McDonald's confirms its status as a defensive asset – shares approach record highs

McDonald's delivered stable results for Q3 2025, with both sales and revenue increasing, although profit came in slightly below expectations. MCD shares are rising as investors remain confident in the company’s resilient business model and its plans to expand the network to 50,000 outlets.

McDonald's Corporation (NYSE: MCD) delivered a solid but slightly below-expectations performance for Q3 2025. Revenue rose by 3% year-on-year to 7.08 billion USD, while global comparable sales increased by 3.6%. However, adjusted earnings per share (non-GAAP EPS) came in at 3.22 USD, 0.13 USD below analyst forecasts. Adjusted net income totalled 2.31 billion USD, slightly lower than the previous year.

From a market perspective, this was not a failure but rather a mild miss: sales and traffic remain resilient, particularly in international markets, though profit growth fell short of expectations. The company continues to demonstrate a healthy business, but the pace of margin improvement has slowed.

During the earnings call, management noted that in Q4 2025, McDonald's plans to accelerate comparable-sales growth in the US through value menus, promotions, and a stronger focus on affordable combo meals. Management also emphasised that pressure on consumers earning under 45,000 USD per year persists and is likely to continue into 2026. Younger customers increasingly choose McDonald's for its low prices, although their average ticket size is smaller and more sensitive to price changes.

The company reaffirmed its long-term expansion strategy: McDonald's plans to open more than 8,000 new restaurants, bringing the total number of locations to 50,000 by the end of 2027. This underscores its focus on geographic expansion and the continued strengthening of its global brand presence.

This article examines McDonald's Corporation, providing a fundamental analysis of the McDonald's Q3 2025 report, a technical analysis of McDonald's Corporation shares (MCD), and a share-price forecast for 2025. It also outlines McDonald's business model, assesses the investment risks associated with the company, and presents expert forecasts for McDonald's Corporation stock.

About McDonald's Corporation

McDonald's Corporation is the world's largest fast-food restaurant chain, founded in 1940 by brothers Richard and Maurice McDonald (McDonald Brothers) in San Bernardino, California. In 1955, Ray Kroc (Raymond Kroc) joined the company and transformed it into an international franchise. The company went public on 21 April 1965, listing on the New York Stock Exchange (NYSE: MCD).

McDonald's specialises in selling burgers, fries, beverages, and other fast-food products. The company is expanding its digital services and loyalty programs while adapting its menu to local markets.

McDonald's also owns one of the largest property portfolios in the world. A significant portion of its profits comes from leasing premises to its franchisees, making it not only a restaurant business but also a major player in commercial real estate.

McDonald's Corporation key financial flows

McDonald's business model is unique, combining elements of the traditional restaurant industry with franchising and real estate management. The company's main revenue streams fall into four key categories:

• Franchising: most of McDonald's restaurants operate under the franchise model, where the company grants its partners the right to use its brand, recipes, quality standards, and other corporate guidelines. Revenue in this segment comes from an initial franchisee fee paid by partners to open a McDonald's restaurant, as well as an ongoing percentage of sales.
• Company-operated restaurants: revenue in this business comes directly from product and service sales, with the company covering all operational expenses for these locations.
• Real estate income: McDonald's owns numerous properties for operating restaurants. As the landowner or leaseholder, it earns income from leasing or subleasing the land to its franchisees. In some cases, McDonald's only owns the land, while partners build and own the buildings. This strategy enables the company to generate stable, long-term income independent of the success of specific restaurants.
• Supply chain and logistics: McDonald's often controls its franchisees' entire supply and procurement chain, generating additional income through markups on products and ingredients.

This diversified business model allows the company to sustain long-term growth and reduce reliance on a single revenue stream. In its quarterly earnings reports, McDonald's provides separate financial data for franchised and company-operated restaurants, while income from other segments is recorded under Other Revenues.

