MCD · Q1 2026 Earnings

Cautious

McDonald's

Reported May 7, 2026

30-second summary

U.S. comparable sales printed +3.9% — narrowly below the +4% watch threshold but a clean step-up from prior trend, and International Operated Markets carried the system again at +14% revenue growth. The hidden story is two-sided: management was forced into Q&A admissions that U.S. company-operated margins are "not acceptable" and the broader ownership model is now an Investor Day topic. Q1 non-GAAP operating margin of 46.0% expanded 40bps YoY (vs. 45.6% in Q1 FY2025), keeping the full-year mid-to-high 40% commitment intact, but the U.S. McOpCo line specifically is where the system is leaking margin.

Headline numbers

EPS

Q1 FY2026

$2.83

Revenue

Q1 FY2026

$6.52B

+9.0% YoY

Operating margin

Q1 FY2026

45.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$6.52B	+9.0%	$7.01B	-7.0%
EPS	$2.83	—	$3.12	-9.3%
Operating margin	45.3%	—	45.0%	+30bps

Guidance

FY2026 guidance broadly reaffirmed with no changes to core operating metrics; FX EPS benefit guidance withdrawn without replacement.

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

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Foreign currency benefit to EPS	FY 2026	20 to 30 cents	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Net restaurant unit expansion contribution to Systemwide sales growth (approximately 2.5%), SG&A expenses as % of Systemwide sales (about 2.2%), Operating margin percent (mid-to-high 40% range), Interest expense growth (increase between 4% and 6%), Effective income tax rate (between 21% and 23%), Capital expenditures ($3.7 to $3.9 billion), Total restaurant openings (approximately 2,600 restaurants globally), Net restaurant additions (approximately 2,100), Free cash flow conversion rate (low-to-mid 80% range)

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Franchised revenues - U.S.	$1.75B	+4.0%
Franchised revenues - International Operated Markets	$1.782B	+15.0%
Franchised revenues - International Developmental Licensed Markets & Corporate	$0.476B	+11.0%
Company-owned and operated sales - U.S.	$0.729B	+1.0%
Company-owned and operated sales - International Operated Markets	$1.477B	+13.0%

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Comparable sales growth	3.8%
Systemwide sales growth (constant currency)	6%
Franchised sales	$31.917 billion
Systemwide restaurants	45,699
Net restaurant unit additions (year-to-date)	1,943

Profitability

Q1 FY2026

Segment	Q1 FY2026
Franchised restaurant margins	$3.331 billion
Company-owned and operated restaurant margins	$285 million
Non-GAAP operating margin	46.0%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Americas	$2.479B	+3.0%
International Operated Markets	$3.258B	+14.0%
International Developmental Licensed Markets & Corporate	$0.587B	+11.0%

Management tone

Q2 promotional value re-engagement → Q3 macro pressure extended "well into 2026" → Q4 confident pivot to capacity expansion → Q1 acknowledged owned-store margins "not acceptable," ownership model under review

The capacity-expansion confidence from Q4 has been complicated by an unscripted admission that the U.S. company-operated model is underperforming. One quarter ago management raised capex and committed to margin expansion from the 46.9% adjusted FY2025 base. This quarter the Q&A surfaced a sharper posture from CFO Borden: U.S. McOpCo margins are "not acceptable" and the broader question of whether McDonald's should be the operator was deferred to September's Investor Day. The diagnosis — excessive labor investment combined with pricing restraint — describes a model where franchisees earn meaningfully better margins on the same restaurants. The Q4 capex raise was framed as offense; the Q1 commentary reframes part of the existing owned-store base as a portfolio liability.

The "well into 2026" macro caution from Q3 has been quietly reinstated after Q4's confident walk-back. Q4's language was that McDonald's was "well positioned to benefit disproportionately" if the environment improved; this quarter Borden told Dennis Geiger the macro is "challenging and potentially worsening" and previewed "meaningful deceleration" in Q2 comps from the Q1 base due to lapping last year's Minecraft promotion. The two-year stack framing is the standard tell that one-year optics are about to soften.

