McDonald's Corporation (MCD) Narrative

Sources: FY2025 Form 10-K (fiscal year ended December 31, 2025), accession 0000063908-26-000035, filed February 24, 2026; Form 10-Q for the quarter ended March 31, 2026, accession 0000063908-26-000051, filed May 7, 2026.

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Business

From the FY2025 10-K, accession 0000063908-26-000035.

What it is. McDonald's franchises, owns and operates McDonald's restaurants serving a locally relevant menu in more than 100 countries. At year-end 2025 there were 45,356 restaurants, approximately 95% franchised. The Company refers to itself plus its franchisees and suppliers collectively as the "System."

Segments. Three reporting segments:

• U.S., the largest single market; 13,706 restaurants at year-end 2025; 95% franchised.
• International Operated Markets (IOM), markets where the Company owns, operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K.; 10,845 restaurants; 89% franchised.
• International Developmental Licensed Markets & Corporate (IDL), over 75 countries operated by developmental licensees and affiliates (including equity-method investments in China and Japan), plus Corporate activities; 20,805 restaurants; 99% franchised.

How it makes money. Revenues are (i) fees from franchised restaurants and (ii) sales at Company-owned and operated restaurants, plus Other revenues. Three franchise structures:

• Conventional franchise, the Company generally owns or holds a long-term lease on the land and building; the franchisee funds equipment, signs, seating and décor. The Company collects rent and royalties as a percent of sales with specified minimum rent payments, plus initial fees. Franchise/license agreements generally run 20-year terms. Management states that real-estate control, combined with franchisee co-investment, is what enables restaurant performance among the highest in the industry.
• Developmental license, the licensee provides all capital including the real estate; the Company invests no restaurant capital and receives a royalty on a percent of sales plus initial fees.
• Affiliate, same economics as a developmental license, but the Company also holds an equity investment and records its share of results in equity in earnings of unconsolidated affiliates. Used primarily in China and Japan.

Other revenues are fees paid by franchisees to recover a portion of the Company's technology and digital platform costs, plus brand licensing arrangements for consumer packaged goods.

The Company keeps Company-operated restaurants deliberately, they preserve operating expertise, provide a training venue, and serve as the test bed for operating standards, marketing concepts and pricing strategies before Systemwide rollout.

Real estate. At December 31, 2025 the Company owned approximately 56% of the land and 80% of the buildings for restaurants in its consolidated markets.

People. Over 150,000 Company employees worldwide at year-end 2025, approximately 70% based outside the U.S. Beyond that, over two million people work in franchised restaurants.

Strategy, "Accelerating the Arches." Growth pillars, M-C-D:

• Maximize our Marketing, culturally relevant, "Feel-Good Marketing" campaigns; value at every menu tier (everyday low-price options, meal bundles, limited-time deals, personalized digital offers).
• Commit to the Core, World Famous Fries, Big Mac, Quarter Pounder, Chicken McNuggets among seventeen billion-dollar brands. "Best Burger" reformulation targeted at nearly all markets by end-2026. McCrispy deployed in nearly all major markets by end-2025, with extension into strips and wraps. Chicken and beverages named as the growth categories.
• Double Down on the 4D's:
• Digital, loyalty programs in 70 markets; target of 250 million 90-day active users by end-2027 and $45.0 billion of annual Systemwide sales to loyalty members by end-2027. "Ready on Arrival" deployed in the top six markets by end-2025.
• Delivery, nearly 41,000 restaurants across ~100 markets (~90% of restaurants); target of 30% of Systemwide delivery sales originating from the mobile app by end-2027.
• Drive Thru, nearly 29,000 locations globally, including over 95% of the ~13,700 U.S. locations.
• Restaurant Development, approximately 2,600 gross openings planned for 2026 (slightly over 4.5% new unit growth gross of closures), progressing toward 50,000 restaurants by end-2027, which would be the fastest unit growth in Company history.

Three technology-enabled platforms underpin the strategy: a consumer platform (loyalty/engagement), a restaurant platform (universal restaurant operating software), and a company platform built through the Global Business Services (GBS) organization.

