Karat Packaging Reports 9.9% Revenue Growth to $136.3 Million in Latest Quarter

Karat Packaging Inc. reported significant financial growth in its latest quarterly results, with net sales reaching $136.3 million for the three months ended June 30, 2026, a 9.9% increase from $123.9 million in the same period last year. For the first half of 2026, the company achieved net sales of $253.2 million, marking an 11.3% increase compared to $227.6 million in the first half of 2025. The growth was primarily driven by a favorable product mix and increased sales volume, which contributed $13.1 million to the quarterly sales increase. The company's gross profit also saw a substantial rise, reaching $77.2 million for the second quarter, up from $49.1 million a year earlier, resulting in a gross margin of 56.6%, an increase of 1,700 basis points year-over-year.

Karat Packaging's operating income for the second quarter was $37.6 million, a 127.2% increase from $16.6 million in the prior year. This surge in profitability was attributed to the significant increase in gross profit, which was partially offset by a rise in operating expenses, which totaled $39.6 million for the quarter. The company reported a net income of $29.6 million for the second quarter, a remarkable 168.3% increase compared to $11.1 million in the same quarter of 2025. The net income margin improved to 21.8%, up from 8.9% a year ago.

In terms of operational developments, Karat Packaging has been actively realigning its supply chain, increasing domestic purchases to 19.5% of total sourcing for the second quarter, up from 14.6% in the same period last year. The company has also diversified its sourcing, reducing reliance on Taiwan and increasing purchases from countries like Indonesia and South America. This strategic shift is expected to enhance supply chain resilience and reduce costs. Additionally, the company recognized $26.7 million in IEEPA tariff refunds during the quarter, which positively impacted both gross profit and net income.

Karat Packaging's balance sheet reflects a strong liquidity position, with total current assets increasing to $199.3 million as of June 30, 2026, compared to $161.2 million at the end of 2025. Current liabilities also rose to $88.6 million, resulting in a working capital of $110.8 million, an increase of 21.8% from the previous period. The company generated $40.3 million in net cash from operating activities for the first half of 2026, a significant increase from $17.5 million in the same period last year. Looking ahead, Karat Packaging plans to continue investing in growth opportunities, including potential acquisitions and enhancements to its logistics and manufacturing capabilities, while maintaining a focus on shareholder value through dividends and share repurchase programs.