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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

Commission file number 001-37762

Yum China Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		81-2421743
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

101 East Park Boulevard, Suite 805 Plano, Texas 75074 United States of America		Yum China Building 20 Tian Yao Qiao Road Shanghai 200030 People’s Republic of China

(Address, Including Zip Code, of Principal Executive Offices)

(469) 980-2898

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	YUMC	New York Stock Exchange
Common Stock, par value $0.01 per share	9987	The Stock Exchange of Hong Kong Limited

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of May 4, 2026 was 349,147,371 shares.

Yum China Holdings, Inc.

INDEX


		Page
		No.

Part I.	Financial Information

	Item 1 – Financial Statements	3

	Condensed Consolidated Statements of Income – Quarters Ended March 31, 2026 and 2025 (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income – Quarters Ended March 31, 2026 and 2025 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows – Quarters Ended March 31, 2026 and 2025 (Unaudited)	5

	Condensed Consolidated Balance Sheets – March 31, 2026 (Unaudited) and December 31, 2025	6

	Condensed Consolidated Statements of Equity – Quarters Ended March 31, 2026 and 2025 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3 – Quantitative and Qualitative Disclosures About Market Risk	40

	Item 4 – Controls and Procedures	40

Part II.	Other Information

	Item 1 – Legal Proceedings	41

	Item 1A – Risk Factors	41

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	41

	Item 5 – Other Information	41

	Item 6 – Exhibits	42

	Signatures	43

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Statements of Income (Unaudited)

Yum China Holdings, Inc.

(in US$ millions, except per share data)


	Quarter Ended
Revenues	3/31/2026			3/31/2025
Company sales	$	3,047		$	2,801
Franchise fees and income		30			27
Revenues from transactions with franchisees		156			121
Other revenues		38			32
Total revenues		3,271			2,981
Costs and Expenses, Net
Company restaurants
Food and paper		963			874
Payroll and employee benefits		813			719
Occupancy and other operating expenses		718			688
Company restaurant expenses		2,494			2,281
General and administrative expenses		137			138
Franchise expenses		12			11
Expenses for transactions with franchisees		150			117
Other operating costs and expenses		31			29
Closures and impairment expenses, net		—			6
Total costs and expenses, net		2,824			2,582
Operating Profit		447			399
Interest income, net		16			26
Investment (loss) gain		(11	)		3
Income Before Income Taxes and Equity in Net Earnings (Losses) from Equity Method Investments		452			428
Income tax provision		(123	)		(119	)
Equity in net earnings (losses) from equity method investments		2			4
Net income – including noncontrolling interests		331			313
Net income – noncontrolling interests		22			21
Net Income – Yum China Holdings, Inc.	$	309		$	292
Weighted-average common shares outstanding (in millions):
Basic		353			376
Diluted		354			378
Basic Earnings Per Common Share	$	0.88		$	0.78
Diluted Earnings Per Common Share	$	0.87		$	0.77

See accompanying Notes to Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Yum China Holdings, Inc.

(in US$ millions)


	Quarter Ended
	3/31/2026		3/31/2025
Net income – including noncontrolling interests	$	331	$	313
Other comprehensive income, net of tax of nil:
Foreign currency translation adjustments		67		27
Comprehensive income – including noncontrolling interests		398		340
Comprehensive income – noncontrolling interests		30		25
Comprehensive Income – Yum China Holdings, Inc.	$	368	$	315

See accompanying Notes to Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Yum China Holdings, Inc.

(in US$ millions)


	Quarter Ended
	3/31/2026			3/31/2025
Cash Flows – Operating Activities
Net income – including noncontrolling interests	$	331		$	313
Depreciation and amortization		117			109
Non-cash operating lease cost		106			99
Closures and impairment expenses		—			6
Investment loss (gain)		11			(3	)
Equity in net (earnings) losses from equity method investments		(2	)		(4	)
Distributions of income received from equity method investments		3			4
Deferred income taxes		(3	)		2
Share-based compensation expense		10			9
Changes in accounts receivable		(7	)		(2	)
Changes in inventories		30			78
Changes in prepaid expenses, other current assets and value-added tax assets		68			25
Changes in accounts payable and other current liabilities		(68	)		(179	)
Changes in income taxes payable		68			61
Changes in non-current operating lease liabilities		(102	)		(101	)
Other, net		(12	)		35
Net Cash Provided by Operating Activities		550			452
Cash Flows – Investing Activities
Capital spending		(144	)		(137	)
Purchases of short-term investments, long-term bank deposits and notes		(1,867	)		(1,838	)
Maturities of short-term investments, long-term bank deposits and notes		1,777			1,916
Acquisition of equity investment		—			(14	)
Other, net		1			1
Net Cash Used in Investing Activities		(233	)		(72	)
Cash Flows – Financing Activities
Proceeds from short-term borrowings		20			—
Repayment of short-term borrowings		(30	)		—
Repurchase of shares of common stock		(218	)		(173	)
Cash dividends paid on common stock		(102	)		(90	)
Dividends paid to noncontrolling interests		(15	)		(13	)
Other, net		(8	)		(4	)
Net Cash Used in Financing Activities		(353	)		(280	)
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash		3			2
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(33	)		102
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period		506			723
Cash, Cash Equivalents, and Restricted Cash - End of Period	$	473		$	825