Capital allocation philosophy, as stated: (i) invest in opportunities to grow the business and drive strong returns, (ii) prioritize the dividend, (iii) repurchase shares with remaining free cash flow over time.

Competition. McDonald's measures its position within the informal eating out ("IEO") segment, which includes quick-service restaurants but also home-delivery/takeaway providers, convenience stores, street stalls and kiosks, cafés, specialist coffee shops, self-service cafeterias and juice/smoothie bars. It competes primarily on price, convenience, service, experience, menu variety and product quality.

Intellectual property. The "McDonald's" trademark and the Golden Arches Logo are described as of material importance to the business.

Legal proceedings. No single named material matter is disclosed. The Company describes recurring categories of dispute: franchising (quality, service, cleanliness, menu pricing, alleged discrimination, delinquent rents and fees, franchise grants/renewals/terminations, and challenges to the legal distinction between the Company and its franchisees for employment-law purposes); suppliers; employees (wage and hour, discrimination, labor-law compliance); customers (products, service, pricing, advertising, nutrition disclosures); intellectual property; and government regulations. Management states it does not believe any such matter currently under review will have a material adverse effect on financial condition or results of operations, while noting an unfavorable ruling could materially affect net income in the period it occurs.

Cybersecurity. The Company states that risks from cybersecurity threats, including from any previous cybersecurity events, did not materially affect the business, strategy, results of operations or financial condition in 2025. The Global Cybersecurity Program is informed by the NIST Cybersecurity Framework; the CISO reports to the CIO, with Audit & Finance Committee oversight.

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Risk factors

From the FY2025 10-K, accession 0000063908-26-000035, condensed to the substantive items.

Strategy and brand

• Strategy execution. Growth in Systemwide sales, operating income and free cash flow depends on the System successfully executing Accelerating the Arches. Delay, higher-than-expected cost, or strategies that simply do not yield the desired results would hurt results.
• Brand value. Brand value rests partly on consumer perception, which is affected by nutritional content, ingredients, commodity sourcing, and people practices across the System, including at restaurants the Company does not operate. Franchisees or business partners may take actions that damage the brand. Adverse social-media or conventional-media commentary about the quick-service category or the brand is called out explicitly.
• Consumer preferences and pricing/marketing execution. Consumer acceptance of menu offerings can shift rapidly. The filing specifically names changes to dietary guidelines and use of weight-loss medications as evolving factors that may alter IEO-segment behavior. Pricing and promotional plans "may not be successful, or may not be as successful as the efforts of our competitors," which could hit sales, guest counts and market share.
• Customer-experience and technology investments (digital channels, loyalty, mobile order and pay, drive thru technology, delivery) may not generate expected results. Third-party delivery may carry lower profitability than a non-delivery transaction and introduces food quality, food safety and customer satisfaction risk.
• Intense competition in a highly competitive IEO segment, including non-traditional participants, convenience stores, grocery stores, coffee shops, online retailers. Results in any period may be hurt by a contracting IEO segment or by competitor/third-party-partner actions and consolidation.
• Intellectual property. Trademarks are not registered in every country where the Company does or may do business. AI-driven tools are named as increasing exposure to theft, unlicensed use, disputes and enforcement challenges.

