To The Moon

It’s not every day a restaurant tech company gets invited to the big table. But Toast’s 2025 playbook has made one thing clear—it’s no longer just serving the local café. With enterprise giants like Applebee’s and Topgolf now on its menu, Toast’s transformation from point-of-sale workhorse to full-stack SaaS heavyweight is finally coming to the boil. For growth-focused investors, the recipe looks increasingly irresistible.

Where POS meets AI: this isn’t your average kitchen anymore

The Enterprise Leap Is Toast’s Defining Inflection Point

Let’s start where the market should be looking—Toast’s quiet revolution into enterprise SaaS. This year, the company signed its largest enterprise deals to date, expanding beyond mom-and-pop eateries to nationally scaled brands. Applebee’s was the headliner, but Topgolf Callaway—with its entertainment-centric food service model—is perhaps the more intriguing signal of Toast’s evolving ambition.

What makes this shift compelling is the operational leverage it unlocks. Toast is no longer relying solely on fragmented SMB customers. These marquee accounts bring larger ticket sizes, lower churn risk, and a roadmap to cross-sell its expanding suite of fintech, AI and analytics tools. It’s not just a larger addressable market—it’s a better one.

$Toast, Inc.(TOST)$ estimates that the enterprise and franchise segment includes over 200,000 locations in the U.S. alone, and early international pilots suggest that the global market could be several times larger. Even modest penetration here could double Toast’s addressable base without relying on further SMB growth.

Big Growth, Bigger Base: Scaling Without Sacrificing Profitability

Q1 2025 delivered another standout performance. Toast added over 6,000 net new locations and grew annualised recurring revenue by 31%, hitting $1.7 billion. That figure is not only impressive on its own—it’s a validation of the company’s ability to scale without blowing its budget.

That’s a critical point. SaaS businesses often hit a profitability wall as they scale. Toast didn’t. It reported GAAP profitability in 2024 and posted operating margins of 3.74% in the trailing twelve months. Net income hit $158 million, and free cash flow surged to $461 million. This is no longer a growth-at-all-costs story. It’s growth with leverage.

What’s also encouraging is the quality of that growth. Toast’s model combines payments, software, and value-added services like marketing, inventory, payroll and AI. Each new location isn’t just another terminal—it’s a customer with multiple monetisation levers. In that sense, Toast has the DNA of a vertical SaaS giant rather than a hardware-dependent POS provider.

AI Isn’t Just a Buzzword—It’s a Margin Engine

ToastIQ, the company’s increasingly capable AI platform, is beginning to drive material differentiation. It automates staff scheduling, suggests optimal menus, and can dynamically adjust marketing campaigns. For restaurants, where labour and food costs are volatile, these are real tools solving real problems.

The beauty here is that AI-driven upselling doesn’t just boost customer outcomes—it improves Toast’s own unit economics. Higher-margin SaaS revenue is replacing transactional dependence. That margin expansion is already visible and supports EBITDA upgrades even as Toast invests in international markets.

What many investors might not know is that Toast has started testing international pilots in Canada and the UK. With most of its competitors still regional or narrowly verticalised, Toast’s full-stack model could scale surprisingly well abroad—especially in franchise-rich economies.

Growth is hot, but valuation tells a smarter story—Toast’s PEG makes the case

Let’s Talk Valuation: The PEG Tells the Real Story

At $47.63, Toast trades near its 52-week high with a market cap of $27.6 billion. The trailing P/E sits at 176, but the forward P/E has collapsed to a more palatable 50.25. That compression is driven by Toast’s move into sustained GAAP profitability, with analysts expecting EPS to more than triple over the next 12–18 months as operating leverage kicks in and high-margin SaaS revenue gains share.

The real showstopper, though, is the PEG ratio—just 0.43.

For context, most profitable SaaS firms with similar growth trajectories (20–30%) trade at PEGs closer to 1.5–2. $Olo Inc.(OLO)$, its closest pure-play restaurant SaaS rival, has seen slower adoption and lacks the same AI and fintech capabilities. $Lightspeed POS Inc(LSPD)$ and $Block, Inc.(XYZ)$ POS arm operate with broader scope, but neither has Toast’s sector intimacy or enterprise momentum.

Here’s how the market is pricing Toast’s growth story right now.

Simply put, Toast is trading at a growth discount despite delivering operating leverage, strong cash flow, and credible AI upside. That disconnect could close fast if it continues to exceed EBITDA expectations

The Real Risks? Not Just Market Volatility

Of course, every growth story carries a few burnt edges. Toast’s beta is a spicy 2.01, so volatility is part of the package. But the more critical risks lie in its business model.

For one, $Toast, Inc.(TOST)$ is deeply tied to restaurant health. A downturn in discretionary spending or a labour cost shock could compress volumes, especially in the SMB segment. It also monetises largely through a payment take rate—one that enterprise clients may negotiate down as they scale. That could pressure margins if not offset by SaaS growth.

There’s also the risk of product creep. Toast’s expansion into payroll, marketing, loyalty and now AI means it’s juggling a broad product surface area. That’s great for upselling—but risky if execution stumbles or customer support stretches thin. Overpromising to large enterprise clients, especially, could backfire fast.

Toast Still Has Room to Rise—and Refine

Toast’s 2025 playbook shows a company levelling up. It’s no longer a scrappy upstart powering burger joints—it’s an AI-enabled, enterprise-facing SaaS business with global ambition and proven unit economics.

The stock has run, yes—but I’d argue it hasn’t outrun its potential. With a PEG below 0.5, free cash flow surging, and institutional ownership near 96%, Toast still looks underappreciated as a quality growth-at-scale stock.

If it can balance enterprise complexity with product focus—and keep margins climbing—Toast could shift from a hot trade into a long-term compounder. Either way, this isn’t a company that’s cooling down anytime soon.

From cafés to cities—Toast is scaling its ambition globally

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