TenQ

The Toast story

Toast provides restaurant operating software and earns most of its revenue from payments, with expansion depending on whether new locations and added software adoption repay the cost of getting restaurants onto its platform.

Written from Toast's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $30.38share price, last close
  • $17.6Bmarket value
  • 21/36TenQ Score checks passed
  • 20.0%growth a year the price assumes

The story in brief

  • Restaurant footprint expands. Toast added approximately 9,500 net new locations in the quarter to June 2026, bringing its total to about 180,000, a 22% increase from a year earlier.
  • Profit and cash diverge. Net income reached $154 million in the quarter to June 2026, compared with $80 million a year earlier, while free cash flow fell to $130 million from $208 million.
  • Growth expectations remain substantial. The reverse DCF implies 20.0% annual growth in free cash flow after stock pay for ten years, above the TenQ check's 16.4% bar.

What drives the business

  • Toast combines restaurant point of sale, payments, ordering, payroll and marketing on one platform, accepting a hardware and installation gross margin of -142% to establish restaurant relationships that generate payment revenue over years.
  • In its annual business review, Toast estimated that its platform served approximately 20% of the U.S. restaurant market, with its expansion strategy spanning additional software adoption, international markets and food and beverage retail.
  • Gross payment volume rose 22% to $60.7 billion in the quarter to June 2026, linking Toast's revenue growth to both its restaurant footprint and the spending those restaurants process.
  • Annualized recurring run-rate reached $2.4 billion as of June 30, 2026, up 25%, with subscription ARR growing 27% and payments ARR growing 23%.
  • The August 2026 release named Kung Fu Tea among new customers, reported BWH Hotels' endorsement of Toast for its properties across the United States and Canada, and described an expanded TGI Fridays rollout in the United Kingdom.

What the price assumes

At $30.38, the reverse DCF implies that free cash flow after stock pay grows 20.0% a year for ten years, using a 10.2% discount rate.

Toast delivered 28.7% growth on that measure over the last twelve months, but the TenQ check sets a 16.4% bar by slowing that record halfway toward 4%.

The implied growth requirement is therefore below the recent record but above the check's allowance for slower growth.

Value TOST on your own assumptions

What could change the story

  • Revenue growth over the last twelve months was 23.0%, below the 31.1% annual pace over the last three years, making sustained expansion rather than acceleration the operating pattern.
  • Toast's 6.3% operating margin trails the TenQ sector benchmark of 11.0%, while its payments dependence ties results to restaurant spending and its hardware losses make customer retention important.
  • The cash decline in the quarter to June 2026 shows that higher earnings did not translate into higher cash generation, and adjusted EBITDA of $221 million included a one-time benefit of approximately $10 million from tariff refunds.
  • Stock-based pay was $231 million over the last twelve months, and shares increased 18.6% over the last three years despite Toast's repurchase of 19 million shares for $486 million in the first half of 2026.

What to watch next

  • For the quarter ending September 2026, Toast expects non-GAAP subscription services and financial technology solutions gross profit of $615 million to $625 million and adjusted EBITDA of $210 million to $220 million.
  • For the year ending December 2026, Toast raised its adjusted EBITDA outlook to $805 million to $825 million from $790 million to $810 million, with the outlook reflecting its decision to reinvest the $10 million tariff refund.
  • Net location additions, payment volume and subscription ARR growth will show whether restaurant expansion and broader software adoption continue together.
  • Free cash flow and inventory movements will help show whether cash generation catches up with earnings after the decline in the quarter to June 2026.

Sources

Back to the TOST report