Shares of Karooooo Ltd. (KARO) are experiencing a significant plunge of 11.96% in pre-market trading on Wednesday, despite the company reporting better-than-expected earnings for the quarter ended August 31. This sharp decline comes as a surprise to many investors, given the positive financial results announced by the South African mobility software-as-a-service (SaaS) provider.

According to the earnings summary released after market close on Tuesday, Karooooo reported adjusted earnings of R7.88 per share, surpassing the mean expectation of R7.72 from four analysts. This represents an improvement from the R7.35 per share reported in the same quarter last year. Revenue also saw a substantial increase of 21.4% to R1.34 billion, beating analysts' expectations of R1.31 billion. The company's net income for the quarter stood at R243.58 million.

Despite these positive results, the stock's sharp decline suggests that investors may be focusing on other factors. It's possible that market participants were anticipating even stronger results or are concerned about future growth prospects. While Karooooo has reaffirmed its fiscal year 2026 outlook, this doesn't seem to have alleviated investor concerns. Additionally, it's worth noting that prior to this pre-market plunge, Karooooo's shares had already fallen by 8.1% this quarter, although they were up 16.3% year-to-date. The contrast between the company's financial performance and the stock's movement highlights the complex factors that can influence stock prices beyond just earnings reports, possibly including market competition or macroeconomic challenges.