Supplemental Cash Flow Data
Cash paid for income tax	53	54
Non-cash Investing and Financing Activities
Capital expenditures included in accounts payable and other current liabilities	133	132

See accompanying Notes to Condensed Consolidated Financial Statements.

Condensed Consolidated Balance Sheets

Yum China Holdings, Inc.

(in US$ millions)


	3/31/2026			12/31/2025
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	473		$	506
Short-term investments		956			878
Accounts receivable, net		103			95
Inventories, net		414			438
Prepaid expenses and other current assets		373			440
Total Current Assets		2,319			2,357
Property, plant and equipment, net		2,570			2,543
Operating lease right-of-use assets		2,175			2,189
Goodwill		1,990			1,963
Intangible assets, net		149			148
Long-term bank deposits and notes		707			678
Equity investments		398			387
Deferred income tax assets		160			156
Other assets		369			362
Total Assets		10,837			10,783

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current Liabilities
Accounts payable and other current liabilities		2,126			2,127
Short-term borrowings		20			30
Income taxes payable		158			89
Total Current Liabilities		2,304			2,246
Non-current operating lease liabilities		1,802			1,823
Non-current finance lease liabilities		50			51
Deferred income tax liabilities		412			406
Other liabilities		162			158
Total Liabilities		4,730			4,684

Redeemable Noncontrolling Interest		—			—

Equity
Common stock, $0.01 par value; 1,000 million shares authorized; 351 million shares and 355 million shares issued at March 31, 2026 and December 31, 2025, respectively; 351 million shares and 354 million shares outstanding at March 31, 2026 and December 31, 2025, respectively.		4			4
Treasury stock		(13	)		(28	)
Additional paid-in capital		3,752			3,796
Retained earnings		1,788			1,764
Accumulated other comprehensive loss		(98	)		(157	)
Total Yum China Holdings, Inc. Stockholders' Equity		5,433			5,379
Noncontrolling interests		674			720
Total Equity		6,107			6,099
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	10,837		$	10,783

See accompanying Notes to Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Equity (Unaudited)

Yum China Holdings, Inc.

(in US$ millions)


	Yum China Holdings, Inc.
												Accumulated
	Common					Additional						Other															Redeemable
	Stock					Paid-in			Retained			Comprehensive			Treasury Stock						Noncontrolling			Total			Noncontrolling
	Shares*			Amount		Capital			Earnings			Loss			Shares*			Amount			Interests			Equity			Interest
Balance at December 31, 2025		355		$	4	$	3,796		$	1,764		$	(157	)		(1	)	$	(28	)	$	720		$	6,099		$	—
Net Income										309												22			331			—
Foreign currency translation adjustments													59									8			67			—
Comprehensive income																									398			—
Cash dividends declared ($0.29 per common share)										(102	)														(102	)
Distributions to noncontrolling interests																						(76	)		(76	)
Repurchase and retirement of shares		(4	)		—		(48	)		(183	)					—			15						(216	)
Exercise and vesting of share-based awards		1			—		(6	)																	(6	)
Share-based compensation							10															—			10
Balance at March 31, 2026		351		$	4	$	3,752		$	1,788		$	(98	)		—		$	(13	)	$	674		$	6,107		$	—

Balance at December 31, 2024		379		$	4	$	4,028		$	2,089		$	(341	)		(1	)	$	(52	)	$	686		$	6,414		$	13
Net Income										292												21			313			—
Foreign currency translation adjustments													23									4			27			—
Comprehensive income																									340			—
Cash dividends declared ($0.24 per common share)										(90	)														(90	)
Distributions to noncontrolling interests																						(69	)		(69	)
Repurchase and retirement of shares		(5	)		—		(50	)		(167	)					1			44						(173	)
Exercise and vesting of share-based awards		1			—		(5	)																	(5	)
Share-based compensation							9															—			9
Balance at March 31, 2025		375		$	4	$	3,982		$	2,124		$	(318	)		—		$	(8	)	$	642		$	6,426		$	13

*: Shares may not add due to rounding.

