Karooooo's (KARO) SaaS Growth Acceleration and Margin Expansion: A Rule of 60 Powerhouse Eyeing Southeast Asia's Untapped Potential

Karooooo Limited (KARO), a South African technology firm with a dominant SaaS (Software-as-a-Service) platform, has emerged as a compelling investment opportunity in 2025–2026. The company's accelerating revenue growth, disciplined margin management in its core Cartrack segment, and strategic expansion into underpenetrated markets like Southeast Asia position it as a standout in the global fleet management and telematics industry. With its Cartrack division exceeding the "Rule of 60"-a benchmark for high-performing SaaS businesses-Karooooo is demonstrating the rare combination of scalable growth and profitability that investors covet.

The Rule of 60: A Benchmark for SaaS Excellence

The Rule of 60, a metric used to evaluate SaaS companies, combines annual recurring revenue (ARR) growth and EBITDA margins. A score above 60 (e.g., 20% growth + 40% EBITDA margins) signals a business with exceptional unit economics and long-term viability. Karooooo's Cartrack segment has consistently outperformed this benchmark. In Q2 2026, the division achieved 20% year-over-year revenue growth and 46% EBITDA margins, a result that underscores its operational discipline and pricing power according to Q2 2026 earnings.

This performance contrasts sharply with the broader company's margin pressures. While Karooooo's overall gross margins contracted by three percentage points to 72% year-over-year, driven by higher R&D and sales expenses, the Cartrack segment's margins remained resilient. This divergence highlights the segment's maturity and the company's ability to allocate capital toward high-margin, high-growth areas. As stated by Karooooo's CEO in a recent earnings call, "Our focus on Cartrack's profitability ensures we can reinvest in innovation while maintaining shareholder returns" according to earnings call.

Southeast Asia: The Next Frontier for SaaS Scalability

Karooooo's strategic pivot to Southeast Asia-a region with underpenetrated demand for advanced fleet management solutions-has become a catalyst for growth. In Q1 2026, the company reported 30% year-over-year subscription revenue growth in Southeast Asia, outpacing its global average of 18%. This acceleration is driven by two factors: rising demand for video-based telematics in logistics and e-commerce, and Karooooo's aggressive sales force expansion.

To capitalize on the region's potential, Karooooo plans to increase its Southeast Asia sales team by 70% by February 2026. This investment reflects confidence in the region's untapped market, where fleet management adoption rates lag behind South Africa and Europe. According to a report by Investing.com, Southeast Asia's logistics sector is projected to grow at a 7% CAGR through 2027, creating a fertile environment for Karooooo's solutions.

The company's financial health further supports this expansion. Karooooo's net cash position of ZAR1.1 billion (as of Q1 2026) provides flexibility to fund growth initiatives without diluting shareholders according to earnings call. Additionally, its 19% year-over-year increase in earnings per share (EPS) to ZAR8.28 ($0.48) demonstrates that profitability is not being sacrificed at the altar of growth according to Q2 2026 earnings.

Risks and Mitigants: A Balanced Perspective

While Karooooo's trajectory is impressive, investors should remain cognizant of risks. The company's overall gross margins have compressed due to higher costs in R&D and sales, and competition in Southeast Asia from regional players could pressure pricing. However, Karooooo's first-mover advantage in video-based telematics-a feature that competitors lack-and its strong balance sheet mitigate these concerns.

Moreover, the Rule of 60 performance of the Cartrack segment provides a buffer. As long as this division continues to generate high-margin cash flow, Karooooo can sustain its expansion while rewarding shareholders through dividends and buybacks.

Conclusion: A SaaS Story with Global Ambition

Karooooo's combination of Rule of 60 excellence, strategic geographic expansion, and disciplined capital allocation makes it a rare SaaS success story. By leveraging its Cartrack platform's profitability to fund growth in underpenetrated markets like Southeast Asia, the company is positioning itself to capture a significant share of the global telematics market. For investors seeking exposure to a high-margin, high-growth SaaS business with a clear path to international scalability, Karooooo presents a compelling case.