McDonald's (MCD) Q3 2026 earnings review
McDonald's profit rises on store sales, but U.S. traffic falls
McDonald's grew its profit by selling company-owned restaurants and opening new ones, while sales at existing U.S. stores shrank. Global comparable sales edged up 1.5%, as international growth offset a 0.2% decline in the United States where customer visits stayed negative. Chief executive Chris Kempczinski pointed to improving U.S. trends after adding value deals, and profit per share excluding restructuring rose 11%, though by our math half of the operating profit growth came from gains on selling restaurants and land.
| Global comparable sales | +1.5% U.S. down 0.2% on falling guest counts |
|---|---|
| Revenue | $7,157M +1% from a year ago |
| Profit per share, excluding one-offs | $3.57 +11% from a year ago |
| 2026 gross openings outlook | Cut by 100 ~2,500 stores; capex trimmed to ~$3.7B |
⚖️ Verdict: 🔴 Bearish
The story got worse because U.S. comparable sales turned negative and the company trimmed its store opening plan. For several quarters, negative U.S. customer traffic was hidden by higher average bills and fast unit expansion, but this quarter U.S. comparable sales fell and McDonald's cut its 2026 gross openings target by 100 stores while trimming capital spending to about $3.7 billion. One bright spot: lower marketing overhead and a rebound in licensing profit lifted international earnings.
The question now is whether value meal deals and new drinks can restore customer traffic without hurting franchisee profits, or if new stores are simply splitting a shrinking customer base. If the value push works, U.S. guest counts will turn positive; if it fails, comparable sales will drop further against last year's big fourth-quarter jump. Fourth-quarter U.S. comparable sales and guest counts will tell.
🐂 Bull Case
New Restaurants and Loyalty Members Carry Growth
Systemwide sales, the total spending across all company and franchised restaurants, rose 4% to over $38 billion even though sales at existing stores barely grew. McDonald's relies on opening new locations, scaling its loyalty app, and rolling out restaurant artificial intelligence tools like ArchIQ to keep top-line spending moving while customer traffic at older locations lags.
- Global restaurant count: 46,554 locations, up 1,955 from a year ago and up 526 from last quarter by our math
- China footprint: 8,395 restaurants, adding 893 locations over the past twelve months
- Loyalty member sales: $41 billion over the past twelve months across 70 markets, up 20.6% from $34 billion a year ago by our math
That steady expansion matters because McDonald's collects rent and royalties as a percentage of total franchisee sales, whether growth comes from existing stores or new ones. Still, the trailing loyalty total rose by $1 billion from last quarter by our math, slower than the $2 billion quarterly additions earlier this year.
What to watch: fourth-quarter net restaurant additions in the full-year report. By our math, the fast-food chain must add 902 net locations next quarter to reach its 2,100 full-year target.
Lower Overhead and China Lifted Licensing Profit
General and administrative overhead costs outran revenue in the first half of the year, pushing profit down in the International Developmental Licensed Markets & Corporate segment, where local partners run the stores. This quarter, total overhead spending fell 3% from a year ago to $759 million, or 0.5 percentage points of revenue by our math, because the burger chain lapped last year's heavy marketing spend.
That cost drop, combined with 4.2% comparable sales growth led by Japan, pushed operating profit in the developmental licensed segment up 79% to $174 million. In China, sales at existing stores fell, but McDonald's still earned higher equity income from its local affiliate because restaurant operating performance improved across a larger store base.
What to watch: full-year overhead expenses as a share of Systemwide sales in the fourth quarter. Holding the 2.1% nine-month rate below the 2.2% full-year plan would show that its shared-services restructuring is finally lowering ongoing costs.
🐻 Bear Case
U.S. Comparable Sales Turned Negative on Traffic
"In the U.S., we're encouraged by improvement as the quarter progressed following our intervention on value," chief executive Chris Kempczinski said. Comparable sales track revenue at restaurants open at least thirteen months, and Kempczinski wants lower-priced meal deals to bring customers back into American stores.
