01—Abstract
Summary
Summary of the 10-Q filed May 6, 2026. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. reported first-quarter 2026 results (quarter ended March 31, 2026) with total revenues of $2.06 billiona, up from $1.79 billion a year earlier, and operating profit of $644 million versus $548 million. Net income rose to $432 million, or $1.55 diluted EPS, compared with $253 million, or $0.90 diluted EPS, in the prior-year quarter. The filing notes that the current quarter's results include Special Items, including a credit card interchange fee litigation settlement that contributed about $44 million of income and $37 million of charges tied to the Pizza Hut strategic options review.
Excluding Special Items, diluted EPS was $1.50b versus $1.30 a year earlier. The company reported worldwide system sales growth of 6% excluding FX, same-store sales growth of 3%, and 1,030 gross unit openings for a net increase of 400 units. Balance sheet and capital allocation remain central to the investment case.
Total shareholders' deficit was $(7.28) billion at March 31, 2026. Long-term debt fell to $10.21 billionc from $11.87 billion, while short-term borrowings rose to $1.74 billion, reflecting the reclassification of Term Loan A and Revolving Facility borrowings to current because of the June 1, 2027 maturity of $750 million in Subsidiary Senior Unsecured Notes. During the quarter the company repurchased shares for $185 million and paid $207 million in dividends, and it had about $0.9 billion of remaining repurchase capacity under its May 2024 authorization.
The filing also discloses an ongoing IRS dispute over approximately $2.1 billiond of asserted tax underpayments plus $418 million in penalties for fiscal 2014, with interest of approximately $2.2 billion accruing through March 31, 2026. The company has not recorded a reserve, believing its tax position is more likely than not to be sustained, but states an unfavorable resolution could be materially adverse. The company also continues a strategic options review for the Pizza Hut brand, which it intends to complete in 2026.
02—Key points
Key Highlights
- Total revenues rose to $2,059 million from $1,787 million, and Company sales increased to $785 million from $607 million.
- Operating profit increased to $644 million from $548 million; Core Operating Profit was $612 million versus $575 million.
- Diluted EPS was $1.55 (GAAP) versus $0.90, and $1.50 excluding Special Items versus $1.30 in the prior-year quarter.
- The effective tax rate was 16.2% versus 41.0% in the prior-year quarter, with the prior year affected by a $92 million Mexican foreign tax reserve.
- Worldwide system sales grew 6% excluding FX and same-store sales grew 3%; 1,030 gross unit openings produced 400 net new units.
- Total debt-related balance sheet shifts: long-term debt fell to $10,213 million from $11,872 million, while short-term borrowings rose to $1,741 million.
- An IRS dispute involving asserted underpayments of about $2.1 billion plus $418 million in penalties for fiscal 2014 remains in Tax Court litigation, with no reserve recorded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Yum! Brands kept $0.21.
- Revenue$2.06B100.0%
- Cost of revenue−$677.0M32.9%
- Gross profit$1.38B67.1%
- Operating costs−$738.0M35.8%
- Operating income$644.0M31.3%
- Interest, other & tax−$212.0M10.3%
- Net income$432.0M21.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed May 6, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $2.06B$1.79B | +15.2% |
| Cost of Revenue | $677.00M$520.00M | +30.2% |
| Gross Profit | $1.38B$1.27B | +9.1% |
| Operating Expenses | $1.42B$1.24B | +14.2% |
| Operating Income | $644.00M$548.00M | +17.5% |
| Net Income | $432.00M$253.00M | +70.8% |
| EPS (Basic) | $1.56$0.91 | +71.4% |
| EPS (Diluted) | $1.55$0.90 | +72.2% |
| Shares Outstanding (Basic) | 277.00M280.00M | −1.1% |
| Shares Outstanding (Diluted) | 279.00M282.00M | −1.1% |
05—Questions
Frequently Asked Questions
What drove the large increase in net income this quarter?
Net income rose to $432 million from $253 million. Operating profit increased to $644 million from $548 million, and the effective tax rate fell to 16.2% from 41.0%. The prior-year tax rate was unfavorably affected by a $92 million reserve tied to a Mexican subsidiary. The current quarter also included a $44 million net litigation settlement gain, which the company treats as a Special Item.
What are the Special Items affecting this quarter's results?
The company recorded a $44 million net gain from a credit card interchange fee litigation settlement, offset in part by $37 million of charges related to the Pizza Hut strategic options review and $1 million of Brand HQ consolidation charges. Special Items reduced operating profit by $6 million on a net basis and produced a net tax benefit of $8 million, which the company excludes when reporting EPS of $1.50 excluding Special Items.
How is the company managing its debt and refinancing?
Total long-term debt was $12,018 million gross at March 31, 2026. The company states that approximately 96% of its $11.5 billion of total debt outstanding (excluding the revolver, finance leases and issuance costs) is fixed, at an effective rate of approximately 4.5%. Term Loan A and Revolving Facility borrowings are classified as short-term because of the June 1, 2027 maturity of $750 million in Subsidiary Senior Unsecured Notes. The company expects to refinance those notes before the 91-day threshold and targets approximately 4.0x net leverage over the medium term.
How much capital was returned to shareholders this quarter?
The company repurchased shares of Common Stock for $185 million and paid $207 million in dividends on Common Stock. It declared dividends of $0.75 per share. Remaining capacity under the May 2024 repurchase authorization, which runs through December 31, 2026, was about $0.9 billion.
What is the status of the Pizza Hut strategic review and the IRS matter?
The company began a review of strategic options for Pizza Hut in 2025 and intends to complete it in 2026, with no assurance of any specific outcome or transaction. It incurred $37 million of related charges this quarter. For the IRS matter, the company filed a Tax Court petition in June 2025 contesting the asserted underpayments, and the litigation is ongoing. The company does not expect resolution within twelve months and records no reserve, but states an unfavorable outcome could be materially adverse.
06—Continue