted EPS | $0.36 | $0.40 | (10.0)% |
Operational Analysis and Segment Data
The decline in operating income was primarily driven by a contraction in service revenues, which fell by $39.2 million year-over-year. Operating expenses saw a slight reduction of 0.6% as the company managed facility operations costs, which dropped 2.7% to $427.5 million. However, general and administrative (G&A) expenses rose 3.2% to $89.4 million, placing additional pressure on margins.
Segment data indicates a divergent trend between domestic and international markets:
United States: Operating income fell 9.2% to $341.5 million as service revenues in the U.S. decreased by 5.6%.
International: While international service revenues grew 7.7% to $132.6 million, international operating income declined 6.1% to $47.2 million, largely due to higher G&A and operational costs in those regions.
Six-Month Cumulative Results
Despite the quarterly dip, Copartโs performance for the first half of fiscal 2026 remained stable. For the six months ended January 31, 2026, net income attributable to Copart rose 0.7% to $754.4 million, and diluted EPS remained flat at $0.77 compared to the prior year. This resilience was supported by a 19.9% increase in interest income, which reached $103.5 million for the half-year period.
Balance Sheet and Strategic Growth Drivers
Copart concluded the quarter with a robust balance sheet, reporting $5.1 billion in cash, cash equivalents, and restricted cash, a significant increase from the $2.8 billion reported at the end of the previous fiscal year. Total assets grew to $10.6 billion.
The company continues to leverage its global scale, connecting consignors to approximately 1 million members in over 185 countries. With operations at more than 250 locations across 11 countries, Copart sold over 4 million units in the last year. During the first half of fiscal 2026, the company demonstrated its commitment to shareholder value by repurchasing $218.2 million of its common stock.
Market Context
As a global leader in online vehicle auctions, Copartโs performance is often viewed as a bellwether for the broader vehicle remarketing industry. The current results suggest a period of adjustment as the company navigates shifting volumes in the insurance and dealer sectors, though its massive cash reserve provides significant flexibility for future infrastructure investment and strategic acquisitions.
Reasons to Pass on CPRT
- Revenue contraction: Total revenue declined 3.6% year over year to $1.12 billion in Q2 FY2026.
- Service revenue pressure: Service revenues, the companyโs primary revenue stream, fell 4.0% year over year, driving much of the overall top-line decline.
- Profitability deterioration: Gross profit declined 6.2% year over year. Operating income decreased 8.8%. Net income attributable to the company fell 9.5%.
- Earnings decline: Diluted EPS decreased 10% year over year to $0.36.
- U.S. segment weakness: U.S. operating income declined 9.2%, with domestic service revenues down 5.6%.
- International margin pressure: Despite 7.7% growth in international service revenues, international operating income fell 6.1% due to higher general and administrative and operational costs.
- Rising G&A expenses: General and administrative expenses increased 3.2% year over year, adding pressure to margins.
- Dependence on interest income for stability: First-half net income growth was supported in part by a 19.9% increase in interest income, indicating core operating momentum was limited.
- Industry volume adjustments: Results reflect shifting volumes in the insurance and dealer sectors, suggesting near-term demand variability in the vehicle remarketing market.
- Near-term earnings volatility: The quarter reflects broad-based declines across key profitability metrics despite a strong liquidity position.
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