Toast
Toast sells US restaurants one system that runs the till, the kitchen, the staff and the card payments, and earns most of its money on each payment.
The scores
Growth4/4 →
Revenue grew 41%, 28% and 24% in 2023 to 2025 without acquisitions, locations 22% a year; recurring gross profit grew 28% in Q2 2026.
Business quality3/4 →
Restaurants running staff and payments on it are costly to move; share and take rise, but Square is accelerating, and no downturn has tested it.
Financial position4/4 →
No debt, $1.71B of cash and securities, and $635M of operating cash flow over twelve months.
Execution record3/4 ↑
Beat the 2025 guide by a wide margin and raised 2026 twice, but it has been profitable for only two years.
Per share capture4/4 ↑
Buybacks exceed issuance: diluted shares fell from 605M to 590M in a year, and stock pay has fallen below 4% of revenue.
Potential3/4 →
About a sixth of an $11.6B pool, with new markets nearly doubling; the steps are observable, but nothing is committed beyond month-to-month use.
Risk profile3/4 ↓
An open FTC matter, third-party payment processors and memory prices outside its control; restaurants close often, but no one customer matters.
Valuation3/4 ↑
About 19 times guided adjusted EBITDA, 27 with stock pay, and 17.4 times 2027 earnings: the plan as guided, little beyond it.
Evidence quality3/4 →
Results, rivals' volumes and restaurant sales are filed or official; the share estimate, core margin and memory outlook are management's word.
The Verdict
We rate Toast Neutral. It is a strong business: restaurants that run their staff, kitchen and payments on it rarely move, and it added a record 9,500 locations in Q2 2026 while earning more on each payment dollar. The price is fair: about 19 times the profit management guides for 2026, roughly 27 once pay in shares is counted, about right if this year's plan arrives, with little extra credit for anything beyond it. The view hinges on whether Toast keeps out-winning Square, whose restaurant business is growing faster than at any time since 2023, and on how the FTC's draft complaint over its sales practices is settled.
The long caseRestaurants keep moving onto one system for the floor, kitchen, staff and payments, and Toast keeps winning more of them than any rival.
The evidence under this - 7 claims
Free cash flow fell to $130M from $208M a year earlier, as Toast stocked hardware ahead of memory price rises (C10), so the cash did not keep pace with the profit.
Part of the rise is price, and more than 80% of operators say card fees strain them (C21), so price rises have a limit a rival can exploit (C27).
Free cash flow was held down by about $100M of extra inventory in the first half (C10), so a normal year's cash would read cheaper than 27 times.
A draft settlement means the outcome may be terms rather than a trial; the 10-Q gives no amount and no date either way.
The company
A restaurant needs a till, screens in the kitchen, a way to take online orders, payroll for its staff and a card machine. Toast sells all of it as one system: its own terminals and handhelds, software for each job, and card processing built in, so an order taken at the table reaches the kitchen and the payment lands in the same record.
The alternative is a patchwork of separate vendors, or an old till from a bank. Toast does not move the card money itself; outside processors settle it.
The evidence under this - 3 claims
How it makes money
Most of the money comes from payments. In 2025 card processing and other fintech brought in $5.04B of $6.15B of revenue, though most of that passes straight on to card networks and processors.
What Toast keeps from payments and software was 0.98 cents of every dollar its restaurants took in Q2 2026. Software fees per location added $936M in 2025, and the hardware is sold at a loss to win the restaurant.
The evidence under this - 3 claims
Part of the rise is price, and more than 80% of operators say card fees strain them (C21), so price rises have a limit a rival can exploit (C27).
Where the money comes from, stream by stream
| Stream | Share of sales (FY 2025) | How it earns it |
|---|---|---|
| Financial technology solutions | 81.9% | Card fees on each payment, booked before what Toast pays processors and card networks, plus fees for marketing and servicing Toast Capital loans. |
| Subscription services | 15.2% | Monthly software fees per location for the point of sale, payroll, ordering, marketing and other modules. |
| Hardware and professional services | 2.9% | Terminals, handhelds and kitchen screens, often sold below cost, and installation and training. |
Who runs it
Co-founder Aman Narang has run Toast since January 2024 and helped lead it since 2012; Elena Gomez, the finance chief, is also president. The founders control it: ten-vote shares give directors and officers 40.6% of the votes.