Franchisee profitability has moved from an internal concern to an explicitly forward risk. On the Q3 FY2025 call, management quantified $115M in corporate support and a Q1 FY2026 glidepath off it. This quarter Borden conceded U.S. franchisee cash flow was "stable" in 2025 but flagged 2026 concerns directly, with mid-single-digit beef inflation pronounced in Europe and low-to-mid-single-digit food/paper inflation in the U.S. The transition from corporate-funded to self-sustaining EVM economics is now a 2026 risk to monitor, not a settled outcome.

Value strategy has matured from "DNA" framing into a tactical two-component model. Q3 elevated value to brand ontology; this quarter Borden disaggregated it into a discrete operating construct — meal deals plus everyday affordable price points under $3 — and named France as the market without strength on both dimensions. The tonal shift is from existential to operational: value is now a system to be implemented and measured, with value/affordability scores cited as "significantly improved over the last six months." That is a more grounded posture than the Q3 framing, but it also implies the work is execution-phase rather than reset-phase.

The Investor Day in September has become the deferral mechanism for every structural question. Re-franchising scope, ownership architecture, capex pacing past 2026 — all were directed to the September event. That is a long deferral window for an investor base that just heard U.S. McOpCo margins labeled "not acceptable" on the record.

Q&A highlights

Dennis Geiger · UBS

How should investors think about U.S. sales trajectory for the remainder of 2026 given key sales drivers (value, marketing, menu innovation) but also against the challenging macro backdrop?

Management expressed confidence in the marketing calendar and McValue program through year-end, noting beverages as a tailwind. Acknowledged macro environment is challenging and potentially worsening, but emphasized focus on controllables. Discussed Q2 expectations of deceleration due to difficult April comparisons (Minecraft lap) but acceleration on two-year stacked basis.

McValue locked in through balance of yearBeverages expected to be tailwind for balance of yearApril comps expected to be negative in U.S. and IOM due to Minecraft lapQ2 expected to show meaningful deceleration from 3.9% comp growth but acceleration on two-year basis

Brian Harbour · Morgan Stanley

Why is McDonald's revisiting McValue again, how often will it change, and what has made certain markets more or less successful on value given recent implementations?

Management explained McValue requires two core components: meal deals and everyday affordable price points (EDAP) under $3. Noted most international markets had this construct in place; France was exception lacking strength on both dimensions. Emphasized value and affordability scores have improved significantly over past six months and are now a real strength versus competition.

Two-component McValue model: meal deals plus EDAP menuFrance lacked strong program on both dimensions, now being addressedValue and affordability scores significantly improved over last six monthsU.S. now has model proven successful in most international markets

John Ivanko · JPMorgan

How big is the re-franchising opportunity for U.S. and IOM company-operated stores, and should development targets be reconsidered given margin pressures since late 2023 guidance?

Management stated U.S. Macapco margins are not acceptable and under review. Noted IOM actually saw Macapco margin growth in the quarter. Emphasized decision matrix focused on strong returns for McDonald's and owner-operators; uneconomical restaurants will be dropped from pipeline. Reiterated confidence in ~50,000 restaurant target by end of 2027 but won't chase absolute growth numbers.

U.S. company-operated margins explicitly stated as 'not acceptable'IOM company-operated margins grew in Q1 despite inflationRe-franchising decision based on return thresholds, not ownership ideologyTarget remains ~50,000 restaurants by end of 2027, contingent on returns

David Tarantino · Baird

What are the trends in U.S. franchisee profitability given Copco margin issues, and what is the outlook for IOM franchisee profitability given energy price spikes similar to 2022?

Management acknowledged significant franchisee profitability pressure from inflation in both U.S. and IOM. Noted U.S. cash flow was stable last year but concerns exist heading into 2026. Beef inflation particularly pronounced in Europe. Noted hedging strategies and supply chain strength help navigate inflation; expect low to mid-single digit commodity inflation in U.S. and mid-single digit in IOM for 2026.

U.S. franchisee cash flow stable in 2025 but concerns for 2026Beef inflation particularly pronounced in EuropeLow to mid-single digit food/paper inflation expected in U.S. for 2026Mid-single digit inflation expected in IOM for 2026

Jeff Bernstein · Barclays

Can management explain the primary drivers of poor U.S. company-operated margin performance despite solid top-line growth, and whether the value menu is unprofitable?

