# TOST — Toast, Inc.

## Company & Research Metadata

- **Company:** Toast, Inc.
- **Ticker:** TOST
- **Exchange:** NYSE
- **Sector / Industry:** Technology / restaurant software and payments
- **Template version:** 2.7
- **Research date:** 2026-10-21
- **Valuation / score price snapshot:** $33.53 — 2026-11-03 regular-session close, America/New_York
- **Tracking tier:** On the Radar
- **Owned:** No
- **Primary operating period reviewed:** Q2 2026
- **Historical period reviewed:** TTM, FY 2025, FY 2024; latest balance-sheet date shown below
- **Latest investor presentation reviewed:** Results release and associated financial tables; no separate slide deck materially used
- **Latest earnings call reviewed:** Q2 2026, complete material Q&A
- **Latest post-earnings management commentary reviewed:** No separate later management presentation incorporated

- **Price snapshot date:** 2026-11-03

- **Price snapshot time / timezone:** Regular-session close, America/New_York (including exchange half-days)
- **Competitor / analyst-Q&A audit:** 2026-10-28; original operating, price and valuation snapshots retained.

## What's Changed Since Previous Review

**Current Review:** 2026-10-28

**Previous Review:** 2026-10-21

**Update Trigger:** Competitor relevance and analyst-Q&A correction

| Area | Previous View | Current View | Investment Impact |
|---|---|---|---|
| Competition | Preceding operating and comparable-company classifications | Product/customer/geographic boundaries corrected; direct rivals separated from substitutes, partners and valuation anchors | Corrects the competitive comparison; does not by itself re-underwrite the valuation |
| Analyst questions | Prior source-linked Q&A summaries | Complete questions and sentence-form management answers; all 7 existing rows retained | Improves readability while preserving the recorded exchange meaning |
| Valuation and scores | Approved operating/price snapshots, scenarios, scores and decisions | Preserved | No price refresh, rerank or change to valuation assumptions in this correction pass |

**Thesis:** No new fundamental thesis determination is made in this correction pass. The prior investment decision is preserved; the corrected competitive scope should govern the next substantive review.

## Investment Snapshot

| Metric | Current View |
|---|---|
| Price Snapshot | $33.53 — 2026-11-03 regular-session close, America/New_York |
| Rating / Zone Status | Hold / Watch |
| Bear / Base / Bull Fair Value | $9.70 / $33.27 / $73.74 |
| Scenario Probabilities | 25% / 50% / 25% |
| Probability-Weighted Fair Value | $37.50 |
| Probability-Weighted Expected Return | +11.8% |
| Bear-Case Return | -71.1% |
| Strong Buy Zone | ≤ $10.67 |
| Buy Zone | >$10.67–$30.00 |
| Avoid Chasing Above | > $41.67 |
| Quality Score / Tier | 81.9 / Tier A |
| Opportunity Score / Rank | 59.4 / #24 of 76 |
| Risk Level | Medium |
| Tracking / Ownership | On the Radar / Not Owned |

**Decision rationale:** TOST is **Hold / Watch** at $32.65, with +14.9% probability-weighted upside and -70.3% bear-case return. An integrated restaurant platform can increase locations and products per customer while scaling operating costs. Confidence is 60/100 because the earnings conversion, competitive and capital assumptions below remain conditional.

## Investment Thesis

An integrated restaurant platform can increase locations and products per customer while scaling operating costs. Q2 locations grew 22% to approximately 180,000 and ARR 25% to $2.4 billion. The central question is whether profitable recurring gross profit continues to grow as the platform moves into larger customers and new markets. Gross payment revenue overstates retained economics and should not drive valuation alone.

### What the Market May Be Mispricing

| Debate | Research judgment |
|---|---|
| Net locations, retention and product attachment | An integrated restaurant platform can increase locations and products per customer while scaling operating costs. |
| Recurring gross profit per location | Net location additions, retention, gross profit per location, product attachment and acquisition payback drive returns. |
| Economic margins, hardware subsidies and dilution | Q2 recurring gross profit grew strongly and adjusted EBITDA reached $221 million. |

## Business Overview

Toast supplies restaurant point-of-sale hardware, cloud software, payment processing and related financial and operating services. Subscription and payment contribution recur with customer activity, while hardware helps acquire and retain locations. Its integrated workflow covers ordering, kitchen operations, payroll and marketing. Restaurant sales, closures and transaction volumes affect the business alongside software adoption.

### Business Takeaway

Toast supplies restaurant point-of-sale hardware, cloud software, payment processing and related financial and operating services. Net location additions, retention, gross profit per location, product attachment and acquisition payback drive returns.