McDonald's Corporation Q3 2024 earnings results

McDonald's released its financial results for Q3 2024 on 29 October. Below is a comparison with the same period in 2023:

• Revenue: 6.87 billion USD (+3%)
• Net income: 2.25 billion USD (–3%)
• Earnings per share: 3.13 USD (–1%)
• Operating income: 3.18 billion USD (–1%)
• Revenues from franchised restaurants: 4.09 billion USD (+1%)
• Franchised restaurant occupancy expenses: 646 million USD (+3%)
• Revenues from company-owned restaurants: 2.65 billion USD (+4%)
• Company-owned restaurant expenses: 2.24 billion USD (+5%)
• Other revenues: 124 million USD (+39%)

In its commentary on the report, McDonald's management highlighted cautious consumer spending and inflationary pressures, which affected sales, resulting in flat performance overall. In the US, a modest increase was recorded, with comparable sales rising by 0.3%, driven by effective promotions and menu enhancements. However, international markets saw a decline, reflecting changes in consumer preferences.

For its Q4 2024 outlook, management did not provide specific numerical forecasts but expressed a prudent stance regarding the future economic environment. They noted that they anticipated ongoing challenges related to consumer spending and potential adverse effects from currency fluctuations, particularly in emerging markets. Despite these challenges, McDonald's leadership remained optimistic about its long-term strategic initiatives, with a focus on restoring consumer confidence following a recent E. coli incident in the US that affected the brand's reputation, and enhancing marketing efforts to attract customers.

McDonald's Corporation Q4 2024 earnings results

On 10 February, McDonald's released its Q4 2024 report, indicating that revenue remained unchanged compared to the same period in 2023. Below are the key financial metrics:

• Revenue: 6.39 billion USD (unchanged)
• Net income: 2.02 billion USD (–1%)
• Earnings per share: 2.8 USD (unchanged)
• Operating income: 2.86 billion USD (+2%)
• Revenues from franchised restaurants: 3.96 billion USD (+2%)
• Franchised restaurant occupancy expenses: 635 million USD (unchanged)
• Revenues from company-owned restaurants: 2.31 billion USD (–7%)
• Company-owned restaurant expenses: 1.98 billion USD (–5%)
• Other revenue: 120 million USD (+88%)

According to CEO Chris Kempczinski, McDonald's faced external challenges in Q4 2024, including a decline in consumer spending and an incident involving bacterial contamination in its products, which negatively affected overall performance. He noted that while the results were generally strong, they fell short of expectations in certain international markets and in customer traffic patterns.

For 2025, the company remained optimistic about profit growth. Management forecast that the operating margin will rise to a mid-to-high range, surpassing the adjusted margin of 46.3% achieved in 2024. In 2025, McDonald's planned to focus on expanding affordable menu options to attract price-conscious consumers, as well as on its global digital transformation, which has already become a key driver of revenue growth.

Despite flat revenue and net income in Q4 2024, investors responded positively to McDonald's optimistic 2025 outlook, leading to a 4.7% increase in its share price following the report's release.

McDonald's Corporation Q1 2025 earnings results

On 1 May, McDonald's released its earnings report for Q1 2025, which ended on 31 March. Below are its key financial indicators:

• Revenue: 5.96 billion USD (–3%)
• Net income: 1.87 billion USD (–3%)
• Earnings per share: 2.60 USD (–2%)
• Operating income: 2.64 billion USD (–3%)
• Revenues from franchised restaurants: 3.66 billion USD (–2%)
• Franchised restaurant occupancy expenses: 620 million USD (–1%)
• Revenues from company-owned restaurants: 2.31 billion USD (–7%)
• Company-owned restaurant expenses: 2.13 billion USD (–9%)
• Other revenues: 162 million USD (+78%)

In Q1 2025, McDonald's faced significant challenges, leading to a 3.6% drop in comparable sales in the US, the steepest fall since 2020. This decline was driven by a fall in restaurant traffic as low- and middle-income consumers tightened their budgets amid inflation and economic uncertainty. CEO Chris Kempczinski noted that while high-income customers remain loyal, most consumers have become more cautious.

