Karooooo Reports Accelerated ARR Growth to 28% in Q3 2026, Beating Prior Quarters

What happened

Karooooo released Q3 2026 results showing Cartrack's SaaS annualized recurring revenue (ARR) accelerating to 28% year-over-year in USD, reaching $298 million. This marks an improvement from the 20% YoY ARR growth reported in Q2 FY26, indicating stronger momentum in the core subscription business. The acceleration aligns with the company's reaffirmed FY26 guidance, suggesting management confidence in achieving its targets. However, investors must critically assess this growth against persistent material weaknesses in internal controls over financial reporting (ICFR) noted in the 2025 audit, which could undermine financial transparency. Overall, the performance reinforces Karooooo's position in the telematics market but highlights ongoing operational and governance challenges.

Implication

Karooooo's 28% ARR growth in Q3 2026, up from 20% in Q2, signals effective execution in a growing telematics market, potentially leading to upward guidance revisions and enhanced stock valuation. This acceleration, coupled with a 98% subscription revenue mix and strong unit economics like LTV/CAC above 9x, reinforces the investment case for a compounding SaaS model. Investors should note that sustained growth could mitigate concerns over competition and regulatory risks, such as data privacy requirements. However, the ICFR material weaknesses from the 2025 filings remain a critical risk, as unresolved issues might trigger regulatory scrutiny or erode confidence in financial reporting. Balancing operational momentum with governance remediation is key, as any slippage in controls or growth deceleration could offset these positive developments.

Thesis delta

The news strengthens the BUY thesis by exceeding the ARR growth watch item of ≥20% YoY, indicating improved execution without altering the core investment narrative. It reinforces confidence in Karooooo's ability to meet FY26 guidance and capitalize on secular tailwinds, though the ICFR risks necessitate continued monitoring. No fundamental shift is required, but operational progress is now more evident.