Toast (TOST) Q2 2026 earnings call transcript

Thank you. Welcome to Toast's second quarter, 2026 earnings call. Toast CEO, Aman Narang and CFO, Elena Gomez, will open with prepared remarks followed by Q&A. Before we start, I'd like to remind everyone that today's call may include forward-looking statements which are subject to risks and uncertainties and reflect our views and assumptions only as of today. These forward-looking statements include expectations around financial and operational metrics, products, business and investment strategy, and guidance.

Actual results may vary significantly and we expressly disclaim any obligations to update the forward-looking statements made today. For a detailed discussion of risks, please refer to the cautionary language in today's press release and or SEC filings. During this call, we will discuss certain non-gap financial measures, including but not limited to non-gap subscription services gross profit and non-gap financial technology solutions gross profit which we refer to collectively as our recurring gross profit streams. These are the basis for our top-line guidance.

These non-gap measures are not intended to be a substitute for our gap results. Please refer to our earnings release and SEC filings for detailed reconciliations of these non-gap measures to the most comparable gap measures.

And once otherwise stated, all references on this call to cost of revenue, gross profit and gross margin, sales and marketing expense, research and development expense, and general and administrative expense are on a non-gap basis. And with that, let me turn the call over to a mom.

Thanks, Michael. And thank you all for joining us today. We had another great quarter. In Q2, we grew recurring gross profit streams over 28% and expanded gap operating income margins to 26%. We had a record 9,500 net location ads in the quarter, 1,000 more than our previous high watermark. Our core business continues to scale. Our new markets are growing rapidly, and we're reinventing our platform with AI to agents and software. Working together could drive real business outcomes for customers.

For example, toast IQ grow. Our marketing agent is the fastest growing product we have ever launched, and it's giving us more conviction in our AI opportunity and its potential to scale R2 over time.

I'm so thankful for our incredible toast team who continue to execute and deliver at a very high level. We're excited to announce a number of notable new customers to toast across a different market segments we serve. In our core business, we welcome Q2T, a brand with over 300 locations.

In enterprise, we're thrilled to become an endorsed provider by leading hospitality brand, Best Western, to continue our momentum across hotels.

And internationally, we expanded our relationship with TGI Fridays in the UK. In addition to this momentum across our restaurant segments, in retail would continue to see really strong traction, including our very first gas stations where we're processing fuel payments for the very first time. We've had a great first task, and our top priorities heading into the back half of 2026 remain unchanged.

Number one, expand what toast can do for customers of AI, from software to energetic platform that takes on critical work and delivers this outcome for customers. Number two, expand the markets we serve. And lastly, reinvent how we work with AI to accelerate our most important goals and drive durable growth.

We are well positioned as a vertically integrated platform across software, hardware, payments and lending. Customers recognize the role we play as the most important technology partner and are looking to us to help them take advantage of the opportunity AI creates.

I continue to believe executing against these priorities sets us up to scale toast to 10 billion in ARR and beyond.

Okay, let's jump into the priorities. Number one, expand what toast can do for customers. Toast has spent 14 years evolving from a point of sale system to a system of record, software that helps restaurant manager operations, staff, guests and suppliers. But many of our customers don't have the time to leverage everything toast offers, and end up outsourcing important functions.

Functions such as marketing, payroll and bookkeeping. With AI, we are showing that we can take out some of that work and do it even better. Digital marketing is the first agent work we launched and we have seen tremendous success thus far. In fact, toast I could grow is on track to become the fastest growing product to 10 million in ARR. The early customer reception reinforces that we're solving a real problem and have a large opportunity to monetize our offerings.

Toast I could grow brings together the tools and capabilities to improve a customer's website, SEO, digital ordering and social presence, leveraging the customer's data to build effective marketing campaigns that drive better guest conversion.

I'll give you an example. Spirits food and friends is a family owned restaurant in Louisiana, the start of a toast in 2025. Consolidating more than 10 disparate systems onto a single platform across POS, payroll, scheduling and more. Now they're using toast I could grow to power their marketing.

For the first time ever, there are segmenting marketing campaigns using their data and are able to conduct these campaigns directly to sales.

