Toast tops revenue estimates but misses on EPS in Q2 2026

Toast reported Q2 revenue of $1.91 billion, beating consensus by $40 million, while EPS of $0.26 missed the $0.32 estimate.

"We had another great quarter. In Q2, we grew recurring gross profit streams over 28% and expanded GAAP operating income margins to 26%," Chief Executive Aman Narang said.

Metric	Actual	Consensus	Beat/Miss
Revenue	$1.91B	$1.87B	+2.1%
EPS	$0.26	$0.32	-$0.06
Adjusted EBITDA	$221M	$195M	+13.3%

The restaurant software provider added a record 9,500 net locations, lifting total locations 22% from a year earlier to about 180,000. Annual recurring revenue rose 25% to $2.4 billion, while recurring gross profit streams climbed 28%. Adjusted EBITDA grew 38% to $221 million, with margin expanding 240 basis points to 37%. Gross payment volume reached $61 billion, up 22%.

Shares slipped 1.8% to $33.20 in after-hours trading after closing the regular session at $33.81, up 3.11%. The company raised its full-year 2026 outlook, now expecting recurring gross profit growth of 23% to 25% and adjusted EBITDA of $805 million to $825 million.

The EPS miss reflects deliberate reinvestment. Chief Financial Officer Elena Gomez said Toast chose to put its roughly $10 million tariff refund and other resources into sales capacity, research and development, and new products. Operating expenses rose 19% from a year earlier, excluding $29 million of bad debt and credit-related expenses.

SaaS ARR grew 27% year over year, with subscription gross profit up 32%. Payments ARR rose 23%, and fintech gross profit increased 26%. Total take rate, measured by recurring gross profit as a share of gross payment volume, reached 98 basis points, up five from a year earlier. Toast Capital contributed $57 million in gross profit and nine basis points to take rate.

Toast IQ Grow, the company's AI-powered marketing agent, is on track to become the fastest-growing product to $10 million in annual recurring revenue, Narang said. The company is expanding beyond restaurants into enterprise, international, and retail, where combined ARR is expected to nearly double to about $200 million this year. New customers include Kung Fu Tea, Best Western, and TGI Fridays in the U.K.

The company repurchased over 19 million shares for $486 million year to date, with about $100 million remaining on its authorization. Free cash flow was $130 million in the quarter, down from a year earlier as Toast chose to hold more hardware inventory.

The guidance raise shows management expects demand to keep accelerating across its core and newer markets. Investors will watch the Q3 earnings call for updates on Toast IQ Grow adoption and hardware margin recovery as memory prices stabilize.

This article is for informational purposes only and does not constitute investment advice.