A significant private equity investor has initiated a substantial divestment from First Watch Restaurant Group, Inc., creating uncertainty in the market. In August 2025, Advent International, one of the company’s principal shareholders, disposed of its entire 5 million share stake in the breakfast and brunch chain. This transaction was executed as a secondary offering, with all proceeds directed to the selling shareholder rather than to the company itself. Large-scale disposals by major institutional holders typically increase trading volume and can place considerable downward pressure on a stock’s price.
Profitability Pressures Overshadow Strong Revenue Growth
The company’s latest quarterly results, released in August 2025, present a conflicting narrative. Second-quarter revenue demonstrated robust growth, climbing 19.1% to $307.9 million and surpassing market forecasts. However, this top-line strength was countered by a severe contraction in profitability. Net income experienced a dramatic decline, falling to $2.1 million from $8.9 million in the same quarter the prior year. Adjusted EBITDA also decreased, landing at $30.4 million. These figures highlight a clear challenge: while expansion continues, it is being achieved at the cost of significantly higher operating expenses, which are eroding bottom-line results.
Should investors sell immediately? Or is it worth buying First Watch Restaurant?
Despite these profit headwinds, management has reaffirmed its positive outlook. The leadership team has responded by raising its full-year 2025 guidance for adjusted EBITDA. Concurrently, First Watch remains committed to an aggressive national expansion strategy, with plans to open between 62 and 67 new restaurant locations.
Investor Confidence Hinges on Sustainable Profitability
The company is actively engaging with the investment community to bolster confidence. This includes participation in key financial conferences, such as a scheduled fireside chat at the recent Piper Sandler Growth Frontiers Conference. The central question for investors now is whether First Watch can successfully translate its rapid growth into sustainable and improved profitability. The dual pressures of a major shareholder’s exit and the current strain on margins are expected to keep the stock under intense scrutiny in the near term.
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