McDonald's MCD · USD

Segment and Geographic InformationThe Company operates under the following global organizational structure, which reflects how management reviews and evaluates operating performance:•U.S. segment - the Company’s largest market. The segment is 95% franchised as of December 31, 2025.•International Operated Markets segment - comprised of markets, or countries in which the Company owns and operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89% franchised as of December 31, 2025.•International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonald’s System, including equity method investments in China and Japan, as well as Corporate activities. The International Developmental Licensed Markets are 99% franchised as of December 31, 2025. The Company's chief operating decision makers ("CODMs") are the President and Chief Executive Officer ("CEO") and the Executive Vice President and Global Chief Financial Officer ("CFO"). Segment performance is evaluated based on one measure of a segment's profit or loss, operating income, which is used to allocate resources in the annual planning process. Throughout the year, the CODMs consider forecast to actual operating income results and variances against plan to evaluate segment performance and priorities related to allocation of capital and resources supporting organizational objectives.All intercompany revenues and expenses are eliminated in computing revenues and operating income. Corporate general and administrative expenses consist of corporate office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Corporate assets include corporate cash and equivalents, financial instruments, deferred tax assets and office facilities. In millions202520242023U.S.$10,825 $10,631 $10,568 International Operated Markets13,633 12,628 12,382 International Developmental Licensed Markets & Corporate2,427 2,661 2,543 Total Revenues$26,885 $25,920 $25,494 U.S.$1,293 $1,294 $1,286 International Operated Markets1,324 1,231 1,170 International Developmental Licensed Markets & Corporate1 11 19 Total Franchised restaurants-occupancy expenses$2,618 $2,536 $2,475 U.S.

Debt FinancingLINE OF CREDIT AGREEMENTSAt December 31, 2025, the Company had a line of credit agreement of $4.0 billion, which expires in June 2028. The Company incurs fees of 0.08% per annum on the total commitment, which remained unused. Fees and interest rates on this line are primarily based on the Company's long-term credit rating assigned by Moody’s and Standard & Poor's. In addition, the Company's subsidiaries had unused lines of credit that were primarily uncommitted, short-term and denominated in various currencies at local market rates of interest. The weighted-average interest rate of short-term borrowings was 4.2% at December 31, 2025 (based on $4 million of foreign currency bank line borrowings and $798 million of commercial paper outstanding) and 4.6% at December 31, 2024 (based on $5 million of foreign currency bank line borrowings and $790 million of commercial paper outstanding). At December 31, 2025, $798 million of short-term borrowings and $725 million of current maturities of other debt obligations, were classified as Long-term debt on the Consolidated Balance Sheet as they are supported by a long-term line of credit agreement expiring in June 2028.DEBT OBLIGATIONSThe Company has incurred debt obligations principally through public and private offerings and bank loans. There are no provisions in the Company’s debt obligations that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company’s business. Certain of the Company’s debt obligations contain cross-acceleration provisions, and restrictions on Company and subsidiary mortgages and the long-term debt of certain subsidiaries. Under certain agreements, the Company has the option to retire debt prior to maturity, either at par or at a premium over par. The Company has no current plans to retire a significant amount of its debt prior to maturity, but continues to look for ways to optimize its debt portfolio. The following table summarizes the Company’s debt obligations (interest rates and debt amounts reflected in the table include the effects of interest rate swaps used to hedge debt).Interest rates(1)December 31Amounts outstandingDecember 31In millions of U.S. DollarsMaturity dates2025202420252024Fixed4.4 %4.2 %$23,233 $24,134 Floating5.1 5.7 1,298 1,290 Total U.S. Dollar2027-205324,531 25,424 Fixed2.6 2.5 11,486 8,875 Floating— 5.3 — 311 Total Euro2026-203511,486 9,186 Fixed3.7 3.

