It has been about a month since the last earnings report for Toast (TOST Quick QuoteTOST - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Toast due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Toast Q2 Earnings Beat on ARR and Location Growth, Outlook Raised

Toast reported second-quarter 2026 earnings of 34 cents per share, beating the Zacks Consensus Estimate of 32 cents. Revenues rose 23.1% year over year to $1.91 billion and beat the consensus mark by $35.08 million, a 1.9% surprise.

Growth was led by subscription and financial technology solutions, supported by a larger location base and continued product adoption. Annualized recurring run-rate increased 25% to $2.41 billion, while Toast added a record 9,500 net locations.

Toast's Revenue Streams Deliver Broad-Based Growth

Subscription services revenues increased 27.8% year over year to $290 million. Financial technology solutions revenues rose 23% to $1.57 billion, while hardware and professional services revenues increased 2.1% to $48 million.

GAAP subscription and financial technology solutions gross profit advanced 30.9% to $585 million. On a non-GAAP basis, these recurring gross profit streams increased 28.2% to $595 million, reflecting growth in both software and payments economics.

Toast Expands Locations and Payment Volume

Total locations increased 22% year over year to approximately 180,000. Gross Payment Volume rose 22% to $60.7 billion, while GPV per location was flat. Management noted better-than-expected core GPV, helped by strong same-store sales trends and a modest World Cup benefit late in June.

SaaS ARR increased 27%, while payments ARR grew 23%. Total take rate reached 98 basis points, up 5 basis points year over year. Non-payments fintech solutions, led by Toast Capital, generated $57 million of gross profit and contributed 9 basis points to take rate.

Toast Advances AI and New Market Expansion

Toast IQ Grow, the company's digital marketing agent, is on track to become its fastest-growing product to $10 million in ARR. Management said early adoption has been strong, with the product already operating at positive margins and showing improving gross margins as it scales.

The company is also investing across enterprise, international and retail markets. ARR from these new total addressable markets is expected to nearly double to $200 million in 2026. Recent developments include Toast becoming an endorsed food and beverage vendor for Best Western, expanding its TGI Fridays relationship in the U.K. and launching initial fuel-payment deployments.

Toast Delivers Margin Gains Despite Higher Investment

Adjusted EBITDA increased 38% year over year to $221 million, and the margin expanded 240 basis points to 37%.

Sales and marketing expenses rose 22% on a non-GAAP basis as Toast added capacity across its core business and new markets. Research and development expenses increased 23%, reflecting investment in agentic AI, vertical-specific products and internal AI tools aimed at improving productivity.

Toast Maintains Liquidity While Repurchasing Shares

Free cash flow totaled $130 million, down from $208 million a year earlier, mainly because Toast chose to hold more hardware inventory. Net cash provided by operating activities was $144 million compared with $223 million in the prior-year quarter.

Cash and cash equivalents plus marketable securities totaled $1.71 billion as of June 30. Toast repurchased more than 19 million shares for $486 million through the first half of 2026, leaving approximately $100 million under its authorization.

Toast Raises Its 2026 Outlook

For the third quarter, Toast expects non-GAAP subscription services and financial technology solutions gross profit of $615-$625 million, representing 22%-24% year-over-year growth. Adjusted EBITDA is projected at $210-$220 million.

For 2026, recurring gross profit guidance was raised to $2,325-$2,355 million, implying 23%-25% growth compared with the prior 21%-23% outlook. Adjusted EBITDA guidance increased to $805-$825 million from $790-$810 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates review.

VGM Scores

Currently, Toast has a strong Growth Score of A, a score with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Toast has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.