Item 1. Financial Statements
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
In millions, except per share data June 30,
2025 December 31,
2024
Assets
Current assets
Cash and equivalents $ 1,876 $ 1,085
Accounts and notes receivable 2,550 2,383
Inventories, at cost, not in excess of market 55 56
Prepaid expenses and other current assets 1,120 1,074
Total current assets 5,601 4,599
Other assets
Investments in affiliates 2,827 2,710
Goodwill 3,308 3,145
Miscellaneous 6,492 6,095
Total other assets 12,628 11,950
Lease right-of-use asset, net 14,286 13,339
Property and equipment
Property and equipment, at cost 47,609 44,177
Accumulated depreciation and amortization ( 20,570 ) ( 18,882 )
Net property and equipment 27,039 25,295
Total assets $ 59,555 $ 55,182
Liabilities and shareholders’ equity (deficit)
Current liabilities
Short-term borrowings and current maturities of long-term debt $ 602 $ —
Accounts payable 838 1,029
Lease liability 686 636
Income taxes 24 361
Other taxes 245 224
Accrued interest 451 482
Accrued payroll and other liabilities 1,452 1,129
Total current liabilities 4,298 3,861
Long-term debt 40,801 38,424
Long-term lease liability 13,778 12,888
Long-term income taxes 292 344
Deferred revenues - initial franchise fees 933 778
Other long-term liabilities 790 771
Deferred income taxes 1,423 1,914
Shareholders’ equity (deficit)
Preferred stock, no par value; authorized – 165.0 million shares; issued – none
— —
Common stock, $ 0.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares
17 17
Additional paid-in capital 9,500 9,281
Retained earnings 68,424 66,834
Accumulated other comprehensive income (loss) ( 2,430 ) ( 2,553 )
Common stock in treasury, at cost; 947.0 and 945.4 million shares
( 78,271 ) ( 77,375 )
Total shareholders’ equity (deficit) ( 2,760 ) ( 3,797 )
Total liabilities and shareholders’ equity (deficit) $ 59,555 $ 55,182
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Quarters Ended Six Months Ended
June 30, June 30,
In millions, except per share data 2025 2024 2025 2024
Revenues
Revenues from franchised restaurants $ 4,213 $ 3,940 $ 7,874 $ 7,663
Sales by Company-owned and operated restaurants 2,458 2,461 4,590 4,816
Other revenues 172 89 334 180
Total revenues 6,843 6,490 12,799 12,659
Operating costs and expenses
Franchised restaurants-occupancy expenses 654 629 1,274 1,256
Company-owned and operated restaurant expenses 2,078 2,074 3,937 4,109
Other restaurant expenses 149 69 289 137
Selling, general & administrative expenses
Depreciation and amortization 106 101 213 199
Other 595 590 1,170 1,212
Other operating (income) expense, net 29 107 36 90
Total operating costs and expenses 3,611 3,570 6,918 7,003
Operating income 3,232 2,920 5,880 5,655
Interest expense 390 373 766 746
Nonoperating (income) expense, net ( 18 ) ( 9 ) ( 76 ) ( 54 )
Income before provision for income taxes 2,861 2,555 5,190 4,964
Provision for income taxes 608 533 1,069 1,013
Net income $ 2,253 $ 2,022 $ 4,121 $ 3,951
Earnings per common share-basic $ 3.15 $ 2.81 $ 5.77 $ 5.49
Earnings per common share-diluted $ 3.14 $ 2.80 $ 5.74 $ 5.46
Dividends declared per common share $ 1.77 $ 1.67 $ 3.54 $ 3.34
Weighted-average shares outstanding-basic 714.5 718.8 714.7 720.3
Weighted-average shares outstanding-diluted 717.6 722.0 717.9 724.0