Operations

• Global scope. Operating in 100+ countries brings cultural, regulatory, geopolitical and economic variance. Disruptions can come from governmental action, price, foreign exchange or trade-related tariffs or controls, trade policies, sanctions and counter-sanctions, government-mandated closures, asset seizures, and from acts of war or terrorism, with knock-on effects including anti-American sentiment. Developing markets carry heightened political instability, corruption and judicial-uncertainty risk.
• Supply chain. Certain items have limited suppliers, increasing reliance. Interruptions and price increases can be driven by shortages, inflation, tariffs, transportation, labor, technology, weather, natural disasters, geopolitical tensions, or hostilities, raising costs, impacting ingredient quality, delaying new openings.
• Franchise business model. Restaurant margins come from franchise fees (rent and royalties on a percent of sales) and, to a lesser degree, Company-operated sales. Because franchisees run their businesses independently, results depend on franchisee sales growth and franchisee financial health, and on franchisees' willingness and ability to fund major initiatives, which in turn depends on funding availability at reasonable interest rates and on banks' lending practices. Franchisee food-safety or operational failures, or an image inconsistent with the brand, damage the Company directly. Ownership mix (franchised vs. Company-operated) itself affects results.
• Labor availability and cost. Staffing challenges have been experienced and may continue, hurting speed of service and satisfaction. Increasingly complex U.S. and international workforce laws (wages and hours, healthcare, immigration, retirement, benefits, workplace practices) raise costs and liability for both the Company and franchisees, pressuring Company-operated margins and franchisee profitability. Boycotts, protests, work stoppages and labor-organization campaigns are named.
• Succession planning for management is called out as its own risk.
• Food safety. Food-safety events, including food-borne illness, "have occurred within the food industry and our System from time to time." Instances of tampering, contamination or illness, actual or perceived, could adversely affect brand, reputation and results.
• Real estate portfolio. Long-term real-estate interests give limited flexibility to alter the portfolio quickly as trade-area demographics, consumer channel use and competitive positions shift. Values and costs are affected by regulation, insurance, zoning, tax and eminent domain, interest rates, financing cost and natural disasters.
• IT failure, security breach, misuse of technology. Security incidents and breaches "have occurred from time to time and may occur in the future" across the Company's systems, franchisee systems and third-party providers. Threats named include AI-enabled attacks, deepfakes, phishing, account takeovers, ransomware. Insurance coverage may be insufficient. Separately, AI tools being incorporated into the business may not generate intended efficiencies and may create operational disruption, data-integrity issues and unintended consequences from algorithmic decision-making; emerging AI regulation (including the EU AI Act) imposes compliance obligations.

Legal and regulatory

• Increasing regulatory and legal complexity across restaurant operations, product packaging and extended producer responsibility, marketing, IT systems, nutritional and allergen content, labeling and disclosure. Exposure to class actions, administrative proceedings, government investigations, shareholder proceedings, employment and personal injury claims, landlord/tenant and supplier disputes, and franchisee claims.
• Franchisee/joint-employer challenge. Litigation, legislative and regulatory action concerning the legal distinction between the Company and its franchisees for employment-law purposes, if determined adversely, "could challenge our franchise business model," increase costs and subject the Company to incremental liability for franchisee actions. The same challenge to supplier independence is flagged.
• Tax. Exposure to changes in tax law or policy and to settlements or adjustments from tax audits in and outside the U.S.
• Accounting standards and impairment. Decisions about underperforming markets or assets may result in impairment or other charges. Long-lived-asset recoverability rests on highly subjective cash-flow estimates whose key assumption is estimated change in comparable sales.
• Privacy and data protection (GDPR, U.S. state laws, EU AI Act), non-compliance or misuse of personal data could bring significant fines, litigation and reputational harm.

Macroeconomic and market conditions

• General economic conditions, including inflationary pressures affecting consumer disposable income and spending habits, which vary significantly by market.
• Currency. Results are affected by exchange-rate fluctuations; unfavorable moves adversely affect reported earnings.
• Health epidemics or pandemics, impact on macro conditions, consumer behavior, labor availability, supply chain and local operations.
• Commodity and operating costs. Beef and chicken markets are singled out as particularly volatile (seasonal shifts, climate, industry demand, food-safety concerns, recalls, regulation, hostilities). The System "can only partially address future price risk through hedging."
• Credit ratings and funding costs. A downgrade or higher funding cost affects interest expense, counterparty availability, collateral requirements and operating/financial flexibility.
• Stock trading volatility from factors largely outside the Company's control, including index rebalancing, shareholder activism, and market commentary.
• Environmental and social impact matters, failure (real or perceived) to progress on initiatives, and equally the act of taking a position on such matters, could adversely affect the business; increasing legislative, regulatory and enforcement scrutiny creates compliance, reputational and litigation exposure.
• Severe weather, natural disasters, hostilities, social and geopolitical unrest, and climate change can affect consumer confidence, supply availability and cost, and local operations including temporary closures and delayed openings.

