What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-12 · 205 added, 96 removed, 512 unchanged (37% of the section changed)

2 unchanged sentences

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the notes thereto, and the audited consolidated financial statements and notes thereto included in our 2024 Annual Report on Form 10-K.

Certain columns and rows in financial tables within management's discussion and analysis of financial condition and results of operations may not add due to rounding.

Certain columns and rows in financial tables within MD&A may not add due to rounding.

Percentages have been calculated from the underlying whole-dollar amounts for all periods presented.

The Company franchises and owns and operates McDonald's restaurants, which serve a locally relevant menu of quality food and beverages in communities across more than 100 countries.

Of the 43,756 McDonald's restaurants at March 31, 2025, approximately 95% were franchised.

Of the 44,113 McDonald's restaurants at June 30, 2025, approximately 95% were franchised.

The Company's reporting segments are aligned with its strategic priorities and reflect how management reviews and evaluates operating performance.

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Conventional franchisees contribute to the Company's revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise.

The Company's

heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

Developmental License or Affiliate

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• C ommit to the Core menu by tapping into customer demand for the familiar and focusing on serving our iconic products that are beloved by customers around the world such as our World Famous Fries, Big Mac, Quarter Pounder and Chicken McNuggets, which are some of our seventeen unique billion-dollar brands.

Building on its foundational strength with burgers, the Company will continue to evolve and innovate its longest-standing menu item with plans to implement “Best Burger”;

Building on its foundational strength with burgers, the Company will continue to evolve and innovate its longest-standing menu item with plans to continue to implement “Best Burger”;

a series of operational and formulation changes designed to deliver hotter, juicier, tastier burgers to nearly all markets by the end of 2026.

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These planned innovations and new menu offerings reflect the Company's ability to meet evolving customer preferences.

The Company also continues to see a significant opportunity with beverages and desserts to drive long-term growth.

The Company also continues to see a significant opportunity with beverages to drive long-term growth.

• D ouble Down on the 4D's:

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Through digital tools, customers can access personalized offers, participate in a loyalty program, order through our mobile app and receive McDonald's food through the channel of their choice.

In the U.S., we are providing increased convenience to customers through “Ready on Arrival”;

We are also providing increased convenience to customers through “Ready on Arrival”;

a digital enhancement that enables crew to begin assembling a customer's mobile order prior to arrival at the restaurant to expedite service and elevate customer satisfaction.

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◦ Drive Thru:

The Company has the most drive thru locations worldwide, with nearly 28,000 drive thru locations globally, including over 95% of the over 13,500 locations in the U.S.

The Company has the most drive thru locations worldwide, with over 28,000 drive thru locations globally, including over 95% of the over 13,500 locations in the U.S.

This channel remains a competitive advantage in meeting customers’ demand for flexibility and choice.

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The Company is building the easiest and most efficient restaurant operating platform which enables the Company and franchisees to run restaurants more efficiently and utilize the latest cloud-based technology to make it easier for restaurant crew to deliver exceptional customer service.

The Company intends to deploy new, universal software that all McDonald’s restaurants will run on, enabling restaurants to roll out innovation even faster, with less complexity and more stability;

The Company intends to deploy new, universal software that all McDonald's restaurants will run on, enabling restaurants to roll out innovation even faster, with less complexity and more reliability;

and customers will enjoy a more familiar, consistent experience.

The Company is building a modern company platform, through our GBS organization, that unlocks speed and innovation throughout the organization, to enable further growth as it modernizes the way it works by focusing on becoming faster, more innovative and more efficient at solving problems for its customers and people.

Our Strategy is aligned with the Company’s capital allocation philosophy of:

(i) invest in opportunities to grow the business and drive strong returns, including both capital expenditures as well as investments in technology, digital, and our GBS organization, (ii) prioritize our dividend and (iii) repurchase shares with remaining free cash flow over time.

Our Strategy is aligned with the Company's capital allocation philosophy of (i) invest in opportunities to grow the business and drive strong returns, including both capital expenditures as well as investments in technology, digital, and our GBS organization, (ii) prioritize our dividend and (iii) repurchase shares with remaining free cash flow over time.