Yet the quarterly result went backward. U.S. comparable sales fell 0.2%, down from 0.8% growth in the second quarter and 2.4% growth a year ago. The company said "negative comparable guest counts were largely offset by positive check growth".
That breakdown cuts against Kempczinski's encouragement because value promotions are meant to lift customer visits at the expense of average bill size. Instead, fewer guests visited and higher prices or larger orders did the work, which means the value push did not stop the traffic decline across the full quarter.
What to watch: fourth-quarter U.S. comparable sales and guest count direction. A second negative reading against last year's 6.8% U.S. jump would show that value deals cannot offset the tough comparison.
Restaurant Sale Gains Drove Half the Beat
McDonald's reported that operating income excluding restructuring charges rose 8% to $3,651 million, lifting its operating margin by 3.0 percentage points of revenue to 51.0% by our math. However, the company said the margin jump came primarily from other operating income rather than restaurant operations.
- Gains on sales of restaurant businesses: $97 million, up from $35 million a year ago
- Property disposition and other net income: $23 million gain, compared with a $21 million expense a year ago
- Operating profit growth excluding those gains and restructuring: 4.4% by our math, half the 8% headline rate
The fast-food group generated those extra gains through "more sales of restaurants in the U.S." to franchisees and sales of excess land. Selling company stores boosts profit once, so the 8% profit growth overstates how fast the underlying rent and royalty stream is growing.
What to watch: gains on restaurant sales in the fourth-quarter supplemental tables. A return to prior-year levels near $30 million would pull operating profit growth back down toward the 3% franchised margin pace.
Inflation Cut U.S. Company Store Profit 16%
While McDonald's franchises 95% of its global locations, it still runs 577 restaurants in the United States and uses their margins as a window into store-level economics. Profit at those company-run U.S. stores dropped 16% from a year ago to $75 million, or 10.1% of their sales, down 1.3 percentage points by our math.
The restaurant chain blamed the drop on the "impact of ongoing inflationary cost pressures" across food, paper, and crew wages. Rather than fixing the margins inside its own portfolio, McDonald's reduced its U.S. company-owned store count by 64 locations during the quarter by selling them to franchisees, who face the exact same beef and wage costs.
What to watch: U.S. company-operated margin dollars and store count in the fourth quarter. Continued margin drops alongside more store sales would show cost inflation is still squeezing U.S. restaurant cash flows.
McDonald's Trimmed Its Store Opening Plan
Unit expansion is the main driver of Systemwide sales, and last quarter McDonald's pushed its long-term goal to "targeting 50,000 global units by the end of 2028" instead of 2027. This quarter, the company lowered its 2026 gross opening plan from about 2,600 restaurants to about 2,500, and trimmed capital spending from $3.7–3.9 billion to about $3.7 billion.
Half of that 100-store reduction comes out of its own capital budget, with planned openings in the U.S. and International Operated Markets cut from about 750 to about 700. The company kept its net addition target at 2,100 only because that implies fewer store closures, which means gross expansion in its highest-revenue markets is slowing down.
What to watch: the 2027 gross openings and capital spending plan in the fourth-quarter release. A target below 2,600 gross openings would signal that construction costs or weak traffic are holding back development.
Risks this quarter didn't answer
Three standing concerns from prior quarters received no new numbers or remained unresolved in the third-quarter filings.
- Beverage platform economics: after promising details for September's investor event, the release gave zero figures on drink sales, margins, or traffic in the four launched markets.
- Recurring restructuring charges: Accelerating the Organization, its internal modernization effort, added $56 million in pre-tax charges ($155 million over nine months) and runs through 2027.
- Fourth-quarter comparison hurdle: the final quarter laps last year's 5.7% global comparable sales jump (6.8% in the U.S.), the toughest comparison of the year.
👓 Other Themes
Menu Changes Target Weight-Loss Drug Habits
In its updated risk factors, McDonald's detailed how its new McDonald's > NEXT strategy will respond to changing dietary guidelines and weight-loss drugs like GLP-1s. The burger chain is "introducing more flexible portion sizes and expanding high-protein and other menu options" to protect visits, while warning that these additions could complicate kitchen operations and may not offset smaller average orders.