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Management's discussion and analysis, full-year 2025

From the FY2025 10-K, accession 0000063908-26-000035.

2025 financial performance

Global comparable sales +3.1%:

U.S. comparable sales benefited from average check growth. IOM reflected positive comparable sales in nearly all markets, led by Germany and Australia. IDL was led by Japan, with all geographic regions positive.

Headline results:

• Consolidated revenues +4% (+2% constant currency) to $26.9 billion.
• Systemwide sales +7% (+5% cc) to $139.4 billion.
• Consolidated operating income +6% (+4% cc) to $12.4 billion.
• Operating margin 45.2% → 46.1%.
• Diluted EPS $11.95, +5% (+4% cc); currency added $0.16.
• Cash from operations $10.6 billion, +12%.
• Capital expenditures $3.4 billion, mainly new openings.
• Free cash flow $7.2 billion, an 8% increase; conversion rate 84% (2024: 81%).
• Nearly 2,300 new restaurants opened Systemwide.
• Quarterly dividend raised 5% to $1.86 for Q4 (annualized $7.44). $7.1 billion returned to shareholders via dividends and buybacks.

Consolidated operating results

Selling, general & administrative expenses totalled $3,039 million in 2025 (2024: $2,858m; 2023: $2,817m), of which depreciation and amortization was $457m.

Currency. 2025 foreign currency translation reflected the strengthening of most major currencies against the U.S. Dollar, partly offset by weaker Australian and Canadian Dollars. Translation benefits: revenues +$385m, operating income +$198m, net income +$114m, diluted EPS +$0.16.

Net income and EPS

Net income +4% (+3% cc) to $8,563 million; diluted EPS +5% (+4% cc) to $11.95.

• 2025 included net pre-tax charges of $229 million, or $0.25 per share, primarily restructuring associated with Accelerating the Organization (the Company's effort to modernize ways of working).
• 2024 included pre-tax charges of $221 million ($0.25/share) for Accelerating the Organization, plus net pre-tax charges of $70 million ($0.08/share) consisting mainly of transaction costs, property sale gains and non-cash impairment charges tied to the sale of McDonald's business in South Korea and transaction costs for the acquisition of McDonald's business in Israel.

Non-GAAP net income $8,741m (+3%, +2% cc); non-GAAP diluted EPS $12.20 (+4%, +3% cc).

The increase was primarily driven by higher sales-driven franchised margins. The Company repurchased 6.7 million shares for $2.0 billion in 2025 (2024: 10.1 million shares for $2.8 billion).

Revenues by segment

Total franchised revenues plus Company-operated sales rose 3% (1% cc), benefiting from IOM sales performance. U.S. growth came from franchised sales, partly offset by negative Company-operated sales. IDL & Corporate was impacted by the prior-year sale of the South Korea business, partly offset by the prior-year Israel acquisition and positive sales performance.

Franchised sales (not Company revenue, but the base on which franchised revenues are calculated) reached $129,675 million, +7% (+6% cc): U.S. $51,946m (+3%), IOM $42,440m (+8%), IDL $35,289m (+12%). By ownership type: conventional franchised $93,761m (+5%), developmental licensed $22,451m (+14%), foreign affiliated $13,463m (+10%).

Systemwide sales increases: U.S. +3%, IOM +8%, IDL +10%, total +7% (+5% cc).

Restaurant margins

Franchised margins represented approximately 90% of restaurant margin dollars. Company-operated margins reflected ongoing inflationary cost pressure in both the U.S. and IOM; the U.S. was additionally hurt by negative sales performance for the year. Total restaurant margins included D&A of $1.7 billion (2024: $1.6 billion).