As a result, they have not only cut their monthly agency spend by 70%, they've also generated over 100,000 in marketing attributed sales in just under two months. We are uniquely positioned to bring the benefits of toast I could grow to restaurants across our platform. We can optimize the full revenue cycle, the digital presence that gets restaurants discovered, drives orders and reaches new guests through customized advertising, the point of sales system that captures transactions in store and online, and the multi-channel marketing engine that brings guests back.

Fueled by transaction data, we know what guests ordered, how often they return, and when they stop coming back. We know the restaurants too, the sales trends, the slow nights and the overall capacity.

Toast I could grow, we'll use all of that to drive guests back across email, text, push notifications and social, moving us towards personalized one-on-one marketing at scale.

And because we power the point of sale, we can close the loop with each campaign type directly to the orders it drives.

As you can see, our success with Toast I could grow comes out of two things. Data and context. That is the foundation of our Toast I could ecosystem.

First, some data. As a customer's system of record, Toast understands how it operates. Sales, guest preferences, scheduling, order flow, and many changes are recorded as they happen.

But data alone isn't the advantage. The context from that data and knowing how to read it is. Over 14 years, we've watched good and bad operators run their businesses, long enough to learn what they do and how the best ones think and adapt.

We know what a smart many change looks like versus a bad one, when a staffing pattern signals trouble and which pricing moves hold up in a given market. Over time, we plan to build on Toast I could grow and roll out a series of agentic products on top of work software platforms using our data and context advantage.

This opens up a market opportunity beyond software. Marketing, scheduling and payroll, and bookkeeping and tax are services restaurants often pay for today. And in many cases, they're spending a multiple of what they spend on software.

Longer term, imagine a series of agents across these services. Working in concert, they'll be able to build a restaurant's projected demand, look at food costs and availability, labor schedules, and projected guest patterns to drive suggestions that improve profitability. That's an incredibly exciting future, especially in an industry known for slim margins and long hours.

Okay, let's shift gears now to our second priority, which is to expand the markets we serve. In our core business, our sales team continues to drive strong wind rates. We're gaining GPB share faster than any other major provider in our space.

Kung Fu T is a great example of a growing brand that chose Toast because they saw us as a leader and an innovative partner that will help them invest in automation and surface actionable intelligence to keep them a step ahead.

Across our new times, enterprise, international, and retail, the vertical playbook that built our restaurant business, product depth, operational expertise, and local go-to market is working just as well. In fact, ARR in each of the new times is both larger than the core was and scaling faster than the core did at the same stage of maturity.

Internationally, we expanded our partnership with TGI Fridays, the UK. There are one of dozens of customers that have locations with us across multiple countries now. These operators tend to be in the largest global cities around the world where average restaurant sales are higher, which is best aligned with their value proposition.

As we expand Toast to more of these tier one markets, I'm confident we can continue to drive durable growth with stronger factories.

In enterprise, we have momentum across the market in restaurants, hotels, as well as sports and entertainment venues. We're excited to become an endorsed food and beverage vendor for best Western, giving us the opportunity to go after the thousands of hotel restaurants they have across the US and Canada.

Sports and entertainment is a large time in the enterprise space, estimated to be a $500 million error opportunity in the US alone.

These customers across stadiums and corporate dining environments, like schools, museums and theme parks, represent an adjacent market to the traditional restaurant can we serve and be roughly doubled our location count in this market over the past year.

It's brands such as VeniWorks, whose portfolio of arenas and stadiums include the Ford Center, which runs on toast, or a last contour company, Alan Marine Tours, running our Costco three devices on their excursion vessels.

Next, shift and gears to retail. We continue to see great progress here as well with our crews that are closest to our poor business. We have doubled our retail sales capacity over the last year, and we expect that to continue to scale to meet the market opportunity we see.

Today, we're primarily targeting grocery, convenience stores and bottle shops. Grocery remains a priority for us given that this part of the market has particularly attracted GPV and our poop.

We also recently launched fuel payments, bringing our first few gas stations, convenience stores out of the platform, a large opportunity for us over time.

We're also testing into other parts of the broader retail town, and we'll expand further where we see product markets hit.

Internally, we talk a lot about how toast emerged as a leading provider for restaurants over the past decade, and how we have a broader opportunity to not to scale within restaurants but support local businesses of all types with our platform.

