Toast's Q3 2025 Earnings Show Revenue Beat but EPS Miss Amid Profitability Inflection

What happened

Toast reported Q3 2025 earnings that beat revenue estimates but missed on EPS, as highlighted in recent news, indicating a mixed performance with top-line strength but bottom-line pressure. The DeepValue master report underscores Toast's profitability inflection, with 2024 revenue of 4,960 and net income of 19, and 1H25 showing continued growth with 2,887 revenue and 136 net income. This revenue acceleration is likely driven by the integrated SaaS and payments platform, which benefits from module attach across 134,000 locations and seasonal tailwinds in Q2-Q3. However, the EPS miss suggests underlying challenges, such as potential compression in payment take-rates or increased competition, as noted in the report's key risks around payment economics and pricing pressure. Despite these headwinds, Toast's strong balance sheet with net cash and a share repurchase authorization provides some downside support, but investors must scrutinize upcoming metrics for sustainability.

Implication

The EPS miss in Q3 2025 earnings raises concerns about Toast's ability to maintain profitability amid possible payment margin compression from network fees or competitive discounting, as warned in the DeepValue report. Revenue growth remains solid, supported by restaurant digitization and module adoption, which aligns with the BUY thesis for scale and operating leverage. However, if EPS misses persist, it could undermine the profitability inflection narrative and challenge the assumption of sustained margin expansion. Investors should prioritize tracking key performance indicators like Gross Payment Volume and ARR in upcoming quarters to assess whether growth is translating into stable or improved earnings. The strong liquidity and share repurchase program offer temporary cushion, but prolonged margin issues might necessitate a stance downgrade from BUY to HOLD.

Thesis delta

The EPS miss introduces caution but does not fully invalidate the BUY thesis; it reinforces the need to closely watch payment economics and competitive pressures highlighted in the DeepValue report. If Toast can stabilize or improve margins while sustaining revenue growth, the thesis remains intact, but further deterioration could prompt a reassessment. Investors should await more data on Q3 specifics and management commentary to gauge the severity of these pressures.