Restaurant technology platform Toast (NYSE: TOST) met Wall Street’s revenue expectations in Q3 2026, with revenue up 21.3% year on year to $1.98 billion. Its GAAP profit of $0.29 per share was 14.3% above analysts’ consensus estimates.

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“We had another strong quarter: recurring gross profit streams1 grew 27%, GAAP Operating Income margin2 expanded to 26% and we added approximately 8,500 net locations,” said Toast CEO Aman Narang. “With our Fall Release, we expanded Toast IQ Grow and launched Toast IQ Team, moving Toast beyond tools that help operators run their business toward agents that take on the work for them. Our results show our priorities at work, and I’m confident in our path to durable growth for years to come.”

Revenue growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Toast grew its revenue at a strong 37.9% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.

Long-term growth matters most, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Toast’s annualized revenue growth of 23.9% over the last two years is below its five-year trend, but the results still suggest healthy demand.

This quarter, Toast’s year-on-year revenue growth of 21.3% was strong, and its $1.98 billion of revenue was in line with Wall Street’s consensus estimates.

Looking ahead, sell-side analysts expect revenue to grow 19.2% over the next 12 months, according to S&P, a deceleration versus the last two years. Despite the slowdown, this projection points to solid growth and implies the market expects success for its products and services.

Annual recurring revenue

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue, or ARR, is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make software-as-a-service businesses valuable.

Toast’s ARR reached $2.5 billion in Q3, and over the last four quarters, its growth was strong, averaging 25.1% year-on-year increases. This alternative top-line metric grew faster than total revenue, which likely means that the recurring portions of the business are growing faster than less predictable, more volatile ones such as implementation fees. That could be a good sign for future revenue growth.

Customer acquisition efficiency

The payback period for customer acquisition cost, or CAC, represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Toast’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.

Key takeaways from Toast’s Q3 results

Toast’s Q3 report had some key positives, led by full-year EBITDA guidance above analysts’ consensus estimates. But annual recurring revenue fell slightly short of expectations. Investors were likely hoping for more: Shares tumbled 6% to $31.85 immediately after the release.

Is Toast worth buying at its current price? That decision depends on its valuation, business quality and latest quarterly results. Read our full research report for more on Toast (it’s free).