Chipotle
CMG · NYSERestaurant overheads, not food, cut the margin
Food costs fell 0.52 points as a share of revenue, while other operating costs rose 0.97 and labor 0.54, taking the operating margin to 13.72%.
Q3 FY2026, the quarter to Sep 30, 2026 · 10-Q filed Oct 29, 2026
- Operating margin
- 13.7%
- Net income
- $339.9M
- Free cash flow, quarter
- $347.1M
Largest source of revenue: Food and beverage revenue, 99.5% of the total.
Where Chipotle's money goes
- 01
Restaurant overheads, not food, cut the margin
Food costs fell 0.52 points as a share of revenue, while other operating costs rose 0.97 and labor 0.54, taking the operating margin to 13.72%.
Why it matters
Total operating expenses rose 12.47% against revenue growth of 9.65%, reaching 86.28% of revenue. Food, beverage and packaging was the exception, down 0.52 points to 29.53% of revenue. The filing credits menu price increases, tariff relief and a favorable limited-time offer mix, partly offset by inflation primarily from beef and freight and by higher protein usage.1
The rise sat in costs a restaurant carries whatever it sells. Other operating costs grew 16.72% to 15.96% of revenue, led by marketing and promotional activities, then delivery, maintenance and utilities. Labor grew 12.0% to 25.74% of revenue; the filing names lower average restaurant sales volumes, wage inflation and performance bonuses, and extra restaurant labor including for promotional activity. Occupancy grew 13.32%.1
Other operating costs alone account for 0.97 of the 2.16-point fall in the operating margin, 44.9% of it. Income from operations fell 5.28% to $452.0M from $477.2M, even though total revenue grew to $3.29B from $3.00B.1
AnalysisAnalysis: comparable restaurant sales rose 2.1%, better than 0.3% a year earlier, but not by enough to spread costs that do not shrink when a restaurant sells less. The margin depends on sales per restaurant, and part of this quarter's extra spending went on the promotion meant to raise them.
- 02
Net income fell twice as fast as operating profit
Operating income fell 5.28%, but lower interest income and a higher tax rate turned that into an 11.05% fall in net income.
Why it matters
Interest and other income fell 73.92% to $5.2M from $19.8M, which the filing attributes to lower balances of interest-bearing securities. As a result, income before income taxes fell 8.02%, more than the 5.28% fall in income from operations.1
The tax provision rose 2.08% to $117.3M even as pre-tax income fell, an effective rate of 25.65% against 23.11% a year earlier. The filing attributes the increase mainly to higher nondeductible expenses and a reduction in tax credits. Net income fell to $339.9M from $382.1M.1
A smaller share count softened the per-share result. Diluted shares averaged 1.27B against 1.34B a year earlier, so diluted earnings per share were $0.27 against $0.29, a smaller fall than in net income.1
AnalysisAnalysis: the interest line and the share count are two sides of one choice. Cash once held in interest-earning securities went into share repurchases, which lowers income and the number of shares at the same time. That is why the decline shows more in net income than in earnings per share.
- 03
Capital spending took 41.2% of operating cash, up from 28.7%
Operating cash flow rose to $590.1M, but capital spending of $243.0M left free cash flow of $347.1M, below $406.2M a year earlier.
Why it matters
Operating cash flow was 1.74 times net income, $590.1M against $339.9M, and rose from $569.7M a year earlier even as net income fell. The filing explains that the business has not required significant working capital because guests generally pay using cash or cards, inventories are small, and suppliers are paid after delivery.1
Capital expenditure rose to $243.0M from $163.5M, 7.38% of revenue, and took 41.18% of operating cash flow against 28.70% a year earlier. The filing ties the year-to-date increase mainly to new restaurant development and new equipment for existing restaurants, and expects elevated equipment costs to continue through next year.1
Free cash flow was 10.54% of revenue, against 13.52% a year earlier.1
AnalysisAnalysis: new equipment in existing restaurants pays back only if it lowers labor per order or lifts capacity at peak hours. Labor grew faster than revenue this quarter, so that payoff is not yet visible in the numbers; the labor line is where it would appear first.
