Yum China buys Pizza Hut China for $1.2 billion
The operator reported 10% revenue growth in the quarter, its fastest pace in six quarters.
Yum China Holdings (YUMC) acquired the Pizza Hut brand in Mainland China for $1.2 billion, eliminating future license fees to Yum! Brands and positioning the chain for accelerated expansion. The deal, disclosed alongside first-quarter results, closed the quarter in which the operator posted its strongest revenue growth in six quarters.
The quarter marked a strategic inflection for the restaurant operator, which now owns the Pizza Hut system it had previously licensed. Pizza Hut China generated $2.3 billion in segment revenue and $183 million in operating profit in 2025, with eight consecutive quarters of margin expansion through March 2026. Yum China targets doubling Pizza Hut’s operating profit by 2029 and expanding its store count to over 6,000 by 2028, up from 4,375 at the end of the quarter.
Revenue rose 10% year-over-year to $3.3 billion, accelerating from 9% growth in the prior quarter and 4% for full-year 2025. Operating profit grew 12% to $447 million, decelerating from 25% growth in the fourth quarter but outpacing the 11% increase in 2025. Operating margin expanded 30 basis points to 13.7%, the eighth consecutive quarter of improvement. Diluted earnings rose 13% to $0.87 a share, slowing from 33% growth in the prior quarter but ahead of the 8% increase in 2025.
Pizza Hut led segment performance, with operating profit up 18% to $71 million and margin expanding 110 basis points to 11.2%. The brand’s restaurant margin rose 60 basis points to 15.0%, while same-store sales turned flat after a 1% decline in the prior quarter. KFC’s operating profit grew 8% to $417 million, though its restaurant margin contracted 70 basis points to 19.1%. Delivery sales contributed 54% of total revenue, up from 48% in 2025, and grew 31% year-over-year.
The company reiterated its 2026 financial guidance on a like-for-like basis, expecting the Pizza Hut acquisition to be immediately accretive to earnings. Yum China plans to fund the deal with cash and debt while maintaining its $1.5 billion capital return plan for the year and targeting 100% of annual free cash flow return starting in 2027. Store expansion remains on track, with a target of over 20,000 locations by year-end, up from 18,737 at the end of March.
Pizza Hut’s WOW store model drove expansion into over 100 new cities during the quarter, while KFC’s KCOFFEE and KPRO modules continued to lift same-store sales for the fourth consecutive quarter. The company opened a record 636 net new stores in the quarter, more than double the prior-year pace.