Global markets also experienced a decline, with global comparable sales down by 1%, missing analysts’ expectations of 0.95% growth. The downturn was attributed to lower consumer spending caused by inflation, tariff uncertainty, and broader economic challenges, particularly evident in the US and Europe. However, some franchising markets, such as the Middle East and Japan, saw demand rebound following earlier boycotts.

From an operational perspective, McDonald's faced pressure due to rising costs. Wage increases, especially in California, and higher raw material prices negatively impacted profitability. Additionally, challenges arose in maintaining the brand’s affordable image: price increases disrupted the usual value programs, prompting customers to reconsider their preferences.

Moreover, the partnership with Krispy Kreme proved disappointing. A nationwide launch of a major doughnut offering in McDonald's restaurants was suspended due to weaker-than-expected demand. Both companies revised their partnership strategy.

Despite the challenges, McDonald's continued to prioritise long-term growth. In 2025, the company planned to open around 2,200 new restaurants worldwide, including about 1,000 in China, increasing the number of outlets by 4%. Capital expenditure was projected at 3.0 to 3.2 billion USD, directed mainly towards opening new locations and advancing technology.

McDonald's Corporation Q2 2025 earnings results

On 6 August, McDonald's released its Q2 2025 results for the period ended 30 June. The key financial metrics are as follows:

• Revenue: 6.84 billion USD (+5%)
• Net income: 2.25 billion USD (+11%)
• Earnings per share: 3.19 USD (+12%)
• Operating income: 3.23 billion USD (+11%)
• Revenues from franchised restaurants: 4.21 billion USD (+7%)
• Franchised restaurant occupancy expenses: 654 million USD (+4%)
• Revenues from company-owned restaurants: 2.46 billion USD (0%)
• Company-owned restaurant expenses: 2.08 billion USD (0%)
• Other revenues: 172 million USD (+93%)

McDonald's published its Q2 2025 results, which surpassed market expectations. The company recorded a 3.8% increase in global comparable sales, supported by all key segments, including the US, Europe, and franchised markets. Consolidated revenue rose 5% to 6.84 billion USD, while adjusted earnings per share reached 3.19 USD, up 12% year-on-year and exceeding the market consensus of around 3.14–3.15 USD. Net income increased by 11% to 2.25 billion USD, with system-wide sales up 8%. The main growth drivers were value-focused programs such as the ‘Meal Deal’ and affordable snacks, the launch of new menu items, and active expansion of digital services and the loyalty program, which generated approximately 9 billion USD across the McDonald's system.

The company stated that it expected stronger financial performance in the second half of 2025, projected an operating margin in the range of 40–45%, and maintained its plan to open around 2,200 new restaurants, a significant portion of which will be in the US and China. Management emphasised that the strategy would focus on expanding market presence, driving digital transformation, and maintaining price affordability for consumers amid continued pressure on household incomes.

McDonald's Corporation Q3 2025 earnings results

On 5 November, McDonald's released its Q3 2025 results for the quarter ended 30 September. The key financial highlights are as follows:

• Revenue: 7.08 billion USD (+3%)
• Net income (non-GAAP): 2.31 billion USD (–1%)
• Earnings per share (non-GAAP): 3.22 USD (0%)
• Operating income: 3.36 billion USD (+5%)
• Revenue from franchised restaurants: 4.36 billion USD (+7%)
• Franchised restaurant occupancy expenses: 666 million USD (+3%)
• Revenue from company-owned restaurants: 2.56 billion USD (–3%)
• Company-owned restaurant expenses: 2.17 billion USD (–3%)
• Other revenue: 151 million USD (+22%)

McDonald's Q3 2025 report proved as steady as the company’s business itself. Revenue rose 3% to 7.08 billion USD, while earnings per share remained unchanged at 3.22 USD. Comparable sales increased by 3.6%, slightly exceeding expectations, though overall revenue and profit came in just below analyst forecasts.

Management remains cautious about the outlook: McDonald's expects consumer pressure, particularly in the US and Europe, to persist at least until 2026. The company is focusing on affordable combo meals, the return of Snack Wraps, and the expansion of loyalty programs to retain customers amid constrained disposable incomes.

