First Watch Restaurant Group Q2FY26 Results: Revenue rises 15.2% to $354.7 million
- Revenue rose 15.2% YoY to $354.7 million in Q2FY26
- Same-restaurant sales grew 3.4%, with traffic improving 160 bps sequentially
- Adjusted EBITDA increased 13.5% to $34.5 million; net income was $2.3 million
- Full-year revenue growth guidance raised to 12.5%-14%; EBITDA guidance set at $133M-$136M
- Long-term plan targets 50 new company-operated restaurants annually starting 2027
*this image is generated using AI for illustrative purposes only.
First Watch Restaurant Group (NASDAQ: FWRG) reported a 15.2% increase in total revenue for the second quarter of fiscal year 2026, reaching $354.7 million. The growth was driven by a 3.4% rise in same-restaurant sales and strong performance from new restaurant openings across its expanding footprint.
The company opened 18 new restaurants during the quarter, bringing its total to 665 locations in 33 states. Adjusted EBITDA rose 13.5% to $34.5 million, while net income stood at $2.3 million. Management raised its full-year revenue growth outlook to 12.5%-14% and adjusted EBITDA guidance to $133 million-$136 million.
Financial performance highlights
The quarter showcased sequential improvement in traffic trends, with same-restaurant traffic growing essentially flat but representing a 160 basis point improvement versus Q1. Positive traffic was recorded in June. The following table summarizes key financial metrics for Q2FY26:
| Metric | Q2FY26 | Change YoY |
|---|---|---|
| Total Revenue | $354.7 million | +15.2% |
| Same-Restaurant Sales | +3.4% | N/A |
| Adjusted EBITDA | $34.5 million | +13.5% |
| Net Income | $2.3 million | N/A |
| Restaurant-Level Operating Profit Margin | 18.8% | +20 bps |
What the numbers show
A divergence exists between top-line momentum and near-term margin pressure. While revenue grew 15.2% and same-restaurant sales rose 3.4%, adjusted EBITDA guidance was lowered slightly due to higher cost of goods sold (COGS) from beef-based menu items. The introduction of premium steak offerings increased overall COGS by just under 100 basis points year-over-year. This indicates that successful product innovation is driving traffic and mix but temporarily compressing margins, a trade-off management views as positive for long-term brand health.
Operational drivers and marketing impact
Marketing investments contributed significantly to improved brand awareness and customer retention. Unaided brand awareness increased more than 50% since early last year. In targeted acquisition campaigns, 17% of new customers returned for a second visit, exceeding average return rates. The new core menu launched in February 2026 drove positive menu mix, with per-person check average growth outpacing carried pricing.
Seasonal limited-time offers (LTOs) also performed well. The Chimichurri Steak and Eggs Hash became the best-selling LTO of all time, contributing to a 50 basis point positive mix in Q2. The current Chipotle Steak and Queso Hash is projected to be the second best-selling LTO ever.
Updated guidance and long-term strategy
First Watch revised its fiscal year 2026 outlook:
- Revenue Growth: Increased to 12.5%-14% (from 12%-14%).
- Adjusted EBITDA: Adjusted to $133 million-$136 million.
- Same-Restaurant Sales: Low end of range raised to 1.5%-3%.
- Net New Restaurants: Narrowed to 60-62 system-wide openings.
- Capital Expenditures: Lowered to $145 million-$150 million.
Looking ahead, the company updated its long-term targets to focus on opening 50 new company-operated restaurants annually starting in 2027. This shift aims to balance unit growth with positive free cash flow generation beginning in 2027, moving away from reliance on credit facilities for capital expenditures.
How will the shift to 50 company-operated openings annually starting in 2027 impact First Watch's long-term return on invested capital compared to its historical franchise-heavy model?
Can First Watch sustain its 12.5%-14% revenue growth outlook if beef-based COGS pressures persist or intensify in the second half of fiscal 2026?
What is the projected timeline for the 50% increase in brand awareness to translate into sustained same-restaurant traffic growth beyond the current flat trends?
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