Toast, Inc. TOST Moat

Key data

The moat

A restaurant that runs on Toast has the terminal at the counter, the handheld the server carries, the kitchen display, the online ordering page, the payroll, and often a loan against future card receipts. Switching means replacing all of it during service hours, retraining staff with high turnover, and re-entering a menu that changes weekly.

That is a switching cost built by integration rather than by contract, and restaurants are unusually good customers for it because they have no technology staff and cannot afford downtime. The second half is a network at the operator level: multi-location groups standardise, and each one added makes the reference list better.

What it produces is a take rate that has not moved while volume grew 44%. In payments, holding price flat through that much growth is the whole test, because scale is normally the moment a customer asks for a discount and gets one.

Widening or narrowing

Scale is compounding and the growth rate is not.

Location additions ran between seven and nine and a half thousand a quarter with the most recent the largest in the company's history. The take rate is flat to a hundredth of a point, which for a payments business facing constant price pressure is the strongest single piece of evidence here.

Recurring revenue growth inflected in the December 2025 quarter, from a steady 30 to 31% down to 26%, and has stayed there. That is the law of large numbers on a $2.4B base rather than a demand problem, and it is still a deceleration.

The overrated case. Forty thousand locations added in six quarters on a base of 140,000 is a 29% increase, against recurring revenue growth of 25%. Revenue per location is therefore falling slightly, which means the newer restaurants are smaller, buying less, or being discounted. None of those is visible in the take rate because the take rate measures payments, not software. The company does not publish revenue per location, so the direction is derived rather than disclosed, and the gap is small enough that a single quarter would not establish it.

On profit pool, Toast takes about 2.6% of the money a restaurant collects, from an operator running low single-digit net margins. That is a fat slice by any standard and it holds because the alternative is a week of chaos.

The moat is widening.