A growing number of younger consumers are choosing McDonald's over more expensive cafés, helping sustain traffic, though the average spend per visit among this group is lower. At the same time, inflation continues to weigh on lower-income households, prompting many to cut back on spending and cook more at home. To retain customers, McDonald's is offering more discounts and promotions, sharing part of the cost burden with franchisees. This supports revenue but limits profit growth.

Overall, the report underscores a stable yet no longer explosive business. McDonald's continues to perform strongly in an inflationary environment and attract younger, price-sensitive customers. However, its profit-growth potential remains constrained by the ongoing need to balance margin protection with aggressive pricing strategies aimed at sustaining customer demand.

Fundamental Analysis of McDonald's Corporation

Below is the fundamental analysis of McDonald's Corporation (MCD) based on Q3 2025 results:

• Liquidity and debt: as of the end of Q3 2025, McDonald's held around 2.4 billion USD in cash and equivalents. Current assets and current liabilities each stood at approximately 6.1 billion USD, giving a current ratio of around 1.0. For a company with a steady operating cash flow, this is a normal level – liquidity is ensured by consistent inflows from operations rather than by maintaining large cash reserves.

Total interest-bearing debt amounted to 41.3 billion USD, of which 1.8 billion USD was short-term, and 39.5 billion USD was long-term. After deducting cash, net debt was 38.9 billion USD, equivalent to 2.7 times annual EBITDA – a comfortable level for McDonald's and consistent with its investment-grade ratings (BBB+ from S&P and Baa1 from Moody’s, both with stable outlooks).

Interest expenses remain well covered by profit: in Q3 2025, operating profit was about 3.36 billion USD versus 0.41 billion USD in interest costs, representing coverage of roughly 8 times (and 7.9× for the nine months). This means that although the company’s debt burden is high in absolute terms, it is comfortably serviced and poses no financial strain.

• Cash flow and free cash generation: McDonald's generated 3.43 billion USD in operating cash flow during Q3 2025, with capital expenditure of 1.01 billion USD and free cash flow (FCF) of 2.4 billion USD – an FCF margin of roughly 34% of quarterly revenue. Over the first nine months, the company generated 5.5 billion USD in free cash flow, with a net income-to-FCF conversion of about 87%. These are very strong figures for the restaurant sector and highlight the efficiency of McDonald's asset-light, franchise-based model.

Almost all free cash flow is returned to shareholders: over the nine months, McDonald's paid 3.8 billion USD in dividends and spent 1.5 billion USD on share repurchases, totalling 5.3 billion USD, or roughly 95% of FCF. Despite the high payout ratio, this policy is not considered risky – with stable cash flows and access to long-term financing, the company continues to follow its strategy of maximising shareholder returns while maintaining a controlled level of leverage.

• Report quality and business structure: Operationally, McDonald's delivered a steady but unspectacular quarter in Q3 2025. Revenue increased by 3%, comparable sales rose 3.6%, but adjusted EPS (non-GAAP) was 3.22 USD, about 3–4% below expectations, while year-on-year profit was virtually unchanged.

The main source of stability is the franchise model: around 95% of McDonald's 44,600 restaurants operate under franchise agreements, providing high margins and stable royalty income with minimal operational risk to the corporation. Growth is currently supported primarily by value-driven offers – such as Snack Wraps and combo menus – which help retain lower-income customers but slightly compress margins, as the company shares promotion costs with franchisees.

Overall, the business structure remains exceptionally solid: broad geographic diversification, a powerful global brand, a mature digital ecosystem, and an extensive partner network together provide a resilient foundation for stable earnings even under inflationary pressure.

Fundamental analysis of McDonald's – Conclusion:

Based on Q3 2025 results, McDonald's remains a highly resilient company. Revenue and comparable sales continue to grow, margins are strong, free cash flow generation is robust, and debt levels are comfortable with solid credit ratings. Growth has slowed compared with the post-pandemic period, and inflationary pressures on low-income consumers, coupled with a focus on affordable menu items, slightly limit profit expansion.