Sources
- 1.Chipotle 10-Q for the period to 2026-09-30 (the filing), Oct 29, 2026, read Nov 1, 2026
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Growth, profit and margin
Revenue went from $3.9B in FY2016 to $11.9B in FY2025, the operating margin from 0.9% to 16.2%, over 9 years.
- Revenue$11.9B
- Operating income$1.9B
- Operating margin16.2%
- Period
- Q3 FY2026
- Revenue
- $3.3B
- Operating income
- $452.0M
- Operating margin
- 13.7%
- Net income
- $339.9M
- Free cash flow
- $347.1M
Does the profit turn into cash?
Q3 FY2026: free cash flow of $347.1M against net income of $339.9M in the quarter.
- Operating cash flow$2.1B
- Capital expenditure$666.3M
- Free cash flow$1.4B
- Net income$1.5B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
Revenue streams
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME. The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Not reported, or not derivable
- gross margin: the company reports expenses by nature: no cost of revenue or gross profit line exists
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Food and beverage revenue | $3.3B | 99.5% |
| Delivery service revenue | $15.2M | 0.5% |
Source10-Q, us-gaap:Revenues, as reported in the 10-Q filed 2026-10-29
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by nature: what they are (food, labor, occupancy, personnel, marketing), not what they were for, so there is no cost-of-revenue line and no gross profit.
| Cost line | Q3 FY2026 | Of revenue | Source |
|---|---|---|---|
| Total operating expenses | $2.8B | 86.3% | Source10-Q, us-gaap:CostsAndExpenses, as reported in the 10-Q filed 2026-10-29 |
| Income from operations | $452.0M | 13.7% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-29 |
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
The increase is attributable to a 1.3% increase in average check and a 0.8% increase in transactions.
View source
During the three months ended September 30, 2026, we opened 84 company-owned restaurants, which included 53 restaurants with a Chipotlane.
View source
As of September 30, 2026, we owned 4,267 restaurants, including 4,146 Chipotle restaurants within the United States and 121 international Chipotle restaurants.
View source
Comparable restaurant sales increased 2.1% for the three months ended September 30, 2026.
View source
The increase is attributable to a 1.3% increase in average check and a 0.8% increase in transactions.
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Digital sales represented 38.8% of total food and beverage revenue for the three months ended September 30, 2026, an increase from 36.7% for the three months ended September 30, 2025.
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As of September 30, 2026, we owned 4,146 Chipotle restaurants throughout the United States and 121 international Chipotle restaurants.
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During the three months ended September 30, 2026, we opened 84 company-owned restaurants, which included 53 restaurants with a Chipotlane.
View source
Additionally, we had 20 international partner-operated restaurants.
View source
As of September 30, 2026, we owned 4,146 Chipotle restaurants throughout the United States and 121 international Chipotle restaurants.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement23 lines, as presented in the 10-Q
Cash flow statement3 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
| Line | Q3 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Operating activities | ||||
| Net income | $339.9M | $382.1M | -11% | Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | $102.6M | $90.5M | +13% | Source10-Q, us-gaap:DepreciationDepletionAndAmortization, as reported in the 10-Q filed 2026-10-29 |
| Statement of Cash Flows | ||||
| Cash, cash equivalents, and restricted cash at end of period | $670.0M | $729.6M | -8.2% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-29 |
Balance sheet31 lines, as presented in the 10-Q
About this data
- Source
- Chipotle 10-Q, accession 0001058090-26-000104, filed Oct 29, 2026, read on Nov 1, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-01
What holds Chipotle's model up, and what could bend it
Competitive edge
Every restaurant owned, every opening funded from cash
Chipotle owned 4,267 restaurants against 3,916 a year earlier, built from operating cash with no borrowings outstanding, so it keeps each restaurant's full profit.
