McDonald’s beats earnings forecast on value menu strategy

McDonald's reported fourth quarter earnings that surpassed analyst expectations, with the fast-food chain crediting its value-focused strategy for driving sales growth across the United States and international markets. The company posted adjusted earnings per share of $3.12 for the quarter, beating forecasts of $3.03, while revenue reached $7.01 billion against predictions of $6.81 billion.

The stronger-than-expected results reflect McDonald's ability to compete during a challenging period for the restaurant industry. Global comparable sales rose 5.7% in the quarter, with particularly strong performance in the United States, where comparable sales increased 6.8%. The company gained market share across income levels, though it has seen particular success attracting lower-income consumers seeking affordable meal options.

Background

McDonald's has spent the past year emphasizing value and affordability in its marketing and menu offerings. The strategy includes promotional campaigns designed to appeal to price-conscious diners, with the company highlighting limited-time offers and menu items at competitive price points. This approach comes as consumers across income levels have become more cautious about spending, prompting many to seek out cheaper dining options.

The company operates through a franchise model, with most of its roughly 40,000 restaurants worldwide run by independent operators. This structure allows McDonald's to benefit from sales growth without bearing all operational costs. For the full year 2025, the company reported systemwide sales of approximately $129.7 billion, up 7% from the previous year.

Key Details

McDonald's fourth quarter performance was broad-based across geographic markets. In the United States, the 6.8% comparable sales growth was driven by both higher average check amounts and increased customer traffic. International markets also performed well, with strong results in the United Kingdom, Germany, and Australia, each delivering comparable sales growth in the mid to high single digits.

The company's loyalty program contributed meaningfully to overall sales. Loyalty members' purchases reached nearly $37 billion for the full year 2025, representing 20% growth compared to the prior year. This growing segment demonstrates McDonald's success in building repeat customer relationships through its app and rewards program.

Financial performance

For the full year 2025, McDonald's reported total revenues of $26.885 billion, up 4% from 2024. Net income grew 4% to $8.563 billion, while diluted earnings per share rose 5% to $11.95. The company's adjusted operating margin for the full year was 46.9%, reflecting the strength of its business model.

The company generated $10.551 billion in cash from operations and produced $7.186 billion in free cash flow during 2025. McDonald's also returned cash to shareholders through dividend increases and share buybacks. The company raised its quarterly dividend by 5% to $1.86 per share and repurchased 6.7 million shares for $2 billion.

Growth outlook

McDonald's plans to open 2,600 new restaurants in 2026, with systemwide sales growth expected to reach 2.5% from new restaurant expansions alone. The company projects capital expenditures of $3.7 billion to $3.9 billion for the year. However, management cautioned that comparable sales growth is expected to decelerate in the first quarter of 2026 from fourth quarter levels.

"The success of value, menu and marketing initiatives supported steady improvement in our baseline momentum," the company stated in its earnings materials.

Despite the strong quarterly results, McDonald's stock fell 0.85% to $324.33 in after-hours trading following the earnings announcement. Investors appeared focused on forward-looking concerns about growth deceleration and broader market conditions rather than the quarter's strong performance.

What This Means

McDonald's results suggest that value-oriented strategies can succeed even as consumers face economic headwinds. The company's ability to attract customers across income levels indicates that its promotional approach resonates beyond just lower-income demographics. The strong performance in developed markets like the United Kingdom and Germany shows that value messaging works internationally.

The growth in loyalty program sales points to a broader shift in how restaurant chains interact with customers. By building direct relationships through apps and rewards programs, McDonald's captures data about customer preferences while encouraging repeat visits. This positions the company to adjust offerings based on what customers actually purchase.

Looking ahead, McDonald's expansion plans signal confidence in the fast-food market despite economic uncertainty. The planned opening of 2,600 new locations represents a significant investment in growth. However, management's caution about first quarter comparable sales suggests the company expects some normalization after strong fourth quarter performance, possibly reflecting easier prior-year comparisons that benefited the latest quarter.

The company's ability to maintain operating margins near 47% while investing in growth and returning cash to shareholders demonstrates the durability of its franchise model. As long as consumers continue seeking affordable dining options, McDonald's value strategy appears positioned to support continued performance.