Yum China delivered QQ2 2025 revenue of $2.787 billion, up 4.03% year over year but down 6.51% quarter over quarter, reflecting seasonality and ongoing macro headwinds in China. The period featured a healthy gross margin of approximately 17.1%, an operating margin near 10.9%, and a net margin around 7.7%, with diluted EPS of $0.57. Operating cash flow totaled $414.6 million and free cash flow reached $291.8 million, underscoring strong cash generation even as the company continues to invest behind store growth and digitization. Net debt stood at roughly $1.64 billion on a total debt base of about $2.23 billion, with cash and cash equivalents of $592 million and a sizeable liquidity cushion from short-term investments in total (~$2.16 billion). These dynamics support a constructive near-term investment thesis, provided the company can sustain revenue growth through same-store sales (SSS), manage input costs, and execute on its store/network optimization and digital strategy.
Key takeaway: Yum China remains well-positioned in China’s large and fragmented QSR market, leveraging a powerful brand portfolio (KFC and Pizza Hut) and an expanding delivery/digital ecosystem. The quarter’s YoY revenue strength combined with solid profitability and robust operating cash flow validate the focus on efficiency, menu localization, and expansion. However, the QoQ deceleration and continued macro uncertainty in China warrant close monitoring of consumer demand, price/mix discipline, and cost inflation in labor and commodities.