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters Ended Six Months Ended
June 30, June 30,
In millions 2025 2024 2025 2024
Net income $ 2,253 $ 2,022 $ 4,121 $ 3,951
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive
income ("AOCI"), including net investment hedges
237 28 307 ( 87 )
Reclassification of (gain) loss to net income — 41 — 41
Foreign currency translation adjustments-net of tax
benefit (expense) of $ 309 , $( 29 ), $ 445 and $( 122 )
237 69 307 ( 46 )
Cash flow hedges:
Gain (loss) recognized in AOCI ( 106 ) 4 ( 158 ) 40
Reclassification of (gain) loss to net income 9 ( 2 ) ( 6 ) ( 1 )
Cash flow hedges-net of tax benefit (expense) of $ 29 , $( 1 ), $ 49 and $( 13 )
( 97 ) 2 ( 164 ) 39
Defined benefit pension plans:
Gain (loss) recognized in AOCI ( 13 ) — ( 19 ) 11
Reclassification of (gain) loss to net income — — ( 1 ) ( 10 )
Defined benefit pension plans-net of tax benefit (expense)
of $ 0 , $ 1 , $ 0 and $ 1
( 13 ) — ( 20 ) 1
Total other comprehensive income (loss), net of tax 127 71 123 ( 6 )
Comprehensive income $ 2,380 $ 2,093 $ 4,244 $ 3,945
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Quarters Ended Six Months Ended
June 30, June 30,
In millions 2025 2024 2025 2024
Operating activities
Net income $ 2,253 $ 2,022 $ 4,121 $ 3,951
Adjustments to reconcile to cash provided by operations
Charges and credits:
Depreciation and amortization 544 502 1,064 1,012
Deferred income taxes ( 41 ) ( 226 ) ( 84 ) ( 364 )
Share-based compensation 44 38 89 88
Other ( 71 ) 16 ( 144 ) ( 15 )
Changes in working capital items ( 731 ) ( 663 ) ( 620 ) ( 593 )
Cash provided by operations 1,998 1,689 4,426 4,079
Investing activities
Capital expenditures ( 744 ) ( 628 ) ( 1,295 ) ( 1,174 )
Purchases of restaurant businesses ( 56 ) ( 110 ) ( 131 ) ( 162 )
Purchases of equity method investments — ( 17 ) — ( 1,837 )
Sales of restaurant businesses 34 60 83 102
Sales of property 11 14 16 22
Other ( 114 ) ( 165 ) ( 314 ) ( 289 )
Cash used for investing activities ( 869 ) ( 846 ) ( 1,641 ) ( 3,338 )
Financing activities
Net short-term borrowings (repayments) 597 ( 2 ) ( 195 ) ( 341 )
Long-term financing issuances 1,403 1,731 2,901 1,731
Long-term financing repayments ( 700 ) ( 500 ) ( 1,393 ) ( 1,785 )
Treasury stock purchases ( 505 ) ( 934 ) ( 982 ) ( 1,852 )
Common stock dividends ( 1,265 ) ( 1,199 ) ( 2,530 ) ( 2,405 )
Proceeds from stock option exercises 41 22 188 121
Other ( 126 ) 13 ( 87 ) 1
Cash used for financing activities ( 555 ) ( 869 ) ( 2,098 ) ( 4,530 )
Effect of exchange rates on cash and cash equivalents 65 ( 21 ) 104 1
Cash and equivalents increase (decrease) 638 ( 46 ) 791 ( 3,787 )
Cash and equivalents at beginning of period 1,238 838 1,085 4,579
Cash and equivalents at end of period $ 1,876 $ 792 $ 1,876 $ 792
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the six months ended June 30, 2024
Common stock
issued Accumulated other
comprehensive income (loss) Common stock in
treasury Total
shareholders’
equity (deficit)
Additional
paid-in
capital Retained
earnings Pensions Cash flow
hedges Foreign
currency
translation
In millions, except per share data Shares Amount Shares Amount
Balance at December 31, 2023 1,660.6 $ 17 $ 8,893 $ 63,480 $ ( 367 ) $ ( 6 ) $ ( 2,083 ) ( 937.9 ) $ ( 74,640 ) $ ( 4,707 )
Net income 3,951 3,951
