Toast, the restaurant technology platform listed on the NYSE under the ticker TOST, has reported impressive financial figures for the fourth quarter of calendar year 2025. The company’s revenue rose by 22% year-over-year, reaching a total of $1.63 billion. Additionally, Toast achieved a non-GAAP profit of $0.27 per share, surpassing analysts’ expectations by 12.9%.
So, is it a good time to invest in TOST? Discover the insights in our comprehensive research report (available at no cost for active Edge members).
Key Highlights from Toast (TOST) Q4 CY2025:
- Revenue: $1.63 billion compared to analyst predictions of $1.62 billion (22% year-over-year growth, 0.5% above expectation)
- Adjusted EPS: $0.27, beating the estimate of $0.24 by 12.9%
- Adjusted Operating Income: $163 million against expectations of $140.8 million (10% margin, 15.8% above estimate)
- Projected EBITDA for financial year 2026: $785 million at midpoint, slightly less than the expected $790.6 million
- Operating Margin: 5.2%, an increase from 2.4% in the same quarter last year
- Annual Recurring Revenue: $2.05 billion versus estimates of $2.06 billion (25.9% year-over-year growth, in line)
- Billings: $1.64 billion at quarter-end, up 22.7% year on year
- Market Capitalization: $15.37 billion
Insights from StockStory
The fourth quarter results for Toast were driven by ongoing growth in its core restaurant technology platform and a rising adoption of new AI-driven features. Management highlighted the achievement of gaining significant new customers, encompassing both independent restaurants and large enterprise chains, as vital to both location expansion and recurring gross profit improvement. According to CEO Aman Narang, the introduction of over 500 new product features, featuring ToastIQ, has significantly enhanced customer engagement and operational efficiencies. The company has remained focused on disciplined investments and product differentiation to sustain momentum in both established and emerging markets.
Looking ahead, Toast’s guidance for 2026 points to expectations for continued net location growth and stable mid-single-digit increases in average revenue per user. Management underscored the ongoing priority of investing in AI, product innovation, and exploring new markets, while also recognizing challenges posed by rising hardware costs and tariffs. CFO Elena Gomez stated, “Our inclination is to reinvest potential top-line gains to accelerate our growth initiatives, including new total addressable markets (TAM), product enhancements, and AI investments.” The company is dedicated to balancing growth prospects with prudent margin expansion.
Management’s Key Takeaways
The strong performance this quarter can be attributed to widespread demand for Toast’s platform, the successful rollout of AI features, and traction gained in both established and emerging markets.
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Adoption of AI-driven features: The introduction of ToastIQ, a conversational AI tool for restaurants, has been met with swift adoption, with more than 50% of locations on the platform utilizing it within four months of its launch. This integration is reported to enhance operational efficiency and assist customers in making quicker, data-informed decisions.
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Success in enterprise and international markets: Toast has expanded its footprint among large chains, securing new agreements with well-known brands like Applebee’s and Firehouse Subs while also completing its initial launch in Australia. These achievements signify Toast’s ability to extend beyond its traditional small and mid-sized restaurant market.
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Growth in retail and non-restaurant sectors: The company has seen early success in retail spaces such as grocery and butcher shops, adapting its offerings to support environments with numerous SKUs (stock-keeping units) and intricate inventory systems. Partnerships with companies like Instacart have bolstered these endeavors.
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Margin improvements through operational efficiency: Toast achieved better SaaS (software-as-a-service) gross margins by increasing adoption of higher-margin offerings and utilizing AI to enhance customer support, thereby reducing the need for extensive human involvement.
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Continuous product innovation: The company launched over 500 new features throughout the year, including enhancements to handheld devices, menu management, and advertising tools, all intended to boost customer engagement and drive cross-selling opportunities across Toast’s platform.
Factors Influencing Future Performance
Toast’s management anticipates that growth in 2026 will stem from the expansion of AI-enabled products, ongoing market share gains, and entrance into new industries, although margin expansion might face pressures due to rising hardware costs.
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Investment in AI and automation: The company plans to broaden its AI capabilities, with aspirations to automate more workflows within restaurants and ultimately provide AI agents for functions such as marketing, payroll, and inventory management. Management believes these innovations will enhance customer adoption and further differentiate the platform.
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Geographical and vertical growth: Toast is strategically investing in international markets and adjacent sectors, such as retail, with targeted product improvements and dedicated sales teams. These efforts are expected to drive new customer acquisition and support long-term revenue growth, albeit with longer payback periods in new markets compared to the core.
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Cost challenges and maintaining margin discipline: The company’s outlook incorporates the anticipated effects of rising hardware and memory chip costs, as well as tariffs, which are projected to exert pressure on margins in the latter half of the year. Toast aims to uphold disciplined investments while navigating growth in new markets alongside operational leverage.
Future Catalysts to Watch
In the coming quarters, the StockStory team will pay close attention to (1) the adoption and utilization rates of AI-driven tools like ToastIQ, (2) the speed of expansion into international and retail sectors, and (3) the company’s effectiveness in managing margin pressures linked to hardware costs and tariffs. The successful implementation of new product features and updates, including the drive-thru solution, will also be key milestones to follow.
Currently, Toast’s stock price stands at $25.92, comparable to $26.14 just prior to the earnings announcement. With the recent results, is it time to buy or sell? Explore our full research report for detailed insights (available for free).
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