Toast vs. Block: Which Fintech Stock Offers the Better Long-Term Growth Opportunity?

The fintech landscape is littered with companies that promise innovation but falter under the weight of execution. Yet two stand out in 2025: Toast, Inc. (TOST) and Block, Inc. (SQ). Both serve the small business and restaurant sectors, but their divergent strategies—Toast's hyper-focused restaurant-centric model versus Block's increasingly fragmented approach—paint a stark contrast in long-term potential. For investors seeking to allocate capital in a market defined by margin pressure and customer acquisition costs, the choice between these two may hinge on which company better balances specialization with scalability.

Market Focus: Niche Dominance vs. Diversified Ambition

Toast has carved out a dominant position in the restaurant technology sector by doubling down on vertical integration. In Q1 2025, it reported $1.7 billion in Annual Recurring Revenue (ARR), a 31% year-over-year increase, with 6,000 net new restaurant locations added to its platform. This growth stems from a tailored ecosystem that includes kitchen display systems, inventory management, and AI-driven analytics—all optimized for the operational pain points of restaurants. Its market share now stands at 24.30% of the restaurant POS market, trailing only Block's 28.01% but gaining rapidly.

Block, by contrast, has pursued a broader strategy, expanding Square into general small business solutions and even consumer-facing products like the Cash App. While this diversification provides a buffer against sector-specific downturns, it also dilutes Block's ability to innovate deeply within the restaurant niche. For example, Square's recent launch of the Square Handheld—a portable POS device—aims to compete with Toast's hardware, but its broader focus on mid-market and retail sellers risks spreading resources thin.

Scalability: Efficiency vs. Fragmentation

Toast's scalability is underpinned by its low customer acquisition costs (CAC) and high customer lifetime value (CLTV). The company's targeted marketing to restaurant operators—coupled with its enterprise wins (e.g., Applebee's, Topgolf)—has driven a 24.4% year-over-year sales growth in 2025, outpacing Block's -3.1% quarterly sales growth. By focusing on a single vertical, Toast can optimize its sales and marketing spend, achieving sales and marketing expenses of less than 10% of revenue in 2024.

Block's approach, however, is more speculative. Its recent partnership with Sysco to subsidize grocery costs for new Square users is a clever play to attract restaurants, but it also reflects a fragmented strategy. While Square's ecosystem of integrations (Uber Eats, DoorDash, Resy) offers flexibility, these partnerships often come at the cost of margin compression. For instance, Square Online Ordering's commission-free model for delivery and pickup may erode gross profit margins unless offset by higher transaction volumes.

Profitability Trends: Turnaround vs. Stagnation

Toast's financial transformation in 2025 is nothing short of remarkable. After posting a GAAP net loss of $83 million in Q1 2024, the company turned a $56 million net profit in Q1 2025, alongside $133 million in Adjusted EBITDA. This turnaround is driven by cost discipline and a shift toward high-margin services, such as its AI-powered inventory management tools. Analysts project $540–560 million in Adjusted EBITDA for 2025, up from $510–530 million in 2024.

Block, meanwhile, has maintained a more stable but less dynamic profit profile. Square's 9% year-over-year gross profit growth in Q1 2025 is respectable, but it pales against Toast's 35% increase in non-GAAP gross profit. Block's broader focus also exposes it to margin volatility, as seen in its recent shift toward consumer lending and Bitcoin exposure. While these ventures may yield long-term gains, they divert attention from the restaurant segment, where Toast's margin discipline is more pronounced.

Strategic Risks and Opportunities

Toast's primary risk lies in the saturation of the restaurant tech market. As it grows, it must balance expansion into international markets (e.g., Canada, UK) with maintaining its operational efficiency. However, its 28% YoY GPV growth in 2025 suggests it can scale without sacrificing margins.

Block's challenges are more existential. Its pivot to software platforms for “neighborhood businesses” and consumer apps risks fragmenting its brand. While Square's $9.96 billion gross profit target for 2025 is ambitious, it relies on macroeconomic stability and continued adoption of its hardware and software. The company's recent emphasis on AI and automation—such as the “goose” tool—may mitigate these risks, but execution remains unproven.

Investment Thesis: The Case for Toast

For long-term investors, Toast's combination of specialized innovation, efficient scalability, and improving margins makes it a compelling bet. Its restaurant-centric approach ensures that it remains a one-stop shop for operators, who are increasingly reliant on integrated solutions to combat labor and supply chain costs. Block, while a formidable incumbent, faces the inherent challenges of a broad business model in a sector demanding hyper-personalization.

The valuation gap also favors Toast. Despite a P/E ratio of 183.9 (vs. Block's 17.7), Toast's stock has surged 29.5% in 2025, reflecting investor optimism about its trajectory. With $26.9 billion in market capitalization, it is smaller than Block's $44.5 billion but growing at a pace that suggests it could close the gap.

Conclusion

In the battle for the future of restaurant technology, Toast's laser focus on a $120 billion market—coupled with its ability to turn losses into profits—positions it as the stronger long-term growth candidate. Block's diversified strategy may offer stability, but it also introduces uncertainty in a sector where niche expertise and operational efficiency reign supreme. For investors willing to bet on a company that executes with precision, Toast is the stock to own.