Karat Packaging Posts Strong 2025 Growth Amid Tariff Pressures — Karat Packaging Inc.

Event summary

Karat Packaging reported $115.6M in Q4 2025 net sales, up 13.7% YoY, with full-year 2025 revenue at $467.7M, a 10.7% increase.
Gross margin declined to 34% in Q4 due to elevated tariffs, but net income rose 22.8% to $7.2M.
The company expects 8-10% net sales growth in Q1 2026, with gross margin improving to 34-36%.
Karat sourced 46% of goods from Taiwan in Q4, reducing reliance on China (14%).
Paper bags category showed strong growth, winning a major contract with a national chain.

The big picture

Karat Packaging’s Q4 2025 results highlight the resilience of its business model amid persistent tariff challenges. The company’s ability to diversify sourcing—reducing China dependency while expanding in Taiwan—positions it well in a volatile trade environment. The paper bags category represents a strategic growth vector, aligning with broader industry shifts toward sustainable packaging. However, margin recovery hinges on external factors like tariff policy and currency fluctuations.

What we're watching

Tariff Tailwinds: Whether the U.S. Supreme Court ruling and stabilized exchange rates will materially improve margins in 2026.
Category Expansion: The pace at which Karat can scale its paper bags business beyond the current national chain contract.
Supply Chain Flexibility: How Karat’s global sourcing strategy will adapt to further geopolitical or trade policy shifts.