The Company believes our Strategy builds on our inherent strengths by harnessing the Company's competitive advantages while leveraging its size, scale, agility and the power of the McDonald's brand to adapt and adjust to meet customer demands in varying economic environments, including the current industry-wide challenges associated with more discerning consumer spending.

Our Strategy is supported by a strong global senior leadership team aimed at executing against the MCD growth pillars, further developing our three platforms and driving long-term growth through increasing guest counts and growing industry market share.

First Quarter 2025 Financial Performance

Global comparable sales decreased 1.0% (excluding Leap Day in the prior year, global comparable sales were essentially flat):

decreased 3.6%.

Comparable sales results were primarily driven by negative comparable guest counts.

• International Operated Markets decreased 1.0%.

Comparable sales reflected mixed results across the markets, primarily impacted by negative comparable sales in the U.K.

• International Developmental Licensed Markets increased 3.5%.

Positive comparable sales were primarily driven by the Middle East and Japan.

In addition to the comparable sales results, the Company had the following financial results:

• Consolidated revenues decreased 3% (2% in constant currencies).

• Systemwide sales decreased 1% (increased 1% in constant currencies).

• Consolidated operating income decreased 3% (1% in constant currencies).

Results reflected pre-tax charges of $66 million and $35 million for the current year and prior year, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Excluding these current and prior year charges, consolidated operating income decreased (2)% (flat in constant currencies).

• Diluted earnings per share was $ 2.60 , a decrease of 2% (1% in constant currencies).

Excluding the current year charges described above of $0.07 per share, diluted earnings per share was $2.67, a decrease of 1% (increase of 1% in constant currencies) when also excluding prior year charges.

is supported by a strong global senior leadership team aimed at executing against the MCD growth pillars, further developing our three platforms and driving long-term growth through increasing guest counts and growing industry market share.

Second Quarter and Six Months 2025 Financial Performance

Global comparable sales increased 3.8% for the quarter and increased 1.4% for the six months.

comparable sales increased 2.5% for the quarter and decreased 0.5% for the six months.

Comparable sales results for the quarter were primarily driven by positive check growth, while results for the six months were primarily driven by negative guest counts.

• International Operated Markets comparable sales increased 4.0% for the quarter and 1.6% for the six months.

All markets reflected positive comparable sales for the quarter.

Results for the six months were driven by positive comparable sales in nearly all markets.

• International Developmental Licensed Markets comparable sales increased 5.6% for the quarter and 4.5% for the six months.

Positive comparable sales for both periods were led by Japan, with all geographic regions reflecting positive comparable sales.

In addition to the comparable sales results, the Company had the following financial results for the quarter and six months:

• Consolidated revenues increased 5% (4% in constant currencies) for the quarter and 1% (1% in constant currencies) for the six months.

• Systemwide sales increased 8% (6% in constant currencies) for the quarter and 4% (4% in constant currencies) for the six months.

• Consolidated operating income increased 11% (8% in constant currencies) for the quarter and 4% (4% in constant currencies) for the six months.

Excluding current and prior year charges detailed in the Operating Income and Operating Margin section on page 30 of this report, consolidated operating income increased 7% (4% in constant currencies) for the quarter and 2% (2% in constant currencies) for the six months.

• Diluted earnings per share was $ 3.14 for the quarter, an increase of 12% (10% in constant currencies) and $ 5.74 for the six months, an increase of 5% (5% in constant currencies).

Excluding current and prior year charges detailed in the Net Income and Diluted Earnings Per Share section on page 24 of this report, diluted earnings per share for the quarter was $3.19, an increase of 7% (5% in constant currencies) and $5.86, an increase of 4% (3% in constant currencies) for the six months.

Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other strategic charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

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• Systemwide sales include sales at all restaurants, whether owned and operated by the Company or by franchisees.

Systemwide sales to loyalty members is comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-owned and operated and franchised restaurants.

Systemwide sales to loyalty members are comprised of all sales to customers who self-identify as a loyalty member when transacting with both Company-owned and operated and franchised restaurants.

Systemwide sales to loyalty members are measured across 60 markets with loyalty programs.