## Industry, TAM & Market Share

Restaurant digitization and integrated payments support a substantial runway. Clover, Shift4, SpotOn and other platforms compete on price, service and workflow fit. International and enterprise markets have different implementation and sales economics from smaller U.S. restaurants.

### Market-Share Analysis

Comparable same-definition share data for the subject and its principal rivals were not established. TAM estimates and company-specific volume measures are not treated as directly comparable market shares. The positioning analysis below is more reliable than a table of unmatched percentages.

#### Competitive Scale / Position

| Company / Platform | Primary Position | Relative Scale | Growth Direction | Investment Relevance |
|---|---|---|---|---|
| SpotOn (private) | Direct: restaurant POS, operating software and payments | Product scope; no matched operating-scale series | Competes for restaurant locations | Customer choice in the stated segment only |
| Shift4 (FOUR) | Direct segment: SkyTab/restaurant payments | Product scope; no matched operating-scale series | Competes in restaurant processing/POS | Customer choice in the stated segment only |
| Fiserv — Clover (FI) | Direct segment: restaurant POS and acquiring | Product scope; no matched operating-scale series | Competes for restaurant operating relationships | Customer choice in the stated segment only |
| Block — Square | Direct segment: restaurant POS and payments | Product scope; no matched operating-scale series | Competes in overlapping restaurant segments | Customer choice in the stated segment only |

### Industry Takeaway

restaurants. The base case requires evidence of profitable adoption within that market.

## Customer Economics

Net location additions, retention, gross profit per location, product attachment and acquisition payback drive returns. Restaurant transaction volume contributes recurring payment profit, but customer churn and hardware subsidies matter. ARR is useful only when its definition is reconciled to subscription and payment economics.

### Customer-Economics Takeaway

The economic test is Economic margins, hardware subsidies and dilution. ARR is useful only when its definition is reconciled to subscription and payment economics.

## Competitive Landscape & Moat

### Competitive Landscape

Restaurant software, POS and integrated payments are the relevant markets. Shopify’s general merchant platform is removed as an unhelpful core restaurant peer.

| Competitor | Market Share | Positioning | Advantages vs. Company | Disadvantages vs. Company | Current Direction |
|---|---|---|---|---|---|
| SpotOn (private) | No consistent comparable series | Direct: restaurant POS, operating software and payments | Integrated restaurant workflow proposition | Different distribution and product packaging | Competes for restaurant locations |
| Shift4 (FOUR) | No consistent comparable series | Direct segment: SkyTab/restaurant payments | Vertical payment integrations | Broader hotel/venue/international mix differs | Competes in restaurant processing/POS |
| Fiserv — Clover (FI) | No consistent comparable series | Direct segment: restaurant POS and acquiring | Merchant/bank distribution | Different software depth and merchant mix | Competes for restaurant operating relationships |
| Block — Square | No consistent comparable series | Direct segment: restaurant POS and payments | SMB merchant distribution and simple onboarding | Customer-size and operating-software needs differ | Competes in overlapping restaurant segments |

### Moat Assessment

Workflow integration, restaurant-specific products and payment processing create meaningful switching costs. The moat strengthens with customer breadth and reliable operations, while competitive pricing and restaurant failures remain constraints.

**Moat direction:** Strengthening — an analytical judgment about product and distribution economics, not a measured market-share claim.

### Competitive Takeaway

Workflow integration, restaurant-specific products and payment processing create meaningful switching costs. The direct rivals determine commercial pressure; diversified or sector anchors provide valuation context and are not substitutes for direct competition.

## Financial Profile

### Historical Financials

Financial reporting periods follow the issuer's fiscal year: completed FY rows plus standalone current-year quarters and cumulative H1/9M for FY2026. Revenue, FCF and SBC are flows; cash is a period-end balance. FCF = operating cash flow minus property/equipment capex from SEC company facts; quarterly FCF after Q1 and any quarterly SBC derived from YTD are visibly marked. Missing values are N/D, not zero. Unit: USD millions. Data extracted from SEC-tagged filings as of 2026-11-07. Company-specific FCF definitions and acquisition effects may require further reconciliation.

