Second Quarter 2026
Filed Jul 30, 2026Revenue Increased by 13%; Operating Profit Up 14%; Diluted EPS Grew 21%
Second-quarter revenue increased 13% YoY to $3.1 billion, operating profit increased 14% YoY to $348 million, and diluted EPS increased 21% YoY to $0.70. Same-store sales growth improved sequentially to 1%, while the Company opened a second-quarter record 560 net new stores and expanded OP margin by 20 basis points.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $3.1 billion | – | +13% |
| Total revenues excluding F/XGAAP | $3.1 billion | – | +6% |
| System Sales Growthother | 6% | – | – |
| Same-Store Sales Growthother | 1% | – | – |
| Same-Store Transactions Growthother | 5% | – | – |
| Operating ProfitGAAP | 348 ($mn) | – | +14% |
| Operating Profit excluding F/XGAAP | 348 ($mn) | – | +7% |
| Adjusted Operating Profitnon-GAAP | 348 ($mn) | – | +14% |
| Core Operating Profitnon-GAAP | 328 ($mn) | – | – |
| Core Operating Profit excluding F/Xnon-GAAP | 328 ($mn) | – | +7% |
| OP MarginGAAP | 11.1% | – | +0.2 |
| Core OP Marginnon-GAAP | 11.1% | – | – |
| Net IncomeGAAP | 244 ($mn) | – | +14% |
| Net Income excluding F/XGAAP | 244 ($mn) | – | +6% |
| Adjusted Net Incomenon-GAAP | 244 ($mn) | – | +14% |
| Diluted Earnings Per Common ShareGAAP | $0.70 | – | +21% |
| Diluted Earnings Per Common Share excluding F/XGAAP | $0.70 | – | +14% |
| Adjusted Diluted Earnings Per Common Sharenon-GAAP | $0.70 | – | +21% |
| Restaurant Marginother | 16.1% | – | flat YoY |
| Delivery Sales Growthother | 26% | – | 26% YoY |
| Delivery contribution to total Company salesother | approximately 54% | – | – |
| Net new stores openedother | 560 | – | 67% higher than the openings in the same quarter last year |
| Total store countother | 19,297 | – | – |
| Franchise-operated storesother | 18% | – | – |
| Active Members of KFC or Pizza Hutother | exceeded 270 million | – | 6% YoY increase |
| First Half Operating ProfitGAAP | 795 ($mn) | – | +13% |
| First Half Adjusted Operating Profitnon-GAAP | 795 ($mn) | – | +13% |
| First Half Core Operating Profitnon-GAAP | 751 ($mn) | – | – |
| First Half OP MarginGAAP | 12.4% | – | +0.2 |
| First Half Net IncomeGAAP | 553 ($mn) | – | +9% |
| First Half Diluted Earnings Per Common ShareGAAP | $1.57 | – | +16% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| KFCSystem sales grew 7% YoY and same-store sales increased 1% YoY. Same-store transactions grew 4% YoY, while ticket average was 3% lower YoY, mainly due to incremental smaller orders from new customer segments and occasions, including KCOFFEE and KPRO. | 2,338 ($mn) | – | +12% |
| Pizza HutSystem sales grew 6% YoY and same-store sales growth returned to positive at 1%. Same-store transactions grew 13% YoY and more than offset the 11% decline in ticket average, which moved closer to the target range primarily due to value-for-money offerings and incremental smaller orders such as those from solo diners. | 613 ($mn) | – | +11% |
2026 Outlook outlook
- NoteTotal stores of over 20,000, or more than 1,900 net new stores.
- Note40-50% franchise mix of net new stores for both KFC and Pizza Hut.
- NoteCapital expenditures of approximately $600 million to $700 million.
- Note$1.5 billion capital return to shareholders.
Capital returns
- Returned $402 million to shareholders through $301 million in share repurchases and $101 million in cash dividends.
- In the first half of 2026, the Company returned $718 million in capital to shareholders through $515 million in share repurchases and $203 million in cash dividends.