Their bonus pays 70% on recurring gross profit and 30% on adjusted profit, and long-term awards vest with time alone. Insiders bought no shares in the past year, and most of their sales were under plans set in advance.
The evidence under this - 4 claims
Why it wins, and who could beat it
Why customers come back
Once a restaurant's schedules, payroll, online orders and loans all run through one system, leaving means retraining every worker and rebuilding the menu. Contracts run one to three years, and loans and leased hardware are repaid from daily card sales.
Restaurants feel every fee: 42% of operators said they lost money in 2025. Yet Toast raised its take on each payment dollar while adding a record 9,500 locations in Q2 2026, which is how customers who find leaving costly behave.
The evidence under this - 4 claims
Part of the rise is price, and more than 80% of operators say card fees strain them (C21), so price rises have a limit a rival can exploit (C27).
Free cash flow fell to $130M from $208M a year earlier, as Toast stocked hardware ahead of memory price rises (C10), so the cash did not keep pace with the profit.
The threat
Square is the real rival. Its restaurant volume grew 20% in Q2 2026, a pace Block says it had not reached since early 2023, after it hired field sales staff. Shift4 gives new restaurants free hardware to switch. DoorDash bought SevenRooms, reservation software, and sells more tools inside the restaurant, though its filings describe no till of its own.
The evidence under this - 3 claims
The rivals: XYZ, FISV, FOUR, DASH, PAR.
Who else does this, rival by rival
| Ticker | Rival | Where it competes | How far along | Priced against it |
|---|---|---|---|---|
| XYZ | Square (Block)Priced against it: Different product | US restaurants | On sale | Different product |
| FISV | Clover (Fiserv)Priced against it: Different product | US restaurants | On sale | Different product |
| FOUR | SkyTab (Shift4)Priced against it: Different product | US restaurants | On sale | Different product |
| DASH | DoorDashPriced against it: Different product | US restaurants | Announced | Different product |
| PAR | PAR TechnologyPriced against it: Different product | Enterprise chains, international and retail | On sale | Different product |
How big it could get
How big this could get
Americans spent $1,181.2B at restaurants and bars in 2025. At the 0.98 cents Toast keeps on each dollar, that spending supports about $11.6B a year of gross profit from software and payments, and Toast earned about a sixth of it.
The rest is spread across more than a million outlets on Square, banks' systems and old tills. Chains, hotels, shops and restaurants abroad come on top, and are not counted here.
The evidence under this - 4 claims
Rivals charge less than Toast for the same job (C27), so the market at their prices is smaller than at Toast's.
The volume figure is not split by country or type of business, so the US restaurant share is somewhat lower than 16.5%.
The results
The numbers
Sales grew 23% over the twelve months to Jun 2026, about the same pace as the 24% in the year to Dec 2025.
Operating margin is 6.3%, up from −7.4% in the year to Dec 2023.
Running costs take 20¢ of each sales dollar, down from 32¢ in the year to Dec 2021.
Each dollar put into the business earns 22% a year after tax, up from 1.0% in the year to Dec 2024.
It turned 8.5% of sales into free cash, $576M over the last twelve months.
Yearly sales growth has ranged from +24% to +107% over the last 5 years.
The share count rose 103% in 4.5 years, and pay in shares costs 3.4% of sales.
All the numbers
Filed figures from the company's 10-K and 10-Q, read 2026-10-06. Fiscal years end in December.
