CAVA Down 4% After Reports Q3 Earnings Show Profitability Slide

CAVA (NYSE: CAVA) reported Q3 2025 earnings after the close on Tuesday, delivering results that largely matched expectations but fell short on profitability. The stock closed at $49.12, down sharply from its 52-week high of $172.43. Revenue came in at $292.24M versus the $291.95M estimate, while EPS missed at $0.12 against a $0.13 consensus. The miss marked a departure from CAVA’s recent track record of beating estimates in five of the last six quarters.

Same-Store Sales Hold, But Margins Compress

The Mediterranean fast-casual chain posted same-restaurant sales growth of 1.9%, a modest but positive signal in a competitive limited-service restaurant market. CAVA opened 17 net new locations during the quarter, staying on track with its full-year guidance of 68 to 70 new restaurants. Revenue grew 19.86% year over year to $292.24M from $243.82M in Q3 2024, showing the company is still expanding at a healthy pace.

What caught my attention, though, was the margin squeeze. Restaurant-level profit margin fell to 24.6% from 25.6% a year ago. Net income declined 17.92% to $14.75M despite revenue growth, a troubling divergence. Management attributed the pressure to higher food, beverage, and packaging costs alongside increased labor expenses. Digital revenue held steady at 37.6% of the mix, a key strength in an increasingly omnichannel environment.

Cost Pressures Outpace Growth

The real challenge here is simple: operating expenses are rising faster than revenue. While same-store sales growth and new unit openings show underlying demand remains intact, the company is fighting to protect profitability as input costs remain elevated. Operating expenses climbed year over year, eroding the benefit of top-line expansion.

This is the number investors should monitor closely going forward. If CAVA can’t stabilize labor and commodity costs in the quarters ahead, margin pressure will persist even as the chain grows.

Key Figures

Revenue: $292.24M (vs. $291.95M expected); +19.86% YoY
EPS: $0.12 (vs. $0.13 expected)
Net Income: $14.75M; down 17.92% YoY
Restaurant-Level Margin: 24.6%; down 100 basis points YoY
Same-Restaurant Sales: +1.9%
Net New Restaurants: 17 (on track for 68-70 full-year guidance)
Digital Revenue Mix: 37.6%

The margin compression is the headline here. Revenue beat expectations, but profitability declined, signaling that growth isn’t translating to earnings expansion at the pace investors expected.

Management Sounds Cautiously Optimistic

CEO Brett Schulman acknowledged the headwinds directly. He said Q3 “delivered another quarter of market share growth, while we continued to reinforce our value proposition, rooted in the quality, relevance, convenience, and experience that we are known for.” He also noted that “despite lapping strong prior-year results and navigating macroeconomic headwinds, the underlying strength of our model is evident.”

The tone was measured. Schulman didn’t dismiss cost pressures, nor did he promise a quick fix. Instead, he emphasized the durability of the brand and its competitive positioning. That’s a reasonable stance given the environment, but investors will want to hear more specifics on the earnings call about when (or if) margins stabilize.

Guidance Holds, But Watch for Revision Risk

CAVA maintained its full-year 2025 guidance for 68 to 70 net new restaurants and adjusted EBITDA of $148.0M to $152.0M. The company isn’t walking back expectations, which suggests management believes the current cost environment is manageable. That said, the EPS miss and margin decline signal that execution is tighter than the market may have anticipated.

You’ll want to listen for how management frames demand trends and cost inflation on the call. Any hint of further pressure could prompt a guidance cut, which would likely weigh on the stock given its already significant decline from recent highs.

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