Nevertheless, McDonald's business model remains one of the most dependable in the sector. The company operates with moderate capital intensity, maintains a high FCF margin, and consistently returns cash to shareholders through dividends and buybacks – all without jeopardising liquidity. From a fundamental perspective, McDonald's represents a defensive, predictable investment story characterised by stable cash generation and minimal financial risk.

Analysis of key valuation multiples for McDonald's Corporation

Below are McDonald's key valuation multiples based on Q3 FY2026 results, calculated using a share price of 305 USD.

Analysis of McDonald's valuation multiples – Conclusion

McDonald's remains a financially solid company with a high-margin business that generates strong free cash flow. Interest expenses are easily covered by profits, while debt levels and cash flow remain under control. However, the stock trades at a premium valuation – the P/E, EV/EBITDA, P/FCF, and EV/Sales multiples are all at the higher end of the range, indicating that investors are paying for stability, brand strength, and predictable dividends.

From a value-oriented investor’s perspective, McDonald's is a high-quality defensive stock trading near the upper end of its fair value range, suitable for those willing to accept moderate returns in exchange for operational resilience and reliable demand, even amid a weaker consumer environment and ongoing inflationary pressures.

Expert forecasts for McDonald's Corporation shares in 2025

• Barchart: 14 out of 35 analysts rated McDonald's shares as a Strong Buy, 1 as a Moderate Buy, 19 as Hold, and 1 as a Strong Sell. The highest price target is 371 USD, and the lowest is 260 USD.
• MarketBeat: 11 out of 28 analysts gave the stock a Buy rating, 15 a Hold, and 2 a Sell. The highest price target is 375 USD, and the lowest is 250 USD.
• TipRanks: 10 out of 22 analysts rated the stock as Buy and 12 as Hold. The highest price target is 375 USD, and the lowest is 300 USD.
• Stock Analysis: 3 out of 25 analysts rated the shares as a Strong Buy, 7 as Buy, 14 as Hold, and 1 as a Strong Sell. The highest price target is 375 USD, and the lowest is 260 USD.

McDonald's Corporation stock price forecast for 2025

On the weekly chart, McDonald's shares are trading within an upward channel and are approaching their historical high of around 320 USD for the third time. Given the company’s strong financial position and proven ability to navigate challenging periods, there is a high likelihood that the price will break above its previous record this time. Based on the current performance of McDonald's Corporation shares, the potential price scenarios for 2025 are as follows:

The base-case forecast for McDonald's Corporation stock anticipates a breakout above resistance at 320 USD, followed by a further rise towards the upper boundary of the channel at 370 USD.

The alternative forecast for McDonald's Corporation shares envisions another pullback from resistance around 320 USD. In this case, MCD shares could decline towards the trendline near 285 USD. A rebound from this level would signal the end of the correction and the resumption of the uptrend, with the next upside target at the upper boundary of the channel around 370 USD.

Risks of investing in McDonald's Corporation stock

When investing in McDonald's Corporation stock, it is essential to consider the risks the company may face in 2025. Below are the key risks:

• Food safety issues: the discovery of E. coli in McDonald's products in October 2024 resulted in a 0.3% decrease in revenue in Q4, affecting consumer trust. Although the FDA confirmed no current food safety issues with McDonald's products, this incident highlighted the risks associated with foodborne illnesses, impacting both sales and the brand's reputation.
• Increased competition and shifting consumer preferences: with a growing number of competitors and a consumer shift towards healthier food options, McDonald's plans to expand its chicken menu, including the return of popular items like the Snack Wrap, to meet evolving consumer expectations.
• Operational challenges: the introduction of the Snack Wrap to the menu aims to boost US sales but could lead to operational issues due to longer preparation times, potentially affecting service speed and overall customer satisfaction.
• Economic factors: inflation continues to strain consumer spending. CEO Chris Kempczinski forecasts a challenging 2025 and notes that low-income customers will likely continue facing financial difficulties, which could reduce their dining-out expenditures.

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