Income Taxes Income before provision for income taxes, classified by source of income, was as follows:In millions202520242023U.S.$3,291 $3,282 $3,665 Outside the U.S.7,606 7,062 6,857 Income before provision for income taxes $10,897 $10,345 $10,522 The provision for income taxes, classified by the timing and location of payment, was as follows: In millions202520242023U.S. federal$1,085 $1,412 $1,340 U.S. state198 269 263 Outside the U.S.1,177 1,014 1,137 Current tax provision2,460 2,695 2,740 U.S. federal(349)(76)(146)U.S. state(84)(20)(30)Outside the U.S.307 (478)(511)Deferred tax (benefit) provision(126)(574)(686)Provision for income taxes$2,334 $2,121 $2,053 Income taxes paid (net of refunds), classified by location of payment, were as follows:In millions2025Federal(1)$1,326 State252 ForeignUnited Kingdom 357 France156 Other foreign jurisdictions597 Total income taxes paid, net$2,688 (1)Included in the income taxes paid amount is $429 million related to the purchase of Federal transferrable energy credits.Income taxes paid, net, was $3.0 billion for the years ended December 31, 2024 and 2023. Net deferred tax (assets) liabilities consisted of:In millions'December 31, 20252024Lease right-of-use asset$3,533 $3,213 Property and equipment1,588 1,568 Intangible assets91 187 Other25 437 Total deferred tax liabilities5,237 5,405 Lease liability(3,615)(3,292)Intangible assets(3,582)(3,495)Property and equipment(488)(469)Deferred foreign tax credits(69)(50)Employee benefit plans(168)(168)Deferred revenue(141)(113)Operating loss carryforwards(197)(195)Other(155)(170)Total deferred tax assets before valuation allowance(8,415)(7,951)Valuation allowance960 917 Net deferred tax (assets) liabilities$(2,218)$(1,629)Balance sheet presentation:Deferred income taxes$1,038 $1,914 Other assets-miscellaneous(3,256)(3,543)Net deferred tax (assets) liabilities$(2,218)$(1,629)At December 31, 2025, the Company had net operating loss carryforwards of $878 million, of which $764 million has an indefinite carryforward. The remainder will expire at various dates from 2026 to 2046.The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows:2025Dollars in millionsAmountPercentStatutory U.S. federal income tax rate$2,288 21.0 %State income taxes, net of related federal income tax benefit(1)149 1.4 Foreign tax effects226 2.

Share-based CompensationThe Company maintains a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and RSUs to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plan was 27.8 million at December 31, 2025, including 17.8 million available for future grants.Share-based compensation expense and the effect on diluted earnings per common share were as follows:In millions, except per share data202520242023Share-based compensation expense$165 $172 $175 After tax$146 $136 $155 Earnings per common share-diluted$0.21 $0.19 $0.21 As of December 31, 2025, there was $198 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 1.5 years. STOCK OPTIONSStock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company’s stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. The following table presents the weighted-average assumptions used in the option pricing model for the 2025, 2024 and 2023 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. Expected stock price volatility is generally based on the historical volatility of the Company’s stock for a period approximating the expected life. The expected dividend yield is based on the Company’s most recent annual dividend rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected life.Weighted-average assumptions 202520242023Expected dividend yield2.3 %2.3 %2.3 %Expected stock price volatility21.5 %21.2 %21.6 %Risk-free interest rate4.5 %4.1 %3.9 %Expected life of options (in years)5.85.85.8Fair value per option granted$66.69 $59.82 $54.35 Intrinsic value for stock options is defined as the difference between the current market value of the Company’s stock and the exercise price. During 2025, 2024 and 2023, the total intrinsic value of stock options exercised was $240 million, $269 million and $304 million, respectively.

