Toast is betting on artificial intelligence and geographic expansion to offset a slowdown in same-store sales growth among its restaurant customers.
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Toast pushes into 3 new markets as AI tools lift software margins
Toast's push into AI-powered restaurant tools and three new geographic markets comes as the company's software margins improve but revenue growth decelerates, testing its ability to sustain a premium valuation in a competitive POS market.
"Restaurateurs don't have to understand blockchain, they just have to have at their disposal tools that make their business better," Ben Leventhal, chief executive officer of Blackbird and co-founder of Resy, said. "I think this is going to be seen as a golden age for restaurants."
In a 2025 Deloitte study, 82 percent of restaurant executives said they planned to increase AI investment, though adoption still lags other industries. A separate Toast survey of more than 700 operators found that 86 percent were comfortable using AI. The National Restaurant Association's 2025 State of the Industry report showed many operators lack enough staff to meet current demand — a gap that AI tools aim to fill.
Toast's strategy carries implications for its stock valuation. The company trades at a premium multiple to legacy POS providers, and sustaining that premium depends on converting AI adoption into measurable margin expansion. With same-store sales growth among its customer base slowing, the company needs new revenue streams from both software upsells and market expansion to maintain its growth narrative.
The company's AI push spans multiple product areas. Toast has integrated machine learning into its point-of-sale system to help operators forecast demand, optimize staffing, and personalize marketing campaigns. These tools are designed to increase average revenue per user — a key SaaS metric that investors track closely. Rising software margins suggest the strategy is gaining traction, though the company has not disclosed specific AI-related revenue figures.
On the expansion front, Toast is entering three new metropolitan markets where it has historically had limited presence. The company is targeting regions with high concentrations of independent and multi-location restaurant groups, a segment that has shown higher retention rates and software attachment. Alicart Restaurant Group, a multi-brand operator, recently implemented the Toast platform across its portfolio, showing the company can win larger enterprise accounts beyond its core independent restaurant base.
Competitive dynamics
Toast faces competition from Block's Square, which has been investing in its own restaurant-specific features, and from legacy providers like Oracle's Micros. The key differentiator is Toast's vertical focus: the platform is built exclusively for restaurants, allowing it to offer deeper integrations with third-party delivery services, reservation systems, and inventory management tools. That specialization has helped Toast maintain net revenue retention above 120 percent, a threshold that SaaS investors view as a sign of strong product-market fit.
The broader restaurant technology market is also attracting new entrants. heytruffle, a fully managed AI phone concierge for multi-location restaurant groups, recently raised funding from Preface Ventures and rebranded from its former name, RestoHost. The company handles more than 20,000 calls a month for Rreal Tacos, a 12-location group in Georgia, supporting the seating of 14,085 guests in a typical month. The emergence of specialized AI tools for restaurants supports the view that operators are willing to spend on technology that addresses persistent labor shortages.
For investors, the key question is whether Toast's AI and expansion initiatives can offset the natural deceleration that comes with a maturing customer base. The company's software margin trajectory will be a critical metric to watch in upcoming quarters. If Toast can demonstrate that AI tools drive higher attach rates and reduce churn, the premium valuation may be justified. If growth continues to slow without corresponding margin expansion, the stock could face multiple compression.
This article is for informational purposes only and does not constitute investment advice.
[1] Toast's AI and Market Expansion Could Reshape Its Long-Term Growth[2] heytruffle Raises Funding to Grow Its Managed Restaurant AI Nationwide[3] Alicart Restaurant Group implements Toast platform across portfolio[4] This Founder Changed How People Book Restaurants. He Says Food Entrepreneurs Have Never Had a Better Shot — If They Get This Right[5] Toast vs. Block: Which POS Platform Stock Offers More Upside?
