Toast's AI, Enterprise and Retail Push Point to a Broader Growth Shift

Toast IQ Moves From Feature to Operating Layer

Toast IQ is developing into an operating layer for restaurant decision-making. The product had 40,000 weekly active locations in the first quarter of 2026, and operators are using it to find revenue opportunities, save time and identify trends.

Toast IQ Grow adds marketing automation to that base. It builds campaigns from historical performance data and sales forecasts, while future agents are expected to extend into payroll, inventory, scheduling, bookkeeping and food-cost management.

TOST Targets Enterprise, Hotels and Grocery

Toast is moving into customer categories that can expand its market beyond independent restaurants. The approximately 500-location Hungry Howie’s rollout illustrates full-stack enterprise adoption across point-of-sale terminals, multi-location management, kitchen display systems and payment processing.

The company is also pursuing hotels through the Preferred Hotels & Resorts partnership, grocery as a near-term retail focus and drive-thru restaurants through a dedicated product. Shift4 Payments, Inc. FOUR also operates in commerce technology markets where payments and software must support larger venues and complex customer experiences. Lightspeed Commerce Inc. LSPD provides another point of reference in retail and hospitality technology, where integrated platforms are becoming central to merchant operations.

Toast’s Monetization Mix Supports Margin Expansion

Toast’s strategy is increasingly about generating more revenue and gross profit from each location. In the first quarter of 2026, total software-as-a-service and fintech monetization reached 103 basis points of gross payment volume, up 5 basis points from a year earlier.

Payments take rate was 51 basis points, while fintech net take rate was 61 basis points. Non-payment fintech products, led by Toast Capital, contributed $51 million in gross profit, helping broaden the company’s monetization mix beyond payment processing and subscription services.

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TOST Must Prove AI Can Scale Consistently

AI remains an emerging growth lever, not a fully proven driver. Toast must demonstrate that products such as Toast IQ Grow can produce repeatable customer returns before they can materially lift average revenue per user or take rates.

Expansion into new verticals also requires investment. Hardware, implementation, support, product development and onboarding costs may pressure margins, even as scale improves. Hardware and professional services gross profit was negative 13% of recurring gross profit streams in the first quarter.

Toast’s Scores Reflect Growth With Weak Momentum

Toast’s broader growth shift is credible, but not yet one-sided for the stock. AI, enterprise penetration, retail expansion and higher monetization support the long-term case, while execution costs and slower core growth keep the near-term setup balanced.

TOST currently carries a Zacks Rank #3 (Hold). Its Growth Score of A and VGM Score of B reflect favorable growth characteristics, but its Value Score of C and Momentum Score of D show that the stock does not yet offer an unambiguously attractive signal across valuation and price action. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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