Restaurant technology platform Toast (NYSE: TOST) announced better-than-expected revenue in Q2 CY2026, with sales up 23.1% year on year to $1.91 billion. Its GAAP profit of $0.26 per share was 28.2% above analysts’ consensus estimates.
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Toast (TOST) Q2 CY2026 Highlights:
- Revenue: $1.91 billion vs analyst estimates of $1.87 billion (23.1% year-on-year growth, 1.8% beat)
- EPS (GAAP): $0.26 vs analyst estimates of $0.20 (28.2% beat)
- Adjusted EBITDA: $221 million vs analyst estimates of $195.1 million (11.6% margin, 13.3% beat)
- EBITDA guidance for the full year is $815 million at the midpoint, above analyst estimates of $807.9 million
- Operating Margin: 8%, up from 5.2% in the same quarter last year
- Free Cash Flow Margin: 6.8%, similar to the previous quarter
- Annual Recurring Revenue: $2.4 billion vs analyst estimates of $2.4 billion (24.5% year-on-year growth, in line)
- Billings: $1.91 billion at quarter end, up 23.3% year on year
- Market Capitalization: $19.01 billion
Company Overview
Born from the frustrations of three friends waiting too long for their restaurant bill, Toast (NYSE: TOST) provides a cloud-based digital technology platform with software, payment processing, and hardware solutions built specifically for restaurants.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Toast’s sales grew at an incredible 41.8% compounded annual growth rate over the last five years. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Toast’s annualized revenue growth of 24.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Toast reported robust year-on-year revenue growth of 23.1%, and its $1.91 billion of revenue topped Wall Street estimates by 1.8%.
Looking ahead, sell-side analysts expect revenue to grow 18.7% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and suggests the market is forecasting success for its products and services.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Toast’s ARR punched in at $2.4 billion in Q2, and over the last four quarters, its growth was fantastic as it averaged 26.4% year-on-year increases. This alternate topline metric grew faster than total sales, which likely means that the recurring portions of the business are growing faster than less predictable, choppier ones such as implementation fees. That could be a good sign for future revenue growth. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Toast’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.
Key Takeaways from Toast’s Q2 Results
It was encouraging to see Toast beat analysts’ billings expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter slightly missed. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 1.3% to $33.38 immediately following the results.
So should you invest in Toast right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
