Toast raised its AI marketing add-on 40% to $699 in five months as the FTC sues over its fees
The AI product investors bought Toast for is partly a price increase on restaurants that already run on Toast, sold by an upsell team into the same quarter the FTC and seven states sued over its fee and cancellation terms. The fourth-quarter guide is the first test of whether the hike sticks.
Vincent Jiangtwo-minute read
Toast−1.41% — Toast, down 1.41 percent today launched IQ Grow, its AI marketing add-on that runs campaigns, loyalty, email, SEO and review agents for restaurants, in May 2026 at $499 a month 1. By October it cost $699, a 40% increase in five months 1.
The product is sold by Toast's upsell team to merchants already on its payments rails, not attached to new contracts. On the November 3 call, CEO Aman Narang called it the company's "fastest-growing product on track to reach $10 million in ARR by end of year" and credited it, along with the upsell motion, for an inflection in ARPU growth in the core business 2. The cheapest way to show AI revenue is to raise the price on merchants who cannot easily leave.
The quarter that repriced and got sued at once
Third-quarter revenue was $1.98 billion, ARR $2.5 billion, recurring gross profit $642 million, up 27% 4. Total take rate reached 104 basis points, up 6, and CFO Elena Gomez attributed the payments rise partly to "small targeted price moves" 2. Toast raised full-year guidance: 26% recurring gross profit growth and $840 million to $850 million of adjusted EBITDA 3.
Gross profit has grown 63% since late 2024, revenue 48%
- Revenue
- Gross profit
Data
| Revenue | Gross profit | |
|---|---|---|
| Q4 '24 | $1.34B | $0.33B |
| Q1 '25 | $1.34B | $0.35B |
| Q2 '25 | $1.55B | $0.39B |
| Q3 '25 | $1.63B | $0.43B |
| Q4 '25 | $1.63B | $0.42B |
| Q1 '26 | $1.63B | $0.45B |
| Q2 '26 | $1.91B | $0.52B |
| Q3 '26 | $1.98B | $0.54B |
That raise landed five days after the FTC, seven state attorneys general and two California localities sued Toast in the Northern District of California over hidden fees, a $150-per-remaining-month early termination charge buried in a 25-page Merchant Agreement, a 30-day written cancellation notice and a weekday-only "churn line," and a 99-cent diner fee Toast kept 8. Toast says no court has held that ROSCA, a consumer subscription law, reaches negotiated B2B contracts 7.
Gross profit growth has halved from 47% while the AI add-ons repriced
Growth has cooled since late 2024, and the Q4 guide sits below every quarter reported
- Gross profit growth, % YoY
- Estimate
Data
| Gross profit growth, % YoY | |
|---|---|
| Q4 '23 | 43 |
| Q1 '24 | 43.1 |
| Q2 '24 | 37.5 |
| Q3 '24 | 42.5 |
| Q4 '24 | 47.3 |
| Q1 '25 | 39 |
| Q2 '25 | 37.1 |
| Q3 '25 | 34.2 |
| Q4 '25 | 27 |
| Q1 '26 | 29.2 |
| Q2 '26 | 31.6 |
| Q3 '26 | 25.7 |
| Q4 '26e (estimate) | 23 (22–24) |
No one publishes how much is price and how much is volume
Neither Toast nor the sell-side discloses how much recurring profit growth is price and how much is volume 2. Bernstein downgraded the stock to Market Perform on November 11, cutting its target to $38 from $45, saying the AI-winner thesis "has already played out"; Needham and Piper Sandler stay at Buy and Overweight 5.
CFO Gomez steps down December 31, and chief revenue officer Jonathan Vassil leaves the same day 6. The Q4 guide of 22% to 24% recurring gross profit growth settles the question: the bottom means the $699 price did not stick, the top means Toast can reprice its base at will 3.
The Inference followed the suit's opening in "FTC and eight states sue Toast over hidden fees" (/article/ftc-and-eight-states-sue-toast-over-hidden-fees-taking-aim-at-a-6-billion-payments-machine) and the terminal subsidy behind it (/article/toast-s-free-terminal-now-costs-it-85-million-a-quarter-and-the-ftc-wants-the-fee-that-pays-for-it). New here is what the terminal buys, and what it now costs.
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