What Happened?
Shares of restaurant technology platform Toast (NYSE: TOST) jumped 7.5% in the afternoon session after the company reported fourth-quarter 2025 earnings that featured a significant beat on profitability, leading investors to look past a slightly disappointing forecast.
For the fourth quarter, Toast's revenue grew 22% year-over-year to $1.63 billion, narrowly beating Wall Street estimates. The company's GAAP earnings per share of $0.16 also surpassed expectations by over 33%. However, the standout figure was its adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which came in at $298 million, nearly doubling the consensus estimate. This strong display of current profitability seemed to outweigh the company's slightly weaker-than-expected EBITDA guidance for the full year 2026, which had initially caused shares to dip following the announcement. The subsequent rally suggested investors ultimately focused on the impressive operational performance in the reported quarter.
After the initial pop the shares cooled down to $27.37, up 4.7% from previous close.
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What Is The Market Telling Us
Toast’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 6.1% on the news that investors continued to distinguish between the winners and losers in the artificial intelligence boom, leading to a broad sell-off.
The Nasdaq fell 1.5%, while the S&P 500 and Dow Jones Industrial Average also saw significant declines. This market shift indicated that investors were becoming more selective, moving beyond the initial excitement surrounding AI. In addition, a stronger-than-expected U.S. jobs report dampened investor expectations for near-term interest rate cuts from the Federal Reserve. Data showed the U.S. labor market remained resilient, with non-farm payrolls indicating impressive job creation and falling unemployment. This positive economic signal led markets to re-evaluate the timeline for monetary policy easing, which is the process by which a central bank reduces interest rates to stimulate economic growth. Investors priced in the first potential rate cut for July, a shift from previous expectations of June. This delay created a headwind for growth-oriented sectors like software, as higher interest rates can reduce the present value of future earnings.
Toast is down 19.6% since the beginning of the year, and at $27.37 per share, it is trading 44.5% below its 52-week high of $49.30 from August 2025. Investors who bought $1,000 worth of Toast’s shares at the IPO in September 2021 would now be looking at an investment worth $437.82.
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