Karat Expects Gross Margin and EBITDA to Improve in 2026
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 12 2026
0mins
Gross margin and adjusted EBITDA margin for full year 2026 expected to continue to improve compared with the prior year, under current global tariff policy. "Our new paper bags product category continues to perform strongly, expanding steadily and generating meaningful revenue growth. In 2025, we won a significant paper bag contract with one of our largest national chain accounts, and we are actively pursuing further opportunities, some of which are at the final confirmation stage. We are also strengthening this category by supplying generic paper bags to smaller customer accounts, and we expect to continue gaining market share in this category in the coming years. In today's dynamic trade environment, we are confident that Karat's proven global sourcing flexibility and efficient logistics capabilities will support a solid growth trajectory," Yu added.
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Analyst Views on KRT
Wall Street analysts forecast KRT stock price to fall
3 Analyst Rating
1 Buy
1 Hold
1 Sell
Hold
Current: 31.080
Low
22.00
Averages
28.50
High
35.00
Current: 31.080
Low
22.00
Averages
28.50
High
35.00
About KRT
Karat Packaging Inc. is a specialty distributor and manufacturer of a range of disposable foodservice products and related items, primarily used by national and regional restaurants and in foodservice settings across the United States. The Company classifies its customers into four categories. Distributors include national and regional distributors across the United States that purchase their products and provide a channel to offer their products to restaurants, offices, schools, government entities and other end users. National and regional chains typically include fast casual, fast-food restaurants and supermarket chains with locations across multiple states to which they supply specified products. Retail primarily includes regional bubble tea shops and frozen yogurt shops that often purchase their specialty beverage ingredients and related items. E-commerce/Online includes small businesses, often with only one or two locations, as well as customers who purchase for personal use.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Upgrade Boost: Karat Packaging's stock was upgraded by William Blair from 'Market Perform' to 'Outperform,' leading to an approximately 8% increase in shares on Thursday, reflecting market optimism regarding the company's growth prospects.
- Positive Growth Outlook: Analysts noted that with accelerating online sales and recovering gross margins, Karat Packaging could achieve gross margins of around 38% to 39% in the second half of 2026, indicating a strong recovery potential in a competitive market.
- Increased Demand for Eco-Friendly Products: The rising demand for eco-friendly products, coupled with expanding online sales, provides additional support for the business, further solidifying its market position.
- Double-Digit Growth Target: Karat Packaging has set a target for double-digit growth for the year, demonstrating confidence in future performance, particularly as easing tariff pressures are expected to drive margin recovery.
See More
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- Executive Participation: Karat Packaging's CEO Alan Yu and CFO Jian Guo will participate in the Wells Fargo 16th Annual Industrials & Materials Conference on June 11, 2026, at the Loews Chicago Hotel, showcasing the company's leadership in the foodservice industry.
- Investor Interaction Opportunity: Management will conduct one-on-one meetings with investors during the conference, aiming to strengthen relationships and provide updates on the company, thereby increasing market interest in Karat.
- Webcast Access: The fireside chat will be streamed live on Karat's investor relations website and archived for approximately one year, ensuring that investors who cannot attend live can still access the information, enhancing transparency.
- Product Diversity Introduction: Karat Packaging offers a wide range of disposable foodservice products, including food and take-out containers and tableware, particularly highlighting its eco-friendly Karat Earth® line, which demonstrates the company's commitment to sustainability in response to the growing market demand for environmentally friendly products.
See More
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- Online Sales Recovery: The company pivoted to enhance its own online sales and third-party platforms, resulting in a robust recovery in online sales that further improved gross margins, demonstrating the effectiveness of strategic adjustments in high-margin product lines.
- Cost Management Actions: Despite rising tariffs, gross margin remained resilient at 35.5%, with plans to implement price increases on select plastic items starting mid-month to address cost pressures, while anticipating tariff policy relief to reduce costs of goods sold.
- Optimistic Future Outlook: The CFO guided for Q2 2026 net sales to increase by 8% to 10% year-over-year, reiterating expectations for low double-digit sales growth for the full year, reflecting the company's confidence in future market conditions and sustained growth potential.
See More
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- Earnings Beat: Karat Packaging reported Q1 GAAP EPS of $0.34, exceeding expectations by $0.03, reflecting strong profitability that boosts market confidence in future growth prospects.
- Significant Revenue Growth: Q1 revenue reached $116.9 million, up 12.8% year-over-year, surpassing expectations by $3.92 million, indicating robust market demand that drives overall performance improvement.
- Gross Margin Decline: The gross margin stood at 35.5%, down from 39.3% in the prior year due to rising tariffs, yet the company is actively working to optimize its cost structure to maintain profitability.
- Optimistic Future Outlook: Net sales for Q2 2026 are expected to increase by 8% to 10% year-over-year, with gross margin anticipated between 35% and 37%, demonstrating the company's flexibility and adaptability in response to changing trade policies.
See More
Analysis of Prospects in Paper Packaging Industry
- Weak Industry Demand: The paper packaging industry is experiencing weak demand due to declining consumer spending and inflationary pressures, leading producers to announce production cuts and mill closures, which negatively impacts overall revenue performance.
- E-commerce Growth Catalyst: The rise in e-commerce activities has significantly increased the importance of packaging, expected to drive industry growth, particularly in consumer sectors like food and beverages, ensuring stable demand for packaging solutions.
- Eco-Friendly Packaging Trend: There is a growing consumer preference for environmentally friendly packaging materials, prompting industry players to adopt the latest technologies and innovative products to meet this demand, thereby promoting sustainable production methods.
