Cava Q2 2025 Earnings Report: Revenue Rockets +20% Amid Flat Traffic. Why CAVA Stock Is Plummeting and What's Next

#Top-Line Growth: Expansion Sizzles, But Comps Cool Off

Let's start with the revenue banquet: Total group revenue hit $280.6 million, a 20.2% leap from $233.5 million in Q2 2024, while CAVA-specific revenue climbed 20.3% to $278.2 million. Year-to-date, that's $612.4 million, up 24.3% from $492.5 million - impressive when you factor in the 62.6% surge from Q2 2023, highlighting Cava's rocket-like trajectory since going public. The secret ingredient? A net of 16 new restaurants opened, ballooning the fleet to 398 from 341 last year, a 16.7% unit growth that's outpacing many peers in a real estate market tighter than a stuffed grape leaf.

Digging deeper, these newbies are overachievers: The 2025 class is tracking AUVs above $3 million, eclipsing the system-wide $2.9 million AUV (up from $2.7 million, excluding fiscal 2023's extra week). That's a wow-worthy stat often buried - imagine each spot pulling in nearly $3 million annually; at scale, it's a cash cow herd. But the comps growth of 2.1%? Mostly from pricing and mix, with traffic flat as a lavash cracker. Contrast that with Q1 2025's 10.8% or Q4 2024's adjusted 18.3% (after fiscal shift tweaks excluding $3.9 million in revenue), and you see a stark slowdown. Opinion: This deceleration screams macro fatigue - consumers balking at premium pricing amid wallet squeezes - but Cava's still snagging share, as flat traffic beats the negatives plaguing broader dining.

Digital revenue mix at 37.3%, holding steady. In a world where apps are the new drive-thru, this high penetration - encompassing catering, native delivery, and pick-up - insulates against in-store slumps and harvests data for targeted promos. Year-to-date restaurant operating weeks? Up to 10,594 from prior periods' implied totals, quantifying the sheer operational scale-up. And that 75 net new openings since Q2 2024? They've driven the bulk of growth, proving the model's portability across markets, but also raising a flag: Over-reliance on unit expansion could bite if site quality dips.

1. Quarterly AUV Trend

   Q2 2025: $2.939M; Q1 2025: $2.933M; Q4 2024: $2.865M; Q3 2024: $2.784M; Q2 2024: $2.689M. This steady climb underscores maturing units, but the plateau from Q1 to Q2 hints at comps pressure capping upside.

2. Revenue Split

   CAVA revenue dominates at 99.2% of total, with the rest likely Zoes remnants - overlooked, but it shows clean focus post-acquisition integrations.

Humorously, if Cava were a meal, expansion is the hearty protein keeping it satisfying, while comps are the wilted greens needing a vinaigrette revival. My take: Bullish on the unit growth engine, but traffic stasis demands menu innovation beyond steak to reignite visits.

#Profitability Metrics: Margins Stay Juicy Amid Cost Spice

Restaurant-level profit for CAVA hit $73.3 million, up 19.6% year-over-year, with margins at 26.3% - a hair below 26.5% last quarter but still a fast-casual flex. Year-to-date: $155.6 million at 25.6%, up 23.6%. The dip? Blame steak launch inputs and wage hikes, offset by sales leverage. Food costs rose to 29.5% of revenue (from 29.4%), labor held at 25.0% (down from 25.2%), occupancy dipped to 6.8%, but other ops climbed to 12.4%. Overlooked: That other ops increase includes likely tech or maintenance spends, crucial for sustaining digital prowess but a subtle drag if unchecked.

Group net income: $18.4 million (6.5% margin), down from $19.7 million, but adjusted for tax normalization, it's up from $16.8 million. Adjusted EBITDA: $42.1 million (15.0%), up 22.6% - year-to-date $87.0 million (14.2%). Free cash flow year-to-date at $21.9 million, fueled by $98.9 million operating cash, though down from $27.4 million last year due to capex ramp-up to $77.0 million for openings. G&A excluding equity comp fell to 9.8% of revenue from 10.6%, an 80bps win from lower incentives and legals, plus the CAVA Connect conference investment - smart for culture, but watch if it balloons.

