Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

DRI · Q2 2026 Earnings

Darden Restaurants

Reported December 18, 2025

30-second summary

Darden delivered consolidated SRS of +4.3% against an FY guide that began the year at +2–3.5%, with Olive Garden (+4.7%) and LongHorn (+5.9%) both clearing the +5% bar set in last quarter's watch list at LongHorn and missing it modestly at Olive Garden. Management raised FY26 total sales growth by 100bps at the low end (to 8.5–9.3%) and SRS by 100bps (to 3.5–4.3%), but reaffirmed EPS at $10.50–$10.70 — the second consecutive quarter the topline raise has been absorbed by inflation rather than flowed to earnings. The hidden cut is now explicit: pricing ran 130bps below inflation in Q2, beef peaked, and the FY EPS algorithm depends on a Q4 catch-up that hasn't happened yet.

Headline numbers

EPS

Q2 FY2026

$2.08

Revenue

Q2 FY2026

$3.10B

+7.3% YoY

Operating margin

Q2 FY2026

10.3%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$3.10B	+7.3%	$3.04B	+2.0%
EPS	$2.08	—	$1.97	+5.6%
Operating margin	10.3%	—	11.1%	-80bps

Guidance

Darden raises FY2026 total sales growth to 8.5-9.3% (from 7.5-8.5%) and same-restaurant sales to 3.5-4.3% (from 2.5-3.5%), driven by Q2 outperformance, but reaffirms full-year EPS at $10.50-10.70, indicating margin pressures offset topline strength.

Guidance is issued for both next quarter and the full year. Both may appear below.

New guidance

Metric	Period	Guide	YoY
53rd week EPS contribution	FY 2026	approximately $0.20	—
Earnings per share growth	Q3 FY2026	mid-single digits YoY	mid-single digits

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Total sales growth	FY 2026	7.5% to 8.5%	8.5% to 9.3%	+1.0 to +0.8 percentage points at low and high end	Raised
Same-restaurant sales growth	FY 2026	2.5% to 3.5%	3.5% to 4.3%	+1.0 to +0.8 percentage points	Raised
New restaurant openings	FY 2026	approximately 65	65 to 70	+5 units at high end	Raised
Total capital spending	FY 2026	$700 to $750 million	$750 to $775 million	+$50 to +$25 million	Raised
Total inflation	FY 2026	3.0% to 3.5%	approximately 3.5%	+0.5 percentage points at low end (midpoint now assumed 3.5%)	Raised
Weighted average diluted shares outstanding	FY 2026	approximately 117 million	approximately 116.5 million	-0.5 million shares	Lowered

Reaffirmed unchanged this quarter: Effective tax rate (approximately 13%), Adjusted diluted EPS from continuing operations ($10.50 to $10.70)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Olive Garden	$1.363B	+5.4%
LongHorn Steakhouse	$0.776B	+9.3%
Fine Dining	$0.316B	+3.3%
Other Business	$0.647B	+11.3%

Platform metrics

Q2 FY2026

Segment	Q2 FY2026
Same-Restaurant Sales Growth (Consolidated Darden)	4.3%
Same-Restaurant Sales Growth (Olive Garden)	4.7%
Same-Restaurant Sales Growth (LongHorn Steakhouse)	5.9%
Same-Restaurant Sales Growth (Fine Dining)	0.8%
Same-Restaurant Sales Growth (Other Business)	3.1%
Net New Restaurants	30

Other KPIs

Q2 FY2026

Segment	Q2 FY2026
Share Repurchases	$222 million
Quarterly Dividend Per Share	$1.50

Management tone

Narrative arc: Margin maximization → Sales reinvestment pivot → Wallet-share validation → Beef trough and back-half bet.

Three quarters ago at Q4 FY25, the new algorithm was framed as a philosophical reframing toward sales growth. Two quarters ago at Q1, management absorbed the first inflation raise and held EPS while running pricing 30bps below. This quarter the gap has widened sharply: "We priced 130 basis points below inflation...this large investment in underpricing inflation resulted in restaurant-level margins being below last year." That is no longer restraint — that is a deliberate cash burn against the value moat, and management is explicit about it. The signal: the reinvestment-over-margin pivot has moved from rhetoric to GAAP impact.

The beef narrative has shifted from open-ended risk to a falsifiable peak call. This quarter Raj upgraded the framing materially: "beef prices peaked in our fiscal second quarter...Prices have started to improve in recent weeks, and we've been able to take some coverage for the back half." The Q1 watch list explicitly asked whether coverage would move above 25% — it did, with management citing roughly 45% coverage for the back half at improving cost basis. That said, the FY inflation guide was simultaneously raised to ~3.5%, meaning the coverage improvement is real but the overall basket is worse than expected.

The pricing-to-inflation catch-up timeline is now specific and dated, which makes the FY EPS reaffirmation auditable. Per the call: "we expect that to cut in half by the time we get to third quarter and actually catch up to inflation as we get to fourth quarter." This is the load-bearing assumption behind both the Q3 mid-single-digit EPS guide and the FY $10.50–$10.70 hold. If Q3 EPS prints below mid-single-digit growth, the FY reaffirmation breaks in Q3, not Q4.

