Toast, Inc. Q3 FY2025 earnings

Toast's fiscal 2025 third quarter showed broad GAAP profitability gains. Revenue was $1.63 billion, up 25.1% year over year. Gross profit rose 34.2% to $432 million. Gross margin expanded to 26.5%, up 1.8 percentage points. Operating income reached $84 million, up 147.1%. Net income was $105 million, up 87.5%. Diluted earnings per share came in at $0.16, up 128.6%. Operating margin improved to 5.1%, up 2.5 percentage points. On a year-to-date basis, revenue was $4.52 billion, up 24.8%. Year-to-date net income was $241 million, a swing to a profit from a prior-year loss. Year-to-date operating income was $207 million, also a swing to a profit. Diluted EPS for the nine months was $0.39, up from a loss per share a year earlier. Year-to-date gross margin was 25.9%, up 2.2 percentage points, and year-to-date operating margin was 4.6%, up 5.0 percentage points.

The quarter's operating scale metrics kept growing. Annualized recurring run-rate crossed $2.0 billion as of September 30, 2025, up 30% year over year. Gross payment volume rose 24% to $51.5 billion. Toast ended the quarter with approximately 156,000 locations, up 23%, after adding about 7,500 net new locations. Adjusted EBITDA was $176 million, compared with $113 million in the prior-year quarter. Non-GAAP subscription services and financial technology solutions gross profit was $506 million, up 34% from $378 million. Cash generation also strengthened. Operating cash flow was $165 million, up 51.4%. Free cash flow was $153 million, compared with $97 million a year earlier. Year-to-date operating cash flow was $467 million, up 119.2%. Capital expenditures were $12 million in the quarter, flat year over year. Year-to-date capital expenditures were $37 million, down 9.8%. Deferred revenue was $69 million, up 7.8%. Remaining performance obligations were $941 million, up 20.2%.

Management's outlook points to continued growth, though at a slower pace in the fourth quarter. For the fourth quarter ending December 31, 2025, Toast expects non-GAAP subscription services and financial technology solutions gross profit of $480 million to $490 million, representing 22% to 25% growth compared with the fourth quarter of 2024. Fourth-quarter Adjusted EBITDA guidance is $140 million to $150 million. For the full year ending December 31, 2025, the company expects non-GAAP subscription services and financial technology solutions gross profit of $1,865 million to $1,875 million, or 32% growth compared with 2024, up from its prior 28% to 29% growth expectation. Full-year Adjusted EBITDA guidance is $610 million to $620 million, up from $565 million to $585 million.

Risks remain tied to the restaurant economy and Toast's own execution. The company flagged tariffs as an uncertainty that could influence consumer spending or restaurant operations. It also noted that financial technology solutions revenue is seasonal, with financial technology solutions revenue per Toast Processing Location historically stronger in the second and third quarters. Toast continues to add large enterprise customers, including Nordstrom, TGI Fridays and Everbowl. It announced a multi-year global partnership with Uber focused on product innovation and go-to-market initiatives. Toast also expanded its Toast IQ intelligence ecosystem and is collaborating with The Coca-Cola Company on an AI-powered beverage feature. The company's forward-looking statements point to risk factors in its 10-K, including competition, demand for its products, and the pace of investments in technology and infrastructure. These efforts support the long-term growth story, but the quarterly results still depend heavily on payments volume, location growth, and restaurant spending trends.