Costs and other operating items

• SG&A $3,039m, +6% (+6% cc), primarily higher employee costs including incentive-based compensation. By segment: U.S. $653m (flat), IOM $705m (+12%), IDL & Corporate $1,682m (+7%). Incentive-based compensation $370m (2024: $268m, +38%); excluding it, SG&A $2,670m (+3%).
• Other operating (income) expense, net totalled $2m (2024: $139m; 2023: $99m): gains on sales of restaurant businesses $(133)m, equity in earnings of unconsolidated affiliates $(190)m, asset dispositions and other $97m, impairment and other charges $229m.
• Operating income by segment: U.S. $5,808m (+1%), IOM $6,382m (+7%, +4% cc), IDL & Corporate $203m (from $33m). Operating margin 46.1%; non-GAAP operating income $12,621m, non-GAAP operating margin 46.9% (2024: 46.3%).
• Interest expense +5% (+4% cc), reflecting currency translation and higher average interest rates.
• Effective tax rate 21.4% (2024: 20.5%; the lower 2024 rate reflected discrete benefits related to restructuring initiatives). Consolidated net deferred tax assets $7.4 billion (2024: $7.0 billion).

Cash flows, development and capital returns

• Cash from operations $10.6 billion, up $1.1 billion on favorable working capital movement and improved operating results.
• Free cash flow $7.2 billion, up roughly $0.5 billion or 8% (cash provided by operations $10,551m less capital expenditures $3,365m, versus $9,447m less $2,775m in 2024); conversion rate 84% (2024: 81%). Note that the FY2025 10-K, accession 0000063908-26-000035, is internally inconsistent on this point: its performance highlights describe free cash flow as an 8% increase, while its liquidity discussion describes it as a decrease of $510 million. The cash flow statement arithmetic and the rising conversion rate both support an increase.
• Investing outflow $3.8 billion, down $1.5 billion, primarily because 2024 included the increased ownership stake in Grand Foods Holding.
• Financing outflow $7.1 billion, down slightly, primarily lower treasury stock purchases.
• Cash and equivalents $774 million at year-end 2025 (2024: $1,085 million).
• Openings/closings: 2,276 opened, 396 closed in 2025 (2024: 2,116 / 461). Systemwide restaurants 45,356 (2024: 43,477; 2023: 41,822).
• Capital expenditures +$590 million or +21%, driven by restaurant openings.
• Shareholder returns: 6.7 million shares repurchased for $2,016m; dividends paid $5,115m; total returned $7,131 million. Dividends declared per share $7.17. Shares outstanding at year end 711 million. A $15.0 billion share repurchase authorization was approved November 21, 2024, effective January 1, 2025, with no specified expiration. Dividends have been paid for 50 consecutive years and increased every year.

Financial position

• Total assets +$4.3 billion or +8%, primarily currency translation and a $2.9 billion increase in net property and equipment from higher capex.
• After-tax ROIC from continuing operations: 20.3% in 2025, versus 21.8% in 2024 and 25.2% in 2023.
• Debt obligations $40.0 billion at December 31, 2025 (2024: $38.4 billion); the increase was primarily exchange-rate effects on foreign-currency debt. 97% fixed-rate; weighted-average annual interest rate 4.0%; foreign-currency-denominated debt 39% of total ($15.6 billion, vs. $13.2 billion in 2024). Total debt as a percent of total capitalization: 105% (2024: 111%), the Company operates with negative book shareholders' equity.
• Ratings: commercial paper A-2 / P-2; long-term debt BBB+ / Baa1.
• Liquidity: $10.3 billion remained available of the $15.0 billion Board-authorized borrowing capacity; up to $5.0 billion of commercial paper authorized; $4.0 billion committed line of credit.
• Approximately 68% of operating income is earned outside the U.S.
• Loan guarantees supporting System borrowing arrangements totalled approximately $85 million, with no carrying value recorded.
• Largest foreign-currency net asset exposures at year end: Australian Dollars $1,771m, British Pounds $1,416m, Polish Zloty $820m, China Renminbi $501m, Hong Kong Dollars $289m.

