Karat Packaging Q3 2026: Cost Surge Cuts Earnings Nearly in Half

Karat Packaging reported adjusted earnings per share of $0.24 for the third quarter of 2026, missing the Wall Street consensus of $0.46. Revenue came in at $134.74 million, below the $140.33 million estimate, even as sales rose 8.2 percent year over year. Healthy top-line growth paired with a weak bottom line reflects a company caught in a cost squeeze.

The primary culprits were ocean freight and raw material expenses. Higher average container rates and increased container imports together added $2.4 million to freight costs. Resin prices remained elevated, and domestic shipping expenses swelled alongside a fast-growing e-commerce channel that expanded nearly 38 percent year over year. Those combined pressures pushed operating income down 43 percent compared to the same quarter a year earlier, with gross margin narrowing to 33.5 percent from 34.5 percent.

To claw margin back, management announced price increases on select items in November 2026 and again in January 2027. CEO Alan Yu also pointed to new chain account wins as a reason for confidence, noting that four additional chain accounts were secured in Q3 2026, with shipments expected to begin in the first half of 2027. A new Florida distribution center is expected to open in November 2026, adding distribution capacity to support the growth push.

For the fourth quarter of 2026, Karat guided net sales growth of 9 to 11 percent year over year, with gross margin expected between 33 and 35 percent and adjusted EBITDA margin in the high-single digits. The board held the quarterly dividend steady at $0.47 per share, declared on November 3 and payable November 27. For investors, the question heading into Q4 is whether the November and January price increases can restore margins fast enough to close the gap with where analysts had expected the company to be.