| Dec 2021 | Dec 2022 | Dec 2023 | Dec 2024 | Dec 2025 | 12 mo to Jun 2026 | |
|---|---|---|---|---|---|---|
| Size and growth | ||||||
| Sales | $1.71B | $2.73B | $3.87B | $4.96B | $6.15B | $6.80B |
| Sales growth | +107% | +60% | +42% | +28% | +24% | +23% |
| Profit | ||||||
| Gross margin | 18% | 19% | 22% | 24% | 26% | 27% |
| Operating margin | −13% | −14% | −7.4% | 0.3% | 4.7% | 6.3% |
| Net margin | −29% | −10% | −6.4% | 0.4% | 5.6% | 7.1% |
| What growth costs, per sales dollar | ||||||
| Research and development | 9.6% | 10% | 9.3% | 7.1% | 6.1% | 6.0% |
| Sales and marketing | 11% | 12% | 10% | 9.5% | 9.3% | 9.1% |
| General and admin | 11% | 11% | 9.4% | 6.2% | 5.6% | 5.3% |
| Pay in shares | 8.3% | 8.3% | 7.2% | 5.1% | 3.9% | 3.4% |
| Capital spending | 1.1% | 1.2% | 1.1% | 1.1% | 0.9% | 0.9% |
| Cash | ||||||
| Cash from operations | $2.00M | −$156M | $135M | $360M | $661M | $635M |
| Free cash flow | −$17.0M | −$189M | $93.0M | $306M | $608M | $576M |
| Balance sheet | ||||||
| Cash and short-term investments | $1.27B | $1.02B | $1.12B | $903M | $1.35B | $1.01B |
| Debt | $0 | - | - | - | - | - |
| Net cash | $1.27B | - | - | - | - | - |
| Returns and shares | ||||||
| Return on capital | - | - | - | 1.0% | 16% | 22% |
| Shares (diluted) | 290M | 512M | 533M | 591M | 607M | 590M |
What growth costs
Growth has been getting cheaper. From 2021 to 2025 selling, research and overheads all fell as a share of sales, and pay in shares fell from 8.3% to 3.9%, taking the operating margin from a 13.4% loss to a 4.7% profit, and 6.3% over the year to June 2026. Hardware runs the other way, sold at a loss that rising memory prices deepen.
The evidence under this - 2 claims
The last report (4 Aug)
Quarter ended June 2026, filed figures.
In the June 2026 quarter revenue grew 23% to $1.91B, and recurring gross profit, what Toast keeps from software and payments, grew 28% to $595M. Operating profit nearly doubled to $152M. A record 9,500 net new locations joined, though spending per location was flat.
Management raised its 2026 guide for the second time, to 23% to 25% growth. The weak spot was hardware: it lost $68M as memory chip prices rose, and management expects that to cost more in 2027 than this year.
What it did to the thesisIt showed the plan on track: the guide rose again and restaurants kept arriving at a record pace. It left open whether rising memory costs and Square's push slow the growth that the price already pays for.
The quarter in detail
Sales growth from the previous quarter, filed figures.
Earnings per share $0.34 against $0.32 expected; $0.26 as filed, the gap being what the company adds back.
The evidence under this - 4 claims
Free cash flow fell to $130M from $208M a year earlier, as Toast stocked hardware ahead of memory price rises (C10), so the cash did not keep pace with the profit.
The August raise to adjusted EBITDA was smaller than the second-quarter beat: management chose to reinvest the tariff refund (S03), and operating costs grew 19% excluding credit losses (S04).
No figure for 2027 has been given; in May an analyst cited about 150 basis points of 2026 margin from it (S08), and memory prices are set outside Toast.
What management did with the money
Toast spent $486M buying back 19 million shares in the first half of 2026, more than it handed staff in shares, so the diluted share count fell from 605 million to 590 million in a year. About $100M of the buyback authority is left.
Insiders in 2026Q3: 34 purchases and 60 sales, from their Form 4 filings.
The evidence under this - 1 claim
The price, and where we disagree
In short. Fair. The price pays for the 2026 plan as guided, and for little of the wider margin management targets beyond it.
The shares closed at $30.04 on 5 October 2026, 24.4% below their high a year earlier, while sales per share rose 26.2%. Buyers now pay a third less for each dollar of sales. The shares fell 14.7% in a day in May, when analysts asked about DoorDash, then recovered by August.
The next tests are close: third-quarter results on 3 November 2026, the chief revenue officer's departure at the end of 2026, and the 2027 guide in February.
The evidence under this - 4 claims
The August raise to adjusted EBITDA was smaller than the second-quarter beat: management chose to reinvest the tariff refund (S03), and operating costs grew 19% excluding credit losses (S04).
How we read the multiple
A buyer pays for this year's plan.
