[MCD] McDonald's: Q3 2026 earnings preview on U.S. traffic and value menu fixes

McDonald's operates and franchises McDonald's restaurants in more than 100 countries, and about 95% of its 45,356 restaurants at year-end 2025 were run by franchisees[1]. The company will hold its earnings call on 2026-11-04[2] to report the third quarter 2026, the three months ended September 30, 2026. In the latest disclosed quarter, the second quarter of 2026, revenue rose 4% (2% in constant currencies) to $7.099 billion, global systemwide sales reached about $37 billion, and global comparable sales grew 1.3%, with the U.S. up 0.8%, International Operated Markets (IOM) up 1.5% and International Developmental Licensed Markets (IDL) up 1.9%[3]. Diluted EPS was $3.32 and non-GAAP EPS, which excludes restructuring and other charges, was $3.38, both up 6%[4]. The company does not guide quarterly revenue or EPS; its only quarterly guidance, given on the August 4 call, is that IOM and IDL comparable sales should accelerate sequentially from second-quarter levels of 1.5% and 1.9%[5]. For the full year, the company guides to a 2026 operating margin in the mid-to-high 40% range and capital expenditures of $3.7 billion to $3.9 billion[6]. Drillr's compilation of 18 analysts puts third-quarter consensus EPS at $3.384 (range $3.243-$3.444), 17 analysts put consensus quarterly revenue at $7.294 billion[7], and 20 analysts put full-year 2026 consensus EPS at $12.885[8].

Three things matter most in this McDonald's Q3 2026 earnings report. The first is whether U.S. traffic stops falling: U.S. comparable sales grew only 0.8% in the second quarter, entirely on higher check, while guest counts fell[9], and comparable sales turned slightly negative in July[10]. Management blamed pulled-back digital offers and uneven execution of the under-$3 menu[11], and the third quarter is the first full quarter after the fixes, so it can show whether the problem is execution or demand. The second is whether international comparable sales deliver the promised sequential acceleration: IOM and IDL comps are the company's only quarterly guidance[5], and IOM, the most profitable segment, is the main reason profit still grew while the U.S. weakened in the second quarter[12]. The third is where profit growth comes from: second-quarter SG&A rose 17% and absorbed most of the gain in franchised margins, while gains on sales of restaurant businesses rose from $7 million to $40 million[12]. Without the cost of the worldwide owner/operator convention, the third quarter will show whether profit growth returns to being driven mainly by franchised margins.

Company Background and Business Structure

McDonald's is a predominantly franchised restaurant company headquartered in Chicago, led by Chairman and CEO Chris Kempczinski[3]. Of its 45,356 restaurants at year-end 2025, franchisees ran 43,317, including 22,570 conventional franchises, 9,675 developmental licenses and 11,072 foreign affiliates, while the company operated 2,039[13]. In June 2026 the company launched a new growth strategy, McDonald's > NEXT, at its worldwide franchisee convention[14], and on September 23 it set out financial targets for 2027-2030 at an investor day[15]. On August 4 it appointed Skye Anderson as President of McDonald's USA to lead its largest market[3].

The company reports three segments, and revenue and profit are concentrated in the U.S. and International Operated Markets. The U.S. segment was 95% franchised at year-end 2025[16] and had 13,769 restaurants at the end of June 2026[17]; in 2025, franchised revenues plus company-operated sales totaled $10.487 billion[18], about 39% of revenue, and operating income was $5.808 billion[19]. IOM, which includes Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K., was 89% franchised[16] and had 10,918 restaurants at the end of June[17]; its 2025 revenue was $13.410 billion[18], about half of the total, and its operating income of $6.382 billion made it the most profitable segment[19]. International Developmental Licensed Markets & Corporate covers more than 75 countries, is 99% franchised and accounts for China and Japan under the equity method[16]; it had 21,341 restaurants at the end of June, including 8,114 in China[17]. That segment's 2025 revenue was $2.342 billion[18], but because it carries corporate overhead, its operating income was only $203 million[19].

