NEW YORK, August 4, 2026, 18:54 EDT. U.S. markets had ended regular trading for the day; after-hours activity continued.
- Revenue increased by 23% to $1.91 billion, surpassing expectations before the report.
- Toast reached a record by adding 9,500 new locations, but GPV per location remained unchanged.
- Toast’s free cash flow declined by 38% due to a rise in hardware inventory.
Shares of Toast, Inc. NYSE:TOST declined 1.7% to $33.22 as of 18:34 EDT, after ending the session up 3.1% at $33.81. The restaurant technology provider surpassed revenue forecasts and lifted its outlook for 2026.
The division among investors is reflected behind the headline growth. Toast posted a record net addition of 9,500 locations, increasing its total to approximately 180,000. Gross payment volume climbed 22% to reach $60.7 billion.
However, there was no growth in average customer activity. Chief Financial Officer Elena Gomez stated that “GPV per location [was] flat.” As a result, payment growth is currently being driven by adding new locations instead of heightened activity at existing sites. StockAnalysis
| Approximate unit metric | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Active locations | 180,000 | 148,000 | +21.6% |
| GPV per location each quarter | $337,222 | $337,162 | +0.0% |
| ARR per location, annualized | $13,383 | $13,027 | +2.7% |
| Recurring gross profit for each location | $3,306 | $3,135 | +5.4% |
Company-provided data was used for calculations. Toast rounds overall location numbers.
Monetization saw gains even as payment volume per location remained steady. ARR per location was up approximately 2.7%. Recurring gross profit per location climbed 5.4%.
Management reported a five basis point increase in the total take rate. Subscription ARR increased by 27%, driven by steady mid-single-digit gains in average revenue per user.
| Q2 performance | 2026 | 2025 | Change |
|---|---|---|---|
| Revenue | $1.908 billion | $1.550 billion | +23% |
| ARR | $2.409 billion | $1.928 billion | +25% |
| Recurring gross profit | $595 million | $464 million | +28% |
| Adjusted EBITDA | $221 million | $161 million | +37% |
| Operating income | $152 million | $80 million | +90% |
| Free cash flow | $130 million | $208 million | -38% |
Source: Toast; percentages derived from disclosed data.
Revenue surpassed the analyst consensus of $1.87 billion by about 2%. Diluted GAAP earnings rose to $0.26 per share, up from $0.13. Shares continued to decline following the call.
Cash quality remained problematic. Operating cash flow declined by $79 million, reaching $144 million. Free cash flow was down $78 million, while adjusted EBITDA saw an increase of $60 million.
Inventory used up $81 million in cash, compared to a release of $8 million in the previous year. The resulting $89 million shift was greater than the full drop in operating cash flow.
Toast reported inventory of $217 million on its balance sheet, up from $114 million as of the end of December.
Gomez attributed the softer cash conversion to “our strategic decision to acquire and hold more hardware inventory in the near term.” The management team anticipates stronger conversion in the second half. StockAnalysis
| Cash-conversion measure | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Operating cash flow | $144 million | $223 million | -$79 million |
| Inventory cash impact | -$81 million | +$8 million | -$89 million |
| Free cash flow | $130 million | $208 million | -$78 million |
| FCF/adjusted EBITDA | 59% | 129% | -70 percentage points |
Source: Toast; conversion rates computed.
The reported adjusted EBITDA factored in a $10 million tariff refund. Excluding this impact, the figure stands at approximately $211 million, which still reflects an increase of around 31%.
Adjusted EBITDA, calculated on the same basis, represented approximately 35.5% of recurring gross profit, up from 34.7% a year ago. This indicates that while there was underlying margin expansion, the improvement was moderate.
Toast increased its full-year recurring gross profit midpoint by $35 million and raised the adjusted EBITDA midpoint by $15 million. The company’s management put the tariff refund and other additional gains towards growth initiatives.
| Full-year 2026 outlook | Previous range | New range | Midpoint increase |
|---|---|---|---|
| Recurring gross profit | $2.290–$2.320 billion | $2.325–$2.355 billion | $35 million |
| Adjusted EBITDA | $790–$810 million | $805–$825 million | $15 million |
Source: Toast.
Toast IQ Grow may provide additional monetization opportunities. CEO Aman Narang described it as the “fastest-growing product we have ever launched.” According to Narang, it is set to hit $10 million in ARR more quickly than any other product released by Toast. StockAnalysis
As of the close on Tuesday, Toast shares were up approximately 4.6% across the past five sessions. Wednesday’s regular trading will mark the first entire session reacting to the results. Toast is also set to file its quarterly report after it releases earnings.
Risks: With GPV per location steady, expansion relies on acquiring new customers. Potential increases in hardware memory expenses and the timing of inventory could impact cash flow. Ongoing investments in growth might restrict immediate margin improvement. Credit-loss expense increased to $27 million from $18 million, though management noted defaults were still within anticipated levels.
The next important metric is cash conversion. Location expansion continues at a solid pace. Investors now seek proof that hardware investments generate ongoing profit rather than requiring additional cash.
