Financial Analysis

Contingencies In the ordinary course of business, the Company is subject to proceedings, lawsuits and other claims primarily related to competitors, customers, employees, franchisees, government agencies, intellectual property, shareholders and suppliers. The Company is required to assess the likelihood of adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in a particular matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations.

CommitmentsAndContingenciesDisclosureTextBlock

Debt Financing LINE OF CREDIT AGREEMENTS At December 31, 2025, the Company had a line of credit agreement of $4.0 billion, which expires in June 2028. The Company incurs fees of 0.08% per annum on the total commitment, which remained unused. Fees and interest rates on this line are primarily based on the Company's long-term credit rating assigned by Moodys and Standard & Poor's. In addition, the Company's subsidiaries had unused lines of credit that were primarily uncommitted, short-term and denominated in various currencies at local market rates of interest. The weighted-average interest rate of short-term borrowings was 4.2% at December 31, 2025 (based on $4 million of foreign currency bank line borrowings and $798 million of commercial paper outstanding) and 4.6% at December 31, 2024 (based on $5 million of foreign currency bank line borrowings and $790 million of commercial paper outstanding). At December 31, 2025, $798 million of short-term borrowings and $725 million of current maturities of other debt obligations, were classified as Long-term debt on the Consolidated Balance Sheet as they are supported by a long-term line of credit agreement expiring in June 2028. DEBT OBLIGATIONS The Company has incurred debt obligations principally through public and private offerings and bank loans. There are no provisions in the Companys debt obligations that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Share-based Compensation The Company maintains a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and RSUs to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plan was 27.8 million at December 31, 2025, including 17.8 million available for future grants. Share-based compensation expense and the effect on diluted earnings per common share were as follows: In millions, except per share data 2025 2024 2023 Share-based compensation expense $ 165 $ 172 $ 175 After tax $ 146 $ 136 $ 155 Earnings per common share-diluted $ 0.21 $ 0.19 $ 0.21 As of December 31, 2025, there was $198 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 1.5 years. STOCK OPTIONS Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Companys stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. The following table presents the weighted-average assumptions used in the option pricing model for the 2025, 2024 and 2023 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

