5 Interesting Learnings from Toast at $6.5 Billion Run-Rate: 22%+ Growth, Profitable, No Deceleration. But AI Is Just Getting Started

AI Vertical SaaS is hot now. Toast is … a dominant vertical SaaS leader becoming AI-first.

Toast is running at a ~$6.5 billion revenue run-rate. At its core Toast is a payments business, with a high-margin software business as a subset inside it, a fintech lender attached, and increasingly an AI agent platform, all wrapped in one vertically integrated package aimed at restaurants and now retail. It just crossed into durable GAAP profitability while still adding locations at a record pace. Net income more than doubled to $126 million, and free cash flow hit $115 million.

→ +22% growth, GAAP profitable

→ Crossed 1% of payment volume for the first time

→ 40,000 locations using its AI weekly

→ 27% blended margin (~80% on software)

→ Adding ~7,000 locations a quarter. Not accelerating but not slowing

5 Interesting Learnings:

1. $6.5 Billion Run Rate, Growing 22%, And Still Adding 7,000 Locations a Quarter

Revenue grew 22% year-over-year to $6.5 billion run rate, of which $2.2 billion is from software growing 26%.

Toast added roughly 7,000 net new locations in the quarter, ending at approximately 171,000 live locations, up 22%. For context, the company set a record of 30,000+ net adds in 2025, and management has guided to beating that in 2026. So Toast is still accelerating in terms of net new customers, albeit modestly, in the end the most important metric of all in B2B.

APRU is also growing modestly as well. That combo is what fuels growth at this scale.

2. Software Gross Margins Crossed 80% For the First Time, And the Whole Model Got More Profitable

For years the knock on Toast was margins. Payments-heavy revenue, lots of hardware, a long road to profitability. It’s still an “issue”, but the business model isn’t.

In Q1, SaaS gross margin exceeded 80% for the first time, hitting 81%, up roughly 300 basis points year-over-year. Subscription gross profit grew 32%. That’s the part of the business that looks like classic high-margin software, and it’s now scaling with real leverage.

Zoom out and the profitability inflection is everywhere in the numbers:

• Net income: $126 million, up from $56 million a year ago - Adjusted EBITDA: $179 millionat a 34% margin, up 35% - GAAP operating income: $110 million, with operating margin expanding to 21% on a non-GAAP basis - Free cash flow: $115 million, up from $69 million

Toast grew recurring gross profit streams 27% while expanding margins. But they still lose money on hardware (point of sale).

3. Monetization Crossed 1% of Payment Volume For the First Time

This is the most underrated metric in the quarter. Toast processed $51.3 billion in Gross Payment Volume, up 22%. The number that matters more is the take rate.

For the first time, total monetization across SaaS and fintech exceeded 1% of GPV. Payments take rate rose to 51 bps, and the fintech net take rate hit 61 bps. Non-payment fintech, led by Toast Capital (their lending product), contributed $51 million in gross profit and roughly 10 bps of take rate on its own.

Volume is only half of it. Toast is also earning more on every dollar that runs through the platform. When you own the system of record for a restaurant, you can layer on payments, then capital, then more software, and each layer raises your effective take rate. Crossing 1% of GPV is a milestone that says the multi-product strategy is working, not just in slideware.

4. Enterprise Bookings in One Quarter Beat the Entire Prior Year’s Customer Count

Toast built its business on independent restaurants. The new chapter is moving upmarket and outward, and the early enterprise numbers are striking.

Management noted that first-quarter bookings for new enterprise locations exceeded the entire prior-year customer count. Recent enterprise wins include names like Applebee’s, Alinea, and Preferred Hotels. The “vertical playbook” that built the core business, product depth plus operational expertise plus local go-to-market, is now being pointed at enterprise chains, international markets, and retail.

International is scaling location count and growing ARPU, with the strategy focused on tier-1 cities in Canada, the UK, Ireland, and Australia where higher-GPV restaurants align with Toast’s value prop. The Toast Go 3 handheld launched across all four international markets.

Retail is the newest frontier. Toast called out grocery specifically: over 20,000 independent grocers in the U.S. generating over $250 billion in sales. That’s a massive adjacent TAM that runs on the same core platform.

5. The AI Agent Platform Has Real Adoption Already: 40,000 Weekly Active Locations

Every B2B company is talking about AI agents right now. Most of it is roadmap. Toast has shipping product with real usage.

Toast IQ, the company’s AI analytics and agent platform, already has 40,000 weekly active locations. With 171,000 total locations, roughly one in four is actively using Toast IQ every week. The first AI agent inside it, Toast IQ Grow, focuses on restaurant marketing automation and campaign management.

Management framed why Toast wins in AI in structural terms. The data that powers these agents, what guests order, when they visit, what operators spend on labor and inventory, how the business performs, already lives inside Toast. That data has been accumulating for 14 years, and every new location, transaction, and deployed agent makes it more valuable.

That’s arguably the durable AI moat for vertical software: not the model, but the proprietary operational data and the system of record the agent plugs into. AI is also showing up on the cost side, with management crediting it for measurable gains in engineering productivity and operational efficiency.

How Toast Actually Makes Money: The 27% Gross Margin Hides an 80% Software Business

Pull up Toast on any stock screener and you’ll see a gross margin around 27%. That number makes Toast look like a thin-margin payments processor. It isn’t. The 27% is a blend of three completely different businesses stitched together on one income statement, and once you pull them apart, the picture flips.

Three things are going on here, and none of them are obvious from the headline number.

**The software business runs at true software margins.**Subscription services posted a 77.6% gross margin on a GAAP basis, and Toast’s featured non-GAAP SaaS gross margin crossed 80% for the first time at 81%. This is the high-quality, recurring, software-economics core. The catch: it’s only 16% of revenue. So it gets buried in the blend.**Fintech’s “23.6% margin” is the wrong lens.**Financial technology is 81% of Toast’s revenue, but that’s because the revenue line includes the gross payment volume flowing through the platform. You don’t evaluate a payments business on gross margin percentage, you evaluate it on take rate. Toast keeps roughly 61 basis points net on every dollar of the $51.3 billion in GPV it processed. Inside that $312M of fintech gross profit, $261M came from payments and $51M came from non-payments fintech, led by Toast Capital, the lending product. The low margin percentage is structural, not a problem.**Hardware is supposed to lose money.**Hardware and professional services ran a $72M gross loss in the quarter, a margin of roughly negative 185%. That’s by design. Toast sells terminals and handhelds at or below cost to win the location, because once a restaurant is on the platform, the software and payments economics compound for years. It’s customer acquisition spend that happens to sit in cost of revenue instead of the sales line.

So the real way to read Toast: it’s a software business with ~80% margins, wrapped in a payments business you measure on take rate, subsidized at the door by hardware sold as a loss leader. The blended 27% is an accounting artifact of bundling all three together, with $1.3B of pass-through payment volume sitting in the denominator.

**Software / subscriptions a