By Evie Liu

Cava Group stock surged more than 20% on Wednesday after the Mediterranean restaurant chain posted fourth-quarter results the day before that beat Wall Street expectations, and issued guidance that suggested a 2026 bounceback. But the test for fast-casual restaurants like Cava isn't over just yet.

The group had a messy 2025: revenue rose as the chains continued to expand, but traffic softened, same-store sales became choppy as consumers dined out less. Meanwhile, investors stopped paying "growth at any price" valuations for brands that couldn't prove durable demand.

For the quarter ended in December, Cava grew its total revenue by 21.2% to $272.8 million, ahead of consensus Wall Street expectations of $268 million. Adjusted earnings came at four cents per share, slightly below five cents a year ago but ahead of the expected three cents.

Comparable sales edged up 0.5%, the worst since the company went public in 2023. Higher menu prices masked weaker guest traffic, which declined 1.4% from a year ago. But investors were encouraged by the company's guidance that comparable sales would grow 3% to 5% in 2026.

The fourth-quarter results seem to have "bottomed," wrote J.P. Morgan analyst John Ivankoe in a Wednesday note, who has an Overweight rating for the stock.

"Cava continues to be an economically advantaged business model with high-potential for full national penetration," wrote Ivankoe, noting that while near-term results are difficult to predict, the outlook is better than previously anticipated.

The market has been punishing fast-casual restaurants on hints that growth is decelerating. In 2025, Cava's shares have been volatile around earnings miss and guidance changes. Before Tuesday's earnings report, the stock had lost 32% over the past 12 months.

Chipotle Mexican Grill, the first to report fourth-quarter earnings among the group, offered a snapshot of the mood swing: Even as revenue rose 4.9% thanks to new restaurant openings, comparable sales decreased 2.5% from a year ago, and earnings per share was largely flat.

Investors have treated this as a warning sign: Chipotle's shares had tumbled 30% over the past 12 months and valuation -- measured by stock price to forward earnings -- fell to the lowest level in at least a decade.

Wingstop's results, released last week, told a similar story. In the fourth quarter, systemwide sales increased 9.3% and revenue was 8.6% as the chain accomplished a record of 493 unit growth in 2025. But domestic same-store sales declined 5.8% from a year ago.

The chain's franchise-heavy model helped shield its margins. Most restaurant-level costs and sales volatility sit with franchisees. That means even when same-store sales wobble, new unit growth and royalty collection could keep Wingstop's profit engine humming.

In the fourth quarter, earnings at the chicken-wing chain improved from $0.93 a year ago to $1.00 per share. The stock is up 3.8% in the past 12 months.

Two more fast-casual chains -- Shake Shack and Sweetgreen -- are scheduled to report earnings on Thursday.

In a January update of preliminary results, Shake Shack said comparable sales increased 2.1% from the year-ago period in the fourth quarter. The company opened 45 new Shacks in 2025 and expects 55 to 60 more in 2026 -- the largest development pipeline in its history.

Sweetgreen's outlook is bleaker. Same-store sales fell 9.5% from a year ago in the third quarter of 2025. Even as the chain opened dozens of new restaurants, net revenue slipped 0.6% -- the first time since the company went public in 2021 and before it started making any profits.

The chain, known for its salads and bowls, is rolling out wraps in select markets across the country. The new menu item comes in a "handheld format designed to deliver the portability and satisfaction guests crave," according to a press release on Tuesday.

When the chain reports earnings on Thursday, investors expect revenue to continue to shrink and losses to deepen. Same-store sales are expected to decline 12% from a year ago, according to analysts polled by FactSet. The stock has lost 76% over the past 12 months.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 25, 2026 11:07 ET (16:07 GMT)

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