McDonald's revenue is driven mainly by franchisee sales multiplied by its fee rates, while franchisees bear most food, packaging and labor costs. Royalties are a percentage of sales and are recognized when the underlying sales occur; rent includes minimum rent recognized straight-line and variable rent based on a percentage of sales, and franchise terms are generally 20 years[20]. In 2025 franchised revenues were $16.548 billion, made up of $10.442 billion of rent, $6.018 billion of royalties and $88 million of initial fees[21], against franchisee sales of $129.675 billion[22], an implied blended rate of about 12.8%. Only the costs of the roughly 2,000 company-operated restaurants flow directly through the company's income statement; those restaurants generated $9.690 billion of sales in 2025, and other revenues added $647 million[23].

Financial History and Current Position

Over the past three fiscal years McDonald's revenue and profit grew steadily, but comparable-sales growth swung widely. Revenue was $25.494 billion in 2023, $25.920 billion in 2024 and $26.885 billion in 2025, up 4% in 2025[23], or 2% in constant currencies[24]. Global comparable sales rose 9.0%, fell 0.1% and rose 3.1% across those years, and in 2025 the U.S., IOM and IDL grew 2.1%, 3.2% and 4.6%[18]. In 2025 systemwide sales rose 7% (5% in constant currencies) to $139.4 billion[24], operating income was $12.393 billion and the operating margin was 46.1%[19]. Net income was $8.563 billion, diluted EPS was $11.95, and non-GAAP EPS excluding restructuring charges was $12.20[23].

The 2025 cash flow shows dividends and buybacks exceeding free cash flow, with debt covering the gap. Cash from operations was $10.551 billion, capital expenditures were $3.365 billion, free cash flow was about $7.2 billion and the free cash flow conversion rate was 84%; the company paid $5.115 billion of dividends, repurchased $2.056 billion of stock and ended the year with $39.973 billion of debt[25]. It opened 2,276 restaurants and closed 396 during the year[25].

In the first half of 2026 revenue and EPS kept growing, but the second quarter slowed noticeably. First-quarter revenue rose 9% (4% in constant currencies), global comparable sales grew 3.8%, diluted EPS was $2.78 and non-GAAP EPS was $2.83[26]. Second-quarter operating income rose 3% to $3.338 billion, and non-GAAP operating income, excluding charges, rose about 4% to $3.391 billion[12]; first-half revenue totaled $13.616 billion and net income $4.345 billion[4]. First-half cash from operations was $5.222 billion, capital expenditures were $1.516 billion, dividends paid were $2.6 billion and buybacks $1.3 billion; the carrying amount of debt was $39.9 billion at the end of June, and the quarterly dividend was $1.86 per share[27]. The system had 46,028 restaurants at the end of June, 1,915 more than a year earlier[17].

Operating Model

McDonald's revenue is the sum of franchised revenues, company-operated sales and other revenues, and franchised revenues equal franchisee sales multiplied by rent and royalty rates. Franchisee sales are driven by comparable sales and net unit growth, and comparable sales are guest counts multiplied by average check, which in turn reflects pricing and product mix[9]. In the second quarter of 2026 franchised revenues rose 4% to $4.393 billion, including $1.942 billion in the U.S., up 2%[9], on U.S. franchised sales of $13.523 billion, also up 2%[28]; international revenue is translated into dollars, and currency added $116 million to second-quarter revenue[4]. This transmission has almost no lag: royalties and variable rent are recognized when franchisee sales occur[20], so a change in comparable sales reaches company revenue in the same quarter.

Operating income equals franchised margins plus company-operated margins plus net other revenue, minus SG&A, plus or minus other operating items such as gains on restaurant sales, equity earnings from affiliates and restructuring charges. In 2025 franchised margins were $13.930 billion and company-operated margins $1.422 billion, of which the U.S. contributed only $360 million, down 14%[22], while SG&A was $3.039 billion[19]. In the second quarter of 2026 franchised margins rose $154 million to $3.713 billion, company-operated margins rose only $7 million to $387 million[29], and SG&A rose $117 million to $817 million[12]. Food, packaging and labor inflation falls mostly on franchisees and does not hit the company's income statement directly; instead it works through franchisee pricing, traffic and willingness to invest, and reaches comparable sales and fee revenue indirectly after one to several quarters[30].

