- Toast Inc. achieved a five-year revenue CAGR exceeding 53%, driven by its integrated SaaS offering in the restaurant sector.
- The firm reported ARR surpassing $2 billion in Q2 2025, supported by ongoing location growth and strong net retention.
- Toast transitioned from -30% net margins in 2020 to a positive 4% in recent periods, with adjusted EBITDA reaching $161 million in Q2 2025.
- Valuations remain elevated, with a forward P/E of 121.17 and share prices outperforming both the S&P 500 and tech sector over the prior year.
- Key risks include economic sensitivity and sector competition, but Toast’s balance sheet and SaaS model provide resilience.
Toast Inc., the cloud-based platform serving the restaurant industry, has demonstrated a remarkable trajectory in its financial performance over recent years. With a five-year compound annual growth rate (CAGR) in revenue exceeding 53%, the company has transitioned from substantial net losses to positive margins, reflecting operational efficiencies and market expansion. This shift underscores Toast’s ability to capitalise on the digital transformation in hospitality, where integrated software and payment solutions are driving sustainable growth amid evolving consumer behaviours.
Revenue Growth: A Five-Year Surge
Toast’s revenue has expanded at an impressive pace, achieving a CAGR of over 53% from 2020 through the latest twelve months. This growth stems from the company’s all-in-one digital platform, which combines point-of-sale systems, payments processing, and operational tools tailored for restaurants. According to data from Toast’s investor relations, the firm reported annualised recurring run-rate (ARR) reaching $901 million by the end of 2022, marking a significant increase from prior periods. This metric highlights the scalability of Toast’s subscription-based model, bolstered by gross payment volume (GPV) that surged alongside location additions.
In the fourth quarter of 2022, Toast added approximately 23,000 net new locations, bringing the total to around 79,000 by early 2023—a 40% year-over-year increase. More recent figures indicate continued momentum, with ARR surpassing $2 billion in the second quarter of 2025, driven by a 35% year-over-year growth in recurring gross profit. Analysts attribute this to Toast’s penetration into diverse restaurant segments, from quick-service to full-service establishments, and its expansion into international markets. For instance, partnerships with entities like American Express have facilitated broader adoption, enabling restaurants to streamline operations and unlock new revenue streams.
Comparative analysis shows Toast outperforming broader sector trends. The internet software market has seen average growth rates of around 25–30% in recent years, yet Toast’s 53% CAGR positions it as a standout. This is partly due to its focus on underserved small and medium-sized businesses (SMBs), where digital adoption has accelerated post-pandemic. Historical data from 2020 reveals revenue figures that, while starting from a lower base, have compounded robustly, supported by a net retention rate exceeding 135% in 2021, indicating strong customer loyalty and upsell opportunities.
Profitability Turnaround: From Deep Losses to Positive Margins
Equally compelling is Toast’s improvement in net margins, evolving from a -30% in 2020 to a positive 4% in the latest twelve months. This transformation reflects disciplined cost management and economies of scale as the business matures. In 2020, amid global disruptions, Toast grappled with high operating expenses relative to revenue, resulting in significant losses. However, strategic initiatives, including product innovations and efficiency gains, have steadily enhanced profitability.
By the fourth quarter of 2022, gross profit grew 116% year-over-year, with non-GAAP gross profit up 110%, as per SEC filings. Fast-forward to 2025, and Toast’s adjusted EBITDA reached $161 million in the second quarter, with an 8 percentage point margin improvement. This progress is evident in key ratios: operating margins have climbed from negative territories to positive, supported by a gross margin rebound from 17.4% in 2022 to 34.5% in recent periods. Net income trends further illustrate this, with the company reporting profitability in 2025 quarters, contrasting sharply with the $275 million net loss in the fourth quarter of 2022.
Analyst sentiment, as captured by sources like Truist Securities, remains bullish, with price targets raised to $51 based on sustained growth outlooks. InvestingPro data highlights a healthy current ratio of 2.59, underscoring financial stability. This margin expansion aligns with broader industry shifts, where SaaS providers like Toast benefit from high-margin recurring revenues once fixed costs are covered. Forecasts from analyst models suggest continued EBITDA growth, potentially reaching $591 million in 2025 and $838 million in 2026, assuming steady location additions and GPV increases.