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Dollars in millions, except per share data

Quarters Ended March 31, 2025 2024 Inc/(Dec)

Quarters Ended June 30, 2025 2024 Inc/(Dec)

Revenues from franchised restaurants $ 4,213 $ 3,940 7 %

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Other 595 590 1

Other operating (income) expense, net 7 ( 17 ) n/m

Other operating (income) expense, net 29 107 (73)

Total operating costs and expenses 3,611 3,570 1

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Interest expense 390 373 4

Nonoperating (income) expense, net ( 18 ) ( 9 ) n/m

Income before provision for income taxes 2,861 2,555 12

Provision for income taxes 608 533 14

Net income $ 2,253 $ 2,022 11 %

Earnings per common share-basic $ 3.15 $ 2.81 12 %

Earnings per common share-diluted $ 3.14 $ 2.80 12 %

Six Months Ended June 30, 2025 2024 Inc/(Dec)

Revenues from franchised restaurants $ 7,874 $ 7,663 3 %

Sales by Company-owned and operated restaurants 4,590 4,816 (5)

Other revenues 334 180 85

Total revenues 12,799 12,659 1

Operating costs and expenses

Franchised restaurants-occupancy expenses 1,274 1,256 1

Company-owned and operated restaurant expenses 3,937 4,109 (4)

Other restaurant expenses 289 137 n/m

Selling, general & administrative expenses

Depreciation and amortization 213 199 7

Other 1,170 1,212 (3)

Other operating (income) expense, net 36 90 (60)

Total operating costs and expenses 6,918 7,003 (1)

Operating income 5,880 5,655 4

Interest expense 766 746 3

Nonoperating (income) expense, net ( 76 ) ( 54 ) 40

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Impact of Foreign Currency Translation

The impact of foreign currency translation on consolidated operating results for the quarter primarily reflected the weakening of all major currencies against the U.S.

Dollar, primarily driven by the Euro.

The impact of foreign currency translation on consolidated operating results for both periods primarily reflected the strengthening of most major currencies against the U.S.

Dollar, partly offset by the weakening of the Australian Dollar and Canadian Dollar.

While changes in foreign currency exchange rates affect reported results, McDonald's mitigates exposures, where practical, by purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign-denominated cash flows.

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Benefit/ (Cost)

Quarters Ended March 31, 2025 2024 2025

Quarters Ended June 30, 2025 2024 2025

Revenues $ 6,843 $ 6,490 $ 124

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Earnings per share-diluted $ 3.14 $ 2.80 $ 0.06

Benefit/ (Cost)

Six Months Ended June 30, 2025 2024 2025

Revenues $ 12,799 $ 12,659 $ 10

Franchised margins 6,600 6,407 8

Company-owned and operated margins 653 707 —

Selling, general & administrative expenses 1,383 1,411 (1)

Operating income 5,880 5,655 8

Net income 4,121 3,951 12

Earnings per share-diluted $ 5.74 $ 5.46 $ 0.02

Net Income and Diluted Earnings per Share

Net income decreased 3% (2% in constant currencies) to $ 1,868 million, and diluted earnings per share decreased 2% (1% in constant currencies) to $ 2.60 .

Foreign currency translation had a negative impact of $0.04 on diluted earnings per share.

Results included pre-tax charges of $66 million, or $0.07 per share, for the three months ended March 31, 2025 and $35 million, or $0.04 per share, for the three months ended March 31, 2024, primarily related to restructuring charges associated with the Company's internal effort to modernize ways of working ( Accelerating the Organization).

Excluding the above items, operating income performance was primarily driven by lower Franchised and Company-owned and operated margins.

During the quarter, the Company paid a quarterly dividend of $1.77 per share, or $1.3 billion.

Additionally, the Company repurchased 1.5 million shares of stock for $447 million.

For the quarter, net income increased 11% (9% in constant currencies) to $ 2,253 million, and diluted earnings per share increased 12% (10% in constant currencies) to $ 3.14 .

Foreign currency translation had a positive impact of $0.06 on diluted earnings per share.

For the six months, net income increased 4% (4% in constant currencies) to $ 4,121 million, and diluted earnings per share increased 5% (5% in constant currencies) to $ 5.74 .