| Period | Revenue | Growth | Gross Margin | Operating Margin | FCF | FCF Margin | SBC | Diluted Shares | Cash | Debt |
|---|---:|---:|---:|---:|---:|---:|---:|---:|---:|---:|
| FY2024 | 4,960 | 28.33% | 24.09% | 1.35% | 306 | 6.17% | 253 | 591 | 1,417 | 24 |
| FY2025 | 6,153 | 24.05% | 25.97% | 4.96% | 608 | 9.88% | 242 | 607 | 1,991 | 20 |
| Q1 FY2026 | $1,630 | N/D | 27.4% | 6.7% | $115 (derived: CFO - capex) | 7.1% | $54 | 602 | $1,098 | N/D |
| Q2 FY2026 | $1,908 | N/D | 27.0% | 8.0% | $130 (derived: current YTD - prior YTD) | 6.8% | $55 (derived: current YTD - prior YTD) | 590 | $1,015 | N/D |
| H1 FY2026 | $3,538 | N/D | 27.2% | 7.4% | $245 (derived: CFO - capex) | 6.9% | $109 | 596 | $1,015 | N/D |
| Q3 FY2026 | $1,981 | N/D | 27.4% | 8.3% | $181 (derived: current YTD - prior YTD) | 9.1% | $49 (derived: current YTD - prior YTD) | 592 | $1,203 | N/D |
| 9M FY2026 | $5,519 | N/D | 27.3% | 7.7% | $426 (derived: CFO - capex) | 7.7% | $158 | 595 | $1,203 | N/D |

### Financial Takeaways

Q2 recurring gross profit grew strongly and adjusted EBITDA reached $221 million. TTM FCF was about $576 million versus SBC of $231 million. The model uses sustainable economic EPS after compensation, hardware acquisition costs and continuing reinvestment. Share repurchases should be evaluated against net diluted-share changes.

**Financial direction:** Improving — assess the reported trend alongside dilution and the balance sheet.

## Management & Capital Allocation

Management has improved operating discipline while expanding locations. Capital allocation should preserve customer service and product quality as enterprise and international efforts grow. Monitor contribution per location and sales efficiency rather than rewarding location growth without profitability.

### Management Takeaway

Monitor contribution per location and sales efficiency rather than rewarding location growth without profitability.

## Valuation

### Current Valuation

| Metric | Value |
|---|---|
| Price Snapshot | $33.53 — 2026-11-03 regular-session close, America/New_York |
| Market Capitalization | $18.87B |
| Enterprise Value | $17.16B |
| Trailing P/E | 41.62 |
| Provider forward P/E | 20.96 |
| EV / Sales | 2.52 |

### Comparable Company Analysis

| Company | Relevance | Public / Private | Forward P/E | EV / Sales | Growth / Margin / Risk Context |
|---|---|---|---|---|---|
| TOST — Toast, Inc. | Subject company | Public | 20.96 | 2.52 | restaurant software and payments; 3Y revenue-growth estimate 19.03%; operating margin 6.26% |
| SpotOn | Direct operating competitor / substitute | Private | N/A | N/A | direct restaurant operating software and payments; no compatible standalone public multiple used |
| FOUR — Shift4 Payments, Inc. | Direct restaurant segment; diversified vertical payments group | Public | 7.43 | N/A — financial / share-class mismatch | integrated payments; 3Y revenue-growth estimate 15.92%; operating margin 8.64% |
| FI — Fiserv | Direct Clover acquiring/POS segment; consolidated parent multiple | Public | 6.58 | 2.54 | merchant acquiring and Clover point of sale; 3Y revenue-growth estimate -0.43%; operating margin 21.41% |
| Block — Square | Direct segment: restaurant POS and payments | Operating product / listed parent | N/D — no matched snapshot collected | N/D — no matched snapshot collected | Competes in overlapping restaurant segments |

**Comparable takeaway:** Restaurant software, POS and integrated payments are the relevant markets. Shopify’s general merchant platform is removed as an unhelpful core restaurant peer. Quoted multiples retain their original dated snapshot; missing matched multiples are not estimated. Consolidated parent multiples do not isolate the competing product. No mechanical peer average is used.

The base terminal P/E is 30×, versus the provider's current forward P/E of 20.96×. Holding that quoted multiple constant on this model's 2029 EPS gives an illustrative present value of **$23.24**, versus the central base FV of **$33.27**. Earnings definitions differ, so this is a sensitivity check; it makes the dependence on a rerating or derating explicit.