See accompanying Notes to Condensed Consolidated Financial Statements.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Tabular amounts in US$ millions, except as otherwise noted)

Note 1 – Description of Business

Yum China Holdings, Inc. (“Yum China” and, together with its subsidiaries, the “Company,” “we,” “us,” and “our”) was incorporated in Delaware on April 1, 2016. The Company separated from Yum! Brands, Inc. (“YUM”) on October 31, 2016 (the “separation”).

The Company owns, franchises or has ownership in entities that own and operate restaurants (also referred to as “stores” or “units”) under the KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell concepts (collectively, the “concepts”). Our right to use and sublicense the use of intellectual property owned by YUM and its subsidiaries for the development and operation of the KFC, Pizza Hut and Taco Bell brands and their related marks and other intellectual property rights for restaurant services is governed by the master license agreement between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019. Pursuant to the master license agreement, we are the exclusive licensee of the KFC, Pizza Hut and, subject to the agreed terms, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the People’s Republic of China (the “PRC” or “China”), excluding Hong Kong, Macau and Taiwan. The term of the license is 50 years from October 31, 2016 for the KFC and Pizza Hut brands and, subject to achieving certain agreed-upon milestones, 50 years from April 15, 2022 for the Taco Bell brand, with automatic renewals for additional consecutive renewal terms of 50 years each, subject only to us being in “good standing” and unless we give notice of our intent not to renew. In exchange, we pay a license fee to YUM equal to 3% of net system sales from both our Company and franchise restaurants. The agreed-upon milestone for the Taco Bell brand included at least 225 stores by the end of 2025, subject to the terms of the agreement. There were 27 Taco Bell restaurants in China as of March 31, 2026, and the Company and YUM are currently in the process of renegotiating the terms with respect to the development of the Taco Bell brand in China. We own the intellectual property of Huang Ji Huang and Little Sheep and pay no license fee related to these concepts.

In 1987, KFC was the first major global restaurant brand to enter China. As of March 31, 2026, there were 13,454 KFC stores in China. We maintain a controlling interest of 58%, 70%, 83%, 92% and approximately 60% in the entities that own and operate the KFCs in and around Shanghai, Beijing, Wuxi, Suzhou and Hangzhou, respectively.

The first Pizza Hut in China opened in 1990. As of March 31, 2026, there were 4,375 Pizza Hut restaurants in China.

In the second quarter of 2020, the Company partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and established a joint venture (“Lavazza joint venture”) to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. We maintain a controlling interest of 65% equity interest in the Lavazza joint venture.

In 2017, the Company acquired a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an online food delivery service provider in China. This business was extended to also include a team managing the delivery services for restaurants, including restaurants in our system, with their results reported under our delivery operating segment.

The Company has two reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell and our delivery operating segment, are combined and referred to as All Other Segments, as these operating segments are insignificant both individually and in the aggregate. Additional details on our segment reporting are included in Note 13.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “YUMC”. On September 10, 2020, the Company completed a secondary listing of its common stock on the Main Board of the Hong Kong Stock Exchange (“HKEX”) under the stock code “9987,” in connection with a global offering of 41,910,700 shares of its common stock. Net proceeds raised by the Company from the global offering after deducting underwriting fees and the offering expenses amounted to $2.2 billion. On October 24, 2022, the Company’s voluntary conversion of its secondary listing status to a primary listing status on the HKEX became effective (“Primary Conversion”) and the Company became a dual primary listed company on the NYSE and HKEX. On the same day, the Company’s shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The Company’s common stock listed on the NYSE and HKEX continue to be fully fungible.

Note 2 – Basis of Presentation

Our preparation of the accompanying Condensed Consolidated Financial Statements in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

We have prepared the Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary to present fairly our financial position as of March 31, 2026, and our results of operations, comprehensive income, statements of equity and cash flows for the quarters ended March 31, 2026 and 2025. Our results of operations, comprehensive income and cash flows for these interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 27, 2026.

Through the acquisition of Daojia, the Company also acquired a variable interest entity (“VIE”) and subsidiaries of the VIE effectively controlled by Daojia. There exists a parent-subsidiary relationship between Daojia and its VIE as a result of certain exclusive agreements that require Daojia to consolidate its VIE and subsidiaries of the VIE because Daojia is the primary beneficiary that possesses the power to direct the activities of the VIE that most significantly impact its economic performance, and is entitled to substantially all of the profits and has the obligation to absorb all of the expected losses of the VIE. The acquired VIE and its subsidiaries were considered immaterial, both individually and in the aggregate. The results of Daojia’s operations have been included in the Company’s Condensed Consolidated Financial Statements since the acquisition date.