Management attributed U.S. Macapco underperformance to two factors: (1) investing in additional labor, and (2) being overly conservative on pricing despite cost pressures. Described issues as fixable but noted broader question of whether McDonald's should be the operator. Indicated any structural changes to ownership would be discussed at Investor Day (September).

Primary issues: excessive labor investment and pricing restraint simultaneouslyFranchisees earning significantly better margins on same restaurantsOwnership structure under review; decision topic for Investor DayIssues described as fixable but broader confidence question exists

Answers to last quarter's watch list

Whether Q1 FY2026 U.S. comps sustain above +4% as EVM corporate support fully rolls off — Narrow miss. U.S. comps printed +3.9% (global comp +3.8%), short of the +4% threshold. Management's guide to Q2 deceleration on the Minecraft lap and explicit "negative April comps" comment confirms the bar gets harder before it gets easier.

Continue monitoring

Whether the implied FY2026 capex step-up translates to visible opening pace in Q1 — Confirmed on track. YTD net restaurant additions of 1,943 against the ~2,100 FY target indicate strong front-loading rather than back-end-loaded risk; gross opening guidance of ~2,600 was reaffirmed. The capacity raise from Q4 is showing up in the build pace, not just the budget.

Resolved positively

Whether Q1 FY2026 operating margin expands YoY — Resolved positively on the comparable basis. Q1 FY2026 non-GAAP operating margin printed 46.0% vs. 45.6% in Q1 FY2025, a 40bps expansion. The FY2026 mid-to-high 40% commitment and expansion from the 46.9% FY2025 full-year adjusted baseline remain full-year targets, not quarterly ones.

Resolved positively

Whether low-income share gains compound or fade — Not directly addressed in the available Q&A. Management cited McValue traction and improved value/affordability scores broadly but did not disaggregate low-income performance the way they did on the Q4 call. Without a specific December-style data point this quarter, the December share-gain inflection has not been re-evidenced.

Continue monitoring

Whether the tax-rate ceiling moves above 23% or interest expense growth exceeds 6% — Both held. Tax rate reaffirmed at 21–23%, interest expense growth reaffirmed at 4–6%. The cost-side creep that defined Q3 and Q4 FY2025 paused this quarter, which is the cleanest positive in the guidance reaffirmation set.

Resolved positively

What to watch into next quarter

Whether Q2 FY2026 U.S. comps print negative against the Minecraft lap — management has explicitly previewed negative April comps; the watchable threshold is whether the full Q2 print stays positive or rolls negative, and whether the two-year stack actually accelerates as guided

Whether the September Investor Day reveals a concrete re-franchising program for U.S. company-operated stores — Borden labeled U.S. McOpCo margins "not acceptable" on the record; absent a specific portfolio plan in September, the credibility of the margin expansion algorithm erodes

Whether Q2 FY2026 non-GAAP operating margin continues to expand YoY — Q1 delivered +40bps (46.0% vs. 45.6%); a second consecutive quarter of YoY expansion would reinforce the full-year mid-to-high 40% commitment and the implied path toward expanding from the 46.9% FY2025 baseline

Whether the FX EPS tailwind guidance ($0.20–0.30) holds or moves as rates evolve — reaffirmed this quarter, but management flagged the directional nature of the disclosure; revisions in either direction will materially flow through to FY2026 EPS optics

Whether U.S. franchisee cash flow holds in 2026 as corporate EVM support fully ceases — Borden flagged 2026 concerns directly; any Q2 commentary suggesting franchisees are pulling back on value participation would mean the Q3 FY2025 glidepath assumption is broken

Sources

McDonald's Q1 FY2026 8-K / Earnings Release: https://www.sec.gov/Archives/edgar/data/63908/000006390826000048/exhibit992-33126xq1.htm
McDonald's Q1 FY2026 earnings call Q&A (analyst exchanges)
McDonald's Q4 FY2025 8-K / Earnings Release (for prior guidance baseline)

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.