Why CAVA Stock Is Up After Earnings
By Brian McCormick ·
CAVA shares moved higher after the Mediterranean fast casual chain reported strong second quarter growth, helped by higher customer traffic, strong same restaurant sales and continued success from newer locations.
CAVA Group stock was up roughly 7% in after hours trading Tuesday shortly after the company reported its second quarter earnings.
At first glance, the reason isn't too hard to see. CAVA is opening restaurants quickly, and the restaurants it already has are still getting more business.
Here are the main numbers:
- CAVA revenue: $365.4 million, +31.3% YoY
- Same restaurant sales: +9.0%
- Guest traffic: +5.3%
- Net income: $23.0 million, +25.3% YoY
- Diluted EPS: $0.19, up from $0.16
- Adjusted EBITDA: $54.7 million, +30.0% YoY
- Restaurant level profit: $93.8 million, +28.1% YoY
- Restaurants: 476, +19.6% YoY
There is a lot packed into those numbers. The easiest way to understand the quarter is to look at where all that growth is actually coming from.
CAVA is still serving more customers
If you run a restaurant, there are a few basic ways to grow sales. You can open another restaurant, raise prices, or sell more food to more customers.
CAVA is getting help from all three.
Same restaurant sales increased 9.0% during Q2:
- Guest traffic: +5.3%
- Price and product mix: +3.7%
- Total same restaurant sales growth: +9.0%
CAVA defines guest traffic as the number of entrees ordered both in restaurants and through digital orders, so this isn't literally a count of how many people walked through the front door. Still, most of the same restaurant sales growth came from more orders rather than just higher prices.
That's generally what you want to see. A restaurant can get a temporary sales boost by raising menu prices, but there is only so far you can push that before customers start noticing.
More orders suggest people are still choosing CAVA.
And the improvement from last year is pretty noticeable:
- Q2 2025: +2.1%
- Q3 2025: +1.9%
- Q4 2025: +0.5%
- Q1 2026: +9.7%
- Q2 2026: +9.0%
Growth cooled a little from 9.7% in Q1, but I wouldn't read much into a move from 9.7% to 9.0%.
The bigger story is that same restaurant sales nearly stopped growing late last year, then jumped back to around 9% for two quarters in a row.
The new restaurants seem to be working too
This is probably the more important part of the story if you're thinking about CAVA several years from now.
CAVA isn't growing revenue 31% just because existing customers are spending more. The company is opening a lot of restaurants.
A year ago, CAVA had 398 restaurants.
Now it has 476.
That's 19.6% more restaurants than a year ago.
Opening a restaurant is the easy part to measure. The harder question is whether enough customers actually show up once it opens.
Management gave us some useful information on that.
CAVA said the 94 net new restaurants opened during or since Q2 of last year are exceeding its performance expectations.
CAVA is trying to take something that worked in its earlier markets and repeat it across more of the country. It would be a problem if each new group of restaurants got weaker as the company moved farther from its original markets.
So far, management is saying the opposite. The newer restaurants are doing better than it expected.
Average unit volume, or AUV, gives us another piece of the picture:
- Q2 2025 AUV: $2.94 million
- Q2 2026 AUV: $3.09 million
- Increase: about 5.1% YoY
AUV looks at restaurants that have been open for the entire trailing thirteen periods, so this number mostly tells us about CAVA's established restaurant base rather than the brand new locations.
Still, that combination is nice to see. Older restaurants are producing more sales, while management says the newer restaurants are beating expectations.
Margins were the weaker part of the quarter
There was one area that didn't look quite as good.
CAVA's restaurant level profit margin fell from 26.3% last year to 25.7% this quarter.
That's a decline of 60 basis points.
The actual dollars of restaurant profit still grew quite a bit:
- Q2 2025 restaurant level profit: $73.3 million
- Q2 2026: $93.8 million
- Growth: +28.1% YoY
So CAVA made almost $21 million more restaurant profit than it did a year ago. It just made a slightly smaller amount of profit on each dollar of restaurant sales.
Here's where the costs moved:
- Food, beverage and packaging: 30.0% of restaurant revenue, up from 29.5%
- Labor: 25.3%, up from 25.0%
- Occupancy: 6.3%, down from 6.8%
- Other restaurant expenses: 12.8%, up from 12.4%
Occupancy is actually a good example of how restaurant economics can improve as sales go up.
Your rent doesn't suddenly jump 9% because sales increased 9%. So when a restaurant sells more food out of the same building, rent becomes a smaller percentage of sales. That's basically what happened here.
