Toast, Inc. TOST

The business

Toast sells an integrated operating system to restaurants: point-of-sale hardware, payments processing, and a widening software stack spanning online ordering, kitchen displays, payroll, marketing, and working-capital loans. Each location pays a monthly subscription plus a payments take-rate on the card volume it runs through the platform. The recurring gross-profit stream is the engine: subscription plus fintech gross profit grew 27% in Q1 2026 while reported revenue grew 22%, and that spread, higher-margin lines compounding faster than the blended whole, is what drives the operating-leverage story. Payments is the biggest dollar line but the thinner-margin one; the software layer is where the lock and the incremental margin live.

What the financials understate is the land-and-expand mechanic and how the last two quarters strengthened it. Toast added roughly 7,000 net locations in Q1 2026 to reach 171,000 live locations, up 22% year over year, while annualized recurring run-rate reached $2.2B, up 26%, all per management's Q1 release. The base is growing and each restaurant in it runs more Toast software every year, now including Toast IQ, the AI layer launched in October 2025 that management is positioning as a new premium module. Alongside the May print, management raised the FY26 guide to $2.29B to $2.32B of subscription-plus-fintech gross profit (21% to 23% growth) and $790M to $810M of adjusted EBITDA.