Toast Adds 30K Locations in 2025 as AI Adoption Surpasses Expectations

Date of Call: Feb 12, 2026

Financials Results

• Revenue: Not explicitly quantified; recurring gross profit streams increased 28% in Q4 and 33% for full year 2025.
• EPS: Not explicitly quantified; adjusted EBITDA margin was 34%.
• Gross Margin: SaaS gross margins expanded 300 basis points year-over-year to 80% in Q4.
• Operating Margin: Adjusted EBITDA margin was 34% (implied from adjusted EBITDA of $163M on recurring gross profit streams).

Guidance:

• Full year 2026 recurring gross profit streams expected to grow 20% to 22%.
• Full year 2026 adjusted EBITDA expected to be $775M to $795M, implying margins slightly up YOY.
• Q1 2026 fintech and subscription gross profit growth expected to be 22% to 24% YOY.
• Q1 2026 adjusted EBITDA expected to be $160M to $170M.
• Expect record net location adds and mid-single-digit SaaS ARPU growth on an ARR basis in 2026.

Business Commentary:

Record Net Location Adds and ARR Growth:

• Toast added 30,000 net locations in 2025, ending the year with 164,000 locations. ARR grew 26%.
• The growth was driven by strong performance in both core U.S. SMB and mid-market restaurants and emerging markets like retail, international, and enterprise.

Recurring Gross Profit and Margin Expansion:

• Recurring gross profit streams increased by 33% in 2025. Adjusted EBITDA margins expanded to 34%.
• This was attributed to scaling operations, increasing customer adoption, and disciplined cost management.

AI and Product Innovation:

• Over 500 new features were released, including ToastIQ, with more than half of all Toast locations using it within four months.
• AI and product enhancements like ToastIQ are improving customer efficiency and decision-making, driving higher adoption and retention.

International and New Market Expansion:

• Toast successfully launched in Australia and signed significant enterprise customers like Applebee's and Firehouse Subs.
• Expansion into international and enterprise markets is driven by a proven vertical playbook and leveraging Toast's platform depth and capabilities.

Financial Performance and Guidance:

• Adjusted EBITDA for 2025 was $633 million, with free cash flow of $608 million. For 2026, Toast expects 20% to 22% growth in recurring gross profit streams.
• The strong financial position allows continued investment in growth initiatives while maintaining healthy margins and payback periods.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'record performance', 'strong momentum', and 'incredible accomplishment' with 30,000 net location adds and 26% ARR growth in 2025. They expressed confidence in gaining market share, expanding into new TAMs, and driving durable growth to $5B-$10B+ ARR. The tone was optimistic about AI as an opportunity and their financial outlook.

Q&A:

• Question from Timothy Chiodo (UBS): Could you break down the components of mid-single-digit SaaS ARR per location and consider breaking out enterprise separately?
  Response: Confidence in mid-single-digit SaaS ARPU growth; core ARPU growing faster, new TAMs expected to grow over time. Enterprise evaluated deal-by-deal with strong unit economics; no plan to break out separately.

• Question from William Nance (Goldman Sachs): What is the expected mix of core vs. new verticals for net adds in 2026 and how to gauge success?
  Response: Core expected to be similar to 2025, new TAMs to grow further, driving higher net add growth. Success will be seen in new TAMs scaling and contributing more.

• Question from William Nance (Goldman Sachs): How do you view AI disruption and moats around the business?
  Response: AI is an opportunity to enhance platform and automate workflows for customers, not a threat. Toast's broad platform (software, hardware, fintech, partner ecosystem) creates moats.

• Question from Tien-Tsin Huang (JPMorgan): Does the margin framework allow leeway to lean into R&D for AI opportunities?
  Response: Yes, investing in R&D to drive long-term growth; margin framework targets 40%+ over time with pace in control.

• Question from Matthew Coad (Truist Securities): Is ToastIQ a key factor in winning RFPs and which merchants find most value?
  Response: Yes, ToastIQ is influencing SMB sales cycles by speeding data analysis and workflow automation; early but promising impact.

• Question from Josh Baer (Morgan Stanley): Could you expand on the drive-thru product rollout?
  Response: Planning to launch drive-thru product in 2026 to open up that market, as current enterprise focus has been non-drive-thru.

• Question from Adam Frisch (Evercore ISI): Is 2026 a peak investment year and why back half deceleration in RGP guide?
  Response: Investing for long-term generational growth; margin profile unchanged with path to sub-20 months payback. Back half deceleration is a balanced initial view with aim to outperform.

