McDonald's surprises investors by beating expectations but flags risks: buy now or wait?

Amid rising consumer price sensitivity and higher costs for raw materials and labour, McDonald's share price has approached a key resistance level, reflecting market concerns over margins amid increasing discounts and pricing pressures.

McDonald's Corporation (NYSE: MCD) exceeded expectations for Q2 2025, reporting revenue of 6.84 billion USD and adjusted EPS of 3.19 USD, while global comparable sales rose 3.8% and US comparable sales increased 2.5%. Management highlighted the impact of targeted promotions and digital customer engagement, with system-wide sales among loyalty program members reaching 9 billion USD for the quarter and 33 billion USD over the past twelve months. At the same time, the company noted ongoing challenges from price-sensitive consumers, who are cautious in response to menu price increases and higher resource costs, potentially limiting further pricing flexibility. McDonald's continues to pursue its expansion plan, aiming to open around 2,200 restaurants in 2025, including 1,000 in China, while maintaining a focus on the brand’s value proposition.

McDonald's share price is approaching historic highs, but surpassing these levels will require stronger growth catalysts than those indicated in the published results.

This article reviews McDonald's Corporation, providing a fundamental analysis of McDonald's Q2 report, a technical analysis of McDonald's

shares, and forming the basis for the MCD share price forecast for 2025. It also outlines the company’s business model, evaluates investment risks in McDonald's Corporation, and presents expert projections for MCD shares.

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: the vast majority 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 report

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, which had affected the brand's reputation, and enhancing marketing efforts to attract customers.

McDonald's Corporation Q4 2024 earnings report

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 would 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 report

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 financial results

On 6 August, McDonald's released its Q2 2025 results for the period ending 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 11% to 2.25 billion USD, with system-wide sales up 8%. Key drivers included value-focused programs such as the ‘Meal Deal’ and low-cost 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 expects improved financial performance in the second half of 2025, forecasting an operating margin of 40–45% and continuing with 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 will focus on network expansion, digital transformation, and maintaining price accessibility for consumers amid ongoing household income pressures.

Analysis of key growth drivers and risks for McDonald's Corporation

The analysis of McDonald's Corporation’s Q2 2025 report revealed several factors that weighed on key financial indicators. The main points are as follows:

• Weak traffic among lower-income consumers in the US and the issue of perceived value: management noted a double-digit decline in visits across this segment industry-wide and stressed the need to restore value in the core menu, not only through temporary promotions. The company launched and extended nationally advertised Snack Wraps at 2.99 USD and strengthened promotion of the Value Menu 5 USD Meal Deals, but admitted that the perception of expensiveness is shaped primarily by prices for core items. This explains why growth in comparable sales in the US was largely due to an increase in average cheque rather than traffic, highlighting a risk of margin pressure if promotions are expanded further
• China remains a macroeconomically difficult market: management described the short-term environment as “challenging”, which reduces the predictability of recovery rates and may continue to weigh on comparable sales in the region
• Higher financial expenses: interest payable increased to 390 million USD from 373 million USD a year earlier. The 10-Q indicates that the increase was due to higher average debt levels and, for the half-year, higher rates, which are moderately pressuring net profit and free cash flow
• Weaker performance of company-operated restaurants and rising individual operating costs: sales at company-operated restaurants showed almost no growth compared with last year, while other restaurant expenses rose markedly. Together, these factors reflect pressure on profitability in company-operated outlets. In its half-year commentary, the company specifically highlighted lower margins for company-operated sites in the US. If it becomes necessary to cut prices more aggressively or expand promotions to support traffic, pressure on this part of the business could intensify
• Risk of stronger price competition and sensitivity to regional costs: management emphasised that value menu decisions must be adapted to differing national wage and cost levels, otherwise margins in local markets may be squeezed. With competitors ramping up aggressive promotions, this raises the likelihood of pressure on average cheque and profitability in efforts to restore traffic quickly

Key growth drivers through which McDonald's can improve its financial results over the next few quarters:

• Restoring perceived value and traffic through targeted bundles and promotions: affordable bundled offers and promotions supported comparable sales in Q2 and remain a key lever for driving visit frequency and average cheque in the US and internationally
• Scale of loyalty programs and digital services: sales to customers participating in loyalty programs reached approximately 9 billion USD for the quarter and around 33 billion USD over the past twelve months. Management noted plans for further investment in technology and accelerated digital development, which help to increase customer retention, visit frequency, and average cheque
• Network expansion as a growth factor for sales and royalties: in 2025, the company expects to open 2,200 new restaurants and achieve around 1,800 net additions worldwide, of which approximately 1,000 outlets in China. The strategic goal remains unchanged – to reach 50,000 restaurants globally by 2027. The increase in franchisees directly supports the growth of franchising income and operating profit
• Shift towards franchising income: the report notes that operating profit growth was mainly driven by higher sales at franchisees, which in the longer term strengthens profitability and reduces exposure to rising costs in company-operated restaurants
• Operational efficiency and technology: the Accelerating the Arches program, together with adoption of cloud solutions (in partnership with Google Cloud and others), aims to improve productivity, speed up service, and enhance order accuracy – simultaneously raising customer experience and the efficiency of restaurant operations

Overall conclusion on McDonald's key risks and growth drivers: the company’s main challenges lie in low-income segment traffic, China, and the cost of capital, while its offsets are scale, the franchising model, digitalisation, and targeted value menu and efficiency initiatives. In the coming quarters, the upward trajectory will depend on confirming steady increases in comparable sales while controlling promotions and discounts, as well as sustaining progress on margins and free cash flow.

