Toast Inc. saw its stock price tumble nearly 15% on Friday, with shares trading at $24.93 late in the morning, down $4.45 from the previous close. The sharp decline came even after the restaurant technology company reported a strong first-quarter performance and lifted its full-year profit forecast.
For the first quarter, the Boston-based firm reported revenue of $1.63 billion, a 22% increase compared to the same period last year. Net income more than doubled to $126 million, up from $56 million a year earlier. The company also added roughly 7,000 net new locations and saw its annualized recurring run-rate—a key metric for subscription and payments volume—climb 26% to approximately $2.2 billion.
Despite these positive numbers, investors focused on several headwinds, including rising hardware costs, inventory purchases, and the ongoing threat of tariffs. The earnings per share of $0.20 fell short of analyst expectations of $0.27, according to Investing.com, while revenue met forecasts.
Toast raised its 2026 adjusted EBITDA outlook to a range of $790 million to $810 million, up from the previous guidance of $775 million to $795 million. Adjusted EBITDA is a non-GAAP metric that excludes interest, taxes, depreciation, and stock-based compensation.
Chief Executive Officer Aman Narang described the quarter as a "strong start" to 2026, highlighting a 27% increase in recurring gross profit, an expanded GAAP operating income margin, and growth in location count. He also noted the debut of Toast IQ Grow, the company's first AI agent aimed at helping restaurants boost their digital reach and demand.
Hardware costs emerged as a key concern. On the earnings call, Chief Financial Officer Elena Gomez described the situation as "very fluid" and noted that Toast has built up inventory to cover supply through 2027. She added that the impact on the 2027 profit-and-loss statement will be greater than for 2026, but emphasized that the company does not foresee a permanent structural impact.
Tariffs remain a risk factor. In its latest quarterly filing, Toast highlighted that global tensions could affect consumer spending, squeeze restaurants, or disrupt its own business. The company noted uncertainty over when certain tariffs might take effect and their potential impact on demand.
Toast has been active in share repurchases, buying back $327 million in Class A shares during the first quarter. An additional $51 million was repurchased between March 31 and May 6, leaving approximately $208 million still available under the current authorization.
The competitive landscape remains intense. According to a January Baird analysis cited by Payments Dive, Fiserv's Clover holds about 20% of the small restaurant point-of-sale card processing market, with Toast trailing at 17% and Block's Square at 13%. Large chains typically enjoy lower rates, but Toast, Square, and Clover primarily serve restaurants outside the top 250 groups.
Toast is pushing further into the upmarket segment. This week, the company announced a partnership with The Alinea Group, which will install Toast systems at Alinea, Next, The Aviary, and The Office. "Toast's product roadmap made it the clear choice for our growth plans," said Jason Weingarten, CEO of Alinea Group.
