Shares of Karooooo Ltd. (KARO) experienced a significant drop of 6.05% in intraday trading on Wednesday, despite the company reporting positive first-quarter results for fiscal year 2026. The decline comes as a surprise to many investors, given the South African-based mobility software-as-a-service (SaaS) provider's seemingly strong financial performance.

According to the company's unaudited first-quarter 2026 results, Karooooo saw its operating profit increase by 17% to ZAR352 million. The adjusted earnings per share (EPS) also showed impressive growth, rising 19% to ZAR8.55. Additionally, the company reported an Annualized Recurring Revenue (ARR) of ZAR 4,574 million for the quarter.

Despite these positive indicators, the market's reaction was decidedly negative. The sharp decline in stock price suggests that investors may have had even higher expectations for the company's performance or that there might be underlying concerns not immediately apparent from the financial results. It's worth noting that Karooooo maintained its guidance for fiscal year 2026, which could indicate that the company doesn't foresee significant growth acceleration in the coming quarters. This steady outlook, combined with possible market expectations for more robust growth, might explain the stock's downward movement despite the reported earnings growth.