Fundamental Analysis of McDonald's Corporation

Below is the fundamental analysis of McDonald's Corporation based on the results of Q2 2025:

• Liquidity and debt: as of 30 June 2025, the company held 1.88 billion USD in cash and equivalents. Short-term liabilities amounted to 4.30 billion USD, including 602 million USD in short-term borrowings and the current portion of debt. Long-term interest-bearing debt stood at 40.80 billion USD. Lease liabilities were reported separately: 686 million USD current and 13.78 billion USD long-term. Total assets were 59.55 billion USD, while negative equity was due to the scale of share buybacks, which is typical for the franchising asset-light model. Quarterly interest expenses reached 390 million USD. With an operating income of 3.23 billion USD, interest coverage remains strong
• Cash flows and free cash: operating cash flow for the quarter was 1.20 billion USD, with capital expenditure of 744 million USD, resulting in free cash flow of about 1.25 billion USD. For the half-year, OCF was 4.43 billion USD, CapEx was 1.29 billion USD, and FCF was 3.13 billion USD. This cash generation is underpinned by the predominance of franchising income and margin stability under the royalty + rental model
• Capital allocation: during the quarter, 1.27 billion USD was allocated to dividends and 505 million USD to share buybacks. For the half-year, dividends totalled 2.53 billion USD and buybacks 982 million USD. The company is also refining its debt profile: in Q2, it raised 1.40 billion USD in long-term financing while repaying 700 million USD. Net short-term borrowings increased by 597 million USD. The combination of resilient FCF and access to debt markets enables a high return on capital without significantly raising liquidity risks
• Quality of reporting and business structure: quarterly revenue was 6.84 billion USD, and operating income was 3.23 billion USD. Growth was mainly driven by franchising payments, while other restaurant-related expenses rose, and company-operated restaurants remain more exposed to cost pressures. Around 95% of outlets worldwide are franchised, reducing capital intensity and supporting profit-to-cash conversion
• Financial resilience: the balance sheet and cash flow appear solid, net financial debt after accounting for cash is moderate for the business scale, interest expenses are well covered by operating profit, and FCF consistently funds dividends and a large part of buybacks. Key risks include pressure on perceived value in the US and uncertainty in China, which may necessitate more aggressive promotions and affect profitability at company-operated restaurants, as well as the gradual rise in interest expenses. However, the asset-light model, global scale, and tight capital discipline provide resilience. In the coming quarters, the company’s priority will be to sustain comparable sales without over-reliance on promotions and discounts, preserve free cash flow margins, and manage debt prudently

Expert forecasts for McDonald's Corporation shares in 2025

• Barchart: 14 out of 34 analysts rated McDonald's shares as Strong Buy, 1 as Moderate Buy, 18 as Hold, and 1 as Strong Sell, with price targets ranging from 260 USD to 373 USD
• MarketBeat: 13 out of 28 analysts assigned a Buy rating, 13 a Hold, and 2 a Sell, with price targets between 250 USD and 365 USD
• TipRanks: 14 out of 28 analysts rated the shares as Buy, 13 as Hold, and 2 as Sell, with forecasts spanning 250 USD to 552 USD
• Stock Analysis: 6 out of 26 analysts rated the shares as Strong Buy, 8 as Buy, 11 as Hold, and 1 as Strong Sell, with price targets from 260 USD to 365 USD

McDonald's Corporation stock price forecast for 2025

On the weekly chart, McDonald's shares have formed a Wedge pattern, signalling a high probability of a decline in MCD shares. The lower trendline has already been breached, and the price has returned to retest it as resistance. Until the trendline is broken to the upside, the chart continues to indicate a predominance of downward pressure. Based on the current performance of McDonald's Corporation, the likely price movements for 2025 are as follows:

The base case forecast for McDonald's Corporation shares anticipates a rebound from the resistance line, followed by a decline towards the support level at 277 USD. A bounce from this support would signal the resumption of the uptrend, with the first upside target at 320 USD.

The optimistic outlook for McDonald's Corporation stock assumes a breakout above the 320 USD resistance. In this scenario, MCD shares could reach the upper boundary of the ascending channel at 360 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 sales in the US 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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