Foreign currency translation had a positive impact of $0.02 on diluted earnings per share.

Results for 2025 included the following:

• Pre-tax charges of $43 million, or $0.05 per share, for the quarter and $109 million, or $0.12 per share, for the six months, primarily related to restructuring charges associated with the Company's internal effort to modernize ways of working ( Accelerating the Organization)

Results for 2024 included the following:

• Net pre-tax charges of $97 million, or $0.11 per share, for the quarter and $89 million, or $0.10 per share, for the six months, primarily related to non-cash impairment charges associated with the sale of McDonald's business in South Korea

• Pre-tax charges of $57 million, or $0.06 per share, for the quarter and $100 million, or $0.10 per share, for the six months, related to restructuring charges associated with Accelerating the Organization

Excluding the above items, operating income growth for both periods was primarily driven by higher sales-driven Franchised margins.

Results for the six months were partly offset by lower Company-owned and operated margins, driven by the U.S.

During the quarter, the Company paid a dividend of $1.77 per share, or $1.3 billion, resulting in total dividends paid for the six months of $2.5 billion.

Additionally, during the quarter, the Company repurchased 1.7 million shares of stock for $506 million, resulting in total purchases for the six months of 3.2 million shares, or $953 million.

NET INCOME AND EARNINGS PER SHARE-DILUTED RECONCILIATION

Dollars in millions, except per share data

Quarters Ended March 31,

Quarters Ended June 30,

Net Income Earnings per share - diluted

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Non-GAAP $ 2,286 $ 2,146 7 % 5 % $ 3.19 $ 2.97 7 % 5 %

Six Months Ended June 30,

Net Income Earnings per share - diluted

2025 2024 Inc/ (Dec) Inc/ (Dec)

Translation 2025 2024 Inc/ (Dec) Inc/ (Dec)

GAAP $ 4,121 $ 3,951 4 % 4 % $ 5.74 $ 5.46 5 % 5 %

(Gains)/Charges 84 150 0.12 0.20

Non-GAAP $ 4,206 $ 4,101 3 % 2 % $ 5.86 $ 5.66 4 % 3 %

The Company's revenues consist of fees from restaurants owned and operated by franchisees, developmental licensees and affiliates and sales by Company-owned and operated restaurants.

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The Company’s Other revenues are primarily comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology and digital platforms and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand.

Franchised restaurants represented approximately 95% of McDonald's restaurants worldwide at March 31, 2025.

Franchised restaurants represented approximately 95% of McDonald's restaurants worldwide at June 30, 2025 .

The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

Dollars in millions

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Quarters Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Franchised revenues

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Total Revenues $ 6,843 $ 6,490 5 % 4 %

Six Months Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Franchised revenues

$ 3,579 $ 3,565 — % — %

International Operated Markets 3,393 3,258 4 3

International Developmental Licensed Markets & Corporate 902 839 7 9

Total $ 7,874 $ 7,663 3 % 3 %

Company-owned and operated sales

$ 1,515 $ 1,595 (5) % (5) %

International Operated Markets 2,873 2,793 3 3

International Developmental Licensed Markets & Corporate 202 427 (53) n/m

Total $ 4,590 $ 4,816 (5) % (5) %

Total Franchised revenues and Company-owned and operated sales

$ 5,095 $ 5,160 (1) % (1) %

International Operated Markets 6,266 6,051 4 3

International Developmental Licensed Markets & Corporate 1,104 1,266 (13) (12)

Total $ 12,464 $ 12,479 — % — %

Total Other revenues $ 334 $ 180 85 % 86 %

Total Revenues $ 12,799 $ 12,659 1 % 1 %

n/m Not meaningful

• Total Franchised revenues and Company-owned and operated sales decreased 5% (3% in constant currencies).

revenues reflected negative sales performance and International Operated Markets' revenues were negatively impacted by foreign currency translation.

International Developmental Licensed Markets & Corporate revenues were impacted by the prior year sale of McDonald's business in South Korea, partly offset by the prior year acquisition of McDonald's business in Israel and positive sales performance.

