Restaurant software platform Toast (NYSE: TOST) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 24.8% year on year to $1.55 billion. Its non-GAAP profit of $0.25 per share was 12% above analysts’ consensus estimates.

Is now the time to buy TOST? Find out in our full research report (it’s free).

StockStory’s Take

Toast’s second quarter results for 2025 came in ahead of Wall Street’s revenue and profit expectations but were met with a negative market reaction. Management identified new customer segment momentum, the addition of 8,500 net new locations, and continued product expansion as key drivers of the quarter’s growth. CEO Aman Narang highlighted the launch in Australia and the onboarding of major enterprise brands like Firehouse Subs as evidence of Toast’s expanding reach. The company’s operating margin improvement was attributed to disciplined investment and a focus on platform enhancements.

Looking forward, Toast’s updated guidance reflects management’s intent to accelerate investments in both its core and expanding segments, even as margin pressures—such as higher tariffs—are expected in the second half. CFO Elena Gomez emphasized that the company will prioritize scaling the business, noting, “We are unlocking incremental investments across both core and our new customer segments to move faster in these areas.” Management remains focused on leveraging new product innovation and international launches to drive sustained long-term growth.

Key Insights from Management’s Remarks

Management pointed to broad-based execution, product innovation, and success in new markets and segments as the main forces behind Toast’s results and guidance adjustments.

• New segment traction: Toast’s growth was fueled by increasing adoption across enterprise, international, and food and beverage retail, with over 10,000 live locations in these new segments, a milestone achieved faster than in its core business.
• Major enterprise wins: The addition of Firehouse Subs and Zabar’s demonstrated Toast’s ability to serve both large multi-location brands and complex retail environments, further solidifying its credibility among enterprise clients.
• International expansion: The launch into Australia marked Toast’s fourth international market, building on prior experience in the UK, Ireland, and Canada. Management cited rapid deployment and localization of its product suite as critical to this expansion.
• Product innovation focus: Toast rolled out the Toast Go 3 handheld device, which features improved connectivity and AI-driven personalization through ToastIQ. The device is designed to improve operational efficiency and customer experience for restaurants and retailers.
• Margin improvement and investment: While operating margins expanded due to healthy sales and disciplined spending, management signaled additional investment in go-to-market teams and R&D to further penetrate underrepresented markets and fuel future growth.

Drivers of Future Performance

Toast anticipates continued revenue and margin expansion, underpinned by accelerated investment in product innovation, international growth, and new customer segments, but acknowledges near-term margin headwinds.

• Accelerated investment initiatives: Management plans to increase spending in sales, marketing, and R&D to scale recently launched international and enterprise segments, believing this will drive sustained growth even if it temporarily pressures margins.
• Tariff and cost headwinds: The company expects higher tariff expenses in the second half of the year, which, combined with the seasonality of its payments business, will weigh on operating margins despite anticipated topline growth.
• AI and platform differentiation: Toast aims to further differentiate its offering with AI-driven tools like ToastIQ and the forthcoming Sous Chef assistant, expecting these technologies to drive higher customer adoption and retention across segments.

Catalysts in Upcoming Quarters

Looking ahead, our analysts will track (1) the pace of enterprise and international segment adoption, including the rollout of new markets like Australia, (2) the impact of incremental investments on both topline growth and operating margins, and (3) tangible progress in AI-driven product adoption, such as ToastIQ and Sous Chef. Execution on these fronts will be key to validating Toast’s strategy and long-term profitability targets.

Toast currently trades at $43.80, down from $47.71 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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