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Toast (TOST) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· May 7, 2026

Source: earnings call transcript

Executive summary

Toast Q1 FY26 — Strong Growth in Recurring Gross Profit and Expanded Margins

Toast delivered a strong first quarter, driven by robust recurring gross profit growth and significant margin expansion, while strategically investing in AI and new market expansion. The company is leveraging its vertical integration and AI capabilities to enhance customer value and productivity, positioning for sustained long-term growth across its core restaurant business and new segments like enterprise, international, and retail.

Highlights

5

  • Recurring gross profit streams grew 27% year-over-year.

  • GAAP operating income margins expanded to 21%, or $110 million.

  • Added 7,000 net locations, ending with 171,000 live locations, up 22% YoY.

  • Total monetization across SaaS and Fintech exceeded 1% of GPV for the first time, reaching 103 basis points.

  • Adjusted EBITDA grew 35% to $179 million, with a 34% margin.

Concerns

3

  • Hardware and Professional services gross profit was negative 13% of recurring gross profit streams due to customer acquisition momentum and higher tariff costs.

  • GPV per location was down 1% year-over-year in Q1.

  • Free cash flow conversion for the full year is expected to be slightly lower than in 2025 due to strategic inventory purchases of memory chips.

Guidance & targets

CategoryTargetConfidence
Total subscription and fintech gross profit growth
22% to 24% year-over-year growth
high materiality
High
Adjusted EBITDA
$185 million to $195 million
high materiality
High
Recurring gross profit growth
21% to 23%
high materiality
High
Adjusted EBITDA
$790 million to $810 million
high materiality
High
Long-term Adjusted EBITDA margin
40-plus percent
high materiality
High
Long-term growth
Sustain high growth
high materiality
High
Free cash flow conversion
slightly lower than in 2025
medium materiality
Medium

TOST operating KPIs by quarter

TOST operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Net locations added
7,000 We added 7,000 net locations and are broadening who we serve from local restaurants across the US to enterprise chains, international markets and retail. Source: earnings call transcript
9,500 We had a record 9,500 net location adds in the quarter, 1,000 more than our previous high watermark. Source: earnings call transcript
+35.7%
Live locations
171K Building on last year's momentum, we added 7,000 net locations in Q1 and ended the quarter with 171,000 live locations, up 22% from a year ago. Source: earnings call transcript
~180K We added a record 9,500 net new locations in Q2, growing total locations 22% from a year ago to approximately 180,000. Source: earnings call transcript
—
Payments volume
$51B GPV was $51 billion, up 22% year-over-year with GPV per location down 1% versus last year. Source: earnings call transcript
$61B GPV was $61 billion, up 22% with GPV per location flat. Source: earnings call transcript
+19.6%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
Toast IQlaunch
Toast Growth (including Marketing Agent)launch
Toast Localexpansion
Toast for drive-thrulaunch
Toast Co 3 handheldlaunch
Grocery productupdate

Deals & partnerships

Daniella Group The world-renowned Chicago-based restaurant group, including iconic Allinea, NEXT, the ABR, and The Office, chose Toast as a key technology partner.

The Daniella Group went live on Toast, selecting the platform for its relentless innovation, commitment to precision, and passion for guest experience.

Hungry Howes A 500-unit national pizza chain.

Toast won Hungry Howes, demonstrating success in serving specific sub-verticals like pizza within the Enterprise segment.

Papa Murphy's A pizza chain.

Toast won Papa Murphy's, further demonstrating success in the pizza sub-vertical.

Resy Integration with Toast Local to enable table reservations.

Toast Local now enables guests to discover and book tables at over 20,000 restaurants through Resy and Toast Tables, creating one of the largest reservation marketplaces.

Risks & headwinds

Hardware supply chain / tariff costs Q1 FY26, FY26, FY27

Hardware and Professional services gross profit was negative 13% of recurring gross profit streams in Q1 FY26; full-year FY26 FCF conversion expected to be slightly lower than 2025; 2027 P&L impact will be larger than 2026.

