McDonald's Q1 Earnings: Consumer Caution, Traffic Declines, and Value Strategy Define a Soft Start to 2025

McDonald’s kicked off 2025 with a first-quarter report that revealed mounting pressure on its core U.S. customer base, as soft consumer sentiment, economic uncertainty, and weak guest traffic weighed on the numbers. While the fast-food giant managed to narrowly beat on earnings per share, it fell short of revenue expectations and posted its largest U.S. same-store sales decline since the depths of the pandemic in 2020. Executives emphasized plans to maintain aggressive value strategies, including the continuation of its $5 meal deal through year-end, as it looks to regain guest counts and market share after what it called a “low point” in performance.

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Headline Results: EPS Beat, Revenue Miss

For the first quarter, McDonald’s posted adjusted earnings per share of $2.67, narrowly topping the Street consensus of $2.66. However, revenue came in light at $5.96 billion, below analyst expectations of $6.09 billion. On a reported basis, EPS was $2.60, down from $2.66 a year ago, and net income declined 3% to $1.87 billion. Operating income fell 3% as well, impacted modestly by restructuring charges related to the company’s ongoing transformation strategy. Stripping out those items, adjusted operating income was down 2%.

Ask Aime: Why Did McDonald's Miss Revenue Expectations?

Same-Store Sales: U.S. Suffers Steepest Drop Since Pandemic

Comparable sales across the system fell 1.0%, missing analyst forecasts for a 0.5% gain. The biggest disappointment came from the U.S. segment, where same-store sales tumbled 3.6%, nearly doubling the expected 1.7% decline and marking the worst performance since Q2 2020. Company executives attributed the drop to a confluence of bad winter weather, inflation fatigue, and widespread economic anxiety, particularly among low- and middle-income consumers. According to CEO Chris Kempczinski, QSR traffic from low-income Americans fell nearly double digits, while middle-income consumers were not far behind.

International markets were mixed. The International Operated Markets segment saw same-store sales fall 1.0%, led by weakness in the U.K., where the consumer backdrop also remains fragile. Meanwhile, the International Developmental Licensed Markets—covering China, Japan, and Brazil—delivered 3.5% comp growth, narrowly ahead of expectations and boosted by strength in the Middle East and Asia.

Key Drivers and Management Commentary

Management cited several headwinds contributing to the soft start to the year. Geopolitical instability, persistent inflationary pressures, and recent U.S. tariffs have collectively dented consumer confidence, especially among McDonald’s core value-seeking customers. “Unlike a few months ago, QSR traffic from middle-income consumers fell nearly as much as low-income consumers,” Kempczinski said, underlining the breadth of the slowdown. He added that wealthier customers have been more resilient, but they make up a smaller portion of the customer base.

In response, the company is doubling down on affordability and value. CFO Ian Borden confirmed McDonald’s will continue offering its $5 meal deal for the rest of 2025 and is rolling out other low-cost promotions across markets. These offers are expected to gain more traction later this year. Additionally, the return of popular limited-time items like snack wraps is aimed at luring budget-conscious customers back into stores.

Despite the weak results, McDonald’s maintained its full-year outlook. The company reaffirmed plans to open 2,200 new restaurants in 2025 and spend $3.0–$3.2 billion on CapEx. Net restaurant openings are expected to contribute slightly more than 2% to system-wide sales growth, which the company hopes will help offset domestic traffic softness.

Market Reaction and Strategic Implications

Shares of McDonald’s slipped around 2% in premarket trading following the earnings release, underperforming peers and the broader market. The results, while not entirely unexpected, add to a narrative of weakening consumer momentum that began to emerge late last year. Notably, this is the second consecutive quarter of U.S. same-store sales declines and suggests that even McDonald’s—known for its brand strength and price flexibility—is not immune to macro pressures.

Analysts remain divided on the outlook. Some, like Bernstein’s Danilo Gargiulo, see the report as confirmation of persistent structural headwinds impacting QSR chains reliant on lower-income traffic. Others, such as Citi’s Jon Tower, note that Q1 was flagged in advance as a likely trough and are watching closely to see if the company can reaccelerate through its value and menu innovations.

Conclusion

McDonald’s Q1 report underscores the challenges facing consumer-facing companies in a fragmented economy where purchasing power and sentiment diverge sharply across income groups. While the company’s ability to defend margins and maintain strategic investments is notable, recapturing traffic and top-line momentum—particularly in the U.S.—remains the critical hurdle. If consumer conditions improve and value offerings gain traction, McDonald’s could rebound in the second half. For now, management is signaling that the recovery will be gradual and hard-won.