Olo's Strategic Momentum and Russell 2000 Inclusion Signal a Strategic Entry Point

Olo Inc. (NYSE: OLO) has been added to the Russell 2000 Growth-Defensive Index, a milestone that underscores the company's growing influence in the restaurant technology sector. This inclusion, effective June 30, 2025, positions Olo as a compelling investment opportunity, blending strong product adoption trends with improving financial metrics. For investors, this moment presents a chance to capitalize on a company poised to benefit from structural tailwinds in B2B software and passive fund inflows tied to its new index status.

The Strategic Case for Olo: Product Innovation and Market Penetration

Olo's first-quarter 2025 results highlighted the power of its product-driven strategy. Revenue rose 23% year-over-year to $102.5 million, fueled by adoption of its enterprise solutions like Olo Marketplace and KitchenOS. These platforms address critical pain points for restaurants: Olo Marketplace streamlines third-party delivery partnerships, while KitchenOS centralizes kitchen operations, reducing costs and improving efficiency.

The company's focus on large enterprise clients—those with 50 or more locations—has been particularly effective. Enterprise revenue grew 29% YoY, now representing 66% of total revenue, up from 59% in Q1 2024. This shift reflects Olo's success in upselling its full-suite offerings to major chains, which are increasingly prioritizing tech investments to compete in a fragmented market.

Financial Health: Margin Expansion and Capital Efficiency

Beyond top-line growth, Olo's bottom-line metrics are improving. Adjusted EBITDA rose to $24.1 million, a 49% margin on revenue, marking a significant turnaround from its historically negative margins. This progress stems from operational leverage as its customer base scales. Active locations grew 19% to 22,900, with 88% retention among enterprise clients, signaling strong stickiness.

The company's gross retention rate for enterprise clients remains above 90%, a testament to the strategic value of its software. Meanwhile, average revenue per user (ARPU) climbed 18% to $3,617, driven by higher adoption of add-on services like Olo Marketplace. These metrics suggest Olo is moving from a high-growth, unprofitable model to one of sustainable profitability.

The Russell 2000 Inclusion: A Catalyst for Liquidity and Investor Interest

The addition to the Russell 2000 Growth-Defensive Index is a critical inflection point. The index, which focuses on small-cap companies with stable growth profiles, attracts roughly $10.6 trillion in assets under management. Passive funds tracking the index will be compelled to buy Olo's stock, potentially driving liquidity and upward price momentum.

The inclusion also signals to investors that Olo's business model aligns with defensive characteristics. While the Russell criteria emphasize growth, the “Defensive” tag reflects Olo's recurring revenue streams and low volatility in a sector (restaurant tech) that benefits from both economic expansion and recession resilience. Restaurants of all sizes rely on operational software to cut costs and adapt to consumer trends, making Olo's solutions a necessity rather than a luxury.

Risks and Considerations

Investors should note two key risks. First, Olo's stock price has historically been volatile, with a 52-week range of $10–$25. While its Q1 results may stabilize this, macroeconomic pressures on consumer spending could indirectly impact restaurant tech adoption. Second, competition in cloud-based restaurant software is intensifying, with rivals like Toast and Upserve expanding their offerings.

However, Olo's enterprise focus and vertical integration—spanning POS systems, delivery management, and kitchen operations—differentiate it from broader competitors. Its Q1 gross profit margin of 83% also suggests a robust pricing power.

Investment Thesis: A Multi-Year Growth Story

Olo's inclusion in the Russell 2000 Growth-Defensive Index is not just a technicality—it's a validation of its transition to a scalable, profitable software company. With enterprise revenue growth outpacing the market, margin expansion on track, and passive fund inflows on the horizon, Olo presents a compelling entry point.

For investors, the stock's current valuation—trading at 11x forward revenue, a discount to peers like Toast (20x) and Shopify (18x)—offers further upside potential. The combination of structural growth in B2B software, recurring revenue models, and index-driven liquidity makes Olo a buy for long-term portfolios.

Bottom Line: Olo's strategic execution, financial turnaround, and new index inclusion create a rare confluence of catalysts. This is a stock to watch as it transitions from a high-growth startup to a market leader in restaurant technology.