Fast-food company Yum China (NYSE: YUMC) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.4% year on year to $3.21 billion. Its non-GAAP profit of $0.76 per share was in line with analysts’ consensus estimates.
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Yum China (YUMC) Q3 CY2025 Highlights:
- Revenue: $3.21 billion vs analyst estimates of $3.20 billion (4.4% year-on-year growth, in line)
- Adjusted EPS: $0.76 vs analyst estimates of $0.76 (in line)
- Operating Margin: 12.5%, in line with the same quarter last year
- Free Cash Flow Margin: 10.9%, up from 7.9% in the same quarter last year
- Locations: 17,514 at quarter end, up from 15,861 in the same quarter last year
- Same-Store Sales rose 1% year on year (-3% in the same quarter last year)
- Market Capitalization: $15.86 billion
Total system sales grew 4% year over year ("YoY"), excluding foreign currency translation ("F/X").
Company Overview
One of China’s largest restaurant companies, Yum China (NYSE: YUMC) is an independent entity spun off from Yum! Brands in 2016.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $11.57 billion in revenue over the past 12 months, Yum China is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost. However, its scale is a double-edged sword because there are only a finite of number places to build restaurants, making it harder to find incremental growth. To expand meaningfully, Yum China likely needs to tweak its prices, start new chains, or enter new markets.
As you can see below, Yum China grew its sales at a sluggish 4.9% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts).
This quarter, Yum China grew its revenue by 4.4% year on year, and its $3.21 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months, similar to its six-year rate. This projection doesn't excite us and implies its newer menu offerings will not accelerate its top-line performance yet.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.
Yum China sported 17,514 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 12% annual growth, among the fastest in the restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing restaurants and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Yum China’s demand within its existing dining locations has barely increased over the last two years as its same-store sales were flat. Yum China should consider improving its foot traffic and efficiency before expanding its restaurant base.
In the latest quarter, Yum China’s same-store sales rose 1% year on year. This growth was a well-appreciated turnaround from its historical levels, showing the business is regaining momentum.
Key Takeaways from Yum China’s Q3 Results
Both revenue and EPS were in line with analysts’ expectations this quarter. This was a quarter without many surprises, good or bad. The market seemed to be hoping for more, and the stock traded down 1.1% to $43.50 immediately after reporting.
So do we think Yum China is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
