Toast Beats Earnings, Stock Still Falls 8%

Toast (TOST) reported fiscal 2025 Q4 earnings on Feb 12, 2026, surpassing expectations with a 22.0% revenue increase to $1.63 billion and a 206.1% net income jump to $101 million. The stock declined 8.19% post-earnings, despite beating GAAP EPS by $0.04 and revenue by $10 million.

Revenue

Toast’s total revenue surged 22.0% year-over-year to $1.63 billion in Q4 2025, driven by robust performance in its financial technology segment. Subscription services contributed $256 million, while financial technology solutions accounted for $1.33 billion, reflecting the company’s strategic focus on expanding its fintech offerings. Hardware and professional services added $43 million, though this segment faced margin pressures from higher tariffs and hardware costs.

Earnings/Net Income

The company’s EPS soared 183.3% to $0.17 in Q4 2025, compared to $0.06 in Q4 2024, while net income surged 206.1% to $101 million, marking a five-year high. This significant improvement underscores Toast’s strengthening profitability and operational efficiency. The EPS growth is a strong positive indicator aligned with the company’s margin expansion goals.

Price Action

Toast’s stock has experienced a sharp decline in the short term, falling 6.71% in the latest trading day, 3.36% in the week, and 27.79% month-to-date. This volatility contrasts with its historically favorable post-earnings performance.

Post-Earnings Price Action Review

The strategy of buying Toast shares on the date of its revenue raise announcement and holding for 30 days has historically shown favorable returns, with 30-day share price gains ranging from 10.37% to 16.96% over the past year. This period allows for moderate appreciation if the market reacts positively to earnings news. However, risks persist, including potential market skepticism about the sustainability of growth or unmet expectations. The Zacks Rank #3 (Hold) rating suggests a neutral outlook, indicating alignment with broader market performance. Long-term growth prospects remain promising, driven by recurring gross profit expansion and AI-driven platform innovation.

CEO Commentary

CEO Aman Narang highlighted Toast’s 33% recurring gross profit growth and 34% adjusted EBITDA margins in Q4 2025, emphasizing core U.S. SMB/mid-market restaurant growth and expansion into international and enterprise markets. Strategic priorities include scaling AI-powered ToastIQ, enhancing customer productivity, and targeting ARR growth from $2 billion to $5 billion+ over time.

Guidance

Toast guided to 20%–22% full-year 2026 recurring gross profit growth and adjusted EBITDA of $775M–$795M, reflecting disciplined investment and margin expansion. For Q1 2026, it expects fintech and subscription gross profit growth of 22%–24% and adjusted EBITDA of $160M–$170M, despite seasonal softness and hardware cost headwinds.

Additional News

Toast announced a $500M share buyback program and increased GAAP net income to $342 million in 2025. The company is investing heavily in AI and platform innovation to enhance productivity and maintain competitive moats. However, it faces challenges including rising hardware costs due to global memory chip demand and potential software commoditization from AI advancements. CFO Elena Gomez confirmed mid-single-digit SaaS ARR per location growth for 2026, with core SaaS ARPU outpacing total company growth.