Other comprehensive income (loss),
net of tax 1 39 ( 46 ) ( 6 )
Comprehensive income 3,945
Common stock cash dividends
($ 3.34 per share)
( 2,405 ) ( 2,405 )
Treasury stock purchases ( 6.7 ) ( 1,867 ) ( 1,867 )
Share-based compensation 88 88
Stock option exercises and other 73 1.3 48 121
Balance at June 30, 2024 1,660.6 $ 17 $ 9,055 $ 65,026 $ ( 367 ) $ 33 $ ( 2,129 ) ( 943.3 ) $ ( 76,459 ) $ ( 4,824 )
For the six months ended June 30, 2025
Common stock
issued Accumulated other
comprehensive income (loss) Common stock in
treasury Total
shareholders’
equity (deficit)
Additional
paid-in
capital Retained
earnings Pensions Cash flow
hedges Foreign
currency
translation
In millions, except per share data Shares Amount Shares Amount
Balance at December 31, 2024 1,660.6 $ 17 $ 9,281 $ 66,834 $ ( 393 ) $ 119 $ ( 2,279 ) ( 945.4 ) $ ( 77,375 ) $ ( 3,797 )
Net income 4,121 4,121
Other comprehensive income (loss),
net of tax ( 20 ) ( 164 ) 307 123
Comprehensive income 4,244
Common stock cash dividends
($ 3.54 per share)
( 2,530 ) ( 2,530 )
Treasury stock purchases ( 3.2 ) ( 953 ) ( 953 )
Share-based compensation 89 89
Stock option exercises and other 131 1.6 57 188
Balance at June 30, 2025 1,660.6 $ 17 $ 9,500 $ 68,424 $ ( 413 ) $ ( 45 ) $ ( 1,972 ) ( 947.0 ) $ ( 78,271 ) $ ( 2,760 )
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the quarter ended June 30, 2024
Common stock
issued Accumulated other
comprehensive income (loss) Common stock in
treasury Total
shareholders’
equity (deficit)
Additional
paid-in
capital Retained
earnings Pensions Cash flow
hedges Foreign
currency
translation
In millions, except per share data Shares Amount Shares Amount
Balance at March 31, 2024 1,660.6 $ 17 $ 9,001 $ 64,203 $ ( 367 ) $ 32 $ ( 2,198 ) ( 939.9 ) $ ( 75,520 ) $ ( 4,833 )
Net income 2,022 2,022
Other comprehensive income (loss),
net of tax — 2 69 71
Comprehensive income 2,093
Common stock cash dividends
($ 1.67 per share)
( 1,199 ) ( 1,199 )
Treasury stock purchases ( 3.5 ) ( 946 ) ( 946 )
Share-based compensation 38 38
Stock option exercises and other 15 0.1 7 22
Balance at June 30, 2024 1,660.6 $ 17 $ 9,055 $ 65,026 $ ( 367 ) $ 33 $ ( 2,129 ) ( 943.3 ) $ ( 76,459 ) $ ( 4,824 )
For the quarter ended June 30, 2025
Common stock
issued Accumulated other
comprehensive income (loss) Common stock in
treasury Total
shareholders’
equity (deficit)
Additional
paid-in
capital Retained
earnings Pensions Cash flow
hedges Foreign
currency
translation
In millions, except per share data Shares Amount Shares Amount
Balance at March 31, 2025 1,660.6 $ 17 $ 9,423 $ 67,436 $ ( 400 ) $ 52 $ ( 2,209 ) ( 945.6 ) $ ( 77,773 ) $ ( 3,454 )
Net income 2,253 2,253
Other comprehensive income (loss),
net of tax ( 13 ) ( 97 ) 237 127
Comprehensive income 2,380
Common stock cash dividends
($ 1.77 per share)
( 1,265 ) ( 1,265 )
Treasury stock purchases ( 1.7 ) ( 506 ) ( 506 )
Share-based compensation 44 44
Stock option exercises and other 33 0.2 8 41
Balance at June 30, 2025 1,660.6 $ 17 $ 9,500 $ 68,424 $ ( 413 ) $ ( 45 ) $ ( 1,972 ) ( 947.0 ) $ ( 78,271 ) $ ( 2,760 )
See Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
McDonald’s Corporation, the registrant, together with its subsidiaries, is referred to herein as the "Company." The Company, its franchisees and suppliers, are referred to herein as the "System."