Mitigation:Strategically purchasing memory chips and planning to hold more inventory to secure supply into 2027; managing margins to remain healthy in 2026 and 2027; no anticipated structural long-term impact to P&L.

GPV per location decline Q1 FY26, Q2 FY26

Down 1% year-over-year in Q1 FY26; Q2 trends similar.

Mitigation:Consumer trends are stable; customers are resilient.

Credit defaults (Toast Capital) Q1 FY26

Defaults remain consistent and well within risk guardrails.

Mitigation:Program continues to grow at a steady clip with risk guardrails in place.

What to watch in Q2 FY26

Free Cash Flow Conversion

over time as inventory moves to customers (majority of cash impact in Q2)
Current $115 million (Q1 FCF), expected to be slightly lower than in 2025 (FY26 conversion)
Target Normalization of free cash flow impact as inventory moves to customers.

Why it matters

Indicates capital efficiency and the impact of strategic inventory build on cash flow.

We expect the majority of this cash impact in Q2 and for the free cash impact to normalize over time as inventory moves to customers.

Find out whether TOST delivers this. Inve re-checks your case every morning.

Q&A highlights

How does Toast's hardware, like Toast Go 3, differentiate its AI solutions and help restaurants make AI insights actionable in employee-guest interactions?

Aman Narang stated that vertical integration of hardware and software allows faster development of AI capabilities. He cited examples like upsell visibility, digital check kits, and future voice AI applications at the table, emphasizing the advantage of having both components.

“I think we've learned over the years that being vertically integrated across software and hardware as a platform gives us an advantage where we can build capabilities for our customers faster.”

asked by Stephen Sheldon · answered by Aman Narang

2 min read 6 chapters

Detailed narrative

AI-Driven Platform Evolution

Toast is transitioning from a software platform to an 'agent platform' using AI, with Toast IQ as the foundation. This aims to drive outcomes for customers by automating tasks like marketing, bookkeeping, and payroll, leveraging Toast's proprietary data. The company believes its structural advantage lies in the vast amount of customer data already within its platform, which powers these AI agents.

Toast IQ and Marketing Agent Success

Toast IQ has reached 40,000 weekly active locations, demonstrating strong adoption. The first AI agent, a marketing agent within Toast IQ Grow, builds and optimizes campaigns for restaurants. Pilot customers using Toast IQ Grow have seen an average 8% increase in sales, with nearly one-third of sales in March for one customer directly attributable to Toast marketing tools, highlighting the tangible value AI can deliver.

Expansion into New Markets

Toast is successfully applying its vertical playbook to new markets, including Enterprise, International, and Retail. In Enterprise, new offerings like Toast for drive-thru and deeper hotel presence are driving growth, with Q1 FY26 bookings exceeding total customers in FY23. Internationally, the focus is on scaling locations and ARPU in Tier 1 cities, while in Retail, the company is gaining traction with independent grocers, serving over 100 locations.

Productivity Gains from AI

AI is significantly improving internal productivity across Toast. Engineering coding velocity is up over 60% year-over-year, accelerating product launches like the marketing agent. Additionally, approximately 40% of customer support interactions are now resolved by AI, leading to efficiencies that free up capital for growth initiatives and support the company's long-term margin targets.

Toast Local Expansion

Toast Local, the company's consumer network, has expanded its capabilities, now enabling guests to discover and book tables at over 20,000 restaurants through integration with Resy and Toast Tables. This expansion has led to a doubling of weekly app downloads in the last quarter, positioning Toast Local as one of the largest reservation marketplaces and a key channel for restaurants to drive demand with low commissions.

Hardware as a Differentiator

Toast's vertical integration of hardware and software, exemplified by the Toast Go 3 handheld, provides a competitive advantage. This allows for faster development of AI-powered features at the table, such as upsell suggestions, digital check kits, and future voice AI applications. The company believes this integrated approach creates a superior experience and builds products faster for customers.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.