Toast, Inc.

Q3 reported recurring gross profit growth of 27% year over year, ARR growth of 24%, adjusted EBITDA of $240 million, GAAP operating income of $165 million, and GAAP diluted EPS of $0.29 versus $0.16 a year ago. The company ended the quarter with approximately 189,000 locations, up 21%, and GPV reached $62 billion, up 20%. Total take rate was 104 basis points, up 6 basis points year over year; payments take rate was 50 basis points, up 1 basis point; fintech net take rate was 61 basis points. Free cash flow was $181 million, a 75% conversion from adjusted EBITDA. For Q4, Toast expects subscription and fintech gross profit growth of 22% to 24% year over year and adjusted EBITDA of $200 million to $210 million. For full year, management raised guidance to 26% recurring gross profit growth and adjusted EBITDA of $840 million to $850 million.

Aman Narang framed the quarter as proof that Toast’s core growth algorithm is working and said the company is evolving from software tools to an agentic platform that does work for restaurants. He emphasized three priorities: expand what Toast can do with AI, expand the markets served, and use AI to improve how Toast works internally. His tone was confident and expansive, highlighting share gains, new brand wins, and a long runway across core and Horizon 2 markets.

Elena Gomez focused on the financial execution: ARR up 24%, recurring gross profit up 27%, adjusted EBITDA up 36% to $240 million, and GAAP operating income nearly doubling to $165 million. She said SaaS ARR grew 28% and SaaS gross margin expanded 320 basis points, helped by AI handling more support tickets; payments ARR and fintech gross profit both rose 21%, with GPV up 20% to $62 billion. She also noted free cash flow of $181 million and said conversion was lower because Toast intentionally held more hardware inventory, but expected conversion to improve in Q4. On capital allocation, she pointed to disciplined investment, hardware mitigation steps, and Toast Capital growth, including better economics from holding loans on balance sheet while most originations still flow through CRT.

Analysts focused on adoption and ROI for Toast IQ, the outlook for 2027, hardware memory costs, the FTC lawsuit, Toast Capital funding strategy, consumer spending trends, and competitive durability. Management said IQ Grow and IQ Team are seeing early but strong traction, with monthly active users rising and IQ Grow showing measured sales lift versus a control sample, while IQ Team has already reduced overtime hours by 41% for Scheduling Pro users. On 2027, Michael Senno said formal guidance will come on the February call, but he expects Toast to continue its current growth algorithm and said margin progression next year should be modest because the company wants flexibility to invest. On the FTC suit, Aman Narang said Toast is disappointed, believes the ROSCA theory is unprecedented in B2B custom contracts, and is prepared to defend its practices.