The CISO reports to the CIO. McDonald’s CIO and CISO are responsible for assessing and implementing our cybersecurity risk management programs, which are informed by the National Institute of Standards and Technology (NIST) Cybersecurity Framework. These leaders and their teams have significant relevant experience in various fields, such as incident response, application security, data security, network security and identity and access management, and have implemented and executed security programs across multiple industries at Fortune 100 companies. Our programs are designed to create a comprehensive, cross-functional approach to identify, assess, manage and mitigate cybersecurity risks as well as to mitigate cybersecurity incidents to support business continuity and achieve operational resiliency.The CISO leads the Global Cybersecurity organization, which is responsible for executing the Company’s Global Cybersecurity Program and initiatives. This global program is responsible for identifying technology and cybersecurity risks and for implementing and maintaining controls to manage cybersecurity threats. These controls are designed to mitigate, detect and respond to cybersecurity incidents to help safeguard the confidentiality, integrity and availability of McDonald’s infrastructure, resources and information. McDonald’s Global Cybersecurity Program includes the following functions: •Cybersecurity Services, which is responsible for deploying and operating the frontline security controls that are designed to protect and defend McDonald’s against cyber-attacks. Cybersecurity teams are focused on specific areas of a layered defense, including Network Security, Endpoint Protection, Identity and Access Management, Data Security, and others, to ensure that these controls are integrated into critical systems and processes throughout the McDonald’s environment and operating effectively.•Cyber Defense, which is responsible for implementing and maintaining controls designed to detect and respond to cybersecurity incidents against McDonald’s and includes a dedicated function for incident response and regular monitoring for cybersecurity threats and vulnerabilities, including those among McDonald’s third-party suppliers.

ContingenciesIn the ordinary course of business, the Company is subject to proceedings, lawsuits and other claims primarily related to competitors, customers, employees, franchisees, government agencies, intellectual property, shareholders and suppliers. The Company is required to assess the likelihood of adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in a particular matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations.

Leasing ArrangementsThe Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Company’s discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years.The following table provides detail of rent expense:In millions202520242023Restaurants$1,573 $1,531 $1,491 Other58 51 51 Total rent expense$1,631 $1,582 $1,542 Rent expense included variable lease payments in excess of minimum rents (in millions) as follows–Company-owned and operated restaurants: 2025–$46; 2024–$55; 2023–$56. Franchised restaurants: 2025–$285; 2024–$271; 2023–$261. These variable lease payments are primarily based on a percent of sales.The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably certain of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably certain of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the sales performance of the restaurant remains strong. Therefore, the Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company, and are not currently a future obligation.The following table details amounts related to operating and finance leases recorded within the Company’s Consolidated Balance Sheet.

Employee Benefit PlansThe Company's 401(k) Plan is maintained for U.S.-based employees and includes a 401(k) feature, as well as an employer match. The 401(k) feature allows eligible participants to make pre-tax and Roth contributions that are matched each pay period (with an annual true-up) through cash contributions.All current account balances, future contributions and related earnings can be invested in nine investment alternatives (including a target date fund series), as well as McDonald’s stock in accordance with each participant’s investment elections. Future participant contributions are limited to 20% investment in McDonald’s stock and participants may not transfer their existing account balance into McDonald’s stock if the transfer would cause the value of their interest in the fund to exceed 20% of their total 401(k) Plan account balance. Participants may choose to make separate investment choices for current account balances and future contributions.The Company also maintains certain unfunded nonqualified supplemental benefit plans that allow participants to (i) make tax-deferred contributions and (ii) receive an annual Company-match allocation that cannot be made under the 401(k) Plan because of IRS limitations. The investment alternatives and returns are based on certain market-rate investment alternatives under the 401(k) Plan, net of expenses. Total liabilities were $421 million and $413 million at December 31, 2025 and 2024, respectively, and were primarily included in Other long-term liabilities on the Consolidated Balance Sheet.The Company has entered into contracts to hedge market-driven changes in certain of the liabilities. At December 31, 2025, derivatives with a fair value of $104 million indexed to the Company’s stock were included in Miscellaneous other assets and an investment totaling $247 million indexed to certain market indices were included in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Changes in liabilities for these nonqualified plans and in the fair value of the derivatives and investment are recorded primarily in Selling, general & administrative expenses. Changes in fair value of the derivatives indexed to the Company’s stock are recorded in the Consolidated Statement of Income because the contracts provide the counterparty with a choice to settle in cash or shares.Total U.S. costs for the 401(k) Plan and nonqualified benefits were immaterial to the Consolidated Statement of Income.