Over time, you should expect to see us launch in more sub-verticals, just as we have within grocery, convenience stores and bottle shops.

All right, to wrap it up, our third priority is to reinvent how we work, scale with AI, and invest in durable growth.

We are delivering world-class growth and margins at scale. The results of decisions we've made over time lean into growth opportunities, while simultaneously driving efficiency across the business.

Our core growth algorithm continues to deliver great results. We're gaining market share, increasing our food, and our new AI offerings open up for opportunities to scale ARR over time. The margins in our core business are already over 40%. And we expect the margin to continue to scale and be meaningfully higher longer term.

In our new TAMS, we're scaling quickly, and on a path to nearly double ARR to 200 million this year.

Given the strong market demand and the progress we have made on our unit economics, we're investing behind them to scale faster and expect them to be even larger drivers of growth over time. In addition, we're also ceding longer-term bets in areas such as consumer and new retail TAMS, where our scale and platform advantage gives us a unique opportunity to compete and win.

Given these are earlier-stage opportunities, we will be disciplined in how we invest, and we'll keep you updated as they progress. As we have shared with you before, we want to compound this business over time to 10 billion in ARR and beyond. As margins continue to scale in our core business, we will remain disciplined in how we invest back into our new TAMS and emerging bets and apply the same rigor on capital allocation that got us here.

I want to thank every toaster for their dedication and commitment to toast. We would not be here without all of your work. And thank you to our customers and investors for your continued support as well.

With that, I'll turn the call over to Elena.

Thank you, Aman, and everyone for joining us today. I want to start by recognizing our team. Q2 came in ahead of expectations across the board, and our results reflect the consistent execution happening throughout the company every day. We posted strong top and bottom line results in the second quarter. ARR grew 25% and our recurring gross profit streams increased 28% year over year.

Adjusted EBITDA, grew to $221 million and gas operating income was $152 million, a 26% margin. On a gap basis, we are operating above Rule of 50 with recurring gross profit growth plus operating margin reaching a high of 57% in 2Q, demonstrating the strength of our business model and persistent focus on balancing durable growth and profitability. We added a record 9500 net new locations in Q2 growing total locations 22% from a year ago to approximately 180,000. Our net ad momentum reflects demand for the toast platform and the strength of our go-to-market execution across our core and new towns.

The breadth of our platform and value we provide customers is also driving sustained growth in monetization. Total take rate, measured by recurring gross profit as a percentage of GPD, was 98 basis points in Q2, up 5 basis points from a year ago.

SAS ARR grew 27% year over year, driven by location volume and consistent mid-single digit ARPU growth. Subscription gross profit increased 32% outpacing subscription ARR and revenue growth, benefiting from continued margin expansion. SAS gross margins were approximately 240 basis points year over year from ongoing optimization efforts, including leveraging AI to transform customer support. Payment ARR grew 23% and thin tech gross profit increased 26% in the second quarter versus a year ago. GPD was 61 billion dollars, up 22% with GPD pre-location flat.

In the core, GPD came in better than expected with strong same source sales trends throughout the quarter, including a modest benefit from the World Cup at the end of June.

Thin tech net take rate was 59 basis points with payments take rate at 50 basis points. Payments take rate grew year over year from the same levers we've seen over the last several quarters, adoption of new products, cost optimization efforts and small targeted pricing moves.

Non-payments, thin tech solutions led by Toast Capital contributed $57 million in gross profit and nine basis points to take rate.

Customer demand for capital remains strong and defaults remain within our expectations thanks to our data advantage and disciplined underwriting approach. Moving down the P&L, hardware and professional services gross profit was negative at 11% of our recurring gross profit streams. During the quarter, we received a tariff refund of approximately $10 million that was not contemplated in our Q2 guidance.

Based on the current landscape, this represents the bulk of the refunds we expect to receive. With respect to the dynamic memory market, we've taken several mitigation steps to manage hardware cogs and our supply chain and have already reduced the memory cost impact for 2026 and 2027 versus our original expectations.

A few examples of actions we've taken leveraging earlier generations of our hardware, transitioning certain hardware to lower cost memory and opportunistically buying at attractive prices in the spot market to complement our direct vendor relationships. We'll continue to pull these levers and evaluate other areas to lower costs while meeting customer demand and maintaining our best in class hardware.