• Total Franchised revenues and Company-owned and operated sales increased 4% (2% in constant currencies) for the quarter and were flat (flat in constant currencies) for the six months.

Both periods benefited from positive sales performance in the International Operated Markets.

In the U.S., the quarter benefited from positive franchised sales performance, while the six months was impacted by negative Company-owned and operated sales performance.

International Developmental Licensed Markets & Corporate revenues for both periods were impacted by the prior year sale of McDonald's business in South Korea, partly offset by the prior year acquisition of McDonald's business in Israel and positive sales performance.

Comparable Sales

The following table presents the percent change in comparable sales for the three months ended March 31, 2025 and 2024:

The following table presents the percent change in comparable sales for the quarters and six months ended June 30, 2025 and 2024:

Increase/(Decrease)

Quarters Ended March 31,

Quarters Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

2.5 % (0.7) % (0.5) % 0.9 %

International Operated Markets 4.0 (1.1) 1.6 0.7

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Systemwide Sales and Franchised Sales

The following table presents the percent change in Systemwide sales for the three months ended March 31, 2025:

The following table presents the percent change in Systemwide sales for the quarter and six months ended June 30, 2025:

SYSTEMWIDE SALES*

Quarter Ended March 31, 2025

Quarter Ended June 30, 2025 Six Months Ended June 30, 2025

Inc/ (Dec) Inc/ (Dec)

Translation Inc/ (Dec) Inc/ (Dec)

3 % 3 % — % — %

International Operated Markets 10 6 4 4

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Franchised sales are not recorded as revenues by the Company, but are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.

The following table presents Franchised sales and the related increases/(decreases) for the three months ended March 31, 2025 and 2024:

The following table presents Franchised sales and the related increases/(decreases) for the quarters and six months ended June 30, 2025 and 2024:

FRANCHISED SALES

Dollars in millions

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Quarters Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 13,231 $ 12,764 4 % 4 %

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Total $ 32,760 $ 30,180 9 % 7 %

Six Months Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 25,003 $ 24,850 1 % 1 %

International Operated Markets 19,696 18,892 4 4

International Developmental Licensed Markets 16,865 15,256 11 12

Total $ 61,564 $ 58,996 4 % 4 %

Ownership type

Conventional franchised $ 44,412 $ 43,547 2 % 2 %

Developmental licensed 10,601 9,508 11 14

Foreign affiliated 6,550 5,941 10 9

Total $ 61,564 $ 58,996 4 % 4 %

Restaurant Margins

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Inc/ (Dec) Inc/ (Dec)

Quarters Ended March 31, 2025 2024

Quarters Ended June 30, 2025 2024

$ 1,576 $ 1,515 4 % 4 %

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Total $ 3,939 $ 3,698 7 % 5 %

Inc/ (Dec) Inc/ (Dec)

Six Months Ended June 30, 2025 2024

$ 2,936 $ 2,919 1 % 1 %

International Operated Markets 2,763 2,657 4 3

International Developmental Licensed Markets & Corporate 901 831 8 10

Total $ 6,600 $ 6,407 3 % 3 %

Company-owned and operated

$ 176 $ 223 (21) % (21) %

International Operated Markets 465 453 3 3

International Developmental Licensed Markets & Corporate n/m n/m n/m n/m

Total $ 653 $ 707 (8) % (8) %

Total restaurant margins

$ 3,112 $ 3,142 (1) % (1) %

International Operated Markets 3,228 3,110 4 3

International Developmental Licensed Markets & Corporate n/m n/m n/m n/m

Total $ 7,254 $ 7,114 2 % 2 %

n/m Not meaningful

• Franchised margins reflected negative sales performance in the U.S.

and the negative impact of foreign currency translation in the International Operated Markets.

International Developmental Licensed Markets & Corporate reflected positive sales performance.

Franchised margins represented more than 90% of restaurant margin dollars.

• Company-owned and operated margins in the U.S.

reflected negative sales performance and the negative impact of foreign currency translation in the International Operated Markets.

and International Operated Markets were also impacted by ongoing inflationary cost pressures.

• Total restaurant margins included depreciation and amortization expense of $413 million and $411 million for the three months ended March 31, 2025 and 2024, respectively.

