Karooooo (NASDAQ:KARO) reported strong third-quarter fiscal 2026 results, pointing to accelerating annual recurring revenue (ARR) growth, record subscriber additions, and continued profitability despite a planned step-up in sales and marketing spending. Management said the quarter ended with ARR nearing $300 million, underscoring momentum in its core Cartrack software-as-a-service (SaaS) platform and continued growth in its Karooooo Logistics delivery-as-a-service offering.
ARR nears $300 million as subscriber growth hits a record
Management highlighted accelerating ARR growth as a key theme in the quarter. Karooooo said ARR increased 22% year over year to ZAR 5,106 million, and on a U.S. dollar basis rose 28% to $298 million. The company described this as the fourth consecutive quarter of ARR growth acceleration.
Commercial customer ARR retention remained 95%, and subscription revenue represented 97% of contract revenue. The company also reiterated that it generates more than 275 billion data points monthly across its platform.
Financial results: revenue up 22%, profitability remains strong
For the quarter, Karooooo reported total revenue of ZAR 1,410 million, up 22%, and subscription revenue of ZAR 1,239 million, up 20%. Operating profit increased 14% to ZAR 369 million. Earnings per share increased 11% to ZAR 8.55, while adjusted earnings per share was ZAR 8.54.
Management emphasized that earnings growth came despite significant upfront spending on sales and marketing, which was up 47% in the quarter. CFO Hoeshin Goy said these costs are expensed as incurred, while the associated recurring revenue benefits are expected to be realized over time.
Cash generation remained a notable element of the discussion. Adjusted free cash flow rose 28% to ZAR 239 million in the quarter, and year-to-date adjusted free cash flow increased 37% to ZAR 597 million. Karooooo ended the quarter with net cash and cash equivalents of ZAR 531 million and reported debtors’ collection days of 31.
The company also referenced an August dividend payment totaling about $38.6 million, or $1.25 per share.
Segment performance: Cartrack drives results, Logistics scales profitably
Cartrack, the company’s SaaS operations management platform, was again the primary driver of growth and profitability. Cartrack revenue increased 21% to ZAR 1,275 million, while subscription revenue rose 20% to ZAR 1,236 million. Cartrack operating profit increased 14% to ZAR 359 million.
Cartrack’s operating profit margin was described as healthy at 28% in the quarter, even with higher sales and marketing investment. Management also highlighted a Cartrack adjusted EBITDA margin of 45% and said the company’s EBITDA margin does not include any stock-based compensation add-back. The company stated it has “no stock-based compensation” and an essentially unchanged share count over several years.
Karooooo Logistics reported delivery-as-a-service revenue of ZAR 135 million, up 24%, and an operating profit margin of 7%. Management said growth in e-commerce orders supported the segment’s revenue performance. The company characterized the business as strategically important for helping enterprise customers scale logistics through a capital-light approach while supporting Cartrack retention.
Regional trends: South Africa accelerates; Asia mix impacts ARPU; Europe expands via OEM integrations
In South Africa, where the company said it had about 1.9 million subscribers at quarter-end, subscription revenue growth accelerated to 21%, up from 18% in the prior quarter and 14% in the year-ago quarter. South Africa accounted for 72% of total Cartrack subscription revenue. Management attributed the improved growth to a combination of subscriber additions and cross-selling video solutions and Cartrack Tag to existing customers.
Average revenue per user (ARPU) in South Africa increased 7% to 162 ZAR in November 2025 compared with November 2024. CEO Zak Calisto later said the ARPU increase in South Africa was driven by cameras and Tag rather than general price increases, and described cross-selling of Tag and video as being in the “early stages.”
In Southeast Asia and the Middle East, subscribers rose 20% to approximately 318,000, with year-to-date net subscriber additions up 30%. Subscription revenue growth in the region was 14% (18% on a constant currency basis, according to the CFO). Management said the pace reflected growth in lower-ARPU countries and a translation impact from a strengthening South African rand.
In Europe, subscribers increased 16% to about 223,000, and subscription revenue rose 24% (19% on a constant currency basis). Management said it has partnered with leading OEMs to integrate connected vehicle data via APIs and expects those partnerships to contribute over the medium to long term. In Q&A, Calisto discussed Volkswagen integration as helping vehicles get onto the platform more quickly, while noting operational limitations in OEM telemetry data versus the data points customers require. He said Karooooo has integrated with “most of the providers in Europe, including Tesla,” but described ongoing practical challenges in relying solely on OEM devices.
Outlook raised for Cartrack subscription revenue; currency remains a headwind
Given year-to-date performance, management increased its fiscal 2026 Cartrack subscription revenue outlook to ZAR 4,785 million to ZAR 4,900 million, implying growth of 18% to 21%, compared with a prior outlook of ZAR 4,700 million to ZAR 4,900 million (16% to 21% growth). The company revised its Cartrack operating profit margin outlook to 27% to 30%, compared with 26% to 31% previously. Karooooo’s fiscal 2026 adjusted earnings per share outlook remained unchanged at ZAR 32.50 to ZAR 35.50.
However, the company cautioned that appreciation of the South African rand has created a currency translation headwind on reported results and “constrained the flow-through” of underlying performance to its fiscal 2026 outlook. Management reiterated it does not hedge foreign currency exposure.
In Q&A, Calisto said the company expects to reach its targeted 70% increase in headcount in Asia, noting it was about 40% complete at the end of the third quarter with many hires expected in January and February. He also said the company remains “people-constrained” as it builds sales capability, and emphasized that management’s approach prioritizes long-term value creation, with a focus on sustaining strong unit economics while investing to expand its footprint.
About Karooooo (NASDAQ:KARO)
Karooooo Ltd is a global provider of telematics software-as-a-service solutions for vehicle and fleet management. Through its flagship platform, the company delivers real-time GPS tracking, stolen vehicle recovery and driver behaviour analytics, enabling commercial fleets and automotive insurers to optimise operations, increase safety and reduce costs.
Karooooo’s SaaS platform integrates proprietary hardware devices with cloud-based analytics and mobile applications. Customers gain access to live vehicle location data, engine diagnostics, route planning tools and customizable reporting dashboards.
Read More
- Five stocks we like better than Karooooo
- Elon Taking SpaceX Public! $100 Pre-IPO Opportunity!
- How a Family Trust May Be Able To Help Preserve Your Wealth
- Do not delete, read immediately
- A U.S. “birthright” claim worth trillions – activated quietly
- Refund From 1933: Trump’s Reset May Create Instant Wealth
