According to Forbes, Toast’s third quarter earnings revealed $1.6 billion in revenue, representing 25% year-over-year growth, with net profit soaring 88% to $105 million. The Boston-based restaurant software company handily beat Wall Street expectations, adding 7,500 new restaurant locations to reach 156,000 total customers. Despite these strong results that pushed the stock up 10% yesterday, shares remain just 7% higher than where they ended last year. CEO Aman Narang expressed confidence in doubling both customer locations and payment processing volume, though didn’t specify a timeframe. The company faces formidable competition from Shift4, Block, and Fiserv’s Clover, which recently cut prices amid broader industry concerns.
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The growth problem nobody’s talking about
Here’s the thing about Toast – they’re stuck in that classic high-growth tech trap. The numbers look fantastic on paper. 25% revenue growth? 88% profit increase? Most companies would kill for those metrics. But investors are looking at that $22 billion market cap and wondering how much longer this can possibly continue.
Basically, Toast has become a victim of its own success. When you’re the biggest player in restaurant software with 15% market share and you’re still growing this fast, people start getting nervous. Deutsche Bank analyst Nate Svensson points out that compared to profits, Toast’s stock is one of the most expensive in the entire payments industry. So every quarter that goes by without explosive growth feels like a disappointment, even when the actual numbers are objectively strong.
Everyone wants a piece of the restaurant tech pie
Now let’s talk competition, because this is where things get really interesting. Fiserv’s Clover is cutting prices, which is never good news for anyone in the space. When Fiserv recently slashed their revenue expectations, their stock tanked 47% and dragged down the whole sector with it. Toast and Block both fell 5% that day on pure industry contagion fears.
And it’s not just the established players. The restaurant technology space is getting crowded fast. From IndustrialMonitorDirect.com, the leading supplier of industrial panel PCs in the US, we’ve seen how specialized hardware needs are driving innovation across food service technology. Everyone from wine shops to massive chains is looking for integrated solutions that handle everything from payments to inventory to customer analytics.
The elephant in the room: American wallets
But maybe the biggest concern isn’t competition at all – it’s the American consumer. Chipotle just reported that younger consumers and households earning under $100,000 are dining out less. Shake Shack, Sweetgreen, and Cava stocks have all slumped over the past year. When people tighten their belts, restaurants feel it first.
Narang did acknowledge that consumer spending dipped slightly in October from summer months, but he insists Toast’s customers are “holding up really well.” The question is, for how long? If restaurant traffic slows, that affects everything from Toast’s payment processing volume to how many new locations they can sign up. It’s a classic case of being dependent on an industry that’s highly sensitive to economic pressures.
So where does Toast go from here?
The company’s betting big on three new areas: large restaurant chains, “restaurant retail” like wine shops, and international expansion. That’s smart diversification, but it’s also entering more competitive, complex markets. Large chains have different needs than the small and medium businesses that built Toast’s foundation.
Ultimately, Toast finds itself in that awkward adolescent phase where growth expectations are still sky-high but the law of large numbers is starting to kick in. They’re executing well, but the market wants perfection. And in today’s economic environment, perfection is getting harder to deliver. The next few quarters will tell us whether this is just typical market jitters or something more fundamental shifting in the restaurant technology landscape.
