First Watch’s second quarter results drew a positive reaction from the market, reflecting solid progress across several key business drivers. Management pointed to sequential improvements in guest traffic, with positive momentum culminating in June, and credited targeted marketing investments and continued menu innovation as primary contributors. CEO Chris Tomasso emphasized the impact of new seasonal offerings and enhanced brand visibility, noting that the company’s expanded marketing strategy has led to higher customer return rates and broadened appeal. Tomasso highlighted: “We just continue to up the ante on ourselves, frankly, from a culinary innovation standpoint, from a unit development standpoint and from a marketing standpoint.”
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First Watch (FWRG) Q2 CY2026 Highlights:
- Revenue: $354.7 million vs analyst estimates of $351.4 million (15.2% year-on-year growth, 0.9% beat)
- Adjusted EPS: $0.05 vs analyst estimates of $0.05 (in line)
- Adjusted EBITDA: $34.47 million vs analyst estimates of $34.57 million (9.7% margin, in line)
- EBITDA guidance for the full year is $134.5 million at the midpoint, below analyst estimates of $136.6 million
- Operating Margin: 2.3%, in line with the same quarter last year
- Locations: 665 at quarter end, up from 600 in the same quarter last year
- Same-Store Sales rose 3.4% year on year, in line with the same quarter last year
- Market Capitalization: $742.4 million
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From First Watch’s Q2 Earnings Call
- Todd Brooks (Benchmark StoneX) asked about drivers of the sequential traffic gains and the sustainability of positive same-restaurant sales in the challenging third quarter. CEO Chris Tomasso cited a combination of menu, marketing, and operational improvements as key factors.
- Brian Vaccaro (Raymond James) pressed for details on the magnitude and duration of beef-related food cost pressures. CFO Ashlee Weisser detailed that the impact should moderate as the limited-time offer ends and commodity inflation remains below historical trends for now.
- James Salera (Stephens Inc.) inquired about the frequency of returning new customers and the broader impact on sales mix. Tomasso explained that both new and existing customers are engaging with premium menu items, not just infrequent visitors.
- Allison Arfstrom (Piper Sandler) sought clarity on the contribution of marketing efficiency to traffic growth. Weisser noted that while precise attribution is difficult, brand-building marketing efforts are designed for long-term, sustained impact rather than immediate call-to-action results.
- Gregory Francfort (Guggenheim Partners) questioned the rationale for moderating unit growth targets and changes to labor scheduling. Tomasso described the decision as a balance between maintaining high opening standards and supporting free cash flow, while Weisser noted small adjustments to manager headcount were made to improve efficiency.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) the ongoing impact of new menu innovation and the effectiveness of seasonal limited-time offers on sustained guest traffic, (2) how management balances higher marketing spend with margin pressures stemming from premium product mix, and (3) the pace and performance of new restaurant openings, especially as unit growth moderates. Execution on capital allocation priorities and further details at the upcoming Investor Day will also be key signposts for progress.
First Watch currently trades at $12.04, down from $12.50 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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