1. Management guides $805M to $825M of adjusted profit before interest, tax and depreciation for 2026. 2. Toast is valued at about $15.6B after its cash, with no debt, so about 19 times that profit. 3. Pay in shares, $242M in 2025, is a real cost; counting it, the price is about 27 times. 4. On analysts' forecast for 2027, the shares cost about 17 times earnings.
Fair for a business growing over 20% with net cash, with little room if 2027 slows.
Against its own history. Buyers pay much less for each dollar of sales than a year ago while the business kept growing, so the fall came from the price, not the business.
The evidence under this - 5 claims
Free cash flow was held down by about $100M of extra inventory in the first half (C10), so a normal year's cash would read cheaper than 27 times.
The August raise to adjusted EBITDA was smaller than the second-quarter beat: management chose to reinvest the tariff refund (S03), and operating costs grew 19% excluding credit losses (S04).
Priced against its rivals
None of the listed rivals above sells the same thing to the same buyers as a large part of what it does. A price comparison needs at least two, so the price is judged against its own history instead.
Where we disagree with the market
A fine restaurant platform whose best growth is behind it, now facing Square, DoorDash and AI rivals.
Toast is still winning restaurants faster than its rivals, so the plan is credible; but the price already pays for it.
The filings do not show a business being caught. In the quarter Square's restaurant volume accelerated, Toast added a record 9,500 locations and earned more on each payment dollar. It beat its 2025 guide by a wide margin and has raised 2026 twice.
But at about 19 times guided profit the price already pays for that. Against us on the upside: analysts expect earnings to grow about a quarter in 2027, and short sellers have cut their bets since June.
What analysts say, and the evidence
The evidence under this - 7 claims
Free cash flow fell to $130M from $208M a year earlier, as Toast stocked hardware ahead of memory price rises (C10), so the cash did not keep pace with the profit.
Part of the rise is price, and more than 80% of operators say card fees strain them (C21), so price rises have a limit a rival can exploit (C27).
The August raise to adjusted EBITDA was smaller than the second-quarter beat: management chose to reinvest the tariff refund (S03), and operating costs grew 19% excluding credit losses (S04).
Free cash flow was held down by about $100M of extra inventory in the first half (C10), so a normal year's cash would read cheaper than 27 times.
What could go wrong, and how we would know
The risks
- Square keeps accelerating Square's restaurant volume grew 20% in Q2 2026 after it hired field sales staff; if it wins on price, Toast's take per dollar stops rising.
- The FTC complaint FTC staff drafted a complaint over how Toast sells and runs its systems; a settlement could change its fees or contract terms.
- Memory chips Hardware already loses money, and management expects rising memory prices to cost more in 2027 than in 2026.
- Restaurants close often About one US restaurant in eleven closes each year, and 42% lost money in 2025, so lost locations must be replaced constantly.
- Founders control the votes Ten-vote shares give directors and officers 40.6% of the votes, so outside shareholders cannot force a change.
- Someone else moves the money Outside processors settle Toast's payments, and its own annual report names losing or mismanaging them among its main risks.
The evidence under this - 8 claims
A draft settlement means the outcome may be terms rather than a trial; the 10-Q gives no amount and no date either way.
No figure for 2027 has been given; in May an analyst cited about 150 basis points of 2026 margin from it (S08), and memory prices are set outside Toast.
What we still do not know
- What share of US restaurants each system provider holds; nobody outside the companies publishes it, and Toast's fifth is its own estimate.
- What the FTC settlement will require, and when.
- Whether DoorDash is selling a till of its own, and on what terms; only analysts on Toast's calls have described one.
The evidence under this - 3 claims
No outside body counts point-of-sale share, and Square's food and beverage volume grew 20% in the same quarter (C24), close to Toast's 22%.
A draft settlement means the outcome may be terms rather than a trial; the 10-Q gives no amount and no date either way.
What would change our view
- Neutral→AttractiveA cheaper price on an unchanged plan
It needs:
- ○The company is valued at 15 times this year's guided adjusted profit, from about 19 today.about ≈$23.63 today, 21% below the last close
- Neutral→Attractive2027 guided strong, and the threats shown smaller
It needs all of:
- ○The 2027 guide calls for recurring gross profit growth of 20% or more and adjusted profit above $1B.checked at the next results, due by 3 Nov
- ○The FTC matter settles without a change to Toast's fees or contract terms.watched as it happens
- Neutral→UnattractiveShare gains stall
It needs:
- ○Net new locations fall below 6,000 a quarter for two quarters running.checked at the next results, due by 3 Nov
We would also be wrong if
- 2026 recurring gross profit growth finishes below 23%, the bottom of the guide.