Recently Adopted Accounting Pronouncements

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides the option to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. ASU 2025-05 is effective for the Company from January 1, 2026, with early adoption permitted. We adopted this standard on January 1, 2026, and elected to adopt the practical expedient prospectively. Such adoption did not have a material impact on our financial statements.

Note 3 – Business Acquisitions and Equity Investments

Consolidation of Hangzhou KFC and Equity Investment in Hangzhou Catering

In the fourth quarter of 2021, the Company completed its investment in a 28% equity interest in Hangzhou Catering, an entity holding a 45% equity interest in Hangzhou KFC, of which the Company previously held a 47% equity interest. Upon completion of the transaction, the Company directly and indirectly holds an approximately 60% equity interest in Hangzhou KFC and has majority representation on the board, and thus obtained control over Hangzhou KFC and started to consolidate its results from the acquisition date. In addition to its equity interest in Hangzhou KFC, Hangzhou Catering operates Chinese dining restaurants under four time-honored brands and a food processing business. The Company applies the equity method of accounting to the 28% equity interest in Hangzhou Catering excluding the Hangzhou KFC business and recorded this investment in Equity investments based on its then fair value. The Company elected to report its share of Hangzhou Catering’s financial results with a one-quarter lag because its results are not available in time for the Company to record them in the concurrent period. The Company’s equity earnings (losses) from Hangzhou Catering, net of taxes, were immaterial for both quarters ended March 31, 2026 and 2025, and included in Equity in net earnings (losses) from equity method investments in our Condensed Consolidated Statement of Income. As of March 31, 2026 and December 31, 2025, the carrying amount of the Company’s equity method investment in Hangzhou Catering was $71 million and $54 million, respectively, exceeding the Company’s interest in Hangzhou Catering’s underlying net assets by $22 million and $22 million, respectively. Substantially all of this difference was attributable to its self-owned properties and impact of related deferred tax liabilities determined upon acquisition, which is being depreciated over a weighted-average remaining useful life of 20 years.

The purchase amount from Hangzhou Catering was immaterial for both quarters ended March 31, 2026 and 2025. The Company’s accounts payable and other current liabilities due to Hangzhou Catering were immaterial as of both March 31, 2026 and December 31, 2025.

Fujian Sunner Development Co., Ltd. (“Sunner”) Investment

In the first quarter of 2021, the Company acquired a 5% equity interest in Sunner, a Shenzhen Stock Exchange-listed company. Sunner is China’s largest white-feathered chicken producer and the Company’s largest poultry supplier.

In May 2021, the Company obtained one seat on Sunner’s board of directors upon Sunner’s shareholder approval. The representation on the board, along with the Company being one of Sunner’s significant shareholders, provides the Company with the ability to exercise significant influence over the operating and financial policies of Sunner. As a result, the Company started to apply the equity method of accounting to the investment in May 2021 based on its then fair value. The Company elected to report its share of Sunner’s financial results with a one-quarter lag because Sunner’s results are not available in time for the Company to record them in the concurrent period. The Company’s equity earnings from Sunner, net of taxes, was $2 million for both quarters ended March 31, 2026 and 2025, which were included in Equity in net earnings (losses) from equity method investments in our Condensed Consolidated Statement of Income.

The Company purchased inventories of $96 million and $86 million from Sunner for the quarters ended March 31, 2026 and 2025, respectively. The Company’s accounts payable and other current liabilities due to Sunner were $33 million and $34 million as of March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026 and December 31, 2025, the carrying amount of the Company’s investment in Sunner was $236 million and $231 million, respectively, exceeding the Company’s interest in Sunner’s underlying net assets by $155 million and $153 million, respectively. As of March 31, 2026 and December 31, 2025, $14 million and $15 million of these basis differences were related to finite-lived intangible assets determined upon acquisition, respectively, which are being amortized over the estimated useful life of 20 years. The remaining differences were related to goodwill and indefinite-lived intangible assets, which are not subject to amortization, as well as deferred tax liabilities impact. As of March 31, 2026 and December 31, 2025, the market value of the Company’s investment in Sunner was $160 million and $147 million based on its quoted closing price, respectively.

