Toast (TOST) Q3 2026 earnings summary

Executive summary

• Q3 revenue rose 21% YoY to $1.981B; net income increased to $169M from $105M, and GAAP operating income nearly doubled to $165M from $84M, reaching a 26% margin.

• Recurring gross profit streams grew 27% YoY; ARR reached $2.503B, up 24%.

• Added 8,500 net Locations; the quarter-end base reached ~189,000, up 21% YoY, with $225B in trailing-12-month GPV.

• Priorities include AI-enabled products, expansion into new markets and internal AI use to support durable growth.

Financial highlights

• Adjusted EBITDA rose 36% to $240M; margin expanded 260 bps to 37%, with Q3 margins typically benefiting from payments seasonality.

• GAAP diluted EPS was $0.29 vs. $0.16 YoY; Q3 gross profit was $543M vs. $432M.

• Free cash flow was $181M, or 75% of adjusted EBITDA; conversion was lower YoY as hardware inventory purchases increased.

• Operating expenses grew 16% YoY excluding $35M of bad-debt and credit-related expenses; S&M rose 23% and R&D 15%.

• 9M revenue increased 22% to $5.519B and net income rose to $449M from $241M; operating cash flow was $474M vs. $467M and free cash flow was $426M vs. $430M.

Outlook and guidance

• Q4 non-GAAP subscription and financial technology solutions gross profit guidance is $610M–$620M, or 22%–24% YoY growth; adjusted EBITDA guidance is $200M–$210M.

• FY 2026 non-GAAP subscription and financial technology solutions gross profit guidance rose to $2.375B–$2.385B, or 26% growth, from 23%–25%; adjusted EBITDA guidance rose to $840M–$850M from $805M–$825M.

• For 2027, management expects to deliver its 20%+ growth framework; formal guidance is planned for the February earnings call, with margin progression expected to be very modest as investment flexibility is retained.

• Free-cash-flow conversion is expected to improve in Q4 and benefit longer term as hardware inventory normalizes.

• Core margins exceed 40% and are expected to expand; Horizon 2 payback targets are 20 months or less, with new-market margins expected to converge with core as they scale.