- Toast's take on each payment dollar falls year on year in any 2027 quarter.
- An FTC settlement or ruling forces refunds or cuts to Toast's fees.
What is coming
- 3 November 2026 Q3 2026 results: Recurring gross profit against the $615M to $625M guide, net adds, and the hardware loss as memory costs rise.
Every dated event ahead
- 3 November 2026 Q3 2026 results: Recurring gross profit against the $615M to $625M guide, net adds, and the hardware loss as memory costs rise.
- 31 December 2026 Chief revenue officer Jonathan Vassil retires: Whether sales productivity and net adds hold through the handover.
- 28 February 2027 Q4 2026 results and the 2027 guide: Whether 2027 is guided at 20% or more growth with a wider margin, and what memory costs do to it.
Since we wrote this
- 6 OctThesis writtenNeutral, medium convictionWritten a month before Q3 results, with the shares 24% below their high after a year in which buyers paid a third less per dollar of sales.
Sources 27
Sources - 27
Every claim above cites one of these, or states the reasoning that derived it. The quote is frozen at the date it was read: a link can rot, and an agent fetch returns a reading of a page rather than the page. Backs counts the whole claim ledger, so it can name a claim this page does not surface.
- S01primarycompany filing2026-02-18what Toast sells, its estimate of about 20% of the US restaurant market, contract terms, the competition classes, reliance on third-party processors, locations and payment volume for 2025, and the FY2025 statementsbacksC01C02C06C08C09C38
- S02primarycompany filing2026-08-05the June 2026 balance sheet and share count, hardware purchase commitments, inventory, loans held for investment, the buyback and the FTC matterbacksC10C12C13C14
- S03primarycompany release2026-08-04Q2 2026 revenue, recurring gross profit, operating income, adjusted EBITDA, free cash flow, payment volume, ARR, locations, buybacks and the raised 2026 outlookbacksC01C03C04C07C10C12C13
- S04primarytranscript2026-08-04Toast Q2 2026 earnings call transcript (FMP), held 4 August 2026take rates, net adds, ARPU, the new markets' ARR, core margins, memory costs, inventory, stock pay and the investment plan
Total take rate measured by recurring gross profit as a percentage of GPV was 98 basis points in Q2, up 5 basis points from a year ago.
backsC03C06C07C11C15C16 - S05primarycompany release2026-02-12FY2025 recurring gross profit, adjusted EBITDA and free cash flow, the first 2026 outlook and the $500M buyback increasebacksC02C04C05C12
- S06primarycompany filing2026-04-23the leaders and their tenure, the ownership table, the dual-class votes, the bonus metrics and the time-vesting equity awardsbacksC34C35C36C37
- S07primaryvendor data2026-10-06Research pack for TOST (FMP market tier, FINRA short interest), fetched 6 October 2026price and returns, the price move split, analyst ratings and estimates, short interest and the insider base ratebacksC29C30C31C32C34
- S08primarytranscript2026-05-07Toast Q1 2026 earnings call transcript (FMP), held 7 May 2026the May guide raise, memory chip purchases, and the analyst question on DoorDash's point of sale
We are strategically purchasing memory chips and plan to hold more inventory in the near term.