Key Drivers and Risks
Several factors propel this performance. Toast’s platform integrates front-of-house and back-of-house operations, enabling restaurants to manage dine-in, takeout, delivery, and more efficiently. Innovations in AI and digital ordering have alleviated pain points, fostering customer retention. Internationally, while still nascent—with under 10,000 locations outside the US—expansion represents untapped potential, potentially driving future CAGR.
However, risks persist. Economic slowdowns could impact restaurant spending, and competitive pressures from rivals in payments and software may challenge market share. Recent tariffs and take-rate concerns have been navigated, but they warrant monitoring. Despite these, Toast’s robust balance sheet, with a price-to-book ratio of 13.55 as of 20 August 2025, suggests investor confidence in its growth narrative.
Market Context and Valuation
As of 20 August 2025, Toast’s shares traded at $42.41 on the NYSE, reflecting a 7.17% increase over the 200-day average of $39.57. The forward P/E ratio stands at 121.17, indicating a premium valuation tied to growth expectations. Earnings per share (EPS) for the trailing twelve months is $0.39, with forward estimates at $0.35, pointing to potential volatility but also upside if margins continue improving.
In comparison to peers, Toast’s 78% share price gain over the past year outpaces the S&P 500’s 17.8% return and the technology sector’s 25.4%. This performance, coupled with record net new locations in 2025, positions Toast as a compelling case study in SaaS resilience. Analyst ratings average a ‘Buy’ with a score of 2.1, per available data, reflecting optimism on its path to $100 per share through international scaling.
Looking ahead, if Toast maintains its revenue trajectory and margin gains, it could solidify its role as a leader in restaurant tech. Investors eyeing long-term plays in digital transformation may find Toast’s metrics indicative of a maturing, profitable enterprise.
References
- Business Wire. (2025, February 19). Toast announces fourth quarter and full year 2024 financial results. https://www.businesswire.com/news/home/20250219799274/en/Toast-Announces-Fourth-Quarter-and-Full-Year-2024-Financial-Results
- Forbes. (2025, August 8). Block stock or Toast stock? https://www.forbes.com/sites/greatspeculations/2025/08/08/block-stock-or-toast-stock/
- Investing.com. Toast Q2 2025 earnings call transcript. https://in.investing.com/news/transcripts/earnings-call-transcript-toast-q2-2025-misses-eps-stock-dips-93CH-4945355
- Investing.com. Truist Securities raises Toast stock price target to $51. https://www.investing.com/news/analyst-ratings/truist-securities-raises-toast-stock-price-target-to-51-on-growth-outlook-93CH-4189034
- SEC EDGAR. (2022). Toast Inc. 10-K filing. https://www.sec.gov/Archives/edgar/data/1650164/000165016423000050/tost-20221231xexhibit991.htm
- Toast Inc. Investor Relations. Financials: Quarterly results. https://investors.toasttab.com/financials/quarterly-results/default.aspx
- Toast Inc. Investor Relations. Company overview. https://investors.toasttab.com/overview/default.aspx
- Stock Analysis. Toast Inc. revenue. https://stockanalysis.com/stocks/tost/revenue/
- AlphaSpread. Toast Inc. income statement. https://www.alphaspread.com/security/nyse/tost/financials/income-statement/revenue
- TradingView. Toast Inc. SEC 10-Q report. https://www.tradingview.com/news/tradingview:feab29399ee51:0-toast-inc-sec-10-q-report/
- TradingView. Toast share performance analysis. https://www.tradingview.com/news/zacks:42f2844bb094b:0-tost-skyrockets-78-in-a-year-how-should-you-play-the-stock/
- WebProNews. Toast Inc. delivers 2B ARR in Q2 2025. https://www.webpronews.com/toast-inc-delivers-35-yoy-growth-2b-arr-in-q2-2025-earnings/
- Yahoo Finance. Toast Inc. (TOST) Q2 2025 results. https://finance.yahoo.com/news/toast-inc-tost-q2-2025-073524832.html
- Yahoo Finance. Toast Inc. ticker information. https://finance.yahoo.com/quote/TOST/