Food, labor and other expenses went the other direction and more than offset that benefit.
Management pointed to the new Pomegranate Glazed Salmon, a higher mix of third party delivery and additional wage investments as some of the reasons for the pressure.
The salmon and delivery piece is worth explaining because it sounds a little strange at first.
Management said those sales hurt the margin percentage, but still helped total profit dollars because customers paid more for those orders.
A simple example would be selling something for $20 at a 25% margin instead of something for $10 at a 30% margin. The percentage margin is lower on the $20 item, but you're still making more dollars of profit.
CAVA's actual numbers are obviously more complicated than that, but that's the basic idea.
CAVA is getting some leverage at the corporate level
The margin story also looks a little better once you move past the restaurants and look at the company as a whole.
General and administrative expenses are becoming a smaller piece of revenue.
- Q2 2025: 11.4% of revenue
- Q2 2026: 10.8%
Excluding stock compensation and executive transition costs:
- Q2 2025: 9.8%
- Q2 2026: 9.3%
This is what you'd hope to see as CAVA gets bigger.
The company needs more people and infrastructure as it grows, of course, but you don't need 31% more corporate overhead just because revenue increased 31%.
Adjusted EBITDA came in at:
- Q2 2025: $42.1 million
- Q2 2026: $54.7 million
- Growth: +30.0% YoY
Adjusted EBITDA margin was almost unchanged at 14.9% versus 15.0% last year.
Operating income grew even faster:
- Q2 2025: $19.6 million
- Q2 2026: $26.8 million
- Growth: about +36.7% YoY
So I wouldn't look at the 60 basis point decline in restaurant level margin and assume CAVA's profitability suddenly got much worse. When you look at the whole income statement, that's not really what happened.
CAVA is producing more cash too
One of the quieter positives in the report was cash flow.
For the first 28 weeks of 2026:
- Operating cash flow: $134.5 million, +36.0% YoY
- Capital spending: $89.7 million, +16.6% YoY
- Free cash flow: $44.8 million, +104.5% YoY
Free cash flow was $21.9 million during the same period last year.
That's useful for a company opening this many restaurants.
New restaurants cost money. CAVA has to find locations, build them out, buy equipment and hire people before those restaurants can start contributing much cash.
What you want is for cash coming out of the existing business to grow fast enough to help fund that expansion.
So far, that's happening.
CAVA ended the quarter with:
- Cash: $322.8 million
- Investments: $112.8 million
- Combined: about $435.6 million
I don't think the balance sheet is the main reason the stock jumped after earnings. But having plenty of cash certainly makes it easier to keep opening restaurants without putting financial pressure on the company.
CAVA didn't raise guidance
Here's the part of the report that might look a little odd.
After a quarter like this, CAVA kept its full year guidance unchanged.
Management still expects:
- 75 to 77 net new restaurants
- 4.5% to 6.5% same restaurant sales growth
- 23.7% to 24.3% restaurant level profit margin
- $181 million to $191 million of adjusted EBITDA
The same restaurant sales forecast is the one I keep coming back to.
CAVA has already reported:
- Q1: +9.7%
- Q2: +9.0%
Yet the full year forecast is still just 4.5% to 6.5%.
There is some context here. CAVA had already raised that range after Q1 from its original 3.0% to 5.0% outlook.
So management isn't sticking with an old forecast from the beginning of the year. It already raised expectations once and decided not to raise them again after Q2.
The current guidance gives CAVA plenty of room for same restaurant sales growth to cool during the second half. Maybe management really does expect some slowing. Maybe it's simply keeping a little cushion rather than assuming two very strong quarters will continue all year.
We don't know that part yet.
Why investors seem to like CAVA's quarter
If I were explaining this quarter to somebody over lunch, I probably wouldn't lead with the 31% revenue growth.
I'd start with the restaurants themselves. CAVA's older restaurants are still getting more orders and producing higher sales. At the same time, management says the large group of newer restaurants it has opened over the past year is doing better than expected.
That's a pretty good place to be when you're trying to build a national restaurant chain.
CAVA already knows how to open locations. The harder job is keeping the old restaurants busy while making sure the new ones work when you move into more cities and more states.
There are still a few things to keep an eye on. Restaurant margins slipped a little. Traffic growth came down from Q1. And management isn't assuming the first half growth rate continues for the rest of the year.
But Q2 gave investors more evidence that CAVA can keep adding restaurants without losing the customer demand that made the expansion story attractive in the first place.