When the memory market stabilizes, we're going to come out with structurally better hardware margins than before. Thanks to the optimization work we're doing across hardware product costs and supply chain.

Operating expenses increased 19% from a year ago, excluding $29 million of bad debt and credit related expenses. Our investment priorities remain consistent. Fueling continued share gains in the core, scaling our new towns, building the AI product capabilities that will differentiate toes for years ahead and seating long term bets.

Sales and marketing expenses increased 22%, reflecting incremental investments to support our sustained strong location growth. In the core, we're growing our upsell and account management teams and going deeper across sub segments of the TAM like non-native English speaking customers. Plus, we're increasing our go-to-market presence across new towns.

R&D expenses grew 23%. We're investing to deepen the product capabilities that matter most. Our agentic platform, vertical specific innovations each new TAM, and AI tooling across the organization to improve productivity.

The early results with products like toast. key growth give us confidence in our right to win when we harness our data and AI capabilities to do more for our customers.

In Q2, adjusted with a group 38% to $221 million and margins expanded 240 basis points to 37%. This reflects strong top line execution, continued discipline across the cost structure and the tariff refund benefit.

Free cash flow was $130 million in the second quarter down versus a year ago from our strategic decision to acquire and hold more hardware inventory in the near term. We expect a conversion of adjusted even into free cash flow to improve in the back half of 2026. Over time, we expect to see a corresponding benefit to free cash flow with higher conversion rates when we choose to scale down to more normalized inventory levels.

Gap operating income was $152 million and GAPPPS was $0.26 both nearly doubling from a year ago. We're complementing strong growth with leverage down the P&L reflecting discipline expense management, including stock based compensation and a lower diluted share count. SBC was 10% of recurring gross profit down 400 basis points from a year ago. A function of disciplined equity grant practices and lapping the elevated grant values following our IPO.

Year to date, we repurchased over 19 million shares for $486 million, approximately $100 million remains on our share repurchased authorization. We will continue to opportunistically buy back shares based on market conditions to support long term shareholder value.

Turning to guidance. For the third quarter, we expect total subscription and FinTech gross profit to grow 22 to 24% year over year and adjusted EBITDA to be $210 to $220 million. On the back of our strong first half results, we're raising our full year 2026 outlook. We now expect recurring gross profit to grow 23 to 25% and adjusted EBITDA to be $805 to $825 million.

We strategically chose to reinvest the tariff refund into key growth initiatives and to see long term bets. As a result, we're increasing our full year adjusted EBITDA guidance by less than the 2Q beat. Let me provide some context on our guidance and how we're managing the business for the long term. We're building a generational company that compounds a top tier growth rates over the next five to 10 years. We have a tremendous runway in front of us across core and horizon two. And the opportunity set to build new as curves keeps growing as we scale and expand.

We remain disciplined capital allocators and manager investments across these multiple horizons. The core business is horizon one with a proven growth algorithm and strong cash flow generation.

It operates at rule 60 with over 20% growth and over 40% margins. We're balancing ongoing efficiency gains with investments in AI products to unlock the significant opportunity to do more for customers. Deploying AI tooling internally will unlock more efficiency and productivity gains as we automate work and the teams reimagine how they operate. This positions us to sustain rule of 60 in the core with healthy growth and ongoing margin expansion on the path to meaningfully higher margins over time.

New Thames international enterprise and retail are horizon two. We expect total ARR to nearly double to $200 million this year. And each is on a path to healthy unit economics at scale. Given the positive signal, we're investing to scale even faster and accelerate our path to be a market leader in each. With the potential for billions of ARR across these businesses and high terminal margins given the leverage they get from our core, we're confident these investments will have significant ROI.

Lastly, we're seating longer term horizon bets like consumer and other retail verticals. As we scale and add capabilities are right to win across more areas of local commerce expands. Our goal is for these businesses to become key growth drivers for the company three to five years out. We'll take the same gated approach to incubating them like we did with retail and international, only deploying more capital as we find product market fit and meet certain success criteria.

If we don't see success over a period of time, we'll pull the investment back and either redeploy to the next opportunity or expand margin.