Meituan Dianping (“Meituan”) Investment

In the third quarter of 2018, the Company subscribed for 8.4 million, or less than 1%, of the ordinary shares of Meituan, a delivery aggregator in China, for a total consideration of approximately $74 million, when it launched its initial public offering on the HKEX in September 2018. In the second quarter of 2020, the Company sold 4.2 million of the ordinary shares of Meituan.

The Company accounts for the equity securities at fair value with subsequent fair value changes recorded in our Condensed Consolidated Statements of Income. The fair value of the investment in Meituan is determined based on the closing market price for the shares at the end of each reporting period. The fair value change, to the extent the closing market price of shares of Meituan as of the end of reporting period is higher than our cost, is subject to U.S. tax.

A summary of pre-tax gains or losses on investment in equity securities of Meituan recognized, which were included in Investment gain (loss) in our Condensed Consolidated Statements of Income, is as follows:


	Quarter Ended
	3/31/2026			3/31/2025
Unrealized (loss) gain recorded on equity securities still held as of the end of the period	$	(12	)	$	2

Other Equity Investments

In addition, the Company has strategic equity investments in its eco-system partners, including food and information technology service suppliers. For investments over which the Company has significant influence but does not control, the Company applies equity method to account for such investments. These investments were immaterial both individually and in aggregate, totaling $31 million and $30 million as of March 31, 2026 and December 31, 2025, respectively. The Company purchased inventories or services from these investees and the purchase amounts were immaterial for both quarters ended March 31, 2026 and 2025.

In the first quarter of 2025, the Company completed a strategic investment in SnowValley Agricultural Group, one of the Company’s key suppliers for potato and a private company, for a total consideration of $14 million. The investment contains certain preferential rights, including the right to redeem shares at the Company’s option upon contingent events, and is therefore accounted for as available-for-sale debt securities measured at the estimated fair value. The unrealized gains or losses, arising from the change in fair value, net of tax, is recognized in Other comprehensive income (loss) in the Condensed Consolidated Statement of Comprehensive Income. As of both March 31, 2026 and December 31, 2025, the carrying amount of the investment was $15 million and fair value change was nil for both quarters ended March 31, 2026 and 2025.

Note 4 – Revenue Recognition

The Company’s revenues include Company sales, Franchise fees and income, Revenues from transactions with franchisees, and Other revenues.

Company Sales

Revenues from Company-owned restaurants are recognized when a customer takes possession of the food and tenders payment, which is when our obligation to perform is satisfied. The Company presents sales net of sales-related taxes. We also offer our customers delivery through both our own mobile applications and third-party aggregators’ platforms. We use both our dedicated riders and platform riders to deliver orders. When orders are fulfilled by our dedicated riders or platform riders, we control and determine the price for the delivery service and generally recognize revenue, including delivery fees, when a customer takes possession of the food. When orders are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature.

We recognize revenues from prepaid stored-value products, including gift cards and product vouchers, when they are redeemed by the customer. Prepaid gift cards sold at any given point generally expire over the next 36 months, and product vouchers generally expire over a period of up to 12 months. We recognize breakage revenue, which is the amount of prepaid stored-value products that is not expected to be redeemed, either (1) proportionally in earnings as redemptions occur, in situations where the Company expects to be entitled to a breakage amount, or (2) when the likelihood of redemption is remote, in situations where the Company does not expect to be entitled to breakage, provided that there is no requirement for remitting balances to government agencies under unclaimed property laws. The Company reviews its breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns.

Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain privilege membership programs offering a pre-defined amount of benefits that can be redeemed ratably over the membership period, revenue is ratably recognized over the period based on the elapse of time. With respect to privilege membership programs offering members a mix of distinct benefits, including a welcome gift and assorted discount coupons with pre-defined quantities, consideration collected is allocated to the benefits provided based on their relative standalone selling price and revenue is recognized when food or services are delivered or the benefits expire. In determining the relative standalone selling price of the benefits, the Company considers likelihood of future redemption based on historical redemption pattern and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns.

Franchise Fees and Income

Franchise fees and income primarily include a combination of upfront franchise fees and continuing fees. We have determined that the services we provide in exchange for upfront franchise fees and continuing fees are highly interrelated with the franchise right. We recognize upfront franchise fees received from a franchisee as revenue over the term of the franchise agreement or the renewal agreement because the franchise rights are accounted for as rights to access our symbolic intellectual property. The franchise agreement term is generally 10 years for KFC and Pizza Hut, generally five years for Little Sheep and three to 10 years for Huang Ji Huang. We recognize continuing fees, which are based upon a percentage of franchisee sales, as those sales occur.

