Toast, Inc. (TOST Quick QuoteTOST - Free Report) emphasized expanding profitability, artificial intelligence adoption and investments in new markets during its third-quarter 2026 earnings call. Management raised its full-year outlook while outlining growth opportunities beyond its core restaurant business.

The discussion also addressed 2027 margin expectations, consumer spending trends, regulatory scrutiny and the company's leadership transition.

TOST Raises Full-Year Outlook Amid Strong Growth

Toast raised its 2026 recurring gross profit growth outlook to 26% from the previous 23-25% projection. Adjusted EBITDA guidance increased to $840-$850 million from $805-$825 million.

For the fourth quarter, management expects non-GAAP subscription and fintech gross profit of $610-$620 million, representing 22-24% year-over-year growth. Adjusted EBITDA is projected at $200-$210 million.

President and CFO Elena Gomez attributed the improved outlook to strong execution and operating leverage. Quarterly revenues increased to $1.98 billion, surpassing the Zacks Consensus Estimate of $1.96 billion. Earnings of 37 cents per share matched the Zacks Consensus Estimate.

Toast, Inc. Price, Consensus and EPS Surprise

Toast, Inc. price-consensus-eps-surprise-chart | Toast, Inc. Quote

Toast Signals Modest Margin Expansion in 2027

Incoming CFO Michael Senno told analysts that Toast remains confident in its framework for recurring gross profit growth exceeding 20% in 2027. Formal guidance will follow during February's earnings call.

Responding to a Jefferies analyst, Senno indicated that adjusted EBITDA margins should improve only modestly next year as the company increases investment in emerging opportunities.

He explained that core-business margins already exceed 40%, providing capacity to finance expansion. Management intends to prioritize investments offering attractive long-term returns rather than maximize near-term profitability.

TOST Expands AI-Driven Restaurant Solutions

CEO Aman Narang highlighted Toast IQ Grow and Toast IQ Team as central to the company's transition toward an AI-powered operating platform.

Toast IQ Grow introduces SEO, reviews and promotional agents designed to strengthen customer acquisition and retention. Narang said the product remains Toast's fastest-growing offering and is on track to reach $10 million in annual recurring revenue by year-end.

Toast IQ Team focuses on labor management through automated scheduling and forecasting. Management reported that restaurants using Scheduling Pro averaged 41% fewer overtime hours per employee. During the Q&A session, Narang emphasized early customer adoption and opportunities to automate additional back-office workflows.

Toast Accelerates Expansion Into New Markets

Toast added approximately 8,500 net new locations during the quarter, bringing its total footprint to approximately 189,000 locations, up 21% year over year.

Narang said enterprise, international and retail operations are scaling toward $200 million in combined ARR within approximately four years. These newer markets are on track to double ARR for the second consecutive year.

Enterprise momentum includes Bagel Brands' planned rollout across 800 locations. International expansion includes Quebec and Australian restaurants, while the new Toast Fuel offering extends the platform into convenience retail.

Gomez said the company targets customer acquisition payback periods of 20 months or less in newer markets, supported by improving sales productivity and greater platform efficiencies.

TOST Addresses Consumer Demand and Operating Costs

During the Q&A session, a JPMorgan analyst questioned consumer spending trends. Senno reported stable gross payment volume per location entering the fourth quarter, with core-location spending slightly higher year over year for most of 2026.

Gomez highlighted improving subscription profitability, including 320 basis points of year-over-year SaaS gross margin expansion. AI-enabled customer support contributed to these efficiencies.

An Evercore analyst also questioned restructuring and lending activity. Gomez described the $6 million severance charge as part of resource optimization and said Toast Capital's balance-sheet lending provides stronger economics while maintaining its existing risk approach.

Toast Responds to Regulatory Scrutiny

During the Q&A session, a Wells Fargo analyst raised questions about the Federal Trade Commission's lawsuit concerning Toast's contracting practices.

Narang expressed disappointment with the lawsuit and defended the company's contractual approach. He maintained that the regulatory interpretation underlying the action could have broader implications for business-to-business contracts.

Management also addressed hardware memory costs. Gomez said mitigation initiatives, including alternative components and purchasing strategies, had improved expected cost impacts for 2026 and 2027.

TOST Maintains Focus on Long-Term Execution

Management's overarching message centered on reinvesting core-business profitability into AI capabilities and newer markets while preserving capital allocation discipline.

Gomez will step down at year-end, with Senno assuming the CFO position on Jan. 1, 2027. Executives emphasized continuity in financial strategy and investment priorities.

What Zacks Rank and Style Scores Indicate for TOST

Toast currently carries a Zacks Rank #3 (Hold), reflecting a neutral near-term outlook. Its Growth Score of A highlights favorable growth characteristics, while its Value Score of C indicates a more balanced valuation profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Momentum Score of D points to weaker price-momentum characteristics, while the VGM Score of B reflects favorable combined value, growth and momentum characteristics. The Zacks Rank can change as analysts revise earnings estimates following the latest results.