Shares of Karooooo (KARO -1.88%) tumbled out of the gate on Tuesday, falling as much as 9%. As of 11:54 a.m. ET, the stock was still down 2.1%.
The catalyst that sent the Internet of Things (IoT) and logistics specialist lower was the company's financial report -- but things aren't what they seem.
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Hidden in the disclosure
For its fiscal 2027 second quarter (ended Aug. 31), Karooooo reported revenue that climbed 22% year over year to $101.8 million. The results were driven higher by its Cartrack fleet telematics segment, with revenue up 20% to a record $90 million, while revenue from its Karooooo logistics segment rose 36% to $11.8 million. Despite record operating profits, the bottom line fell short of investor expectations, with EPS rising 18% to $0.58 (more on that in a minute).
Other metrics were generally robust. Subscription revenue of $88 million climbed 31%, fueled by record net subscriber additions, which drove total subscribers up 18% to 2.9 million. This helped drive Cartrack's annual recurring revenue (ARR) up 30% to $354 million, with an ARR retention rate of 95%.
KARO Karooooo
NASDAQ · As of 4:00 PM ET 10/21/26
Despite generally robust growth, the stock slumped in early trading, as Wall Street had projected higher profits. Buried in its accompanying regulatory filing, however, management explained that it made the strategic decision to stock up on vehicle-tracking devices and memory chips in anticipation of rising prices. While this decision weighed on the bottom line in the short term, Karooooo will ultimately save money on these components, fueling higher profits overall.
Fair-weather investors fled the stock on the news, but at 25 times forward earnings, Karooooo stock is priced to move.