Outlook for 2026 (as given in the FY2025 10-K)

• Net restaurant unit expansion to contribute approximately 2.5% to 2026 Systemwide sales growth, in constant currencies.
• Full-year 2026 SG&A of about 2.2% of Systemwide sales.
• 2026 operating margin percent in the mid-to-high 40% range.
• Interest expense to increase 4%–6%, driven primarily by higher average interest rates.
• Effective tax rate 21%–23% for full-year 2026.
• Capital expenditures $3.7–$3.9 billion, majority toward new unit expansion in the U.S. and IOM. Approximately 2,600 openings globally (about 750 in the U.S. and IOM; developmental licensees and affiliates funding more than 1,800), and approximately 2,100 net additions. A sequential capex increase of about $300–$500 million for 2027, targeting 50,000 global units by end-2027.
• Free cash flow conversion rate in the low-to-mid 80% range for 2026.

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Current quarter, Q1 2026 (quarter ended March 31, 2026)

From the Form 10-Q, accession 0000063908-26-000051.

What changed

Global comparable sales +3.8%, a sharp reversal from the prior-year quarter's (1.0)%:

U.S. comparable sales were primarily driven by positive check growth, i.e., price/mix rather than traffic, per the disclosure. IOM saw nearly all markets positive, led by the U.K., Germany and Australia. IDL was led by Japan, with all geographic regions growing.

Headline results:

• Total revenues $6,517m vs. $5,956m, +9% (+4% cc).
• Systemwide sales +11% (+6% cc).
• Operating income $2,953m vs. $2,648m, +12% (+6% cc); excluding restructuring charges in both periods, +11% (+5% cc).
• Net income $1,983m vs. $1,868m, +6% (+1% cc).
• Diluted EPS $2.78 vs. $2.60, +7% (+2% cc); excluding charges, $2.83, +6% (+1% cc). Currency translation contributed +$0.13 to diluted EPS.
• Operating margin 45.3% vs. 44.5%; non-GAAP operating margin 46.0% vs. 45.6%, the increase primarily due to higher other operating income.
• Effective tax rate 22.0% vs. 19.8%, the prior-year quarter benefited from income tax benefits related to restructuring initiatives.

Currency was a large tailwind: translation added $313m to revenues, $152m to operating income and $96m to net income, reflecting the strengthening of most major currencies against the U.S. Dollar, primarily the Euro.

Segment detail

\Total assets comparative is December 31, 2025.*

Franchised revenue composition (Q1 2026 vs. Q1 2025): rents $2,505m vs. $2,313m; royalties $1,483m vs. $1,330m; initial fees $19m vs. $18m.

Franchised sales $31,917m, +11% (+7% cc): U.S. $12,388m (+5%), IOM $10,498m (+17%, +7% cc), IDL $9,030m (+12%, +8% cc). By ownership type: conventional franchised $22,737m (+10%), developmental licensed $5,700m (+15%), foreign affiliated $3,481m (+8%).

Restaurant margins $3,616m vs. $3,314m, +9% (+4% cc). Franchised margins $3,331m (+10%, +5% cc) grew across all segments and represented more than 90% of restaurant margin dollars. Company-operated margins $285m (+4%, (2)% in constant currency), the U.S. Company-operated margin fell 25% to $59m from $79m, primarily on ongoing inflationary cost pressure partly offset by sales-driven growth; IOM Company-operated margin rose to $222m from $186m. Total restaurant margins included D&A of $455m (Q1 2025: $413m).

SG&A increased $77m or 11% (9% cc), primarily higher employee costs including incentive-based compensation, but held at 2.2% of Systemwide sales in both periods.

Other operating (income) expense, net was income of $(69)m vs. expense of $7m: gains on sales of restaurant businesses $(30)m vs. $(8)m (more restaurant sales in IOM); equity in earnings of unconsolidated affiliates $(62)m in both periods; asset dispositions and other $(24)m vs. $11m (higher gains on sale of excess properties); impairment and other charges $47m vs. $66m.

