Shares of Toast (TOST +9.57%) were up by 10.6% at 12 p.m. ET today. The maker of cloud-based software for food-service management posted Q3 2025 results on Tuesday evening, with mixed results versus Wall Street's consensus estimates.
Toast serves up a revenue beat
Toast's third-quarter revenues rose 25% year over year to $1.63 billion. Your average analyst would have settled for $1.58 billion. Adjusted earnings more than doubled from $0.07 to $0.16 per diluted share, but analysts were looking for a triple (and then some). The bottom-line Street consensus pointed to $0.24 per share.
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Investors are hungry for Toast's ARR (see below)
It's no surprise to see investors skip the below-Street earnings figure to focus on strong sales instead. Toast's subscription-based services saw particularly muscular growth, resulting in a 30% year-over-year boost to its annual recurring revenues (ARR). That's a predictable revenue stream, indicating accelerated revenue growth over the next few quarters.
NYSE: TOST
Key Data Points
And the company's management team has long-term goals in mind. Toast is now installed in 156,000 restaurant locations, and the American market alone comes with nearly 900,000 potential client sites. CEO Aman Narang highlighted his company's growth opportunity over the next decade or so, which also includes a broader product portfolio that should generate more revenue per customer in the long run.
The Toast position I started in May 2024 is now up by 42%, and many earlier investors will see even stronger returns. The stock isn't cheap, trading at 90 times adjusted earnings today. Toast is still one of my favorite growth stocks to buy, even at this lofty valuation. The restaurant industry could use some better tools for planning and operations management, and Toast delivers exactly that.