### Valuation Scenarios

| Scenario | Key Assumptions | Fair Value | Probability | Probability Rationale | Return From Price Snapshot |
|---|---|---|---|---|---|
| Bear | 3Y revenue CAGR 12%; sustainable 2029 EPS $0.70 after compensation; 20× P/E; 13% discount rate; Restaurant and pricing pressure limit 2029 economic EPS to $0.70. | $9.70 | 25% | Execution, financing or competitive setbacks remain credible | -71.1% |
| Base | 3Y revenue CAGR 23%; sustainable 2029 EPS $1.60 after compensation; 30× P/E; 13% discount rate; Location growth and operating leverage produce $1.60 of 2029 economic EPS. | $33.27 | 50% | Most likely operating trajectory, requiring measurable progress | -0.8% |
| Bull | 3Y revenue CAGR 33%; sustainable 2029 EPS $2.80 after compensation; 38× P/E; 13% discount rate; Strong platform adoption and efficient expansion produce $2.80 of 2029 economic EPS. | $73.74 | 25% | Successful product conversion and operating leverage; not assured | +119.9% |
| **Probability-Weighted** | Sum of each scenario value × its probability | $37.50 | **100%** | Judgmental scenario probabilities | +11.8% |

### Valuation Takeaway

- **Primary valuation method:** Present value of sustainable 2029 equity earnings × scenario P/E, plus assumed interim dividends. The three-year discount horizon approximates late-2029 earning power.
- **Cross-check methods:** Direct competition, quoted peer multiples, current cash conversion, and the separate revenue/share/net-margin bridge in [the valuation workpaper](../valuation/watchlist_models_2026-10-21.md).
- **Key valuation dependencies:** Net locations, retention and product attachment; Recurring gross profit per location; Economic margins, hardware subsidies and dilution. All forward figures are independent research assumptions, not company guidance or consensus.
- **Valuation confidence / Risk Level:** 60/100 / Medium. Scenario values are sensitive to sustainable earnings and terminal multiples.
- **Margin-of-safety conclusion:** Hold / Watch at $32.65. New-file boundaries use Strong Buy = min(P/W FV ÷ 1.5, 1.1 × bear FV), Buy upper = P/W FV ÷ 1.25, Avoid above = P/W FV ÷ 0.90. Returns are to present fair value, not annualized returns or price targets for a particular date.

## Analyst Questions

The table consolidates related questions and follow-ups from each material participant in the complete call.

| Analyst / Firm | Core Question | Management Response | Research Read-Through |
|---|---|---|---|
| Tim Chiodo / UBS | What work can the AI labor tools perform for restaurants? | Management said it aims to perform work for customers beyond supplying software. | Confirm that this opportunity converts into profitable recurring demand. |
| Harshita Rawat / Bernstein | How are conversion and margins prioritized for AI products? | Management said product fit comes before economic optimization. | Require durable cash conversion after compensation and ongoing investment. |
| Darrin Peller / Managing Director, Wolfe | What supports location wins against competitors? | Management said the broader restaurant value proposition supports wins. | Stress monetization if competition or mix reduces economic yield. |
| Stephen Sheldon / William Blair | How is the Grow offering progressing economically? | Management said the early offering is already contribution-positive. | Confirm that this opportunity converts into profitable recurring demand. |
| Dan Dolev / Mizuho | When will hardware-charge benefits appear in results? | Management said inventory accounting delays the benefits. | Confirm that this opportunity converts into profitable recurring demand. |
| Adam Frisch / Evercore | How are investments in new markets funded? | Management said profits from the core business fund new markets. | Confirm that this opportunity converts into profitable recurring demand. |
| Tien-tsin Huang / JPMorgan | How do sales-capacity investment and the refund affect spending? | Management said it is reinvesting to accelerate penetration. | Confirm that this opportunity converts into profitable recurring demand. |

### Analyst-Q&A Takeaway

Restaurant additions and early AI contribution support expansion. Hardware accounting and reinvestment delay some profit benefits, making recurring gross profit and durable location economics the cleanest tests.

## Thesis Monitoring

| Driver | Current State | Positive Trigger / Catalyst | Negative Trigger / Falsifier | What It Changes |
|---|---|---|---|---|
| Net locations, retention and product attachment | An integrated restaurant platform can increase locations and products per customer while scaling operating costs. | Revenue trajectory sustains approximately 23% annual growth on a comparable basis | Growth remains below the 12% bear assumption over a full operating cycle | Revenue outlook and scenario probabilities |
| Recurring gross profit per location | Net location additions, retention, gross profit per location, product attachment and acquisition payback drive returns. | After-cost earnings progress toward the base implied net margin of 7.7% | Competition, credit losses or service costs make that margin trajectory unattainable | Margins, moat score and valuation multiple |
| Economic margins, hardware subsidies and dilution | Q2 recurring gross profit grew strongly and adjusted EBITDA reached $221 million. | Financing and compensation remain consistent with 609.8M economic shares in the 2029 base case | Required capital or cumulative dilution materially exceeds the model without matching earnings | Financial score, confidence and downside value |

## Quality & Opportunity Scorecards

### Quality Score

| Component | Score | Weight | Weighted Contribution | Evidence |
|---|---|---|---|---|
| Business durability and economics | 84 | 25% | 21.0 | Net location additions, retention, gross profit per location, product attachment and acquisition payback drive returns. |
| Moat and competitive position | 82 | 25% | 20.5 | Workflow integration, restaurant-specific products and payment processing create meaningful switching costs. |
| Growth runway and durability | 87 | 20% | 17.4 | Restaurant digitization and integrated payments support a substantial runway. |
| Financial quality and balance sheet | 77 | 15% | 11.5 | Q2 recurring gross profit grew strongly and adjusted EBITDA reached $221 million. |
| Management, governance and capital allocation | 76 | 15% | 11.4 | Management has improved operating discipline while expanding locations. |
| **Quality Score** | **81.9** | **100%** | **81.9** | Weighted score, independent of ownership and current price |

- **Quality Tier:** A
- **Speculative override:** None

### Opportunity Score

| Component | Raw Input | Normalized Score | Weight | Weighted Contribution |
|---|---|---|---|---|
| Quality | 81.9 | 81.9 | 30% | 24.6 |
| Probability-weighted upside | +11.8% | 73.7 | 35% | 25.8 |
| Bear-case downside | -71.1% | 0.0 | 20% | 0.0 |
| Risk / valuation confidence | 60 | 60.0 | 15% | 9.0 |
| **Opportunity Score** |  | **59.4** | **100%** | **59.4** |

- **Opportunity Rank:** #24 of 76
- **Zone Status:** Hold / Watch

## Portfolio Context

- **Tracking tier:** On the Radar
- **Owned:** No
- **Tracking source of truth:** `ontheradar.md`
- **Portfolio source of truth:** `portfolio/holdings.md`
- **Scoring independence:** Ownership, account, shares, position size and cost basis do not change research, valuation, Quality, Opportunity, rank or zones.

## Investment Decision History

| Timestamp | Price | Rating | Zone Status | Buy Zone | Strong Buy Zone | Avoid Chasing Above | Base FV | P/W FV | P/W Return | Quality | Opportunity / Rank | Change / Rationale |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2026-10-21 (America/New_York) | $32.65 | Hold / Watch | Hold / Watch | >$10.67–$30.00 | ≤ $10.67 | > $41.67 | $33.27 | $37.50 | +14.9% | 81.9 | 61.5 / #21 | Initial missing-file analysis; common-universe ranking; independent scenario assumptions |

---

## Material Sources

| Source | Type | Date / Period | What It Supports |
|---|---|---|---|
| [www.sec.gov](https://www.sec.gov/Archives/edgar/data/1650164/000165016426000162/tost-20260630xexhibit991.htm) | Company IR / earnings filing | Q2 2026 | Latest operating results, guidance, products and financial supplement |
| [TOST complete earnings-call transcript](https://stockanalysis.com/stocks/tost/transcripts/662697-q2-2026/) | Transcript | Q2 2026 | Prepared remarks and all material Q&A exchanges |
| [TOST regular-session historical price](https://stockanalysis.com/stocks/tost/history/) | Market data | 2026-10-20 close | Common price used in returns, scores and zones |
| [TOST valuation statistics](https://stockanalysis.com/stocks/tost/statistics/) | Market data | 2026-10-20 close; ratios retrieved 2026-10-21 | Market capitalization, shares, quoted multiples and current ratios |
| [TOST historical income statement](https://stockanalysis.com/stocks/tost/financials/income-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical income statement; source-native currency and definitions |
| [TOST historical balance sheet](https://stockanalysis.com/stocks/tost/financials/balance-sheet/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical balance sheet; source-native currency and definitions |
| [TOST historical cash flows](https://stockanalysis.com/stocks/tost/financials/cash-flow-statement/) | Standardized financial statements | Latest reported period and two preceding fiscal years | Historical cash flows; source-native currency and definitions |
| [Shift4 Payments, Inc. statistics](https://stockanalysis.com/stocks/four/statistics/) | Comparable-company market data | 2026-10-20 regular close | Peer multiples and financial context; public quote basis |
| [Fiserv statistics](https://stockanalysis.com/stocks/fi/statistics/) | Comparable-company market data | 2026-10-20 regular close | Peer multiples and financial context; public quote basis |
| [Clover restaurant POS](https://www.clover.com/pos-solutions/restaurant) | Regulatory filing / primary product evidence | Current product page; checked 2026-10-28 | Specific restaurant POS/payments overlap |
| [SEC XBRL company facts — TOST](https://data.sec.gov/api/xbrl/companyfacts/CIK0001650164.json) | Regulatory filing (as tagged) | FY2026, through 2026-09-30 | Current-year standalone-quarter and year-to-date source facts for FCF, SBC, revenue and other reported metrics |