Interest expense $400m, +6% (+4% cc), on higher average debt balances and currency translation. Nonoperating expense of $11m versus income of $(57)m a year ago, largely foreign currency and hedging swings.

Restaurant count

Systemwide restaurants at March 31, 2026: 45,699 (March 31, 2025: 43,756). Conventional franchised 22,616; developmental licensed 9,756; foreign affiliated 11,300; total franchised 43,672; Company-owned and operated 2,027. Segment franchising percentages: U.S. 95%, IOM 89%, IDL 99%.

Restructuring, Accelerating the Organization

Restructuring charges of $47 million in Q1 2026 (Q1 2025: $66 million), of which $46m was recorded primarily at Corporate and $1m in IOM. Accrued balance at March 31, 2026 was $55 million (employee termination benefits $36m, contract termination $4m, professional services and other $15m), substantially all expected to be paid within twelve months.

Cumulative restructuring charges since the initiative began in 2023 total $744 million. The Company expects approximately $250 million of restructuring charges in 2026, primarily professional services costs, with the initiative anticipated to complete during 2027.

Equity method investments

Primary equity-method holdings: Grand Foods Holding (mainland China, Hong Kong and Macau) at 48% ownership, carrying amount $2,095m (December 31, 2025: $2,048m); and McDonald's Japan Holdings Co., Ltd at 35% ownership, carrying amount $655m against a Level 1 fair value of $2,444m (December 31, 2025: carrying $657m, fair value $1,915m), a substantial unrecognized gain on the Japan stake.

Aggregate carrying amount exceeded the Company's proportionate share of investee net assets by $1.4 billion; this difference is not amortized and management concluded there are no impairment indicators. Q1 2026 revenue from these investees $145m, equity in earnings $52m, dividends received $17m.

Balance sheet and cash flow

• Cash from operations $2.4 billion, exceeding capital expenditures by $1.7 billion; roughly flat year over year as working capital changes offset improved operating results.
• Investing outflow $777 million, a slight increase on higher capex.
• Financing outflow $1.2 billion, down $318 million, primarily lower bond repayments.
• Dividend of $1.86 per share, $1.3 billion paid in the quarter; 1.3 million shares repurchased for $393–394 million.
• Total shareholders' equity (deficit) improved to $(1,286)m at March 31, 2026 from $(1,791)m at December 31, 2025.
• Debt: fair value of debt obligations $38.2 billion against a carrying amount of $40.1 billion. $16.5 billion of third-party foreign-currency-denominated debt and $1.8 billion of foreign currency derivatives were designated as net investment hedges. $2.4 billion notional of cash flow hedges on forecasted foreign-currency cash flows. Collateral posted on negative-fair-value derivative positions: $88 million.

Guidance reaffirmed

The 2026 outlook in the 10-Q is unchanged from the 10-K: ~2.5% net unit expansion contribution to Systemwide sales growth (cc); SG&A about 2.2% of Systemwide sales; operating margin in the mid-to-high 40% range; interest expense +4% to +6%; effective tax rate 21%–23%; capital expenditures $3.7–$3.9 billion with approximately 2,600 openings and ~2,100 net additions; free cash flow conversion in the low-to-mid 80% range.

Accounting pronouncements not yet adopted

• ASU 2024-03 (expense disaggregation disclosures), effective for fiscal years beginning after December 15, 2026; impact under evaluation.
• ASU 2025-06 (internal-use software), effective for fiscal years beginning after December 15, 2027; impact under evaluation.

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Subsequent events

Form 10-Q for the quarter ended March 31, 2026 (accession 0000063908-26-000051). The subsequent events note states only that the Company evaluated subsequent events through the date the financial statements were issued and filed with the SEC. No acquisitions, divestitures, financings, borrowings, litigation outcomes or other material post-period events are disclosed in the note.

FY2025 Form 10-K (accession 0000063908-26-000035). The subsequent events note states that the Company evaluated subsequent events through the date the financial statements were issued and filed with the SEC and that there were no subsequent events that required recognition or disclosure.