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s December 31, 2024 Annual Report on Form 10-K. In the opinion of management, all normal recurring adjustments necessary for a fair presentation have been included. The results for the quarter and six months ended June 30, 2025 do not necessarily indicate the results that may be expected for the full year.
Certain columns and rows within the financial statements and tables presented may not add due to rounding. Percentages have been calculated from the underlying whole-dollar amounts for all periods presented.
Restaurant Information
The following table presents restaurant information by ownership type:
Restaurants at June 30, 2025 2024
Conventional franchised 22,171 21,892
Developmental licensed 9,373 8,815
Foreign affiliated 10,515 9,531
Total Franchised 42,059 40,238
Company-owned and operated 2,054 2,168
Total Systemwide restaurants 44,113 42,406
The results of operations of restaurant businesses purchased and sold in transactions with franchisees were not material either individually or in the aggregate to the accompanying Condensed Consolidated Financial Statements.
Per Common Share Information
Diluted earnings per common share is calculated as net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation, calculated using the treasury stock method, of 3.1 million shares and 3.2 million shares for the quarters ended June 30, 2025 and 2024, respectively, and 3.2 million shares and 3.7 million shares for the six months ended June 30, 2025 and 2024, respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled 1.9 million shares and 3.2 million shares for the quarters ended June 30, 2025 and 2024, respectively, and 2.0 million shares and 2.2 million shares for the six months ended June 30, 2025 and 2024, respectively.
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
Income Taxes
In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures.
Disaggregation - Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). The pronouncement expands the disclosure requirements for expenses, specifically by providing more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are currently in the process of determining the impact that ASU 2024-03 will have on the Company's consolidated financial statement disclosures.
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Accelerating the Organization
In January 2023, the Company announced an evolution of its successful Accelerating the Arches strategy. Enhancements to the strategy included the addition of Restaurant Development to the Company’s growth pillars and an internal effort to modernize ways of working, Accelerating the Organization , both of which are aimed at elevating the Company’s performance. Accelerating the Organization is designed to unlock further growth as the Company focuses on becoming faster, more innovative and more efficient for its customers and people.
The Company incurred $ 109 million and $ 101 million of restructuring charges related to Accelerating the Organization in the six months ended June 30, 2025 and 2024, respectively. These charges were recorded in the Other operating (income) expense, net line within the Condensed Consolidated Statement of Income. There were no significant non-cash impairment charges included in the amounts listed in the table below.
The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions):
Employee Termination Benefits Costs to Terminate Contracts Professional Services and Other Costs Total
2025
Accrued Balance at Beginning of Year $ 23 $ 4 $ 15 $ 42
Restructuring Costs Incurred 17 — 49 66
Cash Payments ( 5 ) — ( 31 ) ( 36 )
Other Non-Cash Items — — 1 1
Accrued Balance at March 31, 2025 $ 35 $ 4 $ 34 $ 73
Restructuring Costs Incurred ( 3 ) — 46 43
Cash Payments ( 3 ) ( 1 ) ( 55 ) ( 59 )
Other Non-Cash Items — — 3 3
Accrued Balance at June 30, 2025 $ 29 $ 3 $ 28 $ 60
Of the $ 109 million of restructuring charges incurred in the six months ended June 30, 2025, $ 95 million was recorded at Corporate and $ 14 million was recorded in the International Operated Markets.
Substantially all of the accrued restructuring balance recorded at June 30, 2025, related to the Company's Accelerating the Organization initiative, is expected to be paid out over the next twelve months.
The Company continues to evolve its ways of working by driving efficiency and effectiveness across the organization, primarily led by its Global Business Services ("GBS") organization. Transformation efforts under Accelerating the Organization will continue to result in various restructuring charges as the strategy progresses through its anticipated completion during 2027, with $ 580 million of total restructuring charges incurred since the initiative commenced in 2023. The Company currently expects to incur approximately $ 300 million of restructuring charges in 2025, primarily related to professional services costs.