Cash flow comes mainly from rent and royalties collected as sales occur, and after interest, taxes and capital spending it funds dividends and buybacks. First-half 2026 cash from operations was $5.222 billion, up about 18%, mainly because of favorable working capital changes[27]; capital spending goes mostly to new restaurants in the U.S. and IOM, and full-year guidance is $3.7 billion to $3.9 billion[6]. Under NEXT, the company plans about $5 billion of franchisee partnering support through 2030 and about $8.5 billion through 2036, in the form of rent relief and capital support[31]. Rent relief will directly reduce franchised revenues and capital support will add to capital spending; for 2027-2030 the company plans about $3 billion of annual baseline capital expenditures plus $1.5 billion to $2 billion of cumulative capital partnering support[15].

Industry and Competitive Position

McDonald's competes in the informal eating out market against quick-service chains, delivery providers, convenience stores and coffee shops, on price, convenience, service, experience, menu variety and product quality[32]. It has the industry's largest network and digital platform: nearly 29,000 drive-thru locations worldwide, drive-thrus at more than 95% of its roughly 13,700 U.S. restaurants, and delivery from nearly 41,000 restaurants[33]. Across 70 loyalty markets it had nearly 220 million 90-day active users at the end of June 2026, up 13%, and trailing twelve-month systemwide sales to loyalty members rose more than 20% to $40 billion[3]. Management also said U.S. base menu prices are below key competitors in every core category and that consumer scores for value and affordability improved 7-8 points over the past year[34].

McDonald's growth now depends more on taking share, because industry traffic in several of its largest markets is flat to negative[30]. Its investor-day targets call for gaining 1.5 percentage points of share in both chicken and beverages by 2030 while keeping its lead in beef[15]; after the new beverage platform launched in the U.S., Canada and Germany, beverage-platform orders carried checks 50% higher than the full-day average, and more than half of that traffic came after lunch[35]. Compared with similarly franchised peers such as Yum! Brands and Restaurant Brands International, McDonald's stands out for owning a large base of restaurant property and collecting rent, which made up about 63% of franchised revenues in 2025[21]. The material available here contains no comparable peer financials, however, so the margin or growth advantage from that difference cannot be quantified.

Core Debates

McDonald's U.S. comparable sales rose only 0.8% in the second quarter, entirely on higher check, and turned slightly negative in July. After restoring digital offers and pressing franchisees to price the under-$3 menu as recommended, can U.S. traffic stop falling in the third quarter?

This question matters because the U.S. accounts for about 39% of McDonald's revenue and about 47% of its operating income[18][19], and rent and royalties are charged on franchisee sales. U.S. franchised sales were $13.523 billion in the second quarter[28], so each percentage point of comparable sales moves quarterly sales by about $135 million. Management characterized the second-quarter shortfall as an execution misstep rather than a strategic problem[11], and the third quarter is the first full quarter to test that view.

The evidence shows that U.S. growth now rests entirely on average check. U.S. comparable sales rose 0.8% in the second quarter against 2.5% a year earlier, driven by check growth and favorable product mix while guest counts fell[9]; U.S. comps had risen 3.9% in the first quarter[26] and turned slightly negative in July[10]. Management said two-thirds of the second-quarter traffic shortfall came from pulling back digital offers and dropping the buy-one-add-one-for-$1 program to fund the $3-and-under Everyday Affordable Price (EDAP) menu launched in April, and the remaining third came from an underperforming June World Cup campaign[11]. Roughly a third of the system did not follow the recommended EDAP pricing, and those restaurants performed meaningfully worse[36]. Even so, U.S. franchised margins rose 3% to $1.621 billion[29], supported by 2% franchised-sales growth and net new units[28].

Financially, U.S. comparable sales and roughly 1.4% net unit growth together set U.S. franchised sales, which flow through percentage rent and royalties into second-quarter U.S. franchised revenues of $1.942 billion[9], and from there into U.S. franchised margins and the U.S. segment's $1.573 billion of operating income[12]. The company has started corrective action: relaunching national digital flash offers, adding personalized offers for loyalty members and shifting second-half marketing toward proven value offers such as Extra Value Meals[11]. It has also made pricing compliance part of franchisee business reviews that affect growth eligibility[36]. Changes to the marketing calendar, however, cannot take effect until the fourth quarter[34].