"Income Taxes Income before provision for income taxes, classified by source of income, was as follows: In millions 2025 2024 2023 U.S. $ 3,291 $ 3,282 $ 3,665 Outside the U.S. 7,606 7,062 6,857 Income before provision for income taxes $ 10,897 $ 10,345 $ 10,522 The provision for income taxes, classified by the timing and location of payment, was as follows: In millions 2025 2024 2023 U.S. federal $ 1,085 $ 1,412 $ 1,340 U.S. state 198 269 263 Outside the U.S. 1,177 1,014 1,137 Current tax provision 2,460 2,695 2,740 U.S. federal (349) (76) (146) U.S. state (84) (20) (30) Outside the U.S. 307 (478) (511) Deferred tax (benefit) provision (126) (574) (686) Provision for income taxes $ 2,334 $ 2,121 $ 2,053 Income taxes paid (net of refunds), classified by location of payment, were as follows: In millions 2025 Federal (1) $ 1,326 State 252 Foreign United Kingdom 357 France 156 Other foreign jurisdictions 597 Total income taxes paid, net $ 2,688 (1) Included in the income taxes paid amount is $429 million related to the purchase of Federal transferrable energy credits. Income taxes paid, net, was $3.0 billion for the years ended December 31, 2024 and 2023. Net deferred tax (assets) liabilities consisted of: In millions ' December 31, 2025 2024 Lease right-of-use asset $ 3,533 $ 3,213 Property and equipment 1,588 1,568 Intangible assets 91 187 Other 25 437 Total deferred tax liabilities 5,237 5,405 Lease liability (3,615) (3,292) Intangible assets (3,582) (3,495) Property and equi …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leasing Arrangements The Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Companys discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years. The following table provides detail of rent expense: In millions 2025 2024 2023 Restaurants $ 1,573 $ 1,531 $ 1,491 Other 58 51 51 Total rent expense $ 1,631 $ 1,582 $ 1,542 Rent expense included variable lease payments in excess of minimum rents (in millions) as followsCompany-owned and operated restaurants: 2025$46; 2024$55; 2023$56. Franchised restaurants: 2025$285; 2024$271; 2023$261. These variable lease payments are primarily based on a percent of sales. The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably certain of being exercised, discounted using a co …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements Income Taxes In December 2023, the FASB issued ASU No. 2023-09, ""Income Taxes (Topic 740): Improvements to Income Tax Disclosures"" (""ASU 2023-09""). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company adopted the new standard in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Refer to the Income Tax footnote on page 47 of this Form 10-K for the enhanced disclosures added as a result of the adoption of ASU 2023-09. 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 …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Employee Benefit Plans The Company's 401(k) Plan is maintained for U.S.-based employees and includes a 401(k) feature, as well as an employer match. The 401(k) feature allows eligible participants to make pre-tax and Roth contributions that are matched each pay period (with an annual true-up) through cash contributions. All current account balances, future contributions and related earnings can be invested in nine investment alternatives (including a target date fund series), as well as McDonalds stock in accordance with each participants investment elections. Future participant contributions are limited to 20% investment in McDonalds stock and participants may not transfer their existing account balance into McDonalds stock if the transfer would cause the value of their interest in the fund to exceed 20% of their total 401(k) Plan account balance. Participants may choose to make separate investment choices for current account balances and future contributions. The Company also maintains certain unfunded nonqualified supplemental benefit plans that allow participants to (i) make tax-deferred contributions and (ii) receive an annual Company-match allocation that cannot be made under the 401(k) Plan because of IRS limitations. The investment alternatives and returns are based on certain market-rate investment alternatives under the 401(k) Plan, net of expenses. Total liabilities were $421 million and $413 million at December 31, 2025 and 2024, respectively, and were primarily i …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"Segment and Geographic Information The Company operates under the following global organizational structure, which reflects how management reviews and evaluates operating performance: U.S. segment - the Companys largest market. The segment is 95% franchised as of December 31, 2025. 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 89% franchised as of December 31, 2025. International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonalds System, including equity method investments in China and Japan, as well as Corporate activities. The International Developmental Licensed Markets are 99% franchised as of December 31, 2025. 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 objec …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"Summary of Significant Accounting Policies NATURE OF BUSINESS The Company franchises and operates McDonalds restaurants in the global restaurant industry. All restaurants are either owned and operated by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees or affiliates under license agreements. The following table presents restaurant information by ownership type: Restaurants at December 31, 2025 2024 2023 Conventional franchised 22,570 22,077 21,818 Developmental licensed 9,675 9,247 8,684 Foreign affiliated 11,072 10,108 9,178 Total Franchised 43,317 41,432 39,680 Company-owned and operated 2,039 2,045 2,142 Total Systemwide restaurants 45,356 43,477 41,822 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 Consolidated Financial Statements. CONSOLIDATION The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Investments in affiliates owned 50% or less (primarily McDonalds China and Japan) are accounted for by the equity method. On an ongoing basis, the Company evaluates its business relationships such as those with franchisees, joint venture partners, developmental licensees, suppliers and advertising cooperatives to identify potential variable interest entities. Generally, these businesses qualify for a scope exception under the va …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

SUBSEQUENT EVENTS The Company evaluated subsequent events through the date the financial statements were issued and filed with the SEC. There were no subsequent events that required recognition or disclosure.

SubsequentEventsTextBlock

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 Companys 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. …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

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.

IncomeTaxDisclosureTextBlock

"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 St

NewAccountingPronouncementsPolicyPolicyTextBlock

"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 Companys growth pillars and an internal effort to modernize ways of working, Accelerating the Organization , both of which are aimed at elevating the Companys 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-c …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"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 McDonalds 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 re …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing