Is Toast Stock a Bargain AI Play After Its Latest Revenue Surge?

Toast (TOST) has erased an earlier 35% year-to-date decline and now trades near flat for 2024 after posting second-quarter revenue of $1.91 billion, up 23% year-over-year. The restaurant software and payments provider grew annual recurring revenue 25% to $2.4 billion and added a record 9,500 new locations during the quarter.

The company's AI strategy is gaining commercial momentum. Toast IQ Grow, its AI-powered customer acquisition tool, is on pace to become the fastest product in company history to reach $10 million in ARR. The platform uses machine learning to help restaurants optimize marketing spend and drive customer traffic.

Toast currently trades below 8x forward ARR, a discount that analysts consider attractive given the sustained 20%-plus growth rate. The valuation compression earlier this year has reversed as the company demonstrates it can maintain expansion while layering in higher-margin AI products alongside its core point-of-sale and payments infrastructure.