McDonald's beats on profit, misses on revenue as U.S. traffic slips

McDonald's earned $3.57 per share on an adjusted basis in its fiscal third quarter, beating Wall Street's $3.38 forecast, even as revenue fell short at $7.16 billion against an expected $7.29 billion. The company reported the results on Wednesday. The figures come from a survey of analysts by LSEG.

The quarter exposed a split between the burger chain's domestic and international businesses. U.S. same-store sales fell 0.2% at restaurants open at least 13 months. That decline was smaller than the 0.5% drop Wall Street anticipated, according to StreetAccount, but it confirmed that fewer Americans walked through McDonald's doors.

What drove the U.S. sales decline?

Traffic to U.S. restaurants fell during the quarter. The company had signaled weakness before. At its investor day in September, executives said same-store sales in July and August ran slightly negative, though they expected September to return to growth.

CEO Chris Kempczinski framed the quarter as a turnaround in progress. "In the U.S., we're encouraged by improvement as the quarter progressed following our intervention on value," he said in a statement.

The comment echoes his August admission that the U.S. business was falling short on execution, particularly on rolling out value offerings. Like many restaurant chains, McDonald's has leaned into discounts over the last two years to attract budget-conscious diners, and the results suggest the strategy needed fixing rather than abandoning.

How profitable was the quarter?

Net income reached $2.49 billion, or $3.51 per share, up from $2.28 billion, or $3.18 per share, a year earlier. Excluding restructuring charges and other items, the company earned $3.57 per share.

Net revenue rose 1% to $7.16 billion. The top line still missed the $7.29 billion analysts expected, a gap that points to softer domestic volumes rather than pricing power.

Which markets carried the results?

Global same-store sales rose 1.5%, beating the 1.3% increase analysts projected, according to StreetAccount. International segments did the heavy lifting.

• International developmental licensed markets, which include Japan and China, posted same-store sales growth of 4.2%. Wall Street expected 2.1% growth for the division, according to StreetAccount.
• International operated markets, home to top countries like Australia and Germany, grew same-store sales 1.4%. That underperformed the 2.1% rise analysts projected, according to StreetAccount.
• France was a weak spot, McDonald's said.

The comparison is stark. The licensed-markets division doubled expectations, while the operated-markets arm missed by a wide margin and the U.S. shrank outright.

What does this mean going forward?

The quarter shows McDonald's profit machine still works even when American traffic stalls, but the fix Kempczinski promised in August is not finished. If the September rebound executives predicted holds and the value rollout sharpens, U.S. same-store sales could return to growth; if not, the company will keep relying on Japan, China and its other licensed markets to carry the top line.