Fast-food company Restaurant Brands (NYSE:QSR) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 15.9% year on year to $2.41 billion. Its non-GAAP profit of $0.94 per share was 2.8% below analysts’ consensus estimates.
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Restaurant Brands (QSR) Q2 CY2025 Highlights:
- Revenue: $2.41 billion vs analyst estimates of $2.34 billion (15.9% year-on-year growth, 2.9% beat)
- Adjusted EPS: $0.94 vs analyst expectations of $0.97 (2.8% miss)
- Adjusted EBITDA: $762 million vs analyst estimates of $769.2 million (31.6% margin, 0.9% miss)
- Operating Margin: 20%, down from 31.9% in the same quarter last year
- Locations: 32,229 at quarter end, up from 31,324 in the same quarter last year
- Same-Store Sales rose 2.4% year on year, in line with the same quarter last year
- Market Capitalization: $21.35 billion
StockStory’s Take
Restaurant Brands’ second quarter saw strong revenue growth, surpassing Wall Street’s expectations, but non-GAAP profit fell short, contributing to a negative market reaction. Management attributed the mixed performance to ongoing operational improvements at Tim Hortons and within international markets, while noting cost pressures and complexity surrounding its Burger King China transition. CEO Josh Kobza highlighted, “Our two largest businesses, representing nearly 70% of adjusted operating income, delivered strong performance,” but also acknowledged persistent challenges in key segments, particularly margin pressure and bad debt expenses.
Looking forward, Restaurant Brands is focused on disciplined cost management, continued modernization of its core brands, and simplification of its business model. Management aims to deliver at least 8% organic adjusted operating income growth in 2025, citing franchisee alignment and operational initiatives as critical to achieving this goal. CFO Sami Siddiqui cautioned that commodity cost inflation, particularly in beef, and early-stage losses from market development will remain headwinds. The company believes that strategic investments in digital, remodeling, and operational efficiency will be essential for long-term value creation.
Key Insights from Management’s Remarks
Management emphasized that international and Tim Hortons operations drove quarterly growth, while operational complexity and cost headwinds weighed on profits. Strategic moves around refranchising and modernization were highlighted as central to future performance.
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International segment momentum: Management credited strong comparable sales growth in international markets such as Spain, Germany, and the U.K., supported by digital innovation and menu development. Burger King China, recently brought under direct control, returned to positive same-store sales, reinforcing the importance of local leadership and operational turnaround initiatives.
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Tim Hortons’ sustained performance: Tim Hortons posted its 17th consecutive quarter of positive comparable sales in Canada, with growth balanced between check size and traffic. New product launches, such as the Scrambled Eggs Loaded Breakfast Box and filled Timbits, alongside beverage innovation, were cited as key growth drivers.
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Burger King U.S. operational focus: U.S. operations modestly outperformed the segment, driven by improved customer experience, value offerings like $5 Duos and $7 Trios, and continued investment in restaurant remodels. Management noted that remodeled restaurants are generating mid-teen sales uplifts and enhanced profitability.
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Carrols refranchising acceleration: The company began refranchising Carrols' Burger King restaurants ahead of schedule. There is strong demand from existing franchisees and internal leaders, with management prioritizing placement with engaged operators for long-term success.
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Margin compression and cost discipline: Operating margin declined year-over-year, with management pointing to commodity inflation, especially in beef, and increased bad debt expense primarily in the international segment. Cost control measures, including reduced G&A and targeted CapEx, were highlighted as responses to these challenges.
Drivers of Future Performance
Restaurant Brands’ outlook centers on operational execution, franchisee engagement, and navigating inflationary headwinds, balanced by targeted growth investments.
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Commodity cost pressures: Management expects continued inflation in beef to drive up Burger King U.S. costs, with CFO Sami Siddiqui noting that beef makes up about a quarter of the commodity basket and is experiencing high-teens price increases. While some commodity normalization is anticipated in the medium term, these costs are expected to compress margins in the near future.
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Refranchising and modernization initiatives: Accelerating the refranchising of Carrols restaurants and ongoing investment in the modernization of Burger King assets are seen as critical to improving operational consistency and profitability. Management believes expanding the Sizzle remodel program and supporting high-performing franchisees will drive higher sales and guest satisfaction.
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Expansion in international and growth markets: The company is focused on scaling brands like Popeyes and Firehouse Subs internationally, leveraging strong local teams and innovation. Management highlighted early-stage investments in China and Brazil as necessary for future growth, despite current losses, and expects these regions to be meaningful contributors over the long term.
Catalysts in Upcoming Quarters
Going forward, the StockStory team is closely monitoring (1) the pace and profitability of Carrols refranchising and Burger King remodels, (2) the ability to offset commodity cost inflation through operational improvements and pricing discipline, and (3) the execution of international expansion strategies, particularly in China and Brazil. Progress on digital transformation and guest experience metrics will also be key indicators of sustained momentum.
Restaurant Brands currently trades at $65.02, down from $68.60 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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