Uber Direct has cemented its status as a structural growth lever rather than a campaign artifact. At Q4 it was 3.5% of Olive Garden with 40–50% incrementality; at Q1 management said post-campaign delivery remained 40% above pre-campaign baseline; this quarter the disclosure tightened to "Uber Direct sales represented 4% of total sales for the quarter, and approximately half of that was incremental" — and Yard House began rolling out 1P delivery. The penetration curve is now visible quarter over quarter.

Lighter-portion menu work, which entered the conversation defensively as a GLP-1 hedge two quarters ago, has accelerated to system-wide completion at Olive Garden in January — moved up from a phased rollout. Management is treating the affordability lever as a deliberate growth tool, not a hedge.

Versus the more confident Q1 posture, this print reads more defensive: management is doing the work to support the FY EPS reaffirmation, but the qualifying language ("likely to remain elevated into the third quarter," "some relief as we get into the fourth quarter") signals the back-half margin recovery is bet, not base case.

Recurring themes management leaned on this quarter:

Beef commodity inflation impact and timeline for reliefFirst-party delivery as incremental sales channelValue positioning and affordability perception with smaller portion sizesOutperformance of casual dining versus industry benchmarkDisciplined pricing strategy below inflation to protect guestsPortfolio breadth enabling brand-specific strategies despite commodity headwinds

Risks management surfaced:

Beef prices sustained longer than anticipated and likely to remain elevated into Q3Margin pressure in near-term (Q2-Q3) from commodity inflation despite pricing actionsConsumer sentiment weakness, though spending resilience observed to datePotential cannibalization of on-premise by delivery as penetration increasesRegional softness in New England and Pacific Northwest versus historical trends

Answers to last quarter's watch list

Q2 EPS print vs. "lowest YoY EPS growth" framing — Non-GAAP Q2 EPS came in at $2.08 vs. prior-year Q2's $2.03 — flat to marginally up YoY, consistent with the explicitly flagged trough. The FY reaffirmation survived, but the Q3 mid-single-digit guide is the next test. Status: Resolved positively (held the line)

Beef coverage above 25% for back half — Management confirmed ~45% back-half coverage at improving prices, after Q2 was the beef-cost peak. Raj's "peaked in Q2" call was validated by the disclosure.

Resolved positively

Olive Garden SRS holding above +5% — Olive Garden SRS decelerated to +4.7% from +5.9% in Q1. Still above the FY +3.5–4.3% raised guide, but the +5% bar broke. The deceleration signals Q1's number had some campaign assistance. Status: Resolved negatively (relative to the +5% sustainability test)

Fine Dining SRS turning positive — Fine Dining SRS turned to +0.8%, the first clearly positive print after several quarters of softness. The Ruth's Chris three-course LTO playbook delivered.

Resolved positively

Bahama Breeze portfolio decision — No update in the press release. Quarter three of disclosed review with no resolution. Status: Continue monitoring (the silence itself is becoming meaningful)

Pricing-vs-inflation gap holding traffic — Pricing ran 130bps below ~3.5% inflation, restaurant-level margins compressed YoY as flagged, but consolidated SRS still came in at +4.3% with both flagship brands traffic-positive. The bet that traffic gains offset margin sacrifice is being validated at the comp line, even as it hits the P&L. Status: Resolved positively at the strategy level

What to watch into next quarter

Q3 non-GAAP EPS vs. the mid-single-digit YoY guide — A miss against the mid-single-digit framing breaks the FY $10.50–$10.70 reaffirmation in Q3, not Q4.

Pricing-to-inflation gap actually cutting in half — Raj said the 130bps gap should narrow to ~65bps in Q3 and close to zero in Q4. If Q3 still shows a 100bps+ gap, the FY math doesn't work and EPS gets cut.

Beef spot prices confirming the "peaked in Q2" call — Raj's call is now on the record; if Q3 commentary walks it back, credibility on cost-cycle reads will get repriced.

Olive Garden SRS — whether +4.7% is the new run rate or +5%+ returns — A third consecutive quarter below +5% with the bar of the raised SRS guide at +4.3% midpoint would compress the wallet-share narrative quickly.

Bahama Breeze resolution — At quarter four of strategic review with no disclosed outcome (sale, conversion, impairment), the silence is becoming a governance question, not just a portfolio one.

Uber Direct penetration at brands beyond Olive Garden — Yard House rollout was disclosed; quantified contribution at LongHorn or Cheddar's would convert delivery from "Olive Garden lever" to "portfolio lever."

Sources

Darden Restaurants Q2 FY2026 press release (Exhibit 99.1), filed December 18, 2025 — https://www.sec.gov/Archives/edgar/data/940944/000094094425000067/exhibit991-q2fy26.htm
Darden Restaurants Q2 FY2026 management commentary (Raj Vennam, Rick Cardenas) as captured in tone inputs
Tapebrief DRI Q1 FY2026 brief (September 2025) for prior-guidance and watch-list baseline
Tapebrief DRI Q4 FY2025 brief (June 2025) for FY26 initial guidance baseline

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