MCDONALDS CORP 10-Q

Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) In millions, except per share data June 30, 2026 December 31, 2025 Assets Current assets Cash and equivalents $ 822 $ 774 Accounts and notes receivable 2,485 2,466 Inventories, at cost, not in excess of market 58 61 Prepaid expenses and other current assets 980 863 Total current assets 4,345 4,163 Other assets Investments in affiliates 2,896 2,820 Goodwill 3,347 3,354 Miscellaneous 6,393 6,331 Total other assets 12,637 12,505 Lease right-of-use asset, net 14,459 14,606 Property and equipment Property and equipment, at cost 49,943 49,290 Accumulated depreciation and amortization ( 21,464 ) ( 21,049 ) Net property and equipment 28,479 28,241 Total assets $ 59,920 $ 59,515 Liabilities and shareholders’ equity (deficit) Current liabilities Accounts payable $ 1,114 $ 1,149 Lease liability 690 694 Income taxes 327 250 Other taxes 261 247 Accrued interest 428 533 Accrued payroll and other liabilities 1,198 1,488 Total current liabilities 4,018 4,361 Long-term debt 39,863 39,973 Long-term lease liability 14,039 14,147 Long-term income taxes 176 139 Deferred revenues - initial franchise fees 946 945 Other long-term liabilities 677 704 Deferred income taxes 1,222 1,038 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 9,841 9,641 Retained earnings 71,987 70,282 Accumulated other comprehensive income (loss) ( 2,340 ) ( 2,414 ) Common stock in treasury, at cost; 953.0 and 950.0 million shares ( 80,527 ) ( 79,316 ) Total shareholders’ equity (deficit) ( 1,023 ) ( 1,791 ) Total liabilities and shareholders’ equity (deficit) $ 59,920 $ 59,515 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Quarters Ended Six Months Ended June 30, June 30, In millions, except per share data 2026 2025 2026 2025 Revenues Revenues from franchised restaurants $ 4,393 $ 4,213 $ 8,399 $ 7,874 Sales by Company-owned and operated restaurants 2,525 2,458 4,842 4,590 Other revenues 182 172 375 334 Total revenues 7,099 6,843 13,616 12,799 Operating costs and expenses Franchised restaurants-occupancy expenses 680 654 1,356 1,274 Company-owned and operated restaurant expenses 2,138 2,078 4,170 3,937 Other restaurant expenses 163 149 329 289 Selling, general & administrative expenses Depreciation and amortization 111 106 222 213 Other 706 595 1,354 1,170 Other operating (income) expense, net ( 37 ) 29 ( 106 ) 36 Total operating costs and expenses 3,760 3,611 7,324 6,918 Operating income 3,338 3,232 6,292 5,880 Interest expense 409 390 809 766 Nonoperating (income) expense, net ( 6 ) ( 18 ) 5 ( 76 ) Income before provision for income taxes 2,936 2,861 5,478 5,190 Provision for income taxes 574 608 1,133 1,069 Net income $ 2,362 $ 2,253 $ 4,345 $ 4,121 Earnings per common share-basic $ 3.33 $ 3.15 $ 6.12 $ 5.77 Earnings per common share-diluted $ 3.32 $ 3.14 $ 6.10 $ 5.74 Dividends declared per common share $ 1.86 $ 1.77 $ 3.72 $ 3.54 Weighted-average shares outstanding-basic 709.1 714.5 709.9 714.7 Weighted-average shares outstanding-diluted 711.1 717.6 712.3 717.9 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) Quarters Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 Net income $ 2,362 $ 2,253 $ 4,345 $ 4,121 Other comprehensive income (loss), net of tax Foreign currency translation adjustments: Gain (loss) recognized in accumulated other comprehensive income ("AOCI"), including net investment hedges 12 237 21 307 Reclassification of (gain) loss to net income — — — — Foreign currency translation adjustments-net of tax benefit (expense) of $( 40 ), $ 309 , $( 97 ) and $ 445 12 237 21 307 Cash flow hedges: Gain (loss) recognized in AOCI 7 ( 106 ) 30 ( 158 ) Reclassification of (gain) loss to net income 9 9 23 ( 6 ) Cash flow hedges-net of tax benefit (expense) of $( 5 ), $ 29 , $( 16 ) and $ 49 16 ( 97 ) 53 ( 164 ) Defined benefit pension plans: Gain (loss) recognized in AOCI ( 1 ) ( 13 ) 7 ( 19 ) Reclassification of (gain) loss to net income ( 3 ) — ( 7 ) ( 1 ) Defined benefit pension plans-net of tax benefit (expense) of $ 0 , $ 0 , $( 1 ) and $ 0 ( 4 ) ( 13 ) — ( 20 ) Total other comprehensive income (loss), net of tax 24 127 74 123 Comprehensive income $ 2,386 $ 2,380 $ 4,419 $ 4,244 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Quarters Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 Operating activities Net income $ 2,362 $ 2,253 $ 4,345 $ 4,121 Adjustments to reconcile to cash provided by