First Watch Delivers 17.3% Revenue Growth and Expands Operating Margins Despite Net Loss in Q1 2026

Revenue Acceleration and Margin Expansion Lead Q1 Performance

First Watch Restaurant Group, a leading player in daytime dining, reported Q1 2026 results that highlight robust growth and operational gains, even as profitability remains challenged. The company posted revenues of $331.0 million, up 17.3% from $282.2 million last year, marking its strongest top-line increase in recent quarters. This acceleration was supported by system-wide sales rising 13.8% to $367.6 million and steady same-restaurant sales growth of 2.8%.

*Calculated based on annual expansion noted in the press release.

Profitability: Operating Margins Improve, But Net Loss Widens

While First Watch’s overall profit margins strengthened, with restaurant-level operating profit margin rising from 16.5% to 18.5%, the company recorded a wider net loss this quarter ($2.7 million, or $(0.04) per diluted share, compared to a net loss of $0.8 million, or $(0.01) per share a year ago). Adjusted EBITDA—a key measure of core operations—jumped to $27.8 million from $22.8 million, indicating that ongoing restaurant performance is trending positively even as strategic investments and higher costs weigh on net income.

Unit Growth Remains a Strategic Priority

First Watch continued its brisk expansion pace, opening 16 restaurants across 11 states in Q1 2026. The company has now added 67 new units over the past twelve months, ending the quarter with 648 system-wide locations (572 company-owned, 76 franchise-owned) across 32 states. For the year, guidance calls for 59 to 63 net new system-wide openings, supporting a revenue growth outlook of 12% to 14%.

Management Outlook: EBITDA Target Raised Amid Reaffirmed Growth Guidance

Encouraged by strong Q1 results, management raised the low end of its adjusted EBITDA guidance, now expecting $133 million to $140 million for fiscal 2026. Full-year expectations for same-restaurant sales growth (1% to 3%) and revenue growth (12% to 14%) were reaffirmed, with capital expenditures of $150 to $160 million earmarked primarily for new locations and remodels. Notably, the company emphasized ongoing discipline in execution as it ramps up investment to capture new market share.

Key Takeaways: Strong Top-Line Growth Offsets Traffic Decline

First Watch is weathering softer traffic, with same-restaurant traffic down 2.0%, but offsetting this with higher average check and successful new store openings. The operational improvements at the restaurant level, demonstrated by higher profit margins, suggest the company’s growth strategy is gaining traction. However, investors should watch how cost pressures and traffic trends evolve, as well as management’s ability to sustain the pace of profitable unit growth in a competitive environment.

Looking Ahead

With an upgraded EBITDA outlook, continued expansion, and stronger underlying margins, First Watch is positioning itself well for the challenges and opportunities ahead in 2026. Investors and observers may want to tune in to the company’s investor call for deeper insight into how management plans to balance growth, costs, and profitability moving forward.

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