What remains unresolved is whether this is an execution problem or a demand problem. The alternative explanation is that lower-income customers are eating out less under inflation and competitors are also leaning into low prices, so traffic may not recover even with offers restored. In the third-quarter report, watch whether U.S. comparable sales are at or above 0%, whether the traffic description improves from negative, whether EDAP pricing compliance rises clearly above roughly two-thirds, and whether U.S. franchised margin growth is at least 2%. If U.S. comparable sales fall below -1.0%, the August-September fixes did not reverse July's weakness; if U.S. franchised margin growth is below 1%, comparable-sales declines have offset net unit growth.

Comparable sales slowed sharply in both of McDonald's international segments in the second quarter, and management has promised sequential acceleration in the third. Can Germany, the U.K. and Japan keep offsetting the drag from France and China?

This question matters because IOM contributes about half of revenue and the largest share of operating income[18][19], and it was the main reason profit still grew when the U.S. weakened in the second quarter. Third-quarter international acceleration is the company's only quarterly guidance[5], so whether it is delivered says directly whether management reads its business momentum reliably.

The evidence shows a sizable international slowdown with clear differences inside each segment. IOM comparable sales rose 1.5% in the second quarter against 4.0% a year earlier, and IDL rose 1.9% against 5.6%[9], after first-quarter growth of 3.9% and 3.4%[26]. Within IOM, Germany, Australia and the U.K. led while France again missed expectations; within IDL, Japan posted its tenth straight quarter of positive comps while China held back segment growth[10]. Management said Germany's new beverage platform had launched and helped it gain chicken share, and that France's adjusted value menu had started to resonate[10]. Even so, IOM operating income rose 5% (3% in constant currencies) to $1.723 billion in the second quarter[12].

Financially, international comparable sales and unit growth drove second-quarter franchised sales of $11.456 billion in IOM and $9.473 billion in IDL[28], plus IOM company-operated sales of $1.607 billion[9], which flow through franchised and company-operated margins into IOM operating income. That revenue is also translated into dollars, so currency changes reported results directly: translation added $0.03 to second-quarter diluted EPS and $0.17 in the first half[4], and management cut its full-year currency tailwind from the earlier 20 to 30 cents[37] to about 15 cents[5].

What remains unresolved is whether the international slowdown reflects local execution problems or a broad decline in industry traffic. The alternative explanation is that quick-service traffic is flat to negative in several major markets[30], and new beverages and value menus can only partly offset it. In the third-quarter report, watch whether IOM comps exceed 1.5% with France no longer a drag, whether IDL comps exceed 1.9% without a deeper decline in China, whether IOM operating income grows at least 4% in constant currencies, and whether the currency effect is consistent with the roughly 15-cent full-year figure. If IOM comps do not exceed 1.5%, the company's only quarterly guidance has not been met; if IOM operating income grows less than 1% in constant currencies, the international segments cannot offset U.S. weakness.

McDonald's second-quarter operating income grew only about 4%: most of the gain in franchised margins was absorbed by higher SG&A, and gains on restaurant sales filled the gap. Without convention costs in the third quarter, can profit growth return to being driven mainly by franchised margins?

This question matters because the stability of McDonald's profit comes from a chain in which franchisee sales growth lifts rent and royalties and turns into a high margin. If profit growth leans more and more on gains from selling restaurants and on cost control rather than on franchised margins, it becomes less durable; at the same time, rent relief under NEXT will directly reduce franchised revenues in the future[31].

The evidence shows that the composition of second-quarter profit growth was weak. Non-GAAP operating income rose about $116 million to $3.391 billion[12]: franchised margins rose $154 million to $3.713 billion, company-operated margins rose only $7 million, and U.S. company-operated margins fell 6%[29]. SG&A rose $117 million, or 17% (16% in constant currencies), to $817 million, which the company attributed to employee costs, incentive compensation and the 2026 Worldwide Owner/Operator convention; other operating income excluding restructuring improved by about $75 million, and gains on sales of restaurant businesses rose from $7 million to $40 million, mainly from more restaurant sales in IOM[12]. The first-half non-GAAP operating margin was 46.9%, essentially flat against 46.8% a year earlier[14][12].