• Franchised margins in the U.S., International Operated Markets and the International Developmental Licensed Markets & Corporate reflected sales-driven growth for both periods.

Franchised margins represented approximately 90% of restaurant margin dollars.

• Company-owned and operated margins for both periods reflected the impact of ongoing inflationary cost pressures and negative sales performance in the U.S., while the International Operated Markets reflected sales-driven growth, partly offset by the impact of ongoing inflationary cost pressures.

• Total restaurant margins included depreciation and amortization expense of $425 million and $401 million for the quarters ended 2025 and 2024, respectively, and $839 million and $813 million for the six months ended 2025 and 2024, respectively.

Selling, General & Administrative Expenses

• Selling, general and administrative expenses decreased $38 million or 5% (5% in constant currencies).

Results primarily reflect the timing of investments in digital and technology, as well as transformation efforts, under our Accelerating the Arches strategy and the comparison to prior year costs related to the 2024 Worldwide Owner/Operator convention.

• Selling, general and administrative expenses as a percent of Systemwide sales were 2.2% and 2.3% for the three months ended March 31, 2025 and 2024, respectively.

• Selling, general and administrative expenses increased $9 million or 1% (flat in constant currencies) for the quarter and decreased $29 million or 2% (2% in constant currencies) for the six months.

Results for the quarter primarily reflected higher incentive-based compensation, partly offset by the comparison to prior year costs related to the 2024 Worldwide Owner/Operator convention, while the six months primarily reflected the comparison to prior year costs related to the 2024 Worldwide Owner/Operator convention, partly offset by higher incentive-based compensation.

• Selling, general and administrative expenses as a percent of Systemwide sales were 2.1% and 2.2% for the six months ended June 30, 2025 and 2024, respectively.

Other Operating (Income) Expense, Net

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Dollars in millions

Quarters Ended

Quarters Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Gains on sales of restaurant businesses $ (7) $ (4) $ (15) $ (13)

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Total $ 29 $ 107 $ 36 $ 90

• Equity in earnings of unconsolidated affiliates reflected higher equity in earnings in China as a result of improved operating performance and the Company's increased ownership in Grand Foods Holding when compared to the same period in 2024.

• Impairment and other charges (gains), net reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

• Equity in earnings of unconsolidated affiliates for both periods primarily reflected higher equity in earnings in China as a result of improved operating performance.

• The increase in asset dispositions and other (income) expense, net for both periods reflected higher asset write-offs, higher store closing costs and litigation settlements.

• Impairment and other charges (gains), net reflected pre-tax charges of $43 million and $109 million for the quarter and the six months, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Results for the quarter and six months ended 2024 reflected net pre-tax charges of $97 million and $89 million, respectively, primarily related to non-cash impairment charges associated with the sale of McDonald's business in South Korea and pre-tax charges of $57 million and $100 million for the quarter and six months, respectively, related to restructuring charges associated with Accelerating the Organization .

Operating Income

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Dollars in millions

Quarters Ended March 31, 2025 2024 Inc/ (Dec) Inc/ (Dec)

Quarters Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 1,527 $ 1,511 1 % 1 %

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Total $ 3,232 $ 2,920 11 % 8 %

Six Months Ended June 30, 2025 2024 Inc/ (Dec) Inc/ (Dec)

$ 2,829 $ 2,907 (3) % (3) %

International Operated Markets 2,924 2,858 2 2

International Developmental Licensed Markets & Corporate 127 ( 109 ) n/m n/m

Total $ 5,880 $ 5,655 4 % 4 %

Operating margin 45.9 % 44.7 %

• Operating income decreased $87 million or 3% (1% in constant currencies).

Results reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization .

n/m Not meaningful

• Operating income increased $312 million, or 11% (8% in constant currencies), for the quarter and increased $225 million, or 4% (4% in constant currencies), for the six months.

Results reflected pre-tax charges of $43 million and $109 million for the quarter and the six months, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Results for the quarter and six months ended 2024 reflected net pre-tax charges of $97 million and $89 million, respectively, primarily related to non-cash impairment charges and pre-tax restructuring charges of $57 million and $100 million for the quarter and six months, respectively, related to Accelerating the Organization .

