Copart FY Q2 2026 Update
Is the 42% drop in share price since May 2025 a buying opportunity?
Copart, a market leader middleman between car insurance companies and salvage car buyers, reported their FY Q2 2026 numbers yesterday. Because we absolutely love this company, here is an update for you! A quick summary is given first, after which we will explore the quarter in more detail.
The Financials
For the three months ended January 31st 2026, here is a summary of Copart’s financial performance:
Revenue: $1,12 billion, down 3.6% compared to a year ago
Net Income: $350 million, down 9.5% compared to a year ago
Free Cash Flow: $484 in free cash flow, up 58% compared to last year
Cash | Equivalents | Securities: $5,1 billion, up 6.3% compared to half a year ago
Interesting fact: Copart’s cash position is also their net cash position. The company does not have any debt on its balance sheet.
The Industry
The current insurance industry in the United States isn’t in its best state currently. There is a consumer pullback in car insurance, which is offset by an increase in total-loss frequency. For the ones not that familiar with Copart; the company benefits from insured cars that are declared a ‘total-loss’. On behalf of the insurance company, Copart takes care of vehicle transportation, storage and sales after an accident or total-loss incident.
The total number of insured vehicles in the U.S. dropped by 10.7%, which partly explains Copart’s drop in revenue and profit. In calendar year 2015, total loss frequency was 15.6%. In 2025, it was 23.1%. Copart expects the total loss frequency to keep rising in the foreseeable future. This is a huge tailwind for the company.
Vehicle prices have normalized in the past few quarters, after an hectic period of supply shortages in the automobile industry. Nevertheless, Copart reported record average selling prices for their salvage vehicles.
As we explained to our members in our deep dive from 2025, Copart can achieve this due to their scale advantages, network effects and a consistent high supply of cars on their marketspace, which drives up users looking to buy cars.
At an early stage, Copart acknowledged the fact that they need liquidity on their platform. It is the only way to make most money for their customers (insurance carriers) to cover their administrative burden when dealing with a total loss vehicle.
Copart against Competition
Here are a few interesting topics mentioned during the investor call.
Copart operates the largest tow network in the United States and reportedly 5x larger than any other competitor within the industry. This enables cycle times to be 10 days faster compared to when insurance clients would do this themselves.
‘Liquidity begets liquidity’: The more liquidity on a platform, the more attraction from other participants. This is still one of the biggest moats of Copart that’s difficult to disrupt. The result for the quarter: average selling prices up 9% during the quarter.
On artificial intelligence, Copart stated that they have over 1,000 full-time engineers working on making the business more efficient. Think of automatic document processing and working on business analytics tools. Copart’s platform is the best within the industry.
Copart highlighted that recent ‘account wins’ strengthened their position as global salvage auction leader.
Capital Allocation
With over $5 billion sitting on Copart’s balance sheet, action is expected. The only way to create a compounding effect is when businesses reinvest the free cash flow earned.
In the six months ended on the 31st of January, Copart bought back $218 million in shares, representing 0.6% of initial market capitalization. That might seem like nothing, but note that Copart didn’t buy back any shares in the year before. During the investor call, CEO Jeffrey Liaw stated that buying back shares is a result of their scores of fair valuation models, indicating Copart thinks the company is undervalued. Besides, he admitted buying back shares is inevitable, given how much cash is piling up at Copart.
Beer Mat Valuation
With the following assumptions,
[Annual Growth: 7%
FCF Margin: 33%
Exit Multiple: 25
Calculation Period: 10 year
Annual Buy Backs: 1.5%],
you can expect a 9.3% annual return on your investment.
Of course, always make your own assumptions and do your own research.
Wrap-Up
Given the current difficulties in the market with more uninsured vehicles, consumer pull-backs and a very strong comparison year, Copart’s results look worse than they are. When revenue takes a hit while operational costs remain stable, it is logical that net profit shrinks.
There are no strong signs that competitors take market share. On the contrary, Copart reported account wins and record average selling prices for the auction vehicles.
So, it is a weaker quarter for Copart. But in our opinion, it is a temporary one, mainly driven by the weak insurance market. Copart could become very attractive if the downturn continues.
[my dumb math deleted]