backsC04C11C26C32 - S09primarycompany release2025-02-19the 2025 outlook of 23% to 25% recurring gross profit growth and $510M to $530M adjusted EBITDAbacksC05
- S10primarygovernment data2026-02-10US Census Bureau, Advance Monthly Sales for Retail and Food Services, December 2025 (CB26-26) US Census Bureaufood services and drinking places sales for 2025 and their growth on 2024
722 Food services & drinking places ……….. 1,181,172 5.3
backsC17 - S11primarygovernment data2026-09-16US Census Bureau, Advance Monthly Sales for Retail and Food Services, August 2026 (CB26-153) US Census Bureaufood services and drinking places sales growth in August 2026 and January to August 2026
722 Food services & drinking places ……….. 820,720 4.2 108,642 107,354
backsC18 - S12primaryindustry data2026-02-12National Restaurant Association, 2026 State of the Restaurant Industry release National Restaurant Associationthe count of restaurant and foodservice outlets and the 2026 sales forecast
the restaurant industry, which comprises more than 1 million restaurant and foodservice outlets and a workforce of 15.7 million employees
backsC19 - S13primaryindustry data2026-02-13National Restaurant Association, report: sales to hit $1.55T in 2026 despite challenging business environment National Restaurant Associationthe share of operators unprofitable in 2025 and the real growth forecast
42% of operators said their restaurants were not profitable in 2025
backsC18C21 - S14primarygovernment data2025-09-01US Census Bureau, Business Dynamics Statistics 2023, establishment entry and exit by 4-digit industry US Census Bureauhow many restaurant establishments opened and closed in 2023
2023,7225,407800,566382,11411167,11144249,61725,11.018,49355,8.810 (year, industry, firms, establishments, employment, denominator, entries, entry rate, exits, exit rate)
backsC20 - S15primarycompany release2026-08-10Adyen adding US processing for Toast, and Toast's trailing payment volume
Since 2021, Adyen has partnered with Toast to enable scaling across Ireland, the U.K., Canada and Australia, with a single, reliable solution.
backsC09 - S16primarycompany filing2026-02-26Square payment volume for 2025 and its growth, led by food and beverage sellers
The growth in Square processing was in line with Square GPV growth of 10%, driven primarily by strength in Food and Beverage sellers.
backsC24 - S17primarycompany release2026-08-05Square payment volume in Q2 2026, food and beverage growth, field sales and drive-through
GPV from food and beverage sellers was up 20% year over year, driven by U.S. food and beverage GPV accelerating to its strongest growth rate since the first quarter of 2023.
backsC24 - S18primarycompany filing2026-08-07Clover's small-business line as a drag on Merchant revenue, and the class action on Clover growth statements
Small Business contributed a 1% decline to Merchant segment revenue in the second quarter of 2026 and its contribution was flat in the first six months of 2026
backsC25 - S19primarycompany filing2026-02-19where Clover is aimed
Our focus remains on high-growth industry verticals such as healthcare, e-commerce, and professional services, while maintaining a strong presence in restaurant and retail.
backsC25 - S20primarycompany filing2026-02-26PAR's recurring revenue, its enterprise customers and McDonald's share of revenue
our customers are primarily enterprise and fast-growing brands and typically choose our products when opening new stores and locations
backsC28 - S21primarycompany filing2026-02-27Shift4 naming Toast as a competitor, SkyTab's pitch on cost and free hardware for switching merchants
we compete with non-integrated payment processors (such as Chase Paymentech, Elavon, Worldpay, Fiserv and Global Payments) and integrated payment providers (such as Adyen, Lightspeed, Shopify, Square and Toast)
backsC27 - S22primarycompany filing2026-02-18DoorDash's Commerce Platform for in-store dining and the SevenRooms purchase
manage reservations and in-store dining, manage consumer relationships, enable tableside order and pay, and improve customer support.
backsC26 - S23primarycompany release2026-08-05SevenRooms venue growth and the digital ordering service's merchants and revenue growth
In Q2 2026, we grew new signed venues at SevenRooms by over 100% Y/Y and grew revenue from our digital ordering service, which is being used by over 150,000 merchants, by over 40% Y/Y.
backsC26 - S24primarycompany filing2026-10-01Jonathan Vassil's planned retirement from 31 December 2026backsC35
- S25primarycompany filing2026-10-06each open-market trade with its Rule 10b5-1 flagbacksC34
- S26primarycompany filing2026-10-06five years of revenue, costs, stock pay, cash flow and diluted sharesbacksC12C38
- S27secondarynews2026-02-12Nation's Restaurant News: restaurant industry faces modest growth amid cost pressures in 2026 (reporting the NRA survey) Nation's Restaurant Newsthe share of operators strained by card processing fees
more than 80% feel significant strain from credit and debit card processing fees, as well as energy and utility costs.
backsC21