Financially, franchised margins grow with franchisee sales, company-operated margins are squeezed by food, packaging and labor inflation, and SG&A of about 2.2% of systemwide sales for the full year[6] is subtracted; adding or subtracting gains on restaurant sales and equity earnings gives non-GAAP operating income, which flows to EPS. Pressure on U.S. company-operated restaurants has lasted several quarters: second-quarter U.S. company-operated margins were $91 million on $784 million of sales, a margin of about 11.6% against about 12.3% a year earlier[29][9], and first-quarter U.S. company-operated margins were $59 million against $79 million[38]. First-half SG&A was 2.2% of systemwide sales against 2.1% a year earlier[12], and management said savings from global system consolidation should begin lowering that ratio in 2027[5].

What remains unresolved is whether the second-quarter cost spike is temporary or structural. One explanation is that operating income growth will recover in the third quarter once convention costs drop out; the other is that the company keeps adding technology and staff during the NEXT transition, costs grow faster than revenue, and profit growth leans increasingly on asset sales. In the third-quarter report, watch whether non-GAAP operating income grows at least 4% in constant currencies, whether SG&A growth falls back to within 5%, what share of the operating income increase comes from restaurant sales and other operating income, and whether U.S. company-operated margins stop declining. If SG&A growth stays above 10%, the full-year guidance of about 2.2% of systemwide sales will require a clear fourth-quarter contraction; if other operating income supplies more than half of the increase, profit growth is coming mainly from asset sales.

McDonald's has pushed its 50,000-restaurant target back a year but still plans about 2,100 net additions and $3.7-$3.9 billion of capital spending this year. With only 672 net additions in the first half, can second-half openings and cash flow land as planned?

This question matters because, when comparable sales slow, net unit growth is the most predictable part of systemwide sales growth, and the company expects it to contribute about 2.5 percentage points this year[6]; the capital spent on openings also determines free cash flow and the room for dividends and buybacks. After the investor day, the company must fund openings, NEXT franchisee support[31] and more than $5 billion of annual dividends[25] at the same time, which makes the pace of openings a key variable for cash flow.

The evidence shows first-half openings running behind a straight-line path to the full-year plan. The system had 46,028 restaurants at the end of June, 672 more than the 45,356 at year-end 2025 and 1,915 more than a year earlier, including 887 net additions in China[17][13]. The full-year plan calls for about 2,600 openings and about 2,100 net additions, with about 750 openings in the U.S. and IOM and more than 1,800 funded by developmental licensees and affiliates[6]. In August the company moved the 50,000-restaurant target from the end of 2027 to 2028, citing cumulative inflation in development costs and a pressured consumer environment, while keeping its plan for about 2,600 openings in 2026[5]; management said the delay is meant to keep new restaurants above return thresholds and does not change its view of the long-term opportunity[35].

Financially, openings funded by the company and its partners produce net unit growth, which contributes about 2.5 percentage points of systemwide sales growth and enlarges the base of franchisee sales and franchised revenues; the company-funded portion becomes capital expenditure, and free cash flow, equal to operating cash flow minus capital expenditures, funds dividends and buybacks. First-half capital expenditures were $1.516 billion against $1.295 billion a year earlier, with operating cash flow of $5.222 billion[27], leaving free cash flow of about $3.706 billion, roughly 85% of net income of $4.345 billion[4] and above the 84% for full-year 2025[25]. Systemwide sales grew 4% in constant currencies in the second quarter and 5% in the first half[28]. The company guides to a 2026 free cash flow conversion rate in the low-to-mid 80% range[6], and the investor day set a 2030 target in the mid-to-high 80% range[15].

What remains unresolved is whether the delayed target only protects return thresholds or whether development costs and franchisee funding pressure are already slowing this year's openings. In the third-quarter report, watch whether the system reaches about 46,750 restaurants at the end of September, whether constant-currency systemwide sales grow at least 4%, whether nine-month capital expenditures land between $2.5 billion and $2.8 billion, and whether nine-month free cash flow conversion is at least 80%. If the system has fewer than 46,500 restaurants at the end of September, the fourth quarter will need roughly 950 or more net additions; if nine-month free cash flow conversion is below 78%, the full-year low-to-mid 80% guidance comes under pressure.

Risks and Falsifiers

Each of the six risks below maps to a financial line that can be tested in the third-quarter report or later disclosures, and contrary evidence would mean the current understanding needs revising.