Revenues from Transactions with Franchisees

Revenues from transactions with franchisees consist primarily of sales of food and paper products, advertising services, delivery services and other services provided to franchisees.

The Company centrally purchases substantially all food and paper products from suppliers for substantially all of our restaurants, including franchisees, and then sells and delivers them to the restaurants. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which primarily manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The Company also provides delivery services to franchisees. The performance obligation arising from such transactions is considered distinct from the franchise agreement as it is not highly dependent on the franchise agreement and the customer can benefit from such services on its own. We consider ourselves the principal in this arrangement as we have the ability to control a promised good or service before transferring that good or service to the franchisees. Revenue is recognized upon transfer of control over ordered items or services, generally upon delivery to the franchisees.

For advertising services, the Company often engages third parties to provide services and acts as a principal in the transaction based on our responsibilities of defining the nature of the services and administering and directing all marketing and advertising programs in accordance with the provisions of our franchise agreements. The Company collects advertising contributions, which are generally based on certain percentage of sales from substantially all of our restaurants, including franchisees. Other services provided to franchisees consist primarily of customer and technology support services. Advertising services and other services provided are highly interrelated to franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur.

Other Revenues

Other revenues primarily include i) sales of products to customers through e-commerce channels, sales of Lavazza coffee retail products beyond Lavazza coffee shops, and sales of our seasoning products to distributors, and ii) revenues from logistics and warehousing services provided to third parties through our supply chain network. Our segment disclosures also include revenues relating to delivery services that were provided to our Company-owned restaurants and, therefore, were eliminated for consolidation purposes.

Other revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

Loyalty Programs

Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire 18 months after being earned, may be redeemed for future purchases of KFC or Pizza Hut branded products or other products for free or at a discounted price. Points cannot be redeemed or exchanged for cash. The estimated value of points earned by the loyalty program members is recorded as a reduction of revenue at the time the points are earned, based on the percentage of points that are projected to be redeemed, with a corresponding deferred revenue liability included in Accounts payable and other current liabilities in the Condensed Consolidated Balance Sheets and subsequently recognized into revenue when the points are redeemed or expire. The Company estimates the value of the future redemption obligations based on the estimated value of the product for which points are expected to be redeemed and historical redemption patterns and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns.

Disaggregation of Revenue

The following tables present revenue disaggregated by types of arrangements and segments:


	Quarter Ended 3/31/2026
Revenues	KFC		Pizza Hut		All Other Segments		Corporate and Unallocated		Combined		Elimination			Consolidated
Company sales	$	2,410	$	627	$	10	$	—	$	3,047	$	—		$	3,047
Franchise fees and income		23		3		4		—		30		—			30
Revenues from transactions with franchisees		19		2		26		109		156		—			156
Other revenues		1		3		248		22		274		(236	)		38
Total revenues	$	2,453	$	635	$	288	$	131	$	3,507	$	(236	)	$	3,271


	Quarter Ended 3/31/2025
Revenues	KFC		Pizza Hut		All Other Segments		Corporate and Unallocated		Combined		Elimination			Consolidated
Company sales	$	2,208	$	584	$	9	$	—	$	2,801	$	—		$	2,801
Franchise fees and income		21		2		4		—		27		—			27
Revenues from transactions with franchisees		16		2		19		84		121		—			121
Other revenues		1		7		170		17		195		(163	)		32
Total revenues	$	2,246	$	595	$	202	$	101	$	3,144	$	(163	)	$	2,981

Accounts Receivable

Accounts receivable primarily consist of trade receivables and royalties from franchisees, and are generally due within 30 days of the period in which the corresponding sales occur. Our provision of credit losses for accounts receivable is based upon the current expected credit losses (“CECL”) model. The CECL model requires an estimate of the credit losses expected over the life of accounts receivable since initial recognition, and accounts receivable with similar risk characteristics are grouped together when estimating CECL. In assessing the CECL, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical credit loss experience, adjusted for relevant factors impacting collectability and forward-looking information. Upon adoption of ASU 2025-05 on January 1, 2026, the Company elected the practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of accounts receivable. While we use the best information available in making our determination, the ultimate recovery of recorded receivables is also dependent upon future economic events and other conditions that may be beyond our control. Accounts receivable that are ultimately deemed to be uncollectible, and for which collection efforts have been exhausted, are written off against the allowance for doubtful accounts. As of both March 31, 2026 and December 31, 2025, the ending balances of provision for accounts receivable were $2 million, and amounts of accounts receivable past due were immaterial.