With our momentum and the opportunities ahead, we believe reinvesting upside into long term growth areas with high potential ROI is the best path to maximize our long term enterprise value. In 2026, we're managing to modest margin expansion consistent with the framework we laid out coming into the year and reiterated with today's guidance.

We plan to continue operating with this general framework focused on sustained growth and gradual margin expansion as long as our investments are meeting our expectations. That keeps us on a path to 40% plus long term adjusted even the margins with the timing firmly in our control. With the strength of our core and confidence in the margin potential in new towns, we believe there's a path to a much higher margin profile over time.

The first half of this year was a strong chapter for toast. We're entering the back half with momentum and confidence in where we're headed and we're incredibly excited about the opportunity ahead. Now I will turn the call back over to the operator to begin Q&A.

Thanks, Chris. All right. We'll get our Q&A started. First question is from Tim Chioda at UBS. Tim.

Hey, Tim. Sure. That's exactly the vision of the long term to build out our authentic platform. Maybe just to zoom out for a second and look at the context of how we got here. To start off as a point of self-system. And then evolve to be really this broader platform.

And customers love the fact that it's an all-in-one integrated platform that's got a single point of support. And that's what drives a lot of Arpugrowth today.

One of the pieces of feedback we've gotten from operators over the past year is they have decided hard to leverage everything. They're spread thin, just trying to run their businesses. And so even when they're using the toast software, it might outsource the function of marketing, for example, or payroll and tax or inventory management or bookkeeping to a third party.

And so we saw that as an important opportunity for us where we said could toast take on not just the software that's needed to run the business, but actually take on some of that work. And we started off with this marketing agent, which is toast take you grow. And I think what has been really powerful about toast take you grow is that one, we're leveraging data across and learning across 350,000 plus customers to figure out what are the best ways to have a great online ordering presence or a website optimized SEO advertising marketing.

And we're also leveraging data on both when the restaurant is busy and when it's not, as well as data on guests. And that's what's really allowing us to build a platform where it's actually outperforming what humans can do.

You know, restaurants that switch to our toast take you grow platform agent rather are seeing better results and so are seeing same source sales growth. And so as we go beyond toast take you grow, we're using the same approach and framework. And we're looking at what are areas where we can not just provide software, but sort of take on some of that work. It's early, but you look at something as simple as voice AI, for example, picking up the phone in a restaurant on a drive-through.

Over time, we're looking at use cases around scheduling and payroll and tax. So think about like forecasting demand to be smarter about scheduling employees and then making sure that we're getting the best employees, the best shifts. And then we're also looking at use cases around inventory management, bookkeeping and accounting. And really what we're focused on is one, what are areas where restaurants are leveraging third-party services today, and where we have a right to win and create value that's outside relative to because of the data and context we have.

Thank you.

Thanks. We'll take our next question from Harshita Rewat at Bernstein.

Yeah, great question Harshita. One, as I shared this product incremental to the software we provide, this product contracts to be the fastest product to $10 million.

And, you know, we're seeing that's really driven by really good traction, both especially in our upsell funnel where customers see the value. The main driver of that is we're showing that when customers pick our platform, they're seeing same-source programs.

I think in terms of margins, the, if you look at all AI products out there in the market today, it's often, you know, pick a use case, like building, you know, coding software or support. It's often a combination of AI and humans. And it's the same approach that we've taken where the AI is generating, leveraging all the data and context we have, the first task. So like, okay, how do you optimize restaurants, you know, social digital presence was the best attempt at a marketing campaign and the copy on the marketing campaign or advertising.

And then we've got humans reviewing and approving those workflows. And so, as we've gotten some early scale, we've already seen the gross margins improved.

And I frankly have no concerns long-term about what the gross margins of that business could be. We're a lot more focused right now to your earlier question about product market fit and looking at the funnel really closely to make sure that there's a path here to really accelerate growth on that product.

Thanks, Ashita. All right, we'll move on. We'll take our next question from Will Lance at Goldman Sachs.

Yeah, thanks, Will, for the question. So the short answer is both right. So we are really proud of being, you know, really disciplined in terms of capital allocation. And like zooming out our framework is we're really positioning the company to be, you know, a much bigger company or we're building a generational company where we believe we can be much bigger than we are today. And some of that comes from both the way we manage our capital allocation and the discipline that we see. But also to the point you made, our new towns are showing incredible signal already. I'm on talked about reaching 200 million in ARR. So we've always said to the extent that we see success, we're going to actively choose to invest.

And that's exactly what we're doing. And now we're going to do it in a very sustained in a very disciplined way where we're going to sustain growth. But at the same time, deliver a gradual margin expansion. And so we're seeing all of the proper signals. And then, of course, AI presents an opportunity for us as a business to reimagine how we work and continue this effort that we've had for many years really around efficiency.

And we think we can unlock even more efficiency. That's why the commentary in the script is around meaningfully higher margins. That's because we're going to continue this focus on efficiency, but also as we become an AI native company, AI first company, we'll see some benefit from that as well.

Thanks for taking the question.

Thanks. Well, we'll move on to our next question, Darren. Well, Darren, take it away.

Of course, yeah. First off, you know, the results we had in Q2 and really the first half are really, really strong. Really proud of the sales teams performance. We think we had a new watermark 9500 net ads this quarter. I think previously the watermark was 8500.

And really, if you look at it, the majority of that came from our core business, right? This is the SMV and the market business. We continue to see really strong wind rates. We see, you know, we're taking stronger GPV gain, share gains versus any well, or worse than anyone else in our core business.

Haven't seen anything fundamentally change on the competitive side. I think this goes back something I said earlier, which is I think one point that may be underappreciated a bit is if you look at why customers choose toast.

It's not just because of the point of sale. They're picking all in one platform. That's what drives our wind rate. It's capabilities around the operations of restaurant, both front of house and back of house. And now increasingly, it's products like Toseki grow. And so for us, like, that's the focus is to continue to drive more and more value for our customers. Like, you know, we're big believers and continue to be customer obsessed and not competitive competition obsessed. And that's showing up in our wind rates and in the productivity of the sourcing. Thanks for much.

Thanks, Darren. We'll turn to Steven Sheldon at William Blair for our next question.

Yeah, we're still learning. I'll just start by saying, I think it's, you know, in the context of our business and our scale.

Even though Toseki grow is growing in a rapid clip, it's still very early. I think what we see is, I'll go back to what I said here, actually, which is if you look at how we build software, it's the incredible tools, but we still need to be an oversight on top of those tools to make sure we're getting the most out of AI. And I think it's the same mindset where our customers are coming to us and saying, look, we're outsourcing this work of marketing to somebody already if you could take that on and you can do it better. Right. That's awesome. And so our approach is we're using all the data and context we have.

And we are letting AI drive the first task of what, for example, the great website looks like or what are the ways in which you have great online ordering digital presence. What are the right offers you need to generate? What's the best attempt at a marketing campaign or an ad on social? And then you've got our marketing success managers reviewing and approving that work. I think one of the reasons we've been able to see such strong impact where customers that switch to a post IQ grow increase in store sales is because we've got like really unique data. An example is we're looking at the restaurants data in terms of when they're busy, when they're not one of the things that make that brand and the restaurant, what it is on the guest side, we know guest preferences.

Over time, these campaigns can get hyper personalized. And I think we're learning a lot about what creates the best possible campaigns.

And I expect that over time, it'll get better and better in terms of the quality of these campaigns, the conversion rates.

But the early action so far has been really positive. This business is running positive margins already. It's increasing. And of course, the growth has been stellar.

Good year.

Thank you. We'll take our next question from Dan Dolev at Mizuho.

Yeah, thanks Dan for the question. Definitely a very, I would say, fluid environment. I would expect the P&L impact in twenty seven to be greater than twenty six just based on how we account for inventory. I think there's really three things I'll leave you with. One, and I said this in my remarks, I'll just reinforce a few points.

One is we've done a lot of work to improve the impact that we originally shared for both twenty six and twenty seven. And that's really the great work from the hardware ops team deploying mitigation strategies and can talk about those. Two, we feel very confident about the supply and we had supply for both twenty six and twenty seven.

And then three, a really important point because we've done this deep dive over the long term. We're really confident that this work will lead to improved hardware margins over the long run after the memory market stabilizes. So we've done a lot of work to not only impact the near term, but also structurally what the hardware margins look like over the long term. So I feel really great about the work and we're going to continue to do that and optimize anywhere we can really across the hardware panel.

Thank you. We'll take our next question from Adam Frisch at Evercore.

Yeah. I'll take these. So number one, while hardware is an important part of our P&L, like zooming out, there's a much bigger cost structure that we're managing and we're actively choosing to invest. And we've sort of laid out the reasons why we have a ton of conviction around not only these new scams, we're placing horizon three bets. But if you just think about the position we're in, we're in a incredibly strong position as a company with our core business at 40% margins operating at rule of 60.

And now we're in this position where we want to sustain growth over the long term, but also do that in a very disciplined way, which is why we said we'll always have some gradual margin expansion. But we're seeing great signal. It's a positive sign. That means we're investing behind that great signal. So that's sort of the overarching kind of theme you should take from it. In terms of headcount and, you know, rationalization of headcount, we're always incredibly disciplined, frankly, around every headcount we hire, and that's not going to change. And as we consider AI that allows us to reimagine how we work and consider across the company how we can scale even more efficiently.

So I do feel very confident in our ability to drive improved drive to meaningfully hire margins over the long term as we begin to adopt a across the company. And that's not just for our customers, but just even in how we work. I hope I got most of your questions answered.

I think maybe just to build up. Yeah. Just to build on what you said, just to get specific for a second, right? Like, if you look at our plan this year, we saw some opportunity based on the performance in our strategic cuisine. This is the non English speaking reps and we've added some additional investment. With retail, we see opportunity increase in sales investment. We've been green lighted that. So, thank you, grow similarly. We've seen some great early signal with our products. And so back to question about a lot of research, we are leaning into areas that allow us to grow over the long term. I think, as you can imagine, for example, our new time getting from 100 to 200 million this year gives us even more conviction to say let's actually try to move even faster.

And while there's always put some takes in terms of the even in year, like, you know, at least my expectation is hardware over time will normalize back to what the margins were pre this memory issue, like the thing to take away is a lot of the focus investment. In fact, even beyond is the right to invest in some investments in consumer, for example, or these new verticals beyond the ones we're in today are by choice because we believe in the long term potential.

Thanks, Adam. We're going to take our last question today from Tim Jin Wong at JPMorgan. Tim Jin?

Yeah, Tim Jin. I think first of all, like, we want to make sure that any opportunities that exist in our core business to maximize growth, we're focused on that. So we talked about some sales capacity in our core and strategic cuisines. This is the non-English part of the time. So Seki Gro, we saw things in really early signal that's really positive and we actually unlocked some investment there.

And some of that is actually also more broadly on AI products beyond to Seki Gro. See that? They'll take time to materialize. But we're seeing the signal that we can take on some of the work that's beyond the software and take on some of the services work for restaurants over time with AI. And in our new terms, you know, I think it's the, I get this question earlier, a lot of our prioritization too. But I think that the, maybe I'll start by saying in our retail business, we've got, SaaSARP was already there, closest, just within a couple years to our core business. And so we look at the self-capacity we have and the productivity of the team that we have and we say we should try to go faster.

Especially because I think the team's building conviction that as we get to scale, we're going to see some of those valuable effects where, you know, once you get to three, four, five percent market share and grow, we expect there to be till wins on top of funnel and conversion on win rate. And so we're leaning in there. And then I think internationally in an enterprise, we're being opportunistic. You said sports entertainment is one example to find areas where we can invest.

And then I think in the, whether you look at the future, you know, we've, Elena talked about its horizons framework. Lots of investment in our core, investments against our new teams. And then we've also got some investments against best, that set up longer term future growth. So, for example, in retail, you see fuel expansion, for example, recently, you know, leaning into grocery.

We're also looking at additional sub verticals. We're looking at best around consumer. We didn't talk a lot about that in today's call, but, you know, we've seen really good monthly active user growth on that app as it's most local. And so really across the board, where we see opportunity, we're leaning in. And, you know, Elena and team do a great job of making sure that while we're leaning into growth, we're also looking at all the opportunities to drive efficiency in the business, especially with what they will make possible.

Thank you.