What happened

Shares of restaurant software company Toast (TOST -0.27%) popped on Friday after an upbeat financial report for the second quarter. Revenue was up sharply, losses improved slightly, and Wall Street was encouraged. As of 10:20 a.m. ET today, Toast stock was up 14%.

So what

In the second quarter, Toast generated revenue of $675 million, up 58% year over year and ahead of its high-end guidance of $665 million. This top-line growth was driven by the addition of approximately 6,000 new restaurant locations compared to one quarter ago. Moreover, 61% of customers are using four or more add-on Toast products, compared to just 55% last year and 60% last quarter.

On the bottom line, Toast had a $99 million loss from operations in the second quarter compared to a loss of $51 million in the year-ago period. But while the loss from operations was nearly double on a year-over-year basis, this $99 million loss was slightly better than its loss of $101 million in the previous quarter.

Now what

Toast raised its guidance for the remainder of the year. For the third quarter, management expects revenue of $700 million to $730 million, a year-over-year increase of 47% at the midpoint of guidance. And for the entire year, it now expects to generate revenue of $2.62 billion to $2.66 billion compared with previous guidance of $2.50 billion to $2.55 billion.

Perhaps more important, Toast isn't expecting its losses to be as steep as it did previously. Management was expecting a negative figure of $175 million to $195 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Now it expects negative EBITDA of $140 million to $160 million. In absolute terms, these losses are still huge -- there's no sugarcoating it. But investors do appear encouraged with the relative improvement.

The beat and raise in the second quarter for Toast caught Wall Street's eye. For example, Needham analyst Mayank Tandon raised his price target for Toast stock from $21 per share to $27, noting the platform's strong ongoing adoption, according to The Fly.

While I'll stop short of giving a price target, I'll agree that Toast shareholders can be encouraged with its adoption in the second quarter. As a final takeaway, annual recurring revenue was up 59% year over year to $787 million, growing faster than overall revenue, suggesting Toast is getting stickier with time.