Executive Summary

Q3 delivered broad beats: revenue $1.633B vs S&P Global consensus $1.586B; normalized EPS $0.279 vs $0.233, with Adjusted EBITDA $176M and 35% margin; ARR surpassed $2.0B and locations reached ~156K, supported by 7,500 net adds . Values with asterisk are from S&P Global estimates/data.*
Full-year 2025 outlook raised: Non-GAAP recurring gross profit to $1.865–$1.875B (from $1.815–$1.835B) and Adjusted EBITDA to $610–$620M (from $565–$585M); Q4 guide set at $480–$490M for recurring gross profit and $140–$150M Adjusted EBITDA .
Mix-quality improved: total take rate reached 98 bps, payments net take rate rose 4 bps YoY to 49 bps on cost optimization, targeted pricing, and product attach (e.g., surcharging); Toast Capital gross profit was $58M (11 bps) .
Strategic catalysts: rapid AI adoption (Toast IQ >25K restaurants used it >235K times since early Oct), marquee enterprise wins (Nordstrom, TGI Fridays, Everbowl), and an expanded Uber partnership underpin confidence in sustained share gains and TAM expansion .

What Went Well and What Went Wrong

What Went Well
- Record scale and profitability: “We delivered another great quarter with 34% top-line growth, 35% margins… We surpassed $2 billion in ARR for the first time” — CEO Aman Narang . ARR reached $2.016B; Adjusted EBITDA $176M .
- Pricing/mix and attach: “Payments take rate increased 4 bps… benefits from cost optimization, small targeted pricing moves, and new products including surcharging” — CFO .
- AI traction and product velocity: “Since rolling [Toast IQ] out in early October, more than 25,000 restaurants have used [it] over 235,000 times so far” — CEO; Coca‑Cola AI collaboration extends monetization opportunities .
What Went Wrong
- Hardware/professional services drag: GAAP gross profit −$57M; non‑GAAP −$51M; management is “leaning into customer acquisition momentum… and absorbing higher tariff costs” .
- Credit-related expense: CFO highlighted $31M of bad debt and credit-related expenses within the quarter (ex‑this, opex +17%) .
- Seasonality/macro caution: Strong summer GPV per location “normalized” in October; Q4 guide embeds a balanced view on GPV despite typical seasonal strength .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025 (Actual)	Q3 2025 (S&P Cons.)
Total Revenue ($B)	$1.305	$1.337	$1.550	$1.633	$1.586*
GAAP Net Income ($M)	$56	$56	$80	$105	—
Diluted EPS (GAAP)	$0.07	$0.09	$0.13	$0.16	—
Adjusted EBITDA ($M)	$113	$133	$161	$176	$149.4 (EBITDA)*
Non‑GAAP Recurring Gross Profit ($M)	$378	$415	$464	$506	—

Notes: Adjusted EBITDA is company-reported; S&P “EBITDA Consensus Mean” may not be directly comparable to company Adjusted EBITDA.*

Segment Revenue ($M)

Segment	Q3 2024	Q2 2025	Q3 2025
Subscription Services	$189	$227	$244
Financial Technology Solutions	$1,067	$1,276	$1,345
Hardware & Professional Services	$49	$47	$44
Total Revenue	$1,305	$1,550	$1,633

Key KPIs and Unit Economics

KPI	Q1 2025	Q2 2025	Q3 2025
Total Locations (000s)	~140	~148	~156
ARR ($B)	$1.713	$1.928	$2.016
GPV ($B)	$42.2	$49.9	$51.5
Total Take Rate (bps, SaaS+Fintech)	—	—	98
Payments Net Take Rate (bps)	—	—	49
Non‑payments Fintech GP ($M)	—	—	$58
Free Cash Flow ($M)	$69	$208	$153

Q3 Beat vs Prior Quarter Guidance (issued 8/5/25)

Metric	Prior Q3 Guide (8/5)	Q3 Actual	Result
Non‑GAAP Recurring Gross Profit ($M)	$465–$475	$506	Beat
Adjusted EBITDA ($M)	$140–$150	$176	Beat

Estimates comparison (S&P Global)

Metric	Q3 2025 Actual	Q3 2025 S&P Consensus	Surprise
Revenue ($B)	$1.633	$1.586*	+$0.047B
EPS (Normalized)	$0.2791*	$0.2334*	+$0.0457
EBITDA ($M)	—	$149.4*	—