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Equity Method Investments
The Company has various investments accounted for using the equity method. Under the equity method of accounting, the Company records our proportionate share of the net income or loss of each equity method investee, with a corresponding change to the carrying value of the investment. The carrying value of the investment is also adjusted for any dividends received and the effect of foreign exchange. The Company records our proportionate share of net income or loss within the Other operating (income) expense, net line on the Condensed Consolidated Statement of Income. The carrying value of the investments are recorded within the Investments in affiliates line on the Condensed Consolidated Balance Sheet.The Company has elected to record dividends received from our equity method investments under the nature of distribution approach, which provides for the recording of such distributions within the cash provided by operations section of the Condensed Consolidated Statement of Cash Flows to the extent that such distributions are from the normal operating or financing activities of the investee.
The Company’s primary equity method investments include partial ownership in Grand Foods Holding, an entity that operates and manages McDonald's business in mainland China, Hong Kong and Macau, and partial ownership in McDonald’s Japan Holdings Co., Ltd, an entity that operates and manages McDonald’s business in Japan. The Company has granted these entities the right to operate the McDonald's business as part of a Master Franchise Agreement. Revenue related to these agreements are accounted for in a manner consistent with the Company’s other franchise arrangements.
The following table summarizes the amounts related to the Company’s primary equity method investees during the periods presented.
June 30, 2025 December 31, 2024
In Millions Percentage Ownership Fair Value (Level 1) Carrying Amount Percentage Ownership Fair Value (Level 1) Carrying Amount
Grand Foods Holding 48 % N/A $ 2,035 48 % N/A $ 1,973
McDonald's Japan Holdings Co., Ltd 35 % $ 1,943 $ 670 35 % $ 1,849 $ 590
As of June 30, 2025, the aggregate carrying amount of the Company's investments in these equity method investees exceeded its proportionate share of the net assets of these equity method investees by $ 1.5 billion. This difference is not amortized. Management has concluded that there are no indicators of impairment related to these investments.
The following table summarizes the amounts recorded related to the Company's primary equity method investments during the six months ended June 30, 2025 and 2024, respectively.
Six Months Ended June 30,
In Millions 2025 2024
Revenue $ 280 $ 260
Equity in Earnings $ 94 $ 66
Accounts Receivable $ 166 $ 135
Dividends Received $ 15 $ 13
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Income Taxes
The effective income tax rate was 21.3 % and 20.9 % for the quarters ended June 30, 2025 and 2024, respectively, and 20.6 % and 20.4 % for the six months ended June 30, 2025 and 2024, respectively.
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date and are defined as follows:
• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
• Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.
• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
There were no significant changes to the valuation techniques used to measure fair value as described in the Company's December 31, 2024 Annual Report on Form 10-K.
At June 30, 2025, the fair value of the Company’s debt obligations was estimated at $ 39.8 billion, compared to a carrying amount of $ 41.4 billion. The fair value of debt obligations is based upon quoted market prices, classified as Level 2 within the valuation hierarchy. The carrying amount of cash and equivalents and notes receivable approximate fair value.
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Financial Instruments and Hedging Activities
The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes.
