CMG — Q2 2026 Financial Report Analysis

Sales grew 9.3% on new restaurants; profit per restaurant went backwards

Chipotle's second quarter (the three months to June 30, 2026) brought in $3.35 billion of revenue, up 9.3% from a year earlier — but income from operations fell 6.0% to $525.6 million and net income fell 7.5% to $403.5 million. Diluted earnings per share (profit divided by the shares outstanding) was unchanged at $0.32, and it only held flat because the company retired 5.3% of its shares over the past year. On unrounded figures EPS was $0.3155 versus $0.3230.

The gap between the revenue line and the profit lines is the quarter. Chipotle ended June with 4,186 company-owned restaurants, 347 more than a year earlier (+9.0%). Almost all of the sales growth came from that bigger restaurant count. The restaurants it already had sold only 2.2% more, and every major restaurant cost line rose faster than sales.

The numbers

Two terms that do a lot of work here. Comparable restaurant sales ("comps") count only restaurants open at least 13 full months, so they strip out the effect of simply having more locations — they measure whether an existing restaurant is doing more business. Restaurant-level operating margin is what's left of revenue after the four costs of actually running a restaurant (food, labor, rent, and other store-level operating costs), before head-office costs; it is the cleanest read on store economics. The 25.2% and 27.4% figures above are derived from the cost percentages the filing itself discloses (100% less 29.7% food + 25.0% labor + 5.2% occupancy + 14.9% other operating).

Where the $285 million of extra revenue came from

The filing breaks the increase down directly:

New restaurants supplied $227.9 million, or 80% of the growth. Existing restaurants supplied $65.9 million.

Inside the +2.2% comp, 1.0 point came from more transactions (more customer visits) and 1.2 points from a higher average check. That average check gain is entirely price: menu prices were up 1.6%, partly given back by a −0.4% "check mix" effect — customers ordering cheaper combinations or fewer add-ons. So slightly more visits, at slightly higher prices, with customers trading down within the menu.

The comp also flatters the trend, because it laps a weak quarter: a year ago comps were −4.0% with transactions down 4.9%. Stacked over two years, visits are still below where they were. Average restaurant sales — the trailing 12-month volume of a typical restaurant — fell 1.3% to $3.102 million, which is what happens when you open 100 restaurants in a quarter: new ones start below the system average and pull it down.

Why margins fell

Food costs. The 0.8-point increase breaks down as 1.4 points of inflation "primarily from beef and freight" and 0.5 points from higher protein and produce usage — that is, larger or more generous servings — offset by 0.5 points of menu price benefit and 0.5 points of lower avocado and dairy costs. Avocados, historically Chipotle's most volatile input, were a tailwind this quarter; beef was the problem.

Labor. Up 0.3 points, from wage inflation and performance-based bonuses (0.3 points) plus 0.2 points of "restaurant labor execution" — hours running above plan — against a 0.4-point benefit from menu prices.

Other operating costs were the single biggest drag at +0.9 points: 0.3 points more marketing and promotion, with the rest from inflation in insurance claims, maintenance and utilities.

Occupancy rose 0.2 points, entirely from new restaurants — rent starts the day a lease begins, and a new store's sales take time to arrive.

Below the restaurant line, three items compounded the squeeze:

• General and administrative expenses of $190.5 million (5.7% of revenue, from 5.6%) contain $11.1 million more in legal contingencies and $10.8 million more in performance bonuses, plus $6.2 million of wages and $4.1 million of restructuring costs, partly offset by $11.3 million less stock-based compensation as the August 2024 retention awards ran off. The accrued legal liability on the balance sheet rose to $29.6 million from $11.4 million at year-end 2025.
• Pre-opening costs — expenses incurred before a restaurant serves its first customer — jumped 54% to $16.4 million, the direct cost of the opening surge.
• Impairment, closure costs and asset disposals rose 153% to $13.8 million (0.4% of revenue versus 0.2%), "primarily due to charges associated with the replacement of restaurant assets" and more impairment of leases and leasehold improvements.

One more line explains a meaningful share of the earnings decline without touching operations: interest and other income fell 58% to $7.7 million, because Chipotle spent the cash that used to earn that interest on buying back stock. That $10.7 million swing is about a quarter of the $44.1 million drop in pre-tax income.

Chipotle reports a single business segment (the US). US segment income from operations fell only 1.5% to $717.4 million; consolidated operating income fell 6.0%. The difference is head office: corporate and other unallocated expenses rose 14.6% to $198.0 million.

Cash: buybacks now run ahead of cash generation

For the first six months, operating cash flow rose 19% to $1.332 billion — but that is a tax-timing figure, not an earnings figure. Six-month net income actually fell 14.1% to $706.4 million; cash income taxes paid were $82.7 million versus $279.3 million a year earlier, and that includes $93.0 million spent buying federal transferable energy credits for the 2026 tax year.

Against $1.332 billion of operating cash flow, Chipotle spent $397.6 million on capital expenditure (up $92.2 million, and management says equipment spending on existing restaurants stays elevated through 2027) and $1.355 billion on buying back its own stock. Buybacks alone exceeded operating cash flow after capex by roughly $420 million, funded by $349.8 million of maturing investments and a drawdown of cash: cash, equivalents and restricted cash fell to $263.8 million from $385.9 million at year-end, with $810.5 million including investments. In the second quarter the company repurchased $630.7 million of stock at an average $32.55 a share, against $435.9 million at $50.16 a year earlier. The board added $1.3 billion to the authorization on June 11, leaving $1.7 billion available. There is no drawn debt; the $500 million revolver is untouched.

Takeaway: Chipotle bought this quarter's headline twice — once with new restaurants, which delivered 80% of the revenue growth while pulling average restaurant volumes down 1.3%, and once with buybacks, which converted a 7.5% fall in net income into flat EPS. The number that actually describes the business is 1.0% more customer visits against a 2.2-point fall in restaurant-level margin.

What to watch

The 10-Q gives no numeric guidance, and management's own forward comment is cautious: it says it has "recently experienced low-single-digit headwinds to our comparable restaurant sales trends" tied to the consumer environment, "as customers respond to, among other things, recent U.S. food safety concerns and geopolitical developments," and that results "could be materially adversely impacted if these disruptions or trends worsen throughout the third quarter of 2026 or beyond." The filing also flags tariffs as a factor in food, beverage and packaging costs in the third quarter, without quantifying the effect.

Read together with the numbers, that points to a third quarter where the comp is harder to hold and the cost side is no easier. Three things decide whether margins stabilize:

1. Beef and freight. These caused 1.4 points of food-cost inflation. Avocado and dairy relief covered only part of it, and Chipotle's forward-pricing contracts run one to 24 months, so relief arrives with a lag.
2. How much price they take. 1.6% of menu pricing is not covering 1.4% of input inflation plus wage growth plus 0.9 points of other operating cost inflation. Taking more price risks the transactions line, which is already only +1.0%.
3. The pace of openings. 149 restaurants in the first half against 118 a year earlier adds revenue but drags on occupancy, pre-opening and average volumes until the class matures.

The buyback can keep EPS flat for a while — but it is now consuming more than the business generates after capex, and the interest income that used to cushion earnings has largely been spent. If comps slip back toward flat in the second half, there is no longer a financial lever left to hide it.

Source: Chipotle Mexican Grill, Inc. Form 10-Q for the quarterly period ended June 30, 2026, filed July 31, 2026.