- Strong Company Performances: Karat Packaging achieved double-digit volume and profit growth in Q4 2025, while Brambles Ltd. has won new customers by enhancing its customer value proposition and sales capabilities, demonstrating competitiveness even in challenging conditions.
See More
Karat Packaging Stock Upgraded, Shares Rise 8%
- Upgrade Boost: Karat Packaging's stock was upgraded by William Blair from 'Market Perform' to 'Outperform,' leading to an approximately 8% increase in shares on Thursday, reflecting market optimism regarding the company's growth prospects.
- Positive Growth Outlook: Analysts noted that with accelerating online sales and recovering gross margins, Karat Packaging could achieve gross margins of around 38% to 39% in the second half of 2026, indicating a strong recovery potential in a competitive market.
- Increased Demand for Eco-Friendly Products: The rising demand for eco-friendly products, coupled with expanding online sales, provides additional support for the business, further solidifying its market position.
- Double-Digit Growth Target: Karat Packaging has set a target for double-digit growth for the year, demonstrating confidence in future performance, particularly as easing tariff pressures are expected to drive margin recovery.
See More
Wall Street's Latest Ratings and Price Target Adjustments
- Broadcom Rating Adjustment: Morgan Stanley raised Broadcom's price target from $485 to $502, reflecting strong performance amid high expectations, indicating a sustained growth trend that may attract more investor interest.
- RTX Upgraded to Buy: Jefferies upgraded RTX from hold to buy, emphasizing its leading position in aerospace and defense, with significant growth potential from market expansion and budget support, enhancing investor confidence.
- FedEx Freight Coverage Initiated: Wolfe initiated coverage on FedEx Freight with an Outperform rating, expecting material EPS growth in the coming years driven by company-specific pricing and margin opportunities, indicating a positive market outlook.
- Alphabet Maintained Buy Rating: Bank of America reiterated its buy rating on Alphabet, anticipating 2027 capex of $241 billion and $16 billion in free cash flow, showcasing strong performance in future market demand.
See More
Karat Packaging CEO to Attend Conference
- Executive Participation: Karat Packaging's CEO Alan Yu and CFO Jian Guo will participate in the Wells Fargo 16th Annual Industrials & Materials Conference on June 11, 2026, at the Loews Chicago Hotel, showcasing the company's leadership in the foodservice industry.
- Investor Interaction Opportunity: Management will conduct one-on-one meetings with investors during the conference, aiming to strengthen relationships and provide updates on the company, thereby increasing market interest in Karat.
- Webcast Access: The fireside chat will be streamed live on Karat's investor relations website and archived for approximately one year, ensuring that investors who cannot attend live can still access the information, enhancing transparency.
- Product Diversity Introduction: Karat Packaging offers a wide range of disposable foodservice products, including food and take-out containers and tableware, particularly highlighting its eco-friendly Karat Earth® line, which demonstrates the company's commitment to sustainability in response to the growing market demand for environmentally friendly products.
See More
Karat Packaging Reports Strong Q1 2026 Earnings with 13% Sales Growth
- Significant Sales Growth: Karat Packaging reported net sales of $116.9 million for Q1 2026, reflecting a nearly 13% year-over-year increase, with March growth exceeding 20%, indicating strong market demand and continued market share expansion due to order pull-forward effects.
- Online Sales Recovery: The company pivoted to enhance its own online sales and third-party platforms, resulting in a robust recovery in online sales that further improved gross margins, demonstrating the effectiveness of strategic adjustments in high-margin product lines.
- Cost Management Actions: Despite rising tariffs, gross margin remained resilient at 35.5%, with plans to implement price increases on select plastic items starting mid-month to address cost pressures, while anticipating tariff policy relief to reduce costs of goods sold.
- Optimistic Future Outlook: The CFO guided for Q2 2026 net sales to increase by 8% to 10% year-over-year, reiterating expectations for low double-digit sales growth for the full year, reflecting the company's confidence in future market conditions and sustained growth potential.
See More
Karat Packaging Q1 Earnings Beat Expectations
- Earnings Beat: Karat Packaging reported Q1 GAAP EPS of $0.34, exceeding expectations by $0.03, reflecting strong profitability that boosts market confidence in future growth prospects.
- Significant Revenue Growth: Q1 revenue reached $116.9 million, up 12.8% year-over-year, surpassing expectations by $3.92 million, indicating robust market demand that drives overall performance improvement.
- Gross Margin Decline: The gross margin stood at 35.5%, down from 39.3% in the prior year due to rising tariffs, yet the company is actively working to optimize its cost structure to maintain profitability.
- Optimistic Future Outlook: Net sales for Q2 2026 are expected to increase by 8% to 10% year-over-year, with gross margin anticipated between 35% and 37%, demonstrating the company's flexibility and adaptability in response to changing trade policies.
See More
Analysis of Prospects in Paper Packaging Industry
- Weak Industry Demand: The paper packaging industry is experiencing weak demand due to declining consumer spending and inflationary pressures, leading producers to announce production cuts and mill closures, which negatively impacts overall revenue performance.
- E-commerce Growth Catalyst: The rise in e-commerce activities has significantly increased the importance of packaging, expected to drive industry growth, particularly in consumer sectors like food and beverages, ensuring stable demand for packaging solutions.
- Eco-Friendly Packaging Trend: There is a growing consumer preference for environmentally friendly packaging materials, prompting industry players to adopt the latest technologies and innovative products to meet this demand, thereby promoting sustainable production methods.
- Strong Company Performances: Karat Packaging achieved double-digit volume and profit growth in Q4 2025, while Brambles Ltd. has won new customers by enhancing its customer value proposition and sales capabilities, demonstrating competitiveness even in challenging conditions.
See More