OPERATING INCOME & OPERATING MARGIN RECONCILIATION*

Dollars in millions

Quarters Ended March 31,

Quarters Ended June 30, Six Months Ended June 30,

2025 2024 Inc/ (Dec) Inc/ (Dec)

Translation 2025 2024 Inc/ (Dec) Inc/ (Dec)

GAAP operating income $ 3,232 $ 2,920 11 % 8 % $ 5,880 $ 5,655 4 % 4 %

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Non-GAAP operating margin 46.8 % 46.2 %

*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section above for details of the charges in this table.

• Excluding the charges for the three months ended March 31, 2025 and 2024 shown in the table above, operating income decreased 2% (flat in constant currencies).

Results primarily reflected lower sales-driven Franchised and Company-owned and operated margins in the U.S.

and International Operated Markets, partly offset by positive operating results in International Developmental Licensed Markets & Corporate primarily due to lower Selling, general, and administrative expenses.

*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section on page 29 for details of the charges in this table.

• Excluding the current and prior year charges shown in the table above, operating income increased 7% (4% in constant currencies) for the quarter and 2% (2% in constant currencies) for the six months.

Results for the quarter primarily reflected positive operating results primarily due to sales-driven growth in Franchised margins across all segments and lower Selling, general, and administrative expenses in International Developmental Licensed Markets & Corporate.

Results for the six months primarily reflected positive operating results in the International Operated Markets, primarily due to sales-driven growth in Franchised margins, and positive operating results in International Developmental Licensed Markets & Corporate, primarily due to sales-driven growth in Franchised margins and lower Selling, general, and administrative expenses, partly offset by lower sales-driven Company-owned and operated margins and lower Other operating income in the U.S.

• Operating margin is defined as operating income as a percent of total revenues.

1 unchanged sentence

Additionally, temporary restaurant closures, which vary by segment, impact the contribution of each segment to the consolidated operating margin.

The increase in non-GAAP operating margin was primarily due to the prior year sale of McDonald's business in South Korea and lower Selling, general and administrative expenses, partly offset by the prior year acquisition of McDonald's business in Israel and lower Franchised and Company-owned and operated margin dollars.

Interest Expense

• Interest expense increased 1% (2% in constant currencies) primarily due to higher average debt balances as well as higher average interest rates.

• Interest expense increased 4% (3% in constant currencies) for the quarter and 3% (3% in constant currencies) for the six months.

Results for both periods reflected higher average debt balances, while the six months also reflected higher average interest rates.

Nonoperating (Income) Expense, Net

1 unchanged sentence

Dollars in millions

Quarters Ended

Quarters Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Interest income $ (20) $ (20) $ (37) $ (67)

2 unchanged sentences

Total $ ( 18 ) $ ( 9 ) $ ( 76 ) $ ( 54 )

• Interest income decreased due to lower average cash balances.

• The effective income tax rate was 19.8 % and 19.9 % for the three months ended March 31, 2025 and 2024, respectively.

• Interest income for the six months decreased due to lower average cash balances and lower average interest rates.

• The effective income tax rate was 21.3 % and 20.9 % for the quarters ended 2025 and 2024, respectively, and 20.6 % and 20.4 % for the six months ended 2025 and 2024, respectively.

• On July 4, 2025, Public Law Number 119-21 (Bill H.R.

1) was enacted in the U.S.

with varying effective dates beginning in 2025.

The new legislation extends certain provisions enacted with the Tax Cuts and Jobs Act, while introducing or restoring international and domestic business provisions that impact U.S.

corporations.

The Company is currently assessing the impact of the legislation on its Consolidated Financial Statements.

The Company has a long history of generating significant cash from operations and has substantial credit capacity to fund operating and discretionary spending to invest in opportunities to grow the business, such as restaurant development, in addition to funding debt service payments, dividends and share repurchases.

Cash provided by operations totaled $2.4 billion and exceeded capital expenditures by $1.9 billion.

Cash provided by operations slightly increased compared to the prior year primarily due to changes in working capital.