operations Charges and credits: Depreciation and amortization 565 544 1,131 1,064 Deferred income taxes ( 58 ) ( 41 ) 5 ( 84 ) Share-based compensation 39 44 99 89 Other ( 51 ) ( 71 ) ( 143 ) ( 144 ) Changes in working capital items ( 50 ) ( 731 ) ( 215 ) ( 620 ) Cash provided by operations 2,807 1,998 5,222 4,426 Investing activities Capital expenditures ( 831 ) ( 744 ) ( 1,516 ) ( 1,295 ) Purchases of restaurant businesses ( 74 ) ( 56 ) ( 153 ) ( 131 ) Sales of restaurant businesses 137 34 209 83 Sales of property 21 11 56 16 Other ( 121 ) ( 114 ) ( 244 ) ( 314 ) Cash used for investing activities ( 868 ) ( 869 ) ( 1,648 ) ( 1,641 ) Financing activities Net short-term borrowings (repayments) 492 597 ( 299 ) ( 195 ) Long-term financing issuances — 1,403 1,159 2,901 Long-term financing repayments ( 580 ) ( 700 ) ( 581 ) ( 1,393 ) Treasury stock purchases ( 856 ) ( 505 ) ( 1,251 ) ( 982 ) Common stock dividends ( 1,317 ) ( 1,265 ) ( 2,640 ) ( 2,530 ) Proceeds from stock option exercises 14 41 142 188 Other ( 140 ) ( 126 ) ( 142 ) ( 87 ) Cash used for financing activities ( 2,387 ) ( 555 ) ( 3,612 ) ( 2,098 ) Effect of exchange rates on cash and cash equivalents 99 65 85 104 Cash and equivalents increase (decrease) ( 348 ) 638 48 791 Cash and equivalents at beginning of period 1,170 1,238 774 1,085 Cash and equivalents at end of period $ 822 $ 1,876 $ 822 $ 1,876 See Notes to Condensed Consolidated Financial Statements. 6 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) 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 ) For the six months ended June 30, 2026 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, 2025 1,660.6 $ 17 $ 9,641 $ 70,282 $ ( 432 ) $ 13 $ ( 1,995 ) ( 950.0 ) $ ( 79,316 ) $ ( 1,791 ) Net income 4,345 4,345 Other comprehensive income (loss), net of tax — 53 21 74 Comprehensive income 4,419 Common stock cash dividends ($ 3.72 per share) ( 2,640 ) ( 2,640 ) Treasury stock purchases ( 4.2 ) ( 1,252 ) ( 1,252 ) Share-based compensation 99 99 Stock option exercises and other 101 1.2 41 142 Balance at June 30, 2026 1,660.6 $ 17 $ 9,841 $ 71,987 $ ( 432 ) $ 66 $ ( 1,974 ) ( 953.0 ) $ ( 80,527 ) $ ( 1,023 ) See Notes to Condensed Consolidated Financial Statements. 7 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) 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 ) For the quarter ended June 30, 2026 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, 2026 1,660.6 $ 17 $ 9,792 $ 70,942 $ ( 428 ) $ 50 $ ( 1,986 ) ( 950.2 ) $ ( 79,673 ) $ ( 1,286 ) Net income 2,362 2,362 Other comprehensive income (loss), net of tax ( 4 ) 16 12 24 Comprehensive income 2,386 Common stock cash dividends ($ 1.86 per share) ( 1,317 ) ( 1,317 ) Treasury stock purchases ( 2.9 ) ( 858 ) ( 858 ) Share-based compensation 39 39 Stock option exercises and other 10 0.1 4 14 Balance at June 30, 2026 1,660.6 $ 17 $ 9,841 $ 71,987 $ ( 432 ) $ 66 $ ( 1,974 ) ( 953.0 ) $ ( 80,527 ) $ ( 1,023 ) See Notes to Condensed Consolidated Financial Statements. 8 Table of Contents 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, 2025 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, 2026 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, 2026 2025 Conventional franchised 22,722 22,171 Developmental licensed 9,833 9,373 Foreign affiliated 11,461 10,515 Total Franchised 44,016 42,059 Company-owned and operated 2,012 2,054 Total Systemwide restaurants 46,028 44,113 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 2.0 million shares and 3.1 million shares for the quarters ended June 30, 2026 and 2025, respectively, and 2.4 million shares and 3.2 million shares for the six months ended June 30, 2026 and 2025, respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled 3.6 million shares and 1.9 million shares for the quarters ended June 30, 2026 and 2025, respectively, and 3.2 million shares and 2.0 million shares for the six months ended June 30, 2026 and 2025, respectively. Recent Accounting Pronouncements Recent Accounting Pronouncements Not Yet Adopted 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. Internal-Use Software In September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software" ("ASU 2025-06"). The pronouncement modernizes the accounting guidance for internal-use software costs by removing the various stages of a software development project to accommodate different software development methods. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. We are currently in the process of determining the impact that ASU 2025-06 will have on the Company's Consolidated Financial Statements. 9 Table of Contents 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 $ 98 million and $ 109 million of restructuring charges related to Accelerating the Organization in the six months ended June 30, 2026 and 2025, respectively. These restructuring 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 2026 Accrued Balance at Beginning of Year $ 34 $ 4 $ 15 $ 53 Restructuring costs incurred 5 — 42 47 Cash payments ( 3 ) — ( 41 ) ( 44 ) Other non-cash items — — ( 1 ) ( 1 ) Accrued Balance at March 31, 2026 $ 36 $ 4 $ 15 $ 55 Restructuring costs incurred — — 51 51 Cash payments ( 3 ) ( 1 ) ( 58 ) ( 62 ) Other non-cash items — — — — Accrued Balance at June 30, 2026 $ 33 $ 3 $ 8 $ 44 Of the $ 98 million of restructuring charges incurred in the six months ended June 30, 2026, $ 97 million was recorded primarily at Corporate and $ 1 million was recorded in the International Operated Markets. Substantially all of the accrued restructuring balance recorded at June 30, 2026, 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 $ 795 million of total restructuring charges incurred since the initiative commenced in 2023. The Company currently expects to incur approximately $ 250 million of restructuring charges in 2026, primarily related to professional services costs. 10 Table of Contents Equity Method Investments The Company has various investments accounted for using the equity method. Under the equity method of accounting, the Company records its 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 its 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 its 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, 2026 December 31, 2025 In Millions Percentage Ownership Fair Value (Level 1) Carrying Amount Percentage Ownership Fair Value (Level 1) Carrying Amount Grand Foods Holding 48 % N/A $ 2,134 48 % N/A $ 2,048 McDonald's Japan Holdings Co., Ltd 35 % $ 2,161 $ 658 35 % $ 1,915 $ 657 As of June 30, 2026, 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 $ 1.4 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, 2026 and 2025, respectively. Six Months Ended June 30, In Millions 2026 2025 Revenue $ 297 $ 280 Equity in earnings $ 98 $ 94 Accounts receivable $ 96 $ 166 Dividends received $ 17 $ 15 Income Taxes The effective income tax rate was 19.5 % and 21.3 % for the quarters ended 2026 and 2025, respectively, and 20.7 % and 20.6 % for the six months ended 2026 and 2025, respectively. The effective tax rate for the quarter ended June 30, 2026 reflected discrete income tax benefits related to restructuring initiatives. 11 Table of Contents 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, 2025 Annual Report on Form 10-K. At June 30, 2026, the fair value of the Company’s debt obligations was estimated at $ 38.3 billion, compared to a carrying amount of $ 39.9 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. 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, 2026 December 31, 2025 Balance Sheet Classification June 30, 2026 December 31, 2025 Derivatives designated as hedging instruments Foreign currency Prepaid expenses and other current assets $ 58 $ 3 Accrued payroll and other liabilities $ ( 14 ) $ ( 117 ) Interest rate Prepaid expenses and other current assets — — Accrued payroll and other liabilities ( 12 ) — Foreign currency Miscellaneous other assets 37 24 Other long-term liabilities ( 3 ) ( 12 ) Interest rate Miscellaneous other assets — — Other long-term liabilities — ( 16 ) Total derivatives designated as hedging instruments $ 95 $ 27 $ ( 29 ) $ ( 145 ) Derivatives not designated as hedging instruments Equity Miscellaneous other assets 66 104 Total derivatives not designated as hedging instruments $ 66 $ 104 $ — $ — Total derivatives $ 161 $ 131 $ ( 29 ) $ ( 145 ) 12 Table of Contents The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the six months ended June 30, 2026 and 2025, 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 2026 2025 2026 2025 2026 2025 Foreign currency Nonoperating income/expense $ 39 $ ( 192 ) $ ( 32 ) $ 7 Interest rate Interest expense — ( 13 ) 2 — Cash flow hedges $ 39 $ ( 205 ) $ ( 30 ) $ 7 Foreign currency denominated debt Nonoperating income/expense $ 381 $ ( 1,660 ) Foreign currency derivatives Nonoperating income/expense 41 ( 273 ) Foreign currency derivatives (1) Interest expense $ 22 $ 31 Net investment hedges $ 422 $ ( 1,933 ) $ 22 $ 31 Foreign currency Nonoperating income/expense $ ( 4 ) $ ( 6 ) Equity Selling, general & administrative expenses ( 6 ) 5 Undesignated derivatives $ ( 10 ) $ ( 1 ) (1) The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. 