Fast-food chain Shake Shack (NYSE: SHAK) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 15.9% year on year to $367.4 million. Its non-GAAP profit of $0.36 per share was 17.2% above analysts’ consensus estimates.
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Shake Shack (SHAK) Q3 CY2025 Highlights:
- Revenue: $367.4 million vs analyst estimates of $363.8 million (15.9% year-on-year growth, 1% beat)
- Adjusted EPS: $0.36 vs analyst estimates of $0.31 (17.2% beat)
- Adjusted EBITDA: $54.14 million vs analyst estimates of $51.74 million (14.7% margin, 4.6% beat)
- Operating Margin: 5%, up from -5.7% in the same quarter last year
- Free Cash Flow Margin: 6.5%, up from 2.2% in the same quarter last year
- Locations: 630 at quarter end, up from 552 in the same quarter last year
- Same-Store Sales rose 4.9% year on year, in line with the same quarter last year
- Market Capitalization: $3.61 billion
Company Overview
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE: SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.
With $1.37 billion in revenue over the past 12 months, Shake Shack is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.
As you can see below, Shake Shack grew its sales at an impressive 15.9% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Shake Shack reported year-on-year revenue growth of 15.9%, and its $367.4 million of revenue exceeded Wall Street’s estimates by 1%.
Looking ahead, sell-side analysts expect revenue to grow 17.6% over the next 12 months, an acceleration versus the last six years. This projection is admirable and suggests its newer menu offerings will fuel better top-line performance.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations often determines how much revenue it can generate.
Shake Shack sported 630 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 14.1% annual growth, among the fastest in the restaurant sector. This gives it a chance to become a large, scaled business over time.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Shake Shack’s demand has been healthy for a restaurant chain over the last two years. On average, the company has grown its same-store sales by a robust 3% per year. This performance gives it the confidence to meaningfully expand its restaurant base.
In the latest quarter, Shake Shack’s same-store sales rose 4.9% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from Shake Shack’s Q3 Results
We were impressed by how significantly Shake Shack blew past analysts’ same-store sales expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 2.8% to $92.44 immediately after reporting.
Shake Shack had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
