The Egyptian won 11-8, 9-11, 7-11, 12-10, 11-6 in what proved to be a 50-minute gruelling contest.
After the first round win over world number one Raneem El Welily, Joshana had raised the expectations.
Like her earlier matches, the Indian remained at the receiving end most times but made some sensational comebacks to grab two games and drive a scare into her opponent.
She was down 5-9 in the first game but after a few moments of nervous tins, Kawy took it. In the second, Joshana trailed 5-9 but with some impeccable returns jumped to 10-7 game ball position to square the match.
Five winners from her racket extended the game but little else as Kawy ensured it was not the Indian's day.