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, 2026, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $ 488 million, which included a decrease of $ 12 million of cumulative hedging adjustments. For the six months ended June 30, 2026, the Company recognized a $ 4 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, 2026, the Company had derivatives outstanding with an equivalent notional amount of $ 2.4 billion that hedged a portion of forecasted foreign currency denominated cash flows. Based on market conditions at June 30, 2026, the $ 66 million in cumulative cash flow hedging gains, 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, 2026, $ 15.4 billion of the Company's third-party foreign currency denominated debt, and $ 1.3 billion of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates. Undesignated Derivatives 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. 13 Table of Contents 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, 2026 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, 2026, the Company was required to post $ 56 million of collateral due to the negative fair value of certain derivative positions. Franchise Arrangements Revenues from franchised restaurants consisted of: Quarters Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 Rents $ 2,760 $ 2,677 $ 5,264 $ 4,990 Royalties 1,613 1,517 3,096 2,847 Initial fees 20 18 39 37 Revenues from franchised restaurants $ 4,393 $ 4,213 $ 8,399 $ 7,874 Segment Information The Company operates under the following global organizational structure, which reflects how management reviews and evaluates operating performance: • U.S. segment - the Company's largest market. The segment is 95 % franchised as of June 30, 2026. • 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 90 % franchised as of June 30, 2026. • 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, 2026. 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 cash and equivalents, financial instruments, deferred tax assets and office facilities. 14 Table of Contents Quarters Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 U.S. $ 2,827 $ 2,781 $ 5,409 $ 5,276 International Operated Markets 3,603 3,462 6,928 6,377 International Developmental Licensed Markets & Corporate 669 600 1,279 1,145 Total Revenues $ 7,099 $ 6,843 $ 13,616 $ 12,799 U.S. $ 320 $ 325 $ 643 $ 643 International Operated Markets 359 328 712 630 International Developmental Licensed Markets & Corporate — — — 1 Total Franchised restaurants-occupancy expenses $ 680 $ 654 $ 1,356 $ 1,274 U.S. $ 693 $ 694 $ 1,362 $ 1,339 International Operated Markets 1,322 1,286 2,577 2,409 International Developmental Licensed Markets & Corporate 123 97 230 189 Total Company-operated restaurant expenses $ 2,138 $ 2,078 $ 4,170 $ 3,937 U.S. $ 147 $ 149 $ 287 $ 292 International Operated Markets 190 174 378 335 International Developmental Licensed Markets & Corporate 479 377 911 755 Total Selling, general, & administrative expenses $ 817 $ 700 $ 1,576 $ 1,383 U.S. $ 93 $ 85 $ 164 $ 172 International Operated Markets 8 38 31 80 International Developmental Licensed Markets & Corporate 25 55 28 74 Total Other segment items* $ 126 $ 178 $ 223 $ 325 U.S. $ 1,573 $ 1,527 $ 2,953 $ 2,829 International Operated Markets 1,723 1,635 3,230 2,924 International Developmental Licensed Markets & Corporate 42 70 109 127 Total Operating income $ 3,338 $ 3,232 $ 6,292 $ 5,880 U.S. $ 357 $ 318 $ 631 $ 543 International Operated Markets 466 418 868 739 International Developmental Licensed Markets & Corporate 8 9 17 13 Total Capital expenditures $ 831 $ 744 $ 1,516 $ 1,295 U.S. $ 246 $ 252 $ 497 $ 493 International Operated Markets 217 196 430 378 International Developmental Licensed Markets & Corporate 103 95 205 193 Total Depreciation & amortization** $ 565 $ 544 $ 1,131 $ 1,064 In millions June 30, 2026 December 31, 2025 U.S. $ 23,189 $ 23,008 International Operated Markets 27,739 27,487 International Developmental Licensed Markets & Corporate 8,992 9,020 Total Assets $ 59,920 $ 59,515 *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. 15 Table of Contents