The following table presents the fair values of derivative instruments included on the Condensed Consolidated Balance Sheet:
Derivative Assets Derivative Liabilities
In millions Balance Sheet Classification June 30, 2025 December 31, 2024 Balance Sheet Classification June 30, 2025 December 31, 2024
Derivatives designated as hedging instruments
Foreign currency Prepaid expenses and other current assets $ 2 $ 125 Accrued payroll and other liabilities $ ( 223 ) $ ( 1 )
Interest rate Prepaid expenses and other current assets 3 34 Accrued payroll and other liabilities ( 3 ) ( 6 )
Foreign currency Miscellaneous other assets — 40 Other long-term liabilities ( 52 ) —
Interest rate Miscellaneous other assets
— — Other long-term liabilities ( 22 ) ( 34 )
Total derivatives designated as hedging instruments $ 5 $ 199 $ ( 300 ) $ ( 41 )
Derivatives not designated as hedging instruments
Equity Prepaid expenses and other current assets
$ 102 $ 135 Accrued payroll and other liabilities $ — $ —
Foreign currency Prepaid expenses and other current assets
— — Accrued payroll and other liabilities — —
Equity Miscellaneous other assets — —
Total derivatives not designated as hedging instruments $ 102 $ 135 $ — $ —
Total derivatives $ 107 $ 334 $ ( 300 ) $ ( 41 )
The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the six months ended June 30, 2025 and 2024, respectively:
Location of gain or loss
recognized in income on
derivative Gain (loss)
recognized in AOCI Gain (loss)
reclassified into income from AOCI Gain (loss) recognized in
income on derivative
In millions 2025 2024 2025 2024 2025 2024
Foreign currency Nonoperating income/expense $ ( 192 ) $ 49 $ 7 $ 1
Interest rate Interest expense ( 13 ) 4 — 1
Cash flow hedges $ ( 205 ) $ 53 $ 7 $ 2
Foreign currency denominated debt Nonoperating income/expense $ ( 1,660 ) $ 421
Foreign currency derivatives Nonoperating income/expense ( 273 ) 87
Foreign currency derivatives (1)
Interest expense $ 31 $ 18
Net investment hedges $ ( 1,933 ) $ 508 $ 31 $ 18
Foreign currency Nonoperating income/expense $ ( 6 ) $ ( 6 )
Equity Selling, general & administrative expenses 5 ( 27 )
Undesignated derivatives $ ( 1 ) $ ( 33 )
(1) The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.
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Fair Value Hedges
The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At June 30, 2025, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $ 828 million, which included a decrease of $ 25 million of cumulative hedging adjustments. For the six months ended June 30, 2025, the Company recognized a $ 15 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense.
Cash Flow Hedges
The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover up to the next 18 months for certain exposures and are denominated in various currencies. As of June 30, 2025, the Company had derivatives outstanding with an equivalent notional amount of $ 2.2 billion that hedged a portion of forecasted foreign currency denominated cash flows.
To protect against variability of interest rates on anticipated bond issuances, the Company may use treasury locks to hedge a portion of expected cash flows. As of June 30, 2025, the Company had derivatives outstanding with a notional amount of $ 250 million that hedged a portion of forecasted cash flows.
Based on market conditions at June 30, 2025, the $ 45 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on the Company's earnings over the next 12 months.
Net Investment Hedges
The Company uses foreign currency denominated debt (third-party and intercompany) and foreign currency derivatives to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of Other comprehensive income ("OCI") and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of June 30, 2025, $ 15.4 billion of the Company's third-party foreign currency denominated debt, and $ 2.4 billion of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates.
Undesignated Hedges
The Company enters into certain derivatives that are not designated for hedge accounting. Therefore, the changes in the fair value of these derivatives are recognized immediately in earnings together with the gain or loss from the hedged balance sheet position. As an example, the Company enters into equity derivative contracts, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. The Company may also use certain investments to hedge changes in these liabilities. Changes in the fair value of these derivatives or investments are recorded in selling, general & administrative expenses together with the changes in the supplemental benefit plan liabilities. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position.
Credit Risk
The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at June 30, 2025 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in its financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At June 30, 2025, the Company was required to post $ 191 million of collateral due to the negative fair value of certain derivative positions.
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Franchise Arrangements
Revenues from franchised restaurants consisted of:
Quarters Ended Six Months Ended
June 30, June 30,
In millions 2025 2024 2025 2024
Rents $ 2,677 $ 2,523 $ 4,990 $ 4,904
Royalties 1,517 1,402 2,847 2,728
Initial fees 18 16 37 31
Revenues from franchised restaurants $ 4,213 $ 3,940 $ 7,874 $ 7,663
Segment Information
The Company operates under the following global organizational structure, reflecting how management reviews and evaluates operating performance:
• U.S. segment - the Company's largest market. The segment is 95 % franchised as of June 30, 2025.
