Toast, Inc.TOST
Toast, Inc. Stock Compensation Disclosure
Stock-Based Compensation Expense
Stock-based compensation expense recognized for the fiscal years ended December 31, 2025, 2024, and 2023, was as follows (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Cost of revenue | $ | 34 | $ | 40 | $ | 43 | |||||||||||
Sales and marketing | 57 | 54 | 58 | ||||||||||||||
Research and development | 88 | 84 | 94 | ||||||||||||||
General and administrative | 60 | 63 | 82 | ||||||||||||||
Restructuring expenses | 3 | 12 | — | ||||||||||||||
Total stock based compensation | $ | 242 | $ | 253 | $ | 277 | |||||||||||
Stock Option and Incentive Plans
The 2021 Stock Option and Incentive Plan, or the 2021 Plan, was adopted and approved in 2021. The 2021 Plan replaced the 2014 Plan, which was initially adopted in 2014 and continues to govern outstanding equity awards granted thereunder. The 2021 Plan allows us to make equity-based and cash-based incentive awards to our officers, employees, directors, and consultants. The number of shares reserved and available for issuance under the 2021 Plan automatically increases each January 1, by 5% of the total outstanding number of shares of the Class A common stock and Class B common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Compensation Committee of our Board. As of December 31, 2025, 119 million shares were authorized for future issuance under the 2021 Plan.
2021 Employee Stock Purchase Plan
In 2021, our Board adopted, and our stockholders approved, the 2021 Employee Stock Purchase Plan, or ESPP. The ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each year through January 1, 2031, by the lesser of: (i) 12 million shares of our Class A common stock, (ii) 1% of the issued and outstanding total number of shares of Class A common stock and Class B common stock on the date immediately preceding December 31, or (iii) such lesser number of shares of Class A common stock as determined by the plan administrator of the ESPP.
As of December 31, 2025, 31 million shares of our Class A common stock were authorized for issuance to participating employees who are allowed to purchase shares of Class A common stock at a price equal to 85% of its fair market value at the beginning or the end of the offering period, whichever is lower.
Stock Options
Our stock option awards generally have a requisite service period of to five years and a contractual life of ten years.
The following table indicates the weighted-average assumptions made in estimating the fair value based on the Black-Scholes model as of December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Risk-free interest rate | 4.05 | % | 4.06 | % | 3.90 | % | |||||||||||
Expected term (in years) | 6.09 | 6.09 | 6.08 | ||||||||||||||
Expected volatility | 59 | % | 59 | % | 56 | % | |||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | |||||||||||
Weighted-average fair value per share of common stock | $ | 34.00 | $ | 24.53 | $ | 18.01 | |||||||||||
Weighted-average fair value per share of options issued | $ | 20.16 | $ | 14.51 | $ | 10.24 | |||||||||||
The following is a summary of stock option activity under our stock option plans:
| Number of Shares (in millions) | Weighted- Average Exercise Price (per share) | Weighted- Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in millions)(1) | ||||||||||||||||||||
Outstanding as of December 31, 2024 | 28 | $ | 9.42 | ||||||||||||||||||||
Granted | 2 | 34.00 | |||||||||||||||||||||
Exercised | (8) | 7.81 | |||||||||||||||||||||
Forfeited | (1) | 18.90 | |||||||||||||||||||||
Outstanding as of December 31, 2025 | 21 | $ | 11.84 | ||||||||||||||||||||
Options vested and expected to vest as of December 31, 2025 | 20 | $ | 11.49 | 5.1 | $ | 482 | |||||||||||||||||
Options exercisable as of December 31, 2025 | 17 | $ | 8.85 | 4.6 | $ | 458 | |||||||||||||||||
(1) The aggregate intrinsic value was determined as the difference between the closing price of the Class A common stock on the last trading day of the month of December or the date of exercise, as appropriate, and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their in-the-money options at period end.
The aggregate intrinsic values of options exercised was $278 million, $401 million, and $137 million for the fiscal years ended December 31, 2025, 2024, and 2023, respectively.
As of December 31, 2025, total unrecognized stock-based compensation expense related to the options was $42 million and is expected to be recognized over the remaining weighted-average service period of 2.7 years.
Restricted Stock Units
The majority of our restricted stock units, or RSU, awards have a requisite service period of four years. We reflect RSUs as issued and outstanding shares of common stock when such units vest. The following table summarizes RSU activity as of December 31, 2025:
RSU (in millions) | Weighted- Average Grant Date Fair Value (per share) | ||||||||||
Outstanding balance as of December 31, 2024 | 22 | $ | 21.41 | ||||||||
Granted | 6 | 36.09 | |||||||||
Vested | (10) | 22.37 | |||||||||
Forfeited | (3) | 22.42 | |||||||||
Outstanding balance as of December 31, 2025 | 15 | $ | 26.80 | ||||||||
Expected to vest as of December 31, 2025 | 13 | $ | 26.19 | ||||||||
The weighted-average grant-date fair value per share of RSUs granted during the fiscal years ended December 31, 2024 and 2023 was $24.77 and $18.58, respectively. The fair value of RSUs vested during the fiscal years ended December 31, 2025, 2024, and 2023 was $405 million, $284 million, and $208 million, respectively.
As of December 31, 2025, total unrecognized stock-based compensation expense related to the RSUs was $289 million and is expected to be recognized over the remaining weighted-average service period of 2.65 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.