Depreciation and amortization jumped to $16.8 million from $13.7 million, reflecting asset build-out; pre-opening costs at $5.1 million (up from $3.3 million) signal aggressive pacing. Impairment costs: $1.1 million, up slightly - minor, but a whisper of site selection risks in new markets. Opinion: These margins are gold-standard, proving Cava's not burning cash like some venture-backed flops. But steak's cost hit? If it doesn't boost traffic 5-10%, it might be a flavorful flop - management should quantify ROI in future calls.

1. Non-GAAP Adjustments Breakdown:

   Equity comp $4.6 million (up from $3.6 million) - rising with headcount, but necessary for talent retention. Interest income $3.6 million - savvy cash management yielding returns amid high rates.

2. Balance Sheet Nuggets:

   Cash at $290.2 million (down from $366.1 million end-2024, post-investments), plus $95.6 million in fair-value investments - under-the-radar liquidity buffer for 68-70 openings without debt dilution.

In jest, Cava's profitability is like a well-balanced bowl: Protein (margins) strong, but watch those add-ons (costs) from piling up. My view: Enviable efficiency sets a high bar, but sustaining it requires traffic ignition to leverage fixed costs further.

#Guidance Update: Raised Openings, Lowered Comps—Prudent or Pessimistic?

Net new openings upped to 68-70 from 64-68 - bold, given 31 year-to-date versus 33 last year. Comps slashed to 4-6% from 6-8%, margins steady at 24.8-25.2%, Adjusted EBITDA unchanged at $152-159 million, pre-opening costs to $15.5-16.5 million. This comp cut likely sparked the sell-off, but note: It implies back-half acceleration from Q2's 2.1%, assuming macro eases.

Q4 2024 comps included an extra $4.0 million from week adjustments - without it, growth was 18.3%, making historical laps tougher. Restaurant closings: Zero this quarter, versus one last year - flawless execution. Opinion: The openings hike radiates confidence in portability, potentially adding $200 million+ annual revenue at maturity. But comps trim? Conservative genius in uncertain times, or early sign of demand cracks? I'd bet on the former, as Cava's demographic tailwinds (health, ethnicity) outlast short-term squeezes.

Quarterly openings trend: 16 in Q2, 15 in Q1, versus 18 in Q2 2024 - consistent velocity. If traffic rebounds via promotions or menu tweaks, this guidance could prove sandbagged; otherwise, margins might edge lower from unleveraged costs.

#What Cava's Doing Right: Scaling Like a Pro, With Flavorful Finesse

Expansion mastery: 398 restaurants, up 16.7%, with conversions and hybrids unlocking catering - underappreciated for revenue diversification. AUVs at $2.9 million crush norms, and digital's 37.3% mix? A tech edge turning orders into habits. Profitability: 26.3% restaurant margins amid launches show ops excellence; free cash positivity funds growth organically.

Balance sheet strength: $385.8 million in cash/investments, no major debt - poised for acquisitions or buffers. Culture investments like conferences build retention in labor-tight times. Cava's the Mediterranean Chipotle, but healthier - portability proven, with AUV upside as markets densify. They're not just opening doors; they're flinging them wide like a generous host at a meze platter party.

#Where Cava's Struggling: Traffic Flatline and Cost Creep

Traffic flatness: Zero growth despite pricing signals value fatigue - peers like Sweetgreen face similar, but Cava's premium pitch needs defending. Steak costs: Input spike without quantified traffic lift risks margin erosion. G&A up absolutely to $32.1 million, though percentage down - scale must accelerate leverage.

Risks in fine print: Supply chain reliance, cyber threats - real in food ops. Impairments at $2.7 million year-to-date: Subtle hint of occasional site misses. Opinion: These are growing pains, not fatal flaws, but ignoring traffic could turn expansion into empty calories. Light humor: Like overcooking kebabs, cost pressures without sales sizzle lead to dry results.

#Future Outlook: 1,000 Units by 2032? Appetizing, If Traffic Awakens

Path to 1,000: At 68-70 yearly, achievable with current momentum - potentially $3B+ revenue. Tailwinds: Wellness trends, ethnic diversity shifts. But macro volatility demands agility. The market's initial reaction to this report is a potential buy signal for long-termers; comps rebound could catapult shares. If not, hybrids/catering might save the day. Cava's future looks as promising as a fresh tzatziki dip - cool, refreshing, and full of potential, provided they stir in more customer zest.