Pressure on franchisee economics runs through every debate. Management acknowledges that persistent food, packaging and labor inflation is squeezing franchisee margins[30], which can weaken franchisees' willingness to execute value menus, fund NEXT remodels and invest in new restaurants, and in turn hit comparable sales, openings and the rent and royalties the company collects on sales. The exposed line is franchised revenues of $16.548 billion in 2025, including $10.442 billion of rent and $6.018 billion of royalties[21]; the 14% decline in 2025 U.S. company-operated margins[22] serves as a proxy for the cost pressure. If the third-quarter report shows U.S. company-operated margins stabilizing year over year and clearly higher EDAP compliance, this risk weakens.

The cost of NEXT franchisee support will start reaching the financial statements in 2027. The company plans about $5 billion of rent relief and capital support through 2030 and about $8.5 billion through 2036, estimates an approximately four-year payback for franchisees, and depends on delivering about 250 basis points of restaurant-level efficiency[31]. The exposed lines are franchised revenues, franchised margins and capital expenditures from 2027 onward, plus $1.5 billion to $2 billion of cumulative capital partnering support in 2027-2030[15]. If the company discloses the annual pace of rent relief in the third-quarter report or later, while keeping the operating margin in the mid-to-high 40% range[6], this risk becomes measurable and contained.

The U.S. value war could drag on. Restoring digital offers alongside EDAP will lower franchisee check and profit, and if traffic still does not recover, negative comparable sales could persist into the fourth quarter, when marketing changes finally take effect[34]. The exposed line is U.S. franchised margins, which were $6.078 billion in 2025[22] and $1.621 billion in the second quarter[29]; U.S. franchised sales run about $13.5 billion a quarter[28], so each comparable-sales point equals about $135 million of sales. If third-quarter U.S. comparable sales are at or above 0% and the traffic description improves, this risk is falsified.

The international slowdown could persist. France's execution problems and weak consumer demand in China[30], together with flat industry traffic in several major markets, could keep IOM and IDL comparable sales from accelerating as guided. The exposed lines are IOM operating income, which was $6.382 billion in 2025[19] and $1.723 billion in the second quarter[12], along with IDL royalties and equity-method earnings. If third-quarter IOM and IDL comparable sales are both at least 2.6%, back to their first-half averages[9], this risk is falsified.

Costs and transformation spending could keep outpacing growth in franchised margins. If SG&A keeps growing quickly through NEXT and the global system consolidation while U.S. company-operated restaurants stay squeezed by inflation, operating income growth will depend more on gains from restaurant sales. The exposed lines are second-quarter non-GAAP operating income of $3.391 billion[12], 2025 SG&A of $3.039 billion and 2025 gains on restaurant sales of $133 million[19]. If third-quarter SG&A growth is no more than 5% and other operating income contributes less than a quarter of the increase, this risk is falsified.

Inflation in development costs could slow expansion. Cumulative increases in development costs have already pushed back the 50,000-restaurant target[5], and if second-half 2026 openings also slow, units would contribute less than about 2.5 percentage points to systemwide sales growth. The exposed lines are systemwide sales growth, the franchised revenue base and full-year capital expenditures of $3.7 billion to $3.9 billion[6]. If the system has at least 46,750 restaurants at the end of September and full-year opening guidance is maintained, this risk is falsified.

What to Watch Next

• U.S. traffic: U.S. comparable sales were +0.8% in the second quarter, +2.3% in the first half and slightly negative in July[9][10]. A result at or above 0% supports the execution explanation; below -1.0% means the fixes did not reverse the weakness.
• U.S. traffic and EDAP: guest counts were negative and roughly a third of the system did not follow recommended pricing[9][36]. Watch for an improved traffic description and clearly higher compliance; if neither improves, the execution explanation weakens.
• U.S. franchised margins: $1.621 billion in the second quarter, up 3%[29]. Growth of at least 2% is supportive; below 1% means comparable-sales declines offset net unit growth.
• International comps: IOM +1.5% and IDL +1.9% in the second quarter[9]. Both should exceed those levels; IOM at or below 1.5% means the only quarterly guidance was missed.
• IOM operating income: $1.723 billion in the second quarter, up 3% in constant currencies[12]. At least 4% is supportive; below 1% means the international segments cannot offset U.S. weakness.
• Profit mix: second-quarter non-GAAP operating income was $3.391 billion, up 4%, with SG&A up 17%[12]. Watch for constant-currency operating income growth of at least 4% and SG&A growth back within 5%; SG&A above 10% means the 2.2% full-year ratio needs a fourth-quarter contraction.
• Other operating income: gains on restaurant sales were $40 million in the second quarter[12]. If other operating income supplies more than half of the operating income increase, profit growth is coming mainly from asset sales.
• Units: 46,028 restaurants at the end of June[17]. About 46,750 at the end of September keeps the plan on track; below 46,500 means the fourth quarter needs roughly 950 or more net additions.
• Capex and cash conversion: first-half capex was $1.516 billion and conversion about 85%[27]. Watch for nine-month capex of $2.5 billion to $2.8 billion and conversion of at least 80%; below 78% puts the full-year guidance under pressure.

