10-Q · May 5, 2026
First Watch Restaurant Group, Inc. reported strong financial results for Q1 2026, with total revenues of $331.0 million, reflecting a 17.3% increase year-over-year. However, the company faced a larger net loss of $2.7…
Earnings analysis · 10-Q
FWRG earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
First Watch delivered strong Q2 top-line growth, with revenue up 15.2% to $354.672 million, 18 system-wide openings, and restaurant-level margin expansion to 18.8%. However, GAAP operating margin fell 10 basis points to…
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First Watch delivered strong Q2 top-line growth, with revenue up 15.2% to $354.672 million, 18 system-wide openings, and restaurant-level margin expansion to 18.8%. However, GAAP operating margin fell 10 basis points to 2.3%, EPS of $0.04 was below the $0.06 consensus estimate, and comparable traffic declined 0.4%. Cash generation improved in the first half, but the $276.0 million debt balance and $145.0-$150.0 million 2026 capex plan keep funding and margin execution central to the outlook.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.04
- Operating margin
- 2.3%
What stood out
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Revenue growth accelerated and beat consensus
Q2 revenue rose 15.2% year over year to $354.672 million from $307.887 million and increased 7.2% sequentially from implied Q1 revenue of $330.959 million. The reported result exceeded the $352.114 million consensus estimate by $2.558 million.
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EPS returned positive sequentially
Diluted EPS was $0.04, up from $0.03 in Q2 2025 and a $0.04 loss in Q1 2026. Net income increased 11.1% to $2.339 million from $2.106 million.
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Both revenue streams expanded
Company-owned restaurant sales increased 15.2% to $351.481 million, while franchise revenue grew 9.9% to $3.191 million. System-wide sales grew 14.7% to $397.046 million, supported by 18 system-wide openings and one closure during Q2.
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Unit-level profitability improved
Restaurant-level operating profit grew 16.2% to $65.948 million and its margin expanded 20 basis points to 18.8%. Food-and-beverage costs improved 10 basis points to 23.5% of restaurant sales and labor improved 30 basis points to 32.9%.
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Operating cash generation increased
Operating cash flow for the first 26 weeks increased to $61.896 million from $59.570 million. Management attributes the increase principally to more company-owned restaurants, partly offset by the timing of operational payments.
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Commodity outlook remains favorable
Management expects annual same-restaurant sales growth of 1.5%-3.0% and commodity inflation of approximately 0%-1.5%; Q2 commodity costs actually declined 1.6%.
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No new risk-factor disclosures
There were no material changes to the risk factors disclosed in the 2025 Form 10-K, according to Item 1A of this 10-Q.
What to watch
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Corporate and operating costs compressed margin
GAAP operating margin declined 10 basis points year over year to 2.3% from 2.4%, despite operating income rising to $8.127 million from $7.313 million. General and administrative expense rose 16.7% to $38.727 million, depreciation and amortization rose 20.4% to $21.839 million, and other restaurant operating expense rose 19.2% to $55.557 million.
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Comparable traffic turned negative
Same-restaurant traffic decreased 0.4% in Q2, versus 2.0% growth in Q2 2025, even as same-restaurant sales rose 3.4%. This indicates comparable-sales growth was driven by check/mix rather than guest-count growth.
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Higher leverage is raising interest burden
Interest expense increased 22.2% to $4.892 million from $4.003 million because of increased debt. Outstanding Credit Facility borrowings were $276.0 million at June 28, 2026, while cash and cash equivalents were $20.5 million.
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Growth capex requires external funding
The company generated $61.896 million of operating cash flow in the first 26 weeks but used $70.506 million in investing cash flow, producing a $0.761 million decrease in cash. Planned 2026 capital expenditures of $145.0-$150.0 million exceed first-half operating cash flow and are expected to be funded partly with borrowings.
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Labor and commodity cost inflation remains a risk
Restaurant-level wage inflation was 4.1% in Q2, and management expects full-year wage inflation of approximately 3.5%-4.5%. Management also expects commodity inflation of approximately 0%-1.5%, leaving exposure to renewed food-cost inflation after Q2's 1.6% commodity deflation.
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No material risk-factor update
Item 1A states there were no material changes to risk factors from the 2025 Form 10-K. Accordingly, the filing does not identify any newly added or materially revised risk factor for the quarter.
Management's outlook
The filing expects FY2026 same-restaurant sales growth of 1.5%-3.0%, commodity inflation of approximately 0%-1.5%, and restaurant-level wage inflation of approximately 3.5%-4.5%. It estimates 2026 capital expenditures of $145.0-$150.0 million, primarily for new restaurants and remodels. No quantitative revenue or EPS dollar guidance is provided in the 10-Q; the contemporaneous earnings release raised revenue-growth guidance to 12.5%-14.0% from 12.0%-14.0%.
Earlier filings 4
10-K · February 24, 2026
First Watch’s 10-K emphasizes continued unit growth and a scalable daytime-dining model: the system reached 633 restaurants (560 company-owned, 73 franchise-owned) and opened 64 new restaurants in 2025 while acquiring…
10-Q · November 4, 2025
First Watch reported Q3 revenues of $316,022,000, up from $251,609,000 year-over-year, with income from operations rising to $10,050,000 and diluted EPS of $0.05 (vs $0.03 a year ago). Operating cash flow for the 39…
10-Q · May 6, 2025
First Watch reported Q1 revenue of $282,240,000, up from $263,291,000 in the prior quarter and $242,449,000 year-over-year, but profit metrics weakened: gross margin compressed to 52.5% and operating margin to 0.4%,…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.