TOST Q3 Deep Dive: AI Tools, Platform Expansion, and Margin Growth Drive Strong Quarter

Restaurant technology platform Toast (NYSE:TOST) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 25.1% year on year to $1.63 billion. Its GAAP profit of $0.17 per share was 37.6% above analysts’ consensus estimates.

Is now the time to buy TOST? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Toast’s third quarter results were well received by the market, as the company surpassed analyst expectations for both revenue and profitability. Management attributed the outperformance to consistent growth in its core U.S. restaurant platform, with notable wins among large operators like Nordstrom and TGI Fridays. CEO Aman Narang highlighted the company’s investments in AI-powered tools and ongoing expansion into new market segments as key contributors, stating, “We surpassed $2 billion in ARR for the first time, and I’m even more energized about where we’re headed.”

Looking forward, Toast’s updated guidance is underpinned by accelerating adoption of its AI-driven products, international market expansion, and increasing contributions from new verticals such as food and beverage retail. CFO Elena Gomez emphasized a disciplined investment strategy to scale these growth areas while maintaining margin expansion. Management sees continued opportunity to grow net adds in 2026, supported by a platform approach that targets both existing restaurant customers and emerging markets. Narang noted, “Our momentum in the core is strong. With new TAM scaling quickly, we’re confident Toast is in a position to compound our top line at a healthy rate for the next decade.”

Key Insights from Management’s Remarks

Management attributed the quarter's performance to strong execution in the core U.S. market, increased adoption of AI features, and early traction in new international and retail segments.

• Core restaurant platform gains: Toast reported continued momentum in net location adds, driven by high win rates in both small and mid-size restaurant segments. Major brands such as Nordstrom, TGI Fridays, and Everbowl selected Toast’s solutions to unify operations, demonstrating growing appeal among larger operators.
• AI-driven platform adoption: The company highlighted rapid uptake of its AI assistant, Toast IQ, which enables restaurant operators to analyze sales and adjust menus in real time. Over 25,000 restaurants have used Toast IQ more than 235,000 times since its launch, reflecting strong early engagement and customer value.
• International and retail expansion: Toast gained traction with hospitality groups in Ireland, the UK, and Canada, and successfully entered the food and beverage retail sector with clients like Tri-County Meat Markets and DeLallo Italian Market. Management believes these new markets could become significant growth engines over time.
• Product ecosystem enhancements: The expanded partnership with Uber and the introduction of AI-powered marketing tools allow operators to automate outreach and optimize campaigns, further integrating Toast’s offerings into restaurant workflows.
• Margin improvement and capital discipline: Adjusted operating margins expanded as Toast balanced investments in growth with cost optimization, particularly in SaaS and payments. CFO Elena Gomez noted ongoing efforts to optimize cost of goods sold and targeted pricing moves as drivers of profitability.

Drivers of Future Performance

Toast expects growth in the coming quarters to be driven by increased platform adoption, expansion into new markets, and disciplined investments in AI and customer experience.

• AI and automation focus: Management believes that further embedding AI tools like Toast IQ and Toast Advertising will deepen customer engagement and create new upsell opportunities. These initiatives are expected to improve operational efficiency for restaurants and support Toast’s margin goals.
• Market expansion strategy: The company is accelerating investments in international markets and food and beverage retail, expecting these segments to contribute a higher share of new location growth in 2026. Management highlighted a clear path to becoming a leader in each new segment over time.
• Cost structure and pricing discipline: Toast plans to maintain margin expansion by optimizing cost of goods sold, pursuing targeted pricing actions, and carefully managing investments. However, management acknowledged some macroeconomic uncertainty and tariff-related cost pressures that could affect hardware and services profitability.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of adoption and monetization for AI-driven solutions like Toast IQ and Toast Advertising, (2) the company’s ability to expand net location adds through international and retail segments, and (3) ongoing progress in cost optimization and pricing discipline to support margin expansion. Success in scaling new partnerships and integrating product updates will also serve as key indicators of Toast’s execution.

Toast currently trades at $37.40, up from $35.67 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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