Toast Inc. shares dropped 9 per cent despite reporting better-than-expected revenue and raising its full-year outlook, as investors reacted to a shortfall in second-quarter earnings. The restaurant technology company delivered solid top-line growth and expanded its customer base, but the earnings miss appeared to weigh on market sentiment.
Revenue for the second quarter came in at $1.55 billion, slightly ahead of Wall Street expectations of $1.52 billion and up 25 per cent from the prior year. However, adjusted earnings per share were just 13 cents, missing the consensus estimate of 22 cents. While the company showed strong operational growth, the profit miss suggested rising costs or margin pressures that caught investor attention.
Toast added a record 8,500 net new restaurant locations in the quarter, bringing its total to approximately 148,000. That’s a 24 per cent increase from last year. Gross payment volume also rose 23 per cent year-over-year to $49.9 billion, and its annualised recurring revenue run-rate grew 31 per cent to $1.9 billion. These metrics show Toast is expanding at a healthy pace and deepening its footprint in the restaurant tech market.
CEO Aman Narang highlighted the company’s performance, noting strong recurring gross profit growth of 35 per cent and scaled adjusted EBITDA of $161 million. Management expressed confidence in the business trajectory, pointing to sustained customer acquisition and improved financial discipline.
Toast raised its full-year guidance as a result. It now expects gross profit from subscription and financial technology services to be between $1.815 and $1.835 billion, representing 28 to 29 per cent growth compared to its previous projection of 25 to 27 per cent. Adjusted EBITDA guidance was also raised to a range of $565 to $585 million from a prior estimate of $540 to $560 million.
For the third quarter, Toast anticipates gross profit from its core services to land between $465 and $475 million, with adjusted EBITDA forecasted between $140 and $150 million. The company also announced a strategic partnership with American Express, aimed at improving personalised hospitality and helping restaurants drive customer traffic.
Despite all the positive momentum, the earnings miss likely triggered short-term caution among investors. It reflects the market’s high expectations for growth companies like Toast, where even small profit misses can lead to stock pullbacks. However, the strong guidance and continued expansion suggest that the long-term outlook remains promising.