• International Operated Markets segment - comprised of markets or countries in which the Company owns and operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89 % franchised as of June 30, 2025.
• International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonald’s System, including equity method investments in China and Japan, as well as Corporate activities. The International Developmental Licensed Markets are 99 % franchised as of June 30, 2025.
The Company's chief operating decision makers (CODMs) are the President and Chief Executive Officer ("CEO") and the Executive Vice President and Global Chief Financial Officer ("CFO"). Segment performance is evaluated based on one measure of a segment's profit or loss, operating income, which is used to allocate resources in the annual planning process. Throughout the year, the CODMs consider forecast to actual operating income results and variances against plan to evaluate segment performance and priorities related to allocation of capital and resources supporting organizational objectives.
All intercompany revenues and expenses are eliminated in computing revenues and operating income. Corporate general and administrative expenses consist of corporate office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Corporate assets include corporate cash and equivalents, financial instruments and office facilities.
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Quarters Ended Six Months Ended
June 30, June 30,
In millions 2025 2024 2025 2024
U.S. $ 2,781 $ 2,698 $ 5,276 $ 5,258
International Operated Markets 3,462 3,147 6,377 6,134
International Developmental Licensed Markets & Corporate 600 645 1,145 1,267
Total Revenues $ 6,843 $ 6,490 $ 12,799 $ 12,659
U.S. $ 325 $ 322 $ 643 $ 646
International Operated Markets 328 303 630 601
International Developmental Licensed Markets & Corporate — 4 1 8
Total Franchised restaurants-occupancy expenses $ 654 $ 629 $ 1,274 $ 1,256
U.S. $ 694 $ 698 $ 1,339 $ 1,372
International Operated Markets 1,286 1,182 2,409 2,341
International Developmental Licensed Markets & Corporate 97 194 189 396
Total Company-operated restaurant expenses $ 2,078 $ 2,074 $ 3,937 $ 4,109
U.S. $ 149 $ 136 $ 292 $ 277
International Operated Markets 174 149 335 310
International Developmental Licensed Markets & Corporate 377 406 755 824
Total Selling, general, & administrative expenses $ 700 $ 691 $ 1,383 $ 1,411
U.S. $ 85 $ 29 $ 172 $ 56
International Operated Markets 38 20 80 25
International Developmental Licensed Markets & Corporate 55 126 74 147
Total Other segment items* $ 178 $ 176 $ 325 $ 227
U.S. $ 1,527 $ 1,511 $ 2,829 $ 2,907
International Operated Markets 1,635 1,493 2,924 2,858
International Developmental Licensed Markets & Corporate 70 ( 84 ) 127 ( 109 )
Total Operating income $ 3,232 $ 2,920 $ 5,880 $ 5,655
U.S. $ 318 $ 267 $ 543 $ 477
International Operated Markets 418 343 739 654
International Developmental Licensed Markets & Corporate 9 18 13 43
Total Capital expenditures $ 744 $ 628 $ 1,295 $ 1,174
U.S. $ 252 $ 245 $ 493 $ 492
International Operated Markets 196 177 378 355
International Developmental Licensed Markets & Corporate 95 80 193 166
Total Depreciation & amortization** $ 544 $ 502 $ 1,064 $ 1,012
In millions June 30, 2025 December 31, 2024
U.S. $ 22,652 $ 22,547
International Operated Markets 27,044 23,491
International Developmental Licensed Markets & Corporate 9,859 9,143
Total Assets $ 59,555 $ 55,182
*Other segment items is the difference between revenues less the significant expenses disclosed and operating income. This includes other restaurant expenses and other operating expenses included in the Other operating (income) expense, net line within the Condensed Consolidated Statement of Income.
**Total depreciation & amortization is included within the respective expense lines disclosed above, such as Company-operated restaurant expenses, Franchised restaurants-occupancy expenses, and Selling, general & administrative expenses.
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Table of Contents
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