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Texas Roadhouse, Inc. (TXRH)·Q3 2025 Earnings Summary

Executive Summary

  • Traffic-led comp strength offset margin pressure from beef inflation; revenue beat but EPS missed modestly versus consensus. Q3 revenue was $1.436B (+12.8% YoY) vs S&P consensus $1.429B*, while diluted EPS was $1.25 vs $1.279*; restaurant margin fell 168 bps to 14.3% on 7.9% commodity inflation .
  • Guidance: 2025 commodity inflation raised to ~6% (from 5% in Q2), tax rate lowered to ~14.5%; 2026 initial guide calls for ~7% commodity inflation, wage inflation 3–4%, and ~$400M capex .
  • Demand remains resilient: Q3 company comps +6.1% (traffic +4.3%, check +1.8%); first five weeks of Q4 comps +5.4% with ~60 bps Halloween drag; 1.7% price taken at Q4 start, with no noticeable guest pushback noted .
  • Key 2026 narrative risk: elevated beef costs persisting through cattle cycle; management characterizes it as cyclical but expects inflation to moderate after 2026. Strategic offsets include disciplined pricing, labor productivity, and tech rollout nearing 100% .

What Went Well and What Went Wrong

  • What Went Well

    • Robust demand: comps +6.1% with traffic +4.3% and check +1.8%; average weekly sales $157,325, to‑go ~$21,409 (13.6% mix) .
    • Broad-based momentum and execution: labor % leveraged 18 bps YoY; other operating costs improved 40 bps; G&A at 3.8% of revenue with YoY dollar decline .
    • Strategic progress: ~95% of restaurants on digital kitchen and upgraded guest management; retail presence (gift cards and CPG items) in 120,000+ outlets supports brand engagement .

  • What Went Wrong

    • Margin compression and EPS miss: restaurant margin % down 168 bps to 14.3% on 7.9% commodity inflation; diluted EPS down 0.8% YoY to $1.25 (below consensus) .
    • Beef inflation higher than expected into H2; mix shift toward larger steaks added ~20–30 bps COGS headwind; EBITDA trailed consensus .
    • Bubba’s 33 comps slowed to +1.8% vs Texas Roadhouse +6.3% (concept still expanding but sequentially softer) .

Financial Results

Headline P&L vs prior year and prior quarter (USD, per share, %, oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Total Revenue ($B)$1.273 $1.512 $1.436
Income from Operations ($M)$102.0 $146.3 $96.9
Net Income ($M)$84.4 $124.1 $83.2
Diluted EPS ($)$1.26 $1.86 $1.25
Restaurant Margin %16.0% 17.1% 14.3%

Consensus vs Actual – Q3 2025

MetricConsensusActualSurprise
Revenue ($B)$1.4293*$1.4363 +$0.0070B (Beat)
Diluted EPS ($)$1.279*$1.25 -$0.029 (Miss)
EBITDA ($M)$152.