Cash used for investing activities totaled $771 million, a decrease of $1.7 billion primarily due to the Company's increased ownership stake in McDonald's China business in the prior year.

Cash used for financing activities totaled $1.5 billion, a decrease of $2.1 billion.

The decrease was primarily due to $1.5 billion of debt issuances in the current year.

Cash provided by operations totaled $4.4 billion and exceeded capital expenditures by $3.1 billion for the six months 2025.

Cash provided by operations slightly increased compared with the six months 2024, in line with operating results.

Cash used for investing activities totaled $1.6 billion for the six months 2025, a decrease of $1.7 billion compared with the six months 2024.

The decrease was primarily due to the Company's acquisition of an increased ownership stake in McDonald's China business in the prior year.

Cash used for financing activities totaled $2.1 billion for the six months 2025, a decrease of $2.4 billion compared with the six months 2024.

The decrease was primarily due to higher bond issuances and lower treasury stock purchases in the current year.

Based on current conditions, the following is provided to assist in forecasting the Company's future results for 2025.

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• The Company expects 2025 operating margin percent to be in the mid-to-high 40% range.

• Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2025 to increase between 4% and 6% driven primarily by higher average debt balances and higher average interest rates.

• Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year 2025 to increase about 4% driven primarily by higher average debt balances and higher average interest rates.

• The Company expects the effective income tax rate for the full year 2025 to be between 20% and 22%.

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You should not rely unduly on forward-looking statements.

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the SEC.

The risks described below are not the only risks we face.

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In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results.

Any claim of infringement, whether or not it has merit, could, particularly in rapidly evolving areas, be time consuming, or result in costly litigation and could also have an adverse impact on our business.

Any claim of infringement, whether

or not it has merit, could, particularly in rapidly evolving areas, be time consuming, or result in costly litigation and could also have an adverse impact on our business.

In addition, we cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that adversely affect the value of our intellectual property.

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The decision to own restaurants or to operate under franchise or license agreements is driven by many factors whose interrelationship is complex.

The benefits of our more heavily franchised structure depend on various factors, including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous

standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

The benefits of our more heavily franchised structure depend on various factors, including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

Continued challenges with respect to labor, including availability and cost, could adversely impact our business and results of operations.

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The duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures.

A health epidemic or pandemic may also heighten other risks disclosed in these Risk Factors, including, but not limited to, those related to the availability and costs of labor and commodities, supply chain interruptions, consumer behavior, and consumer perceptions of our brand and industry.

A health epidemic or pandemic may also heighten other risks disclosed

in these Risk Factors, including, but not limited to, those related to the availability and costs of labor and commodities, supply chain interruptions, consumer behavior, and consumer perceptions of our brand and industry.

Changes in commodity and other operating costs could adversely affect our results of operations.

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The commodity markets for some of the ingredients we use, such as beef and chicken, are particularly volatile due to factors such as seasonal shifts, climate conditions, industry demand and other macroeconomic conditions, international commodity markets, food safety concerns, product recalls, government regulation, and acts of war, terrorism or other hostilities, all of which are beyond our control and, in many instances, unpredictable.

Our System can only partially address future

price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

Our System can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

A decrease in our credit ratings or an increase in our funding costs could adversely affect our profitability.

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We have faced increased scrutiny related to reporting on and achieving these initiatives, as well as continued public focus on similar matters, such as packaging and waste, animal health and welfare, deforestation and land use.

We have also experienced increased pressure from stakeholders to provide expanded disclosure and establish additional commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks.

We have also experienced increased pressure from stakeholders to provide expanded disclosure and establish additional

commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks.

Moreover, addressing environmental and social impact matters requires Systemwide as well as third party coordination and alignment, over which we do not have complete control and which may be unpredictable.

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Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social and geopolitical unrest, including anti-American sentiment, and climate change (or expectations or uncertainty about them) can adversely affect consumer confidence levels and behavior, supply availability and costs and local operations, including temporary restaurant closures and delayed new restaurant openings, in impacted markets, all of which can affect our results and prospects.

Climate change may also increase the frequency and severity of

weather-related events and natural disasters.

Climate change may also increase the frequency and severity of weather-related events and natural disasters.

Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis