Summary
Toast delivered a sharply more profitable second quarter of 2026. Revenue rose 23.1% to $1.91 billion. Gross profit climbed 31.6% to $516 million. Operating income reached $152 million, up 90.0%. Net income was $154 million, up 92.5%. Diluted earnings per share came in at $0.26, up 100.0%. Gross margin expanded 1.8 percentage points to 27.0%. Operating margin expanded 2.8 percentage points to 8.0%. On a year-to-date basis, revenue was $3.54 billion, up 22.5%, gross profit was $963 million, up 30.5%, operating income was $262 million, up 113.0%, and net income was $280 million, up 105.9%.
The operational story centered on scale. Annualized recurring run-rate grew 25% to $2.4 billion as of June 30, 2026. Total Locations increased 22% year over year to approximately 180,000. Toast added about 9,500 net new Locations in the quarter, which the press release called a record. Gross Payment Volume rose 22% year over year to $60.7 billion. Non-GAAP subscription services and financial technology solutions gross profit grew 28% year over year to $595 million. Adjusted EBITDA was $221 million, compared with $161 million in the prior-year quarter, and included a one-time benefit of approximately $10 million from tariff refunds. CEO Aman Narang pointed to a breadth of new customers, including BWH Hotels, Kung Fu Tea, and an expanded TGI Fridays partnership in the United Kingdom. Toast IQ Grow is the fastest-growing new offering the company has launched, and Toast Lab is a new initiative to co-develop and test technology with a Greater Boston restaurant operator. The MD&A noted that Toast processed $215 billion in gross payment volume over the trailing 12 months.
Cash generation softened even as earnings rose. Net cash provided by operating activities was $144 million in the quarter, down 35.4% from the prior-year quarter. Free cash flow was $130 million, compared with $208 million in the prior-year quarter. Capital expenditures were $14 million in the quarter, down 6.7%, and $31 million year to date, up 24.0%. For the first half, management attributed the decrease in net cash provided by operating activities to working capital changes, mainly higher inventory purchases, partly offset by higher net income. Deferred revenue was $77 million, up 18.5%, and remaining performance obligations were $1.11 billion, up 21.8%. Toast repurchased stock under its program and had approximately $100 million remaining authorized as of June 30, 2026.
Guidance points to continued growth but at a measured pace. For the third quarter ending September 30, 2026, Toast expects non-GAAP subscription services and financial technology solutions gross profit of $615 million to $625 million, or 22% to 24% growth compared to Q3 2025, and Adjusted EBITDA of $210 million to $220 million. For the full year ending December 31, 2026, the company expects non-GAAP subscription services and financial technology solutions gross profit of $2,325 million to $2,355 million, or 23% to 25% growth compared to 2025, up from its previously guided growth range. Full-year Adjusted EBITDA guidance is $805 million to $825 million, up from $790 million to $810 million. The outlook reflects a decision to reinvest the $10 million tariff refund received in the second quarter. Risks include seasonality in financial technology solutions revenue, tariffs and geopolitical events that may influence consumer spending or restaurant operations, and the inherent difficulty of forecasting items such as the change in fair value of the warrant liability and stock-based compensation for forward-looking non-GAAP reconciliations. Toast also notes that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.91B | $1.63B | +17.1% | $1.55B | +23.1% |
| Gross profit | $516.0M | $447.0M | +15.4% | $392.0M | +31.6% |
| Gross margin | 27.0% | 27.4% | -0.4 pp | 25.3% | +1.8 pp |
| Research & development | $109.0M | $97.0M | +12.4% | $91.0M | +19.8% |
| Sales & marketing | $166.0M | $156.0M | +6.4% | $141.0M | +17.7% |
| General & administrative | $89.0M | $84.0M | +6.0% | $79.0M | +12.7% |
| Total operating expenses | $364.0M | $337.0M | +8.0% | $312.0M | +16.7% |
| Operating income (loss) | $152.0M | $110.0M | +38.2% | $80.0M | +90.0% |
| Operating margin | 8.0% | 6.8% | +1.2 pp | 5.2% | +2.8 pp |
| Net income (loss) | $154.0M | $126.0M | +22.2% | $80.0M | +92.5% |
| Net margin | 8.1% | 7.7% | +0.3 pp | 5.2% | +2.9 pp |
| Diluted EPS | $0.26 | $0.20 | +$0.06 | $0.13 | +$0.13 |
Risks
MD&A flags that global financial, economic, and political events, including tariffs, may influence consumer spending or restaurant operations, and states there is uncertainty as to when specific tariffs may go into effect and what impact higher tariffs may have on consumer demand. Roughly 82% of current quarter revenue ($1,570 million of $1,908 million) came from financial technology solutions tied directly to customer payment volumes, leaving results exposed to any softening in diner spending.
Toast states that financial technology solutions revenue per Toast Processing Location has historically been stronger in the second and third quarters, driven by warmer-month customer sales, and that seasonality will continue to impact results of operations. This concentrates revenue and margin performance in specific quarters and makes period-over-period comparisons sensitive to timing.
Operating cash flow fell to $144 million in FY2026 Q2, down 35.4% versus the prior-year quarter, and to $276 million year to date, down 8.6%, which MD&A attributes primarily to higher inventory purchases and net working capital changes. Free cash flow declined to $245 million for the six months ended June 30, 2026 from $277 million a year earlier, and net cash used in financing activities was $412 million, driven by share repurchases of $486 million in the first half, leaving only approximately $100 million authorized under the repurchase program.
Revenue remains heavily concentrated in financial technology solutions, which grew 23% to $1,570 million in the current quarter while hardware and professional services was roughly flat at $48 million and declined 6% on a year-to-date basis. Growth is attributed to a higher number of Locations on the Toast platform and continued product adoption, so any slowdown in location additions or attach of payments would disproportionately affect total revenue.
MD&A cautions that Annualized Recurring Run-Rate, which reached $2,409 million as of June 30, 2026, up 25% compared to one year ago, may decline or fluctuate due to customer satisfaction, pricing, competitive offerings, economic conditions, or changes in customer and guest spending levels, and is not a forecast of future revenue.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Total Locations
Net New Locations
Payments Annualized Recurring Run-Rate
Subscription Annualized Recurring Run-Rate
Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit
Total Annualized Recurring Run-Rate (ARR)
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.