What happened

Week to date, shares of Toast (TOST 1.74%) were up 13%, according to data provided by S&P Global Market Intelligence. This leading SaaS (software-as-a-service) platform for restaurants reported earnings results earlier in the week that exceeded expectations, driving the stock higher.

Year to date, the stock is up more than 15% after a crushing fall in the market sell-off last year.

So what

With lower share prices come lower expectations for growth. The company is continuing to show why its platform, which offers point-of-sale solutions and digital ordering management for restaurants, is well positioned to deliver growth in a competitive market.

Annual recurring revenue is a measure of Toast's current annualized revenue from subscriptions and payment processing fees. It increased by 55% year over year, driven by gross payment volume growth and the number of locations using the company's platform.

Perhaps what got the market most excited was the improving profitability. Gross profit grew faster than revenue, up 96% over the year-ago quarter. Management guided for adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to be between a loss of $10 million and breakeven.

The results validate the opportunity ahead and bode well for the stock's prospects.

Now what

On the earnings call, management noted that the business fundamentals remain healthy. Consumers are still eating out despite uncertainty in the economy, which means Toast is navigating through this environment just fine.

There are 22 million restaurants globally, according to Euromonitor International, and only 85,000 of them are using Toast's platform. The opportunity is massive, but Toast has been a volatile stock. Investors should expect more volatility until inflation and other macroeconomic headwinds clear up.