Values marked with * are from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Non‑GAAP Recurring Gross Profit ($M)	FY 2025	$1,815–$1,835	$1,865–$1,875	Raised
Adjusted EBITDA ($M)	FY 2025	$565–$585	$610–$620	Raised
Non‑GAAP Recurring Gross Profit ($M)	Q4 2025	—	$480–$490	New
Adjusted EBITDA ($M)	Q4 2025	—	$140–$150	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
AI/Technology (Toast IQ)	Introduced ToastIQ with Menu Upsells, Shift at a Glance, Digital Chits ; Toast Go 3 launched with ToastIQ features	>25K restaurants used IQ >235K times since early Oct; Coca‑Cola AI collaboration; Uber integration deepening	Accelerating adoption and ecosystem partnerships
Enterprise wins	Applebee’s (largest deal), Topgolf	Nordstrom (~200 dining locations), TGI Fridays, Everbowl; pipeline “never been stronger”	Upmarket momentum
International	First customer live in Australia; UK/IE/CA presence	International SaaS ARPU +20% YoY; continued regionalization	Improving ARPU and fit
Retail (Food & Bev)	Early traction noted	Adding features/integrations; live wins (Tri‑County Meat Markets, Delalo Italian Market, Nature’s Best)	Steady traction
Pricing/Take rate	Implied optimization; guidance raises	Total take rate 98 bps; payments +4 bps YoY via COGS, targeted pricing, surcharging	Gradual expansion
Tariffs/Supply chain	—	Absorbing higher tariff costs; hardware/pro services a −10% drag on recurring GP streams	Modest headwind
Macro/Consumer	—	Strong summer; October normalized but within plan	Stable/slightly normalizing
Reliability (AWS outage)	—	Offline resilience; no meaningful Q4 impact	Reinforced reliability narrative

Management Commentary

Strategy and scale: “We delivered another great quarter with 34% top-line growth, 35% margins… We surpassed $2 billion in ARR for the first time.” — CEO Aman Narang .
TAM and share: “We win the majority of decisions we’re in… win rates against every major competitor are up YoY… clear path to doubling our share of locations and GPV over time.” — CEO .
AI adoption: “Since rolling [Toast IQ] out in early October, more than 25,000 restaurants have used [it] over 235,000 times so far.” — CEO .
Mix/take rate levers: “Payments take rate increased 4 bps… from cost optimization, small targeted pricing moves, and new products including surcharging.” — CFO .
Profit profile and capital allocation: “Adjusted EBITDA was $176M, a 35% margin… we raised our full-year outlook to 32% growth in recurring gross profit and $615M in adjusted EBITDA at the midpoint.” — CFO .
2026 outlook framing: “At our multi‑billion dollar scale, we will sustain growth over 20%… margins flat to slightly up YoY as we invest behind new TAMs.” — CFO .

Q&A Highlights

GPV per location: Outperformed in summer; normalized in October; platform features (e.g., handhelds) support same‑store sales resilience .
Competition and share: Win rates up across QSR and FSR; tools across fees/hardware/services help close locations, then upsell engine drives expansion .
Consumer/macros: Restaurants remain resilient; October within expectations .
AWS outage: Offline capabilities preserved operations; no meaningful effect on Q4 guide; focus on further resilience of digital channels .
Take rate sustainability: Confidence to continue expanding via COGS optimization, selective pricing, product attach (surcharging) .
Toast IQ monetization: Focus now on value/adoption; exploring usage‑based monetization longer‑term .
Pricing website error: Clarified as human error impacting ~1% of bookings; pricing philosophy remains surgical and market-share oriented .
2026 net adds: Expect higher net adds driven by new TAMs (enterprise, international, retail), with core net adds roughly similar to 2025 levels .

Estimates Context

S&P Global consensus for Q3 2025 revenue was $1.586B vs actual $1.633B; normalized EPS $0.233 vs actual $0.279; EBITDA consensus $149.4M (not directly comparable to company Adjusted EBITDA $176M). Values retrieved from S&P Global.* [Company actuals: revenue and Adjusted EBITDA cited above from filings/call]

Implications: Street likely moves FY25/26 recurring gross profit and Adjusted EBITDA higher on the beat and raise; estimate frameworks may need to reconcile company Adjusted EBITDA vs S&P EBITDA definition and adjust take‑rate trajectories upward given sustained bps expansion .

Key Takeaways for Investors

Toast is compounding scale (ARR >$2B) while expanding margins (35% Adjusted EBITDA margin) and raising FY25 guidance — a rare “beat and raise” at this growth scale .
Mix-quality is improving: total take rate up to 98 bps and payments net take rate +4 bps YoY, with surcharging and Toast Capital adding basis points; supports medium‑term gross profit per location .
AI is moving from features to workflows; Toast IQ adoption is rapid and paired with brand collaborations (Coca‑Cola) and Uber integration — potential to drive attach, ARPU and long‑term monetization .
Enterprise and international pipelines are strengthening (Nordstrom, TGI Fridays, Everbowl), underpinning confidence in net adds into 2026 and TAM expansion beyond core U.S. SMB .
Hardware and professional services remain an intentional near‑term drag (tariffs, CAC), but management is staying within payback guardrails — acceptable if attach and lifetime economics keep improving .
Q4 guidance embeds prudent GPV assumptions after October normalization; upside remains if holiday GPV trends exceed the “balanced view” .
For trading: immediate catalysts include AI progress/monetization signals, enterprise rollouts, take‑rate updates, and potential Q4 outperformance; medium‑term thesis hinges on sustained share gains plus AI‑driven ARPU lift and disciplined investment in new TAMs .

Footnote: All values marked with * are retrieved from S&P Global (Capital IQ) consensus/actuals. Company-reported figures, guidance, and qualitative commentary are sourced from the Q3 2025 8‑K/press release and earnings call transcript as cited.

Toast, Inc. (TOST)·Q3 2025 Earnings Summary