💲 Other KPIs
Franchised sales in International Operated Markets — big overseas markets like Germany, Australia, and France where McDonald's also runs some stores — rose 4% as reported and 5% in constant currency. Comparable sales slowed to 1.4% from 1.5% last quarter and 4.3% a year ago, as growth in Germany and Australia outweighed weakness in France.
Weighted average diluted shares fell 1.1% from 715.9 million a year ago. The fast-food group bought back 1.9 million shares for $519 million during the quarter, down from $858 million in the second quarter, and raised its quarterly dividend by 4% to $1.93 per share.
The tax rate stepped up from 19.5% in the second quarter, when one-off tax benefits from restructuring lowered the bill, and came in slightly below last year's 22.8%. That brought the nine-month tax rate to 21.2%, removing the tax tailwind that helped second-quarter earnings.
🔮 Guidance
Cut. The company narrowed its full-year spending plan to the bottom of its previous $3.7–3.9 billion range, lowering the middle of the range by $100 million by our math. Most of the money goes toward building new restaurants in the U.S. and International Operated Markets.
Cut. McDonald's lowered its global opening plan by 100 locations. Planned openings funded by the company in the U.S. and International Operated Markets dropped from about 750 to about 700, while developmental licensees and affiliates will fund about 1,800 openings instead of more than 1,800.
Unchanged. The plan still calls for about 2,100 net new locations this year and 50,000 total units by the end of 2028. With 1,198 net additions completed in the first nine months, the full-year plan leaves 902 net additions for the fourth quarter by our math, up from 526 in the third quarter.
Unchanged. New restaurants are still set to add about 2.5% to constant-currency Systemwide sales growth this year, matching the 2.5 percentage point gap between 4% Systemwide sales growth and 1.5% comparable sales growth in the third quarter.
Unchanged. The full-year operating margin target stays in the mid-to-high 40% range. Nine-month operating margin reached 47.6% on a reported basis and 48.3% excluding restructuring charges, sitting comfortably inside the target band after third-quarter restaurant sale gains lifted the rate.
Unchanged. Overhead expenses are still planned at about 2.2% of Systemwide sales for the year. Because the ratio ran at 2.1% over the first nine months, the outlook implies a seasonal step-up in fourth-quarter overhead spending.
Unchanged. Full-year interest expense is still set to rise 4% to 6% on higher average interest rates. Because nine-month interest expense grew 3.8% to $1,217 million after a flat third quarter, the middle of the full-year range leaves about 8.3% growth for the fourth quarter by our math.
Unchanged. The full-year tax rate plan remains between 21% and 23%. With the nine-month tax rate at 21.2%, hitting the 22% middle of the full-year range implies a fourth-quarter tax rate of about 24.4% by our math.
Unchanged. The burger chain still expects to convert a low-to-mid 80% share of its net profit into free cash flow this year, supported by the $100 million reduction in planned capital spending.
❓ Key Questions
Why did U.S. and European gross store openings drop?
McDonald's cut its 2026 gross opening plan by 100 stores, including 50 in the U.S. and International Operated Markets, and trimmed capital spending to $3.7 billion. Did construction costs, permitting delays, or weaker franchisee returns drive the pullback?
What are the sales and margins of the new drinks?
Management previously pointed to September's investor event for details on the beverage rollout across the U.S., Canada, Germany, and Australia, but the release gave no numbers. How much did drinks add to comparable sales and store margins in those markets?
How many more U.S. company stores will be sold?
Gains from selling company-owned restaurants jumped to $97 million as U.S. company store count fell by 64 in the quarter and their margins dropped 16%. How many U.S. restaurants are left on the block, and when will refranchising gains normalize?
Did U.S. guest counts turn positive exiting September?
Chief executive Chris Kempczinski noted improvement as the quarter progressed after intervening on value, yet full-quarter U.S. comparable sales fell 0.2% on negative guest counts. Did customer traffic actually grow in September, or did the drop merely narrow?