- The Board declared a cash dividend of $0.29 per share on Yum China’s common stock, payable on September 17, 2026, to shareholders of record as of the close of business on August 27, 2026.
- The Company is on track to return $1.5 billion each year from 2024 to 2026.
- Starting in 2027, the Company plans to return approximately 100% of annual free cash flow after subsidiaries’ dividend payments to non-controlling interests.
- This is anticipated to translate into an average annual return of approximately $900 million to over $1 billion in 2027 and 2028, and to exceed $1 billion in 2028.
What drove it
- Same-store sales growth improved sequentially to 1%, supported by the 14th consecutive quarter of same-store transaction growth.
- Delivery sales grew 26% YoY and delivery contributed approximately 54% of total Company sales, up from 45% in the same quarter last year.
- KFC restaurant margin increased 20 basis points YoY, primarily due to streamlined operations and favorable commodity prices, partially offset by increased rider cost from higher delivery mix and value-for-money offerings.
- Pizza Hut opened 174 net new stores during the quarter, nearly double the net openings in the same quarter last year.
- The Company cited menu innovations, side-by-side modules, KCOFFEE cafe, KPRO, car-side pickup services, Pizza Hut Burger Bar, KFC Small Town and Pizza Hut WOW models as growth drivers.
Concerns
- Restaurant margin was 16.1%, flat YoY, primarily due to increased rider cost from a higher delivery mix, offset by streamlined operations.
- Pizza Hut restaurant margin decreased 40 basis points YoY to 12.9%, reflecting increased costs associated with higher delivery sales mix, value-for-money offerings and investment in Pizza Hut Burger Bar.
- KFC ticket average was 3% lower YoY and Pizza Hut ticket average declined 11% YoY.
- Management expects tougher comparisons in the second half of the year following last year’s delivery platform subsidies.
- The planned Pizza Hut brand acquisition is expected to be financed with an approximately $1.2 billion equivalent offshore bridge loan.
What to watch
- Closing of the Pizza Hut brand acquisition in Mainland China in August.
- License-fee savings and management's expectation that Pizza Hut's restaurant margin will approach KFC's.
- Progress toward total stores of over 20,000 and more than 1,900 net new stores.
- Delivery mix, rider costs and their effect on restaurant margins.
- Same-store sales performance against tougher second-half comparisons following last year’s delivery platform subsidies.
- Execution against the approximately $600 million to $700 million capital expenditure target and $1.5 billion capital-return target.
Balance sheet and cash flow
- The Company plans to secure an approximately $1.2 billion equivalent offshore bridge loan to finance the acquisition of the Pizza Hut brand in Mainland China.
Analysis
Yum China reported broad second-quarter growth, with total revenues increasing 13% YoY to $3.1 billion, operating profit increasing 14% YoY to $348 million, and diluted EPS increasing 21% YoY to $0.70. On an excluding-F/X basis, revenue growth was 6%, operating-profit growth was 7%, and diluted EPS growth was 14%. System sales grew 6% and same-store sales grew 1%, with same-store transactions up 5% for the 14th consecutive quarter of growth.
Management, verbatim
We delivered strong results in the second quarter. For the ninth consecutive quarter, we simultaneously grew system sales, operating profit and OP margin.
Joey Wat, CEO of Yum China
While the operating environment remains dynamic, our topline growth continued to outperform the industry in Q2.
Joey Wat, CEO of Yum China
In the near term, we expect the savings in license fees to support margin expansion, with Pizza Hut's restaurant margin approaching KFC's.
Joey Wat, CEO of Yum China
Not in the filing
stated, not guessed- Total revenue prior-year amount
- Total revenue prior-quarter amount
- Gross margin
- Operating expenses
- Tax rate
- Operating cash flow
- Free cash flow for the reported quarter
- Cash balance
- Debt balance
- Total Company restaurant margin prior-year percentage
- Total Company restaurant margin prior-quarter percentage
- Total Company revenue for the first half
- KFC and Pizza Hut revenue prior-quarter amounts
- Prior outlook for comparison
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.