Toast TOST provides an integrated technology platform for restaurants, combining point-of-sale software, payment processing, hardware, payroll, online ordering, marketing, and other operating tools. As of June 30, 2026, roughly 180,000 locations used Toast and generated $215 billion in payment volume over the preceding twelve months. The company reported $6.2 billion in fiscal 2025 revenue, $342 million in net income, $2.0 billion in cash and marketable securities, and no debt. Revenue grew 24% in 2025, while earnings grew much faster as gross profit expanded more quickly than operating expenses. The valuation depends on how long that operating leverage can continue, along with the pace of location growth and the treatment of stock-based compensation.
An integrated platform for restaurants
Toast combines point-of-sale software, payment processing, hardware, payroll, online ordering, marketing, inventory management, and other operating tools in one platform. A restaurant can start with the core point-of-sale and payments system, then add products as its needs grow. Toast also supports more than 200 partner integrations and has introduced AI features under the Toast IQ name.
The model is straightforward. Toast adds locations, collects recurring software fees, and earns transaction-based revenue as customers process payments. Additional products increase revenue per location and deepen the customer relationship. Management estimates that Toast serves about one-fifth of US restaurant locations and is also expanding into food and beverage retail, international markets, and larger restaurant groups.
How Toast makes money
Toast earns subscription fees, transaction-based financial technology revenue, and revenue from hardware and professional services. These are parts of one customer relationship. The software runs the restaurant’s operations, the payments system processes transactions generated through that software, and the hardware connects the platform to the restaurant.
| Revenue source | FY2025 revenue | Gross profit | Gross margin |
|---|---|---|---|
| Financial technology solutions | $5,037M | $1,146M | 22.8% |
| Subscription services | $936M | $672M | 71.8% |
| Hardware and professional services | $180M | $(220)M | negative |
| Total, including amortization | $6,153M | $1,593M | 25.9% |
Financial technology solutions include payment processing and Toast Capital. Toast reports merchant processing fees on a gross basis, before interchange, network, and processing costs. In fiscal 2025, each $100 of GPV produced an average of $2.58 in financial technology revenue and $0.59 in financial technology gross profit. The remaining $1.99 covered the related transaction costs.
Subscription services generated $936 million of revenue and $672 million of gross profit. Restaurants pay recurring fees for products including point of sale, payroll, online ordering, loyalty, marketing, scheduling, and inventory management. Adding products increases revenue per location and can make the overall relationship harder to replace.
Hardware and professional services generated $180 million of revenue and a $220 million gross loss. Toast accepts that cost to install and support the platform, then earns revenue from the associated software and payment activity over the customer relationship.
Because payment-processing revenue includes substantial pass-through costs, total revenue is less useful for comparing Toast with a conventional software company. Gross profit, location growth, payment volume, product adoption, and operating expenses provide a clearer view. Financial technology contributed 63% of combined subscription and financial technology gross profit in 2025, while subscription services contributed 37%.
How the platform grows
Toast has three main growth levers: adding locations, processing more spending at each location, and selling more products to existing customers. In fiscal 2025, locations increased 22% to roughly 164,000, GPV rose 23% to $195.1 billion, and ARR grew 26% to $2.05 billion. By June 30, 2026, Toast served roughly 180,000 locations and trailing-twelve-month GPV had reached $215 billion.
Across fiscal 2025, Toast generated financial technology gross profit equal to 0.587% of GPV. Financial technology revenue equaled 2.58% of GPV, with most of the difference consumed by interchange, network, and processing costs. Changes in that spread provide a useful measure of pricing and processing economics.
The average location processed about $1.3 million of card volume and generated roughly $12,200 of combined subscription and financial technology gross profit during 2025. ARR per location was about $12,500. These averages can rise as customers adopt more software products, while total gross profit also grows as Toast adds locations.
The operating leverage inflection
Toast’s profitability improved sharply as gross profit grew faster than operating expenses.
| Fiscal year | Gross profit | Core operating expense | Gross profit minus opex |
|---|---|---|---|
| 2023 | $834M | $1,121M | $(287)M |
| 2024 | $1,190M | $1,128M | $62M |
| 2025 | $1,593M | $1,289M | $304M |
Gross profit compounded at about 34% a year while core operating expense, sales and marketing plus research and development plus general and administrative, grew only 9% to 11% a year. That gap is operating leverage, and it flipped the business from a $287 million operating shortfall in 2023 to a $304 million surplus in 2025. GAAP net income went from $19 million in 2024 to $342 million in 2025.
The second quarter of 2026 confirmed the trend is widening rather than fading. Revenue grew 23% in the first half while operating expense grew 14%. First-half net income more than doubled, from $136 million to $280 million. First-half adjusted EBITDA rose from $294 million to $400 million.
Stock compensation and buybacks
Toast reported $608 million of free cash flow in fiscal 2025. That figure adds back $255 million of stock-based compensation, while GAAP net income of $342 million includes the full compensation expense. Buybacks complicate the comparison because they use cash to offset at least part of the resulting dilution.
Basic weighted-average shares increased from 532 million in 2023 to 559 million in 2024 and 582 million in 2025. Toast spent $107 million on repurchases in 2025, then $486 million in the first half of 2026. I give the company credit for repurchases that offset stock compensation, capped at the amount of stock compensation. Under that approach, fiscal 2025 owner earnings were about $449 million: $342 million of GAAP net income plus the $107 million repurchase offset.
For fiscal 2026, I estimate $560 million of GAAP net income and about $270 million of stock compensation. First-half repurchases already exceeded that compensation estimate, producing an owner-earnings base of about $830 million under the same method. This treatment depends on Toast continuing to repurchase enough stock to offset employee issuance. Without that assumption, GAAP net income provides the more conservative base.
Balance sheet and capital allocation
Toast carries no debt. At June 30, 2026 it held $1.7 billion in cash and marketable securities, down from $2.0 billion at year-end 2025, with a $347 million undrawn revolver on top. The decline was deliberate. The company spent $486 million on buybacks in the first half of 2026, and the board added $500 million to the repurchase authorization in February 2026.
The buyback is doing useful work, offsetting a meaningful share of the stock-compensation dilution, but it is not yet shrinking the share count outright. An investor should treat the repurchase program as a dilution offset first and a value-per-share reducer second.
Valuation
I value Toast using a discounted cash flow model based on buyback-adjusted owner earnings. The model does not use the current share price, analyst estimates, or third-party price targets.
The starting point is a fiscal 2026 owner-earnings base of about $830 million. That is roughly $560 million of GAAP net income plus a $270 million add-back for the stock compensation that Toast’s buyback neutralizes, as explained above. First-half net income was already $280 million, and the second and third quarters are seasonally the strongest for payment volume, so the $560 million net income anchor is conservative. The model uses about 610 million diluted shares and adds $1.7 billion of net cash to the operating value.
The three scenarios differ on how long the operating leverage runs and how quickly growth fades to a terminal rate.
| Scenario | Growth path (owner earnings) | Discount rate | Terminal growth | Equity value | Per share |
|---|---|---|---|---|---|
| Bear | 18% fading to 4% over 10 years | 12% | 2.5% | $14.1B | $23 |
| Base | 30% fading to 6% over 10 years | 10% | 3.0% | $28.8B | $47 |
| Bull | 35% fading to 8% over 10 years | 9% | 3.5% | $44.3B | $73 |
The base case values Toast at about $47 per share. The reasonable range runs from roughly $23 in the bear case to $73 in the bull case. A large share of the value, 44% in the bear case rising to 68% in the bull case, sits in the terminal value, which is typical for a compounding platform but a sensitivity worth stating plainly. Small changes in the durability of growth move the answer a lot. The base also assumes the buyback continues to offset dilution; if it stops, the earnings base falls toward GAAP net income and every figure in the table drops accordingly.
As a separate check, combined subscription and financial technology gross profit was running at roughly $2.3 billion annualized in mid-2026 and growing above 20%. The base-case operating value of about $27 billion equals close to 12 times that amount. This is a high multiple, so the valuation requires continued growth and margin expansion.
Risks to the valuation
The valuation depends on several assumptions that may prove too optimistic.
The first is take-rate compression. Payment processing generated most of Toast’s gross profit in 2025, and the 0.587% net take rate is sensitive to merchant pricing, interchange, network fees, and processing costs. Competition from Square, Clover, SpotOn, or bank-led processors could reduce that spread.
The second is dilution. The base case credits Toast for using buybacks to offset roughly $270 million of annual stock compensation. If repurchases slow or compensation rises, the owner-earnings base falls toward GAAP net income and the valuation declines.
The third is credit risk in Toast Capital. The company’s auditor flagged the expected credit loss on its lending product as a critical audit matter, tied to a $46 million contingent liability. A recession would hit lending losses and payment volume at the same time, because both move with restaurant sales.
The fourth is cyclicality. Payment volume is seasonal and economically sensitive. Restaurant spending softens in a downturn, and Toast’s revenue softens with it.
What to Watch
| Catalyst | Why It Matters | Timeline |
|---|---|---|
| Q3 2026 results | Seasonally strongest quarter for GPV; tests whether operating leverage keeps widening | Early November 2026 |
| Net take rate trend | Direct read on payments competition and pricing power | Each quarterly filing |
| Location adds and GPV per location | The two levers behind gross profit growth | Each quarterly filing |
| Share count trajectory | Whether buybacks start shrinking the count or only offset dilution | Each quarterly filing |
| Toast Capital loss rates | Early signal of consumer and small-business credit stress | Each quarterly filing |
| International and retail expansion | The source of the next leg of location growth | FY2026 10-K, February 2027 |
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Sources:
- Toast, Inc. Form 10-K for fiscal year ended December 31, 2025 (filed February 18, 2026)
- Toast, Inc. Form 10-Q for quarter ended June 30, 2026 (filed August 5, 2026)
- Toast, Inc. Form 10-Q for quarter ended March 31, 2026 (filed May 8, 2026)
Research and analysis conducted with AI assistance using SEC EDGAR filings as primary sources.