Conclusion

McDonald's business rests on franchisee sales: franchisees run about 95% of its restaurants, and the company collects rent and royalties on their sales, which produced $16.548 billion of franchised revenues in 2025[21] and a 46.1% operating margin[19]. In the second quarter of 2026 revenue and non-GAAP EPS still grew 4% and 6%[3][4], and first-half free cash flow was about 85% of net income[27], but U.S. comparable sales rose only 0.8% with negative traffic[9], international comps slowed clearly, and a meaningful part of the profit increase came from gains on restaurant sales[12]. The central unresolved relationship is whether U.S. traffic stops falling after the fixes and lets franchised margins again become the main source of profit growth.

Since the second-quarter report, outside views have centered on U.S. comparable sales, with different emphases. RBC Capital Markets analyst Logan Reich argued that the investor-day outlook for unit growth through 2030 was about 100 basis points a year below consensus while restaurant and technology investment could be larger than expected; he was especially cautious on U.S. comps, saying they could remain under pressure in a challenging macro environment until the company finds a way to attract lower- and middle-income customers[39]. Morgan Stanley lowered its U.S. comparable-sales assumptions for the third and fourth quarters to declines of 0.5% and 1%, saw marketing, value, digital and service as sources of gradual improvement, and stressed that comparable sales rather than EPS are now the main metric investors watch, adding that changes in the timing of franchisee support could alter the outcome[40]. Both expect near-term pressure on U.S. comps, consistent with the company's slightly negative July[10]. They differ in that RBC puts the key to recovery on winning back lower- and middle-income customers, which matches the demand explanation in the traffic debate, while Morgan Stanley weighs execution of marketing and value more heavily and flags the timing of franchisee support as a variable, which matches the execution explanation and the NEXT cost risk. These are outside interpretations, not facts, and they do not represent a majority view.

Going forward, the view that the second quarter was an execution misstep would be materially strengthened if the third-quarter report shows, together, U.S. comparable sales at or above 0% with an improved traffic description, IOM and IDL comps above the second quarter's 1.5% and 1.9%, slower SG&A growth with franchised margins again supplying most of the profit increase, and close to 46,750 restaurants at the end of September. Conversely, if U.S. comps fall below -1.0%, international comps fail to accelerate, profit growth keeps relying on restaurant-sale gains, or openings and free cash flow conversion fall behind full-year guidance, the problem is not just execution: demand and cost pressure would be eroding the growth chain of the franchise model at the same time.

Sources

[1] MCD 10-K filed 2026-02-24 · business description and franchise structure · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[2] Drillr earnings calendar (updated 2026-10-16) · MCD 2026-11-04 call · 2026-10-16 · Drillr earnings calendar

[3] MCD 8-K filed 2026-08-04 · 2Q26 results press release · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit991-6302026.htm

[4] MCD 8-K filed 2026-08-04 · 2Q26 currency translation and EPS reconciliation · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[5] MCD Q2 2026 earnings call 2026-08-04 · guidance · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[6] MCD 8-K filed 2026-08-04 · 2026 outlook as of August · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[7] Drillr analyst_financial_estimates (updated 2026-10-16) · MCD quarter ending 2026-09-30 · 2026-10-16 · Drillr analyst_financial_estimates · https://gateway.drillr.ai/mcp/private

[8] Drillr analyst_financial_estimates (updated 2026-10-16) · MCD FY2026 and FY2027 · 2026-10-16 · Drillr analyst_financial_estimates · https://gateway.drillr.ai/mcp/private

