Business Context and Reporting Period
Company: Toast, Inc. (TOST)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 2026
Business Overview: Toast operates a global technology platform for restaurant and retail businesses, integrating software, agentic AI, payments, financial technology solutions, and hardware. As of June 30, 2026, the company served approximately 180,000 live locations, representing a 22% year-over-year increase.
Key Financial Metrics
| Metric (in millions) | Q2 2026 | Q2 2025 | 6 Months 2026 | 6 Months 2025 |
|---|---|---|---|---|
| Total Revenue | $1,908 | $1,550 | $3,538 | $2,887 |
| Gross Profit | $516 | $392 | $963 | $738 |
| Operating Income | $152 | $80 | $262 | $123 |
| Net Income | $154 | $80 | $280 | $136 |
| Diluted EPS | $0.26 | $0.13 | $0.46 | $0.23 |
| Adjusted EBITDA | $221 | $161 | $400 | $294 |
| Free Cash Flow (6mo) | $245 (2026) vs $277 (2025) | |||
| Cash & Equivalents | $1,015 (as of June 30, 2026) | |||
| Marketable Securities | $698 (as of June 30, 2026) |
Key Operational Metrics:
- Gross Payment Volume (GPV): $60.7 billion for Q2 2026 (22% YoY growth).
- Annualized Recurring Run-Rate (ARR): $2,409 million as of June 30, 2026 (25% YoY growth).
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 23% year-over-year for both the quarter and six-month periods, driven primarily by Financial Technology Solutions (up 23%) and Subscription Services (up 28%).
- Profitability Expansion: Operating income more than doubled to $152 million in Q2 2026 from $80 million in Q2 2025. Net income similarly increased to $154 million from $80 million.
- Cost Structure: Costs of revenue increased 20% YoY, largely due to higher transaction volumes in financial technology solutions, partially offset by a one-time $10 million benefit from tariff refunds.
- Share Repurchases: The company significantly increased capital return to shareholders, repurchasing $486 million of Class A common stock in the first six months of 2026, compared to $31 million in the same period in 2025.
- Inventory Build: Inventories increased to $217 million from $114 million at year-end 2025, contributing to a decrease in operating cash flow relative to net income.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary & Outlook:
Management highlighted strong growth in live locations and GPV. The company expects financial technology solutions revenue to remain a significant proportion of the revenue mix, subject to seasonality (typically stronger in Q2 and Q3). No specific forward-looking financial guidance for the full year 2026 was provided in this text, though management expressed confidence in liquidity sufficiency for the next 12 months.
Risks and Contingencies:
- FTC Investigation: The company is cooperating with the Federal Trade Commission regarding a Civil Investigative Demand received in June 2025 concerning its restaurant operating systems and customer-service offerings. A draft complaint and proposed settlement order were received in June 2026. The company strongly disagrees with the challenges and is prepared to litigate. The potential financial impact is currently indeterminable.
- Regulatory & Economic: Risks include potential tariffs, inflation, interest rate fluctuations, and geopolitical events that could impact consumer spending and restaurant operations.
Unusual Items:
- Tariff Refunds: A one-time benefit of approximately $10 million related to tariff refunds reduced costs of revenue in the period.
- Warrant Liability: A $7 million gain was recorded due to a decrease in the fair value of the warrant liability.
Investor Verification Checklist
- FTC Settlement Status: Verify the outcome of the ongoing discussions with the FTC and any potential financial penalties or operational restrictions resulting from the draft complaint.
- Inventory Turnover: Monitor the $103 million increase in inventory over the six-month period to ensure it aligns with sales velocity and does not indicate obsolescence or overstocking.
- Share Repurchase Runway: Confirm the remaining $100 million authorization under the share repurchase program and the company's intent to utilize it given the aggressive pace of buybacks in H1 2026.
- GPV vs. Revenue Correlation: Validate that the 22% growth in Gross Payment Volume continues to translate proportionally into Financial Technology Solutions revenue in subsequent quarters.
- Valuation Allowance: Review the status of the full valuation allowance against U.S. net deferred tax assets, as a release of this allowance could materially impact future effective tax rates.