Toast's AI and Market Expansion Could Reshape Its Long-Term Growth

Toast's AI tools, market expansion and rising software margins strengthen its long-term story as growth slows and costs persist.

Moumita C. Chattopadhyay

3 min read

Toast, Inc. TOST is moving beyond its roots in restaurant payments and point-of-sale technology. Its platform now spans software, financial technology, hardware and connected operating workflows for restaurants and adjacent businesses.

AI adoption, new-market expansion and improving profitability are reshaping the growth story. The question is whether those gains can offset a more normalized pace of revenue, subscription and location growth.

Toast, Inc. Price, Consensus and EPS Surprise

Toast, Inc. price-consensus-eps-surprise-chart | Toast, Inc. Quote

Toast Turns AI Into a Restaurant Workflow Layer

Toast IQ is shifting AI from concept to daily restaurant use. In the first quarter of 2026, the product had 40,000 weekly active locations, with operators using it to identify revenue opportunities, save time and spot operating trends.

Toast IQ Grow adds a marketing use case. The agent builds campaigns from past performance data and sales forecasts, while future agents could extend into scheduling, payroll, inventory, food costs, bookkeeping and accounting.

TOST Expands Beyond Its Core Restaurant Base

Toast is broadening its reach into drive-thru restaurants, enterprise accounts, hotels, grocery and selected international cities. Enterprise wins include Hungry Howie’s, Papa Murphy’s and The Alinea Group, while hotels add another channel through the Preferred Hotels & Resorts partnership.

The push also places Toast in a wider competitive set. Block, Inc. XYZ offers Square for Restaurants, a cloud-based point-of-sale system for single- and multi-location restaurants. Lightspeed Commerce Inc. LSPD also serves retail and hospitality customers through point-of-sale and commerce tools, making both companies relevant comparisons as Toast expands beyond independent restaurants.

Toast Converts Scale Into Stronger Profitability

Scale is beginning to show in Toast’s economics. Locations rose from approximately 148,000 in the second quarter of 2025 to roughly 171,000 in the first quarter of 2026, while trailing 12-month gross payment volume increased to $204 billion from $176 billion.

Annualized recurring run rate reached $2.2 billion, up 26% year over year. Non-GAAP software-as-a-service gross margin reached 81% for the first time, and adjusted earnings before interest, taxes, depreciation and amortization rose to $179 million.

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TOST Still Faces Slower Growth and Cost Pressure

The growth profile is still moderating. Total revenue growth was 22% in the first quarter of 2026, while subscription services growth eased from the mid-30% range to the high-20% range and location growth moved into the low-20% range.

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Costs also remain visible. Hardware and professional services were loss-making, onboarding investments and tariffs weighed on profitability, and management plans to reinvest top-line outperformance into growth initiatives and internal AI tools. Early AI workflows may also need time to prove consistent returns across every restaurant function.

Toast’s Mixed Signals Frame the Long-Term View

The bottom line is that Toast has a wider platform story than it did when the business was viewed mainly through payments and point-of-sale adoption. AI tools, new customer categories and stronger software margins support the long-term case, but normalization and execution costs keep the near-term setup more balanced.

The stock currently carries a Zacks Rank #3 (Hold). Its Growth Score of A and VGM Score of B point to favorable growth characteristics and a solid combined style profile. The Value Score of C and Momentum Score of D are less decisive, suggesting investors may want more evidence on valuation support, estimate momentum or share-price strength before taking a more aggressive stance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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