[9] MCD 8-K filed 2026-08-04 · 2Q26 revenues and comparable sales by segment · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[10] MCD Q2 2026 earnings call 2026-08-04 · segment performance · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[11] MCD Q2 2026 earnings call 2026-08-04 · U.S. execution issues and corrective actions · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[12] MCD 8-K filed 2026-08-04 · 2Q26 SG&A, other operating income and operating margin · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[13] MCD 10-K filed 2026-02-24 · restaurants by ownership type 2023-2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[14] MCD Q2 2026 earnings call 2026-08-04 · overall performance and McDonald's NEXT · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[15] MCD 8-K filed 2026-09-23 · financial targets 2027-2030 · 2026-09-23 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000076/exhibit991-investorupdate2.htm

[16] MCD 10-K filed 2026-02-24 · segment structure · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[17] MCD 8-K filed 2026-08-04 · systemwide restaurants at June 30 2026 · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[18] MCD 10-K filed 2026-02-24 · revenues and comparable sales by segment 2023-2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[19] MCD 10-K filed 2026-02-24 · SG&A and operating income by segment 2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[20] MCD 10-K filed 2026-02-24 · franchise arrangements and revenue recognition · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[21] MCD 10-K filed 2026-02-24 · revenues from franchised restaurants by type 2023-2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[22] MCD 10-K filed 2026-02-24 · franchised sales and restaurant margins 2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[23] MCD 10-K filed 2026-02-24 · consolidated operating results 2023-2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[24] MCD 10-K filed 2026-02-24 · 2025 financial performance · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[25] MCD 10-K filed 2026-02-24 · cash flows, capital expenditures and debt 2025 · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[26] MCD 8-K filed 2026-05-07 · 1Q26 results and comparable sales · 2026-05-07 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000048/exhibit991-33126xq1.htm

[27] MCD 10-Q filed 2026-08-07 · cash flows and capital returns 1H26 · 2026-08-07 · 10-Q · https://www.sec.gov/Archives/edgar/data/63908/000006390826000073/mcd-20260630.htm

[28] MCD 8-K filed 2026-08-04 · 2Q26 systemwide and franchised sales · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[29] MCD 8-K filed 2026-08-04 · 2Q26 restaurant margins · 2026-08-04 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000067/exhibit992-6302026.htm

[30] MCD Q2 2026 earnings call 2026-08-04 · stated risks · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[31] MCD 8-K filed 2026-09-23 · NEXT strategy and franchisee partnering support · 2026-09-23 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000076/exhibit991-investorupdate2.htm

[32] MCD 10-K filed 2026-02-24 · competition and supply chain · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[33] MCD 10-K filed 2026-02-24 · strategy, loyalty and restaurant development · 2026-02-24 · 10-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000035/mcd-20251231.htm

[34] MCD Q2 2026 earnings call 2026-08-04 · U.S. value and recovery timing Q&A · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[35] MCD Q2 2026 earnings call 2026-08-04 · unit growth and beverage platform Q&A · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[36] MCD Q2 2026 earnings call 2026-08-04 · EDAP franchisee compliance Q&A · 2026-08-04 · earnings-call · https://gateway.drillr.ai/mcp/private

[37] MCD Q1 2026 earnings call 2026-05-07 · guidance and Q2 trend · 2026-05-07 · earnings-call · https://gateway.drillr.ai/mcp/private

[38] MCD 8-K filed 2026-05-07 · 1Q26 restaurant margins · 2026-05-07 · 8-K · https://www.sec.gov/Archives/edgar/data/63908/000006390826000048/exhibit992-33126xq1.htm

[39] AASTOCKS 2026-09-24 · RBC稱麥當勞(MCD.US)門店擴張目標遜預期 市場焦點仍在美國業務增長 · 2026-09-24 · RBC Capital Markets(经 AASTOCKS 报道) · https://www.aastocks.com/tc/stocks/news/aafn-con/NOW.1546355/latest-news/AAFN

[40] AASTOCKS 2026-09-28 · 摩根士丹利指麥當勞美國同店銷售今年底前料持續受壓 · 2026-09-28 · Morgan Stanley(经 AASTOCKS 报道) · https://www.aastocks.com/tc/stocks/news/aafn-con/NOW.1546786/latest-news/AAFN