Toast (NYSE: TOST) is an exciting company that provides digital restaurant management services for clients all over the world. It’s been growing beautifully since it went public in 2021, and it has also become profitable.
Its stock, on the other hand, hasn’t done very well for investors. It’s down 17% from its first-day closing price and 6% this year.
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However, management is confident in its future prospects, and the market might finally get on board as the company approaches its long-term goals. Let’s see where a $1,000 investment could be over the next few years.
The linchpin in restaurant management
Toast provides a connected restaurant management platform that unifies all parts of the operation, from backroom financial services like supply orders and accounts payable to on-the-floor tools like digital menus and point-of-sale devices. This saves time and money.
For example, a placed order can go straight to the kitchen with a click, and the system integrates with many partner platforms, such as Uber Eats and American Express‘s Resy reservation platform.
As a software-as-a-service (SaaS) company, Toast was on the receiving end of last year’s backlash against SaaS companies. The market was worried that AI agents would replace, or at least damage, many of these companies. But Toast, like other SaaS powerhouses, is using AI to its advantage. It recently rolled out its artificial intelligence (AI) product, Toast IQ. It’s an AI agent that can accomplish tasks, like updating menus, as well as comb through data and provide analysis.
Despite market worries, Toast continues to demonstrate strength. It added 9,500 locations in the 2026 second quarter, a record that surpasses the previous high by 1,000. It has a total of 180,000 as of the end of the quarter. Some of the new clients include bubble tea chain Kung Fu Tea and an expanded partnership with TGI Friday’s locations in the U.K.
Annualized recurring run rate (ARR), its favored top-line growth metric, increased 25% year over year, and net income rose from $80 million to $154 million.
Reaching its 40% margin goal
Although revenue, or in this case ARR, and net income are standard operating metrics, management charts its progress by gross profit and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Management’s goal is to keep overhead expenses down such that 40% or more of all gross profit converts to adjusted EBITDA.