The detail
It opened 84 company-owned restaurants in the quarter. Total revenue rose 9.65% while comparable restaurant sales rose 2.1%; the filing's sales bridge puts most of the rest on restaurants not yet in the comparable base. The credit facility had no outstanding borrowings. Abroad, it uses partners for new markets: 20 partner-operated restaurants against 7 a year earlier.1
AnalysisAnalysis: owning every unit keeps standards and profit in-house, but each lease and build-out sits with the company. The model works because customer cash arrives before supplier bills fall due, which is why cash conversion matters as much as margin.
Digital orders now 38.8% of food sales
Digital sales rose to 38.8% of food and beverage revenue from 36.7%, and 53 of 84 new restaurants include a Chipotlane pick-up lane.
The detail
Digital sales represented 38.8% of food and beverage revenue, up from 36.7% a year earlier. Of the 84 restaurants opened in the quarter, 53 included a Chipotlane, 63.1% of openings. Delivery service revenue was $15.2M, 0.46% of total revenue.1
AnalysisAnalysis: orders made away from the walk-in line let a restaurant serve more guests at peak hours without a larger dining room, and the app gives a direct record of what each guest orders, which feeds the rewards program and marketing.
What to watch
Slow comparable growth leaves restaurant costs uncovered
Comparable sales rose 2.1%, while labor grew 12.0% and other operating costs 16.72%, so the margin hinges on each restaurant selling more.
The detail
The filing names wage inflation and higher mandated minimum wages, a competitive labor market, and union organizing efforts among its risks. In the quarter it names lower average restaurant sales volumes as a driver of higher labor costs as a share of revenue.1
AnalysisAnalysis: comparable growth came from a 1.3% higher average check and 0.8% more transactions, while marketing and extra crew for promotions rose. If visits fade when promotions end, the costs stay and the margin pressure continues.
Food safety concerns can dent sales within weeks
The filing reports comparable sales headwinds in July that it links to U.S. food safety concerns and geopolitical developments, easing by the end of August.
The detail
The filing describes low-single-digit headwinds to comparable restaurant sales beginning in July, which worsened over several weeks before trends returned to earlier levels by the end of August. Its risk factors name food safety incidents, negative publicity and social media, consumer sentiment and discretionary spending.1
AnalysisAnalysis: because so much of each restaurant's cost is fixed, even a brief dip in sales passes almost directly into the margin.
Corporate costs rose 26.23% while revenue grew 9.65%
General and administrative expenses rose 26.23% to $185.2M against revenue growth of 9.65%, led by stock-based compensation, performance bonuses and outside services.
The detail
General and administrative expenses rose to $185.2M from $146.7M, reaching 5.62% of revenue, up 0.74 points. The filing's bridge puts stock-based compensation first, then performance bonuses, outside services for corporate initiatives, wages and legal contingencies, partly offset by lower expense for retention awards granted after the former chief executive's departure.1
AnalysisCaveat: the filing notes that quarterly results swing with the timing of stock-based compensation and bonuses, so one quarter's jump overstates the underlying trend. The question is whether overhead keeps growing faster than the restaurants it supports.
Sources
- 1.Chipotle 10-Q for the period to 2026-09-30 (the filing), Oct 29, 2026, read Nov 1, 2026
Chipotle, further in
Member research, then your own questions on ChatGPT.
What could change the outlook
What Chipotle's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What has to go right for the margin to recover
Which cost lines move the margin most, what sales per restaurant would need to do, and how the cash plan holds up if comparable sales stall.
- Buybacks, interest income and the per-share math
How turning interest-earning cash into share repurchases reshapes net income, earnings per share and the cushion behind them.
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Have a question about Chipotle?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- Why did Chipotle's net income fall 11.05% when its operating income fell only 5.28%?
- How fast would Chipotle's comparable sales need to grow to absorb labor and other operating costs rising faster than revenue?
- What would Chipotle's new restaurant equipment need to change in the labor line to pay back its higher capital spending?
Business Lens describes Chipotle from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.