Yum! Brands, Inc. (YUM) Earnings & Analysis

Latest quarter

Yum! Brands reported Q2 FY2026 revenue of $2.2 billion, up 12.2% from Q2 FY2025, according to the company’s results. Against the consensus, Yum! reported adjusted EPS of $1.62 versus the $1.59 consensus, a 1.89% beat; it reported revenue of $2.2 billion versus the $2.2 billion consensus, or 0.55% below the consensus as measured by the company’s comparison.

The company reported diluted EPS of $3.08, compared with $1.33 a year earlier. Yum!’s filing says KFC’s quarterly operating-profit increase was driven by same-store sales and unit growth, while Taco Bell’s increase reflected same-store sales, acquired restaurants and unit growth. The filing says Pizza Hut’s operating-profit decline reflected higher advertising costs for its U.S. Hut Forward program, acquired restaurants and same-store sales declines.

Yum!’s gross margin was 67.7%, down 3.3 percentage points year over year, and operating margin was 30.2%, down 2.0 percentage points. The company reported free cash flow of $407.0 million, up 8.53% from a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chris Turner said Yum! delivered 7% system-sales growth excluding Pizza Hut, driven by 6% unit growth and 4% same-store-sales growth. He said KFC produced 6% system-sales growth, supported by 7% unit growth and 2% same-store-sales growth, while Taco Bell reported 7% same-store-sales growth and a 47% digital-sales mix. Turner said Taco Bell’s recent U.S. sales were affected by an industry-wide food-safety issue, but the company had seen steadily improving sales trends over the prior 10 days.

Turner said Taco Bell was using promotions, menu innovation, value and its loyalty app to support demand, and he said the brand aimed to return to sales growth that outpaced the broader quick-service restaurant industry. He also said KFC was pursuing a modernization strategy centered on boneless chicken, sauces, restaurant experience and refreshed branding, with an aspiration to have core elements operating across its top 20 markets by the end of 2027.

Ranjith Roy said digital sales approached $9 billion excluding Pizza Hut and digital mix reached 61%. He said Taco Bell U.S. restaurant-level margin reached 26.2%, reflecting sales leverage, cost optimization and a benefit from acquired stores. Roy said Yum! opened 720 stores excluding Pizza Hut, including 660 KFC locations across 55 markets.

Roy described Byte as Yum!’s technology platform for managing menus, prices, promotions and store hours across ordering channels. He said the company aspired for Byte to power the vast majority of system sales outside China over the long term.

In the Q&A, Roy answered a question on general and administrative spending by saying Yum! expected no change to its discipline after the Pizza Hut transaction and continued to target operating leverage from system-sales growth. Turner answered a question on Quench by saying franchisees would invest only where they expected a return and that the company would continue to learn and refine the program.

Guidance

Yum! now expects Taco Bell’s Q3 2026 equity-store operating margin to range from 19.0% to 21.0%, according to Ranjith Roy. Roy said the range reflected lower but improving sales, promotional investment and the concentration of Taco Bell’s company-operated locations in more affected markets.