Costs to Obtain Contracts

Costs to obtain contracts consist of license fees that are payable to YUM in relation to our deferred revenue of prepaid stored-value products, privilege membership programs and customer loyalty programs, as well as upfront franchise fees that we paid to YUM prior to the separation in relation to initial fees or renewal fees we received from franchisees. They meet the requirements to be capitalized as they are incremental costs of obtaining contracts with customers and the Company expects to generate future economic benefits from such costs incurred. Such costs to obtain contracts are included in Other assets in the Condensed Consolidated Balance Sheets and are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. Subsequent to the separation, we are no longer required to pay YUM initial or renewal fees that we receive from franchisees. The Company did not incur any impairment losses related to costs to obtain contracts during any of the periods presented. Costs to obtain contracts were $6 million as of both March 31, 2026 and December 31, 2025.

Contract Liabilities

Contract liabilities at March 31, 2026 and December 31, 2025 were as follows:


Contract liabilities	3/31/2026		12/31/2025
– Deferred revenue related to prepaid stored-value products	$	148	$	132
– Deferred revenue related to upfront franchise fees		56		57
– Deferred revenue related to customer loyalty programs		17		18
– Deferred revenue related to privilege membership programs		40		44
Total	$	261	$	251

Contract liabilities primarily consist of deferred revenue related to prepaid stored-value products, privilege membership programs, customer loyalty programs and upfront franchise fees, including initial fees and pre-opening service fees. Deferred revenue related to prepaid stored-value products, privilege membership programs and customer loyalty programs is included in Accounts payable and other current liabilities in the Condensed Consolidated Balance Sheets. Deferred revenue related to upfront franchise fees that we expect to recognize as revenue in the next 12 months is included in Accounts payable and other current liabilities, and the remaining balance is included in Other liabilities in the Condensed Consolidated Balance Sheets. Revenue recognized that was included in the contract liability balance at the beginning of each period amounted to $60 million and $63 million for the quarters ended March 31, 2026 and 2025, respectively. Changes in contract liability balances were not materially impacted by business acquisition, change in estimate of transaction price or any other factors during any of the periods presented.

The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with sales-based royalty promised to franchisees in exchange for franchise right and other related services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. We recognize continuing franchisee fees and revenues from advertising services and other services provided to franchisees based on a certain percentage of sales, as those sales occur.

Note 5 – Earnings Per Common Share (“EPS”)

The following table summarizes the components of basic and diluted EPS (in millions, except per share data):


	Quarter Ended
	3/31/2026		3/31/2025
Net Income – Yum China Holdings, Inc.	$	309	$	292
Weighted-average common shares outstanding (for basic calculation)(a)		353		376
Effect of dilutive share-based awards(a)		1		2
Weighted-average common and dilutive potential common shares outstanding (for diluted calculation)(a)		354		378
Basic Earnings Per Common Share	$	0.88	$	0.78
Diluted Earnings Per Common Share	$	0.87	$	0.77
Share-based awards excluded from the diluted EPS computation(b)		2		3

(a)

As a result of the separation, shares of Yum China common stock were distributed to YUM’s shareholders of record as of October 19, 2016 and were included in the calculated weighted-average common shares outstanding. Holders of outstanding YUM equity awards generally received both adjusted YUM awards and Yum China awards, or adjusted awards of either YUM or Yum China in their entirety. Any subsequent exercise of these awards, whether held by the Company’s employees or YUM’s employees, would increase the number of common shares outstanding. The incremental shares arising from outstanding equity awards are included in the computation of diluted EPS, if there is dilutive effect.

(b)

These outstanding stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) were excluded from the computation of diluted EPS because to do so would have been antidilutive for the periods presented, or because certain awards are contingently issuable based on the achievement of performance and market conditions, which have not been met as of March 31, 2026 and 2025.

Note 6 – Equity

Share Repurchase and Retirement

As of March 31, 2026, our Board of Directors authorized an aggregate of $5.4 billion for our share repurchase program, including its most recent increase in authorization in December 2025. During the quarters ended March 31, 2026 and 2025, the Company repurchased 4.1 million shares of common stock for $214 million, and 3.6 million shares of common stock for $172 million, respectively, under the repurchase program, excluding transaction costs and excise tax. As of March 31, 2026, approximately $942 million remained available for future share repurchases under the authorization.

Of the shares repurchased for the quarter ended March 31, 2026, 3.9 million shares were retired and resumed the status of authorized and unissued shares of common stock, and 0.2 million shares repurchased on the HKEX are expected to be retired subsequent to March 31, 2026, and included in Treasury stock in the Condensed Consolidated Financial Statements.

The Inflation Reduction Act of 2022 (“IRA”), which is discussed further in Note 12, imposes an excise tax of 1% on net share repurchases that occur after December 31, 2022. Excise tax on net share repurchases, which was recognized as part of the cost of the shares repurchased, amounted to $2 million and $1 million for the quarters ended March 31, 2026 and 2025, respectively.

Note 7 – Supplemental Balance Sheet Information


Accounts Receivable, net	3/31/2026			12/31/2025
Accounts receivable, gross	$	105		$	97
Allowance for doubtful accounts		(2	)		(2	)
Accounts receivable, net	$	103		$	95


Prepaid Expenses and Other Current Assets	3/31/2026		12/31/2025
Value-added tax (“VAT”) assets	$	147	$	142
Receivables from payment processors and aggregators		57		72
Interest receivables		40		100
Deposits, primarily lease deposits		23		24
Other prepaid expenses and current assets		106		102
Prepaid expenses and other current assets	$	373	$	440


Property, Plant and Equipment (“PP&E”)	3/31/2026			12/31/2025
Buildings and improvements, and construction in progress	$	3,396		$	3,340
Finance leases, primarily buildings		91			90
Machinery and equipment		2,100			2,035
PP&E, gross		5,587			5,465
Accumulated depreciation		(3,017	)		(2,922	)
PP&E, net	$	2,570		$	2,543


Equity Investments	3/31/2026		12/31/2025
Investment in equity method investees	$	338	$	315
Investment in equity securities		45		57
Investment in available-for-sale debt securities		15		15
Equity investments	$	398	$	387


Other Assets	3/31/2026		12/31/2025
Prepayment for acquisition of PP&E(a)	$	123	$	122
Long-term deposits, primarily lease deposits		107		104
Land use right		99		98
VAT assets		14		14
Costs to obtain contracts		6		6
Others		20		18
Other assets	$	369	$	362

(a)

Primarily includes a prepayment made in relation to the acquisition of a building located in Shanghai to house the Company’s headquarters and flagship stores, which is currently expected to be delivered to the Company in 2027.


Accounts Payable and Other Current Liabilities	3/31/2026		12/31/2025
Accounts payable	$	822	$	793
Operating lease liabilities		443		438
Contract liabilities		214		205
Accrued compensation and benefits		178		261
Accrued capital expenditures		133		166
Dividends payable		129		51
Accrued marketing expenses		37		40
Other current liabilities		170		173
Accounts payable and other current liabilities	$	2,126	$	2,127


Other Liabilities	3/31/2026		12/31/2025
Contract liabilities	$	47	$	47
Accrued income tax payable		26		24
Other non-current liabilities		89		87
Other liabilities	$	162	$	158

Note 8 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:


	Total Company			KFC		Pizza Hut		All Other Segments
Balance as of 12/31/2025
Goodwill, gross	$	2,354		$	1,870	$	19	$	465
Accumulated impairment losses(a)		(391	)		—		—		(391	)
Goodwill, net		1,963			1,870		19		74
Effect of currency translation adjustments		27			25		1		1
Balance as of 3/31/2026
Goodwill, gross		2,381			1,895		20		466
Accumulated impairment losses(a)		(391	)		—		—		(391	)
Goodwill, net	$	1,990		$	1,895	$	20	$	75

(a)

Accumulated impairment losses represent goodwill impairment attributable to the reporting units of Little Sheep and Daojia.

Intangible assets, net as of March 31, 2026 and December 31, 2025 are as follows:


	3/31/2026										12/31/2025
	Gross Carrying Amount(a)		Accumulated Amortization(a)			Accumulated Impairment Losses(b)			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment Losses(b)			Net Carrying Amount
Finite-lived intangible assets
Reacquired franchise rights	$	277	$	(275	)	$	—		$	2	$	274	$	(271	)	$	—		$	3
Huang Ji Huang franchise related assets		21		(7	)		—			14		21		(7	)		—			14
Daojia platform		9		(2	)		(7	)		—		9		(2	)		(7	)		—
Customer-related assets		11		(10	)		(1	)		—		11		(10	)		(1	)		—
Others		9		(6	)		—			3		9		(6	)		—			3
	$	327	$	(300	)	$	(8	)	$	19	$	324	$	(296	)	$	(8	)	$	20
Indefinite-lived intangible assets
Little Sheep trademark	$	52	$	—		$	—		$	52	$	51	$	—		$	—		$	51
Huang Ji Huang trademark		78		—			—			78		77		—			—			77

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Yum China Holdings, Inc. 10-Q