• Question from Dominic Ball (Rothschild & Co): How is Toast evolving beyond software into a platform business via ecosystem partnerships?
  Response: Already a platform with software, fintech, network, and partner ecosystem; AI and ToastIQ aim to deepen moat by automating more complex customer workflows.

• Question from Dan Dolev (Mizuho): What are the top cross-sell modules and how much SaaS ARR do they represent?
  Response: AI is embedded across platform (e.g., marketing, inventory, scheduling); ToastIQ is the foundation for future agent workflows. Focus is on broad adoption of ToastIQ.

• Question from Dan Dolev (Mizuho): Will location metric remain the main focus or shift to something else?
  Response: Primary focus is on driving durable growth via ARR and recurring gross profit; location adds demonstrate scalable model and confidence in long-term growth.

Contradiction Point 1

Strategic Focus and Timeline for New Market (TAM) Expansion

Contradiction on the growth contribution from new TAMs between 2025 and 2026.

What were William Nance's key insights from the earnings call? - William Nance (Goldman Sachs Group, Inc.)

2025Q4: In 2025, core net adds were strong, with incremental growth coming from new TAMs. For 2026, the core is expected to be in a similar range to 2025, while growth in new TAMs is expected to accelerate further. - Aman Narang(CEO)

What is the expected mix of core vs. new verticals for 2026 net adds, and what success metric defines effective expansion into new TAMs? - Darrin Peller (Wolfe Research)

20251105-2025 Q3: Confidence for increased net adds in 2026 is based on the trend of new TAMs (enterprise, international, food & beverage retail) contributing more in recent quarters. - Aman Narang(CEO)

Contradiction Point 2

Monetization Strategy for AI Products

Contradiction on the current versus future monetization model for Toast IQ.

What is Tien-Tsin Huang's role at JPMorgan Chase & Co? - Tien-Tsin Huang (JPMorgan Chase & Co)

2025Q4: The focus is on building a generational company over the next decade. Investments in R&D (and AI) are made to serve multiples of the current TAM... even if it means prioritizing growth over faster near-term margin expansion. - Aman Narang(CEO)

Does your margin framework allow increased R&D investment in AI, and how are you balancing it? - Stephen Sheldon (William Blair)

20251105-2025 Q3: The current focus for Toast IQ is on driving adoption and customer value... Monetization strategies are being explored, with one obvious approach being usage-based models. - Aman Narang(CEO)

Contradiction Point 3

Core Net Adds Growth

Contradiction on the growth trajectory of core net adds from one year to the next.

What is William Nance's role at Goldman Sachs Group, Inc.? - William Nance (Goldman Sachs Group, Inc.)

2025Q4: For 2026, the core is expected to be in a similar range to 2025, while growth in new TAMs is expected to accelerate further. - Aman Narang(CEO)

What is the expected core vs. new verticals mix for 2026 net adds, and what success metric would indicate progress in new TAMs? - William Nance (Goldman Sachs)

2025Q3: Net adds in the core business this year are in about the same range as last year, demonstrating consistent market share gains with scaling. - Aman Narang(CEO)

Contradiction Point 4

Business Outlook for New TAMs

Contradiction on the growth contribution and readiness of new TAMs in the near term.

What are your thoughts on the current market conditions and their impact on earnings? - William Nance (Goldman Sachs Group, Inc.)

2025Q4: In 2025, core net adds were strong, with incremental growth coming from new TAMs. For 2026, the core is expected to be in a similar range to 2025, while growth in new TAMs is expected to accelerate further. - Aman Narang(CEO)

What is the expected mix of core versus new verticals in net adds for 2026, and what metrics define success in new TAMs? - Darrin Peller (Wolfe Research)

2025Q3: Confidence comes from the strong trend of the past year, where record net adds each quarter were driven by new TAMs contributing more while core net adds remained steady. - Aman Narang(CEO)

Contradiction Point 5

AI Product Maturity and Launch Timing

Contradiction on the readiness and launch stage of key AI products.

What is Matthew Coad's question from Truist Securities? - Matthew Coad (Truist Securities, Inc.)

2025Q4: ToastIQ is seeing good adoption and is a factor in sales cycles... The vision is to evolve it to automate more complex workflows over time. - Aman Narang(CEO)

How does ToastIQ impact RFP success, and which merchants benefit most from its AI tools? - Harshita Rawat (Sanford C. Bernstein & Co., LLC.)

2025Q2: Progress on Sous Chef is good with positive customer feedback... The platform is planned to be Generally Available (GA) later in the year. - Aman Narang(CEO)