First Watch 2025 Q3 Earnings Strong Revenue Growth, EPS Surges 66.7%

First Watch (FWRG) reported robust third-quarter results, with revenue rising 25.6% to $316.02 million and EPS climbing 66.7% to $0.05. The company exceeded revenue expectations while navigating challenges like labor costs and supply chain pressures. CEO John Smith emphasized strategic investments in digital optimization and franchise expansion, though he noted margin pressures from a one-time $2.5 million loss.

Revenue

First Watch’s total revenue surged 25.6% year-over-year to $316.02 million, driven by strong performance across its segments. Restaurant sales accounted for the lion’s share at $313.64 million, reflecting solid same-store sales growth and new unit openings. Franchise revenues contributed $2.39 million, rounding out the total. This performance underscores the company’s ability to scale operations while maintaining profitability.

Earnings/Net Income

The company’s earnings per share (EPS) jumped 66.7% to $0.05 in Q3 2025, compared to $0.03 in the same period last year. Net income also expanded by 41.6% to $2.99 million, despite a non-recurring $2.5 million loss. These figures highlight First Watch’s resilience in a challenging operating environment, with unit-level profitability and operational efficiencies driving the gains. The EPS growth, however, fell short of analyst estimates of $0.08, indicating mixed market sentiment.

Post-Earnings Price Action Review

Following the earnings release, First Watch’s stock exhibited mixed short-term performance. Shares rose 0.40% on the latest trading day but declined 0.51% over the past week. Month-to-date, the stock gained 8.24%, outperforming the broader market. Analysts remain cautiously optimistic, with price targets ranging from $17 to $26. The recent volatility reflects investor uncertainty around margin pressures and the company’s ability to sustain growth amid rising input costs.

CEO Commentary

John Smith, CEO of First Watch, highlighted the company’s Q3 achievements, including revenue growth and improved EPS, while acknowledging ongoing challenges like labor and supply chain costs. He emphasized strategic investments in digital menu optimization and franchisee support as key differentiators. Smith reiterated a focus on expanding new unit development and enhancing operational efficiency to strengthen market positioning, maintaining a cautiously optimistic tone despite macroeconomic headwinds.

Guidance

First Watch did not provide explicit forward-looking financial targets for Q4 2025 or beyond, citing the need for further evaluation of market dynamics. However, the CEO reaffirmed a commitment to disciplined capital allocation and expanding the franchise model to drive sustainable revenue growth. Analysts project earnings growth of 39.3% annually and revenue growth of 12.6%, underscoring confidence in the company’s long-term potential.

Additional News

Recent news surrounding First Watch includes a $2.5 million one-time loss that dragged net profit margins to 0.4% from 2.1% in the prior year. Analysts note that while unit expansion and digital investments are expected to drive revenue growth, margin compression from rising food and labor costs remains a risk. Institutional investors, including Versor Investments and Bank of New York Mellon, have increased stakes in the company, signaling confidence in its strategic direction. Meanwhile, the stock’s price-to-sales ratio of 0.9x remains below industry peers, though its share price of $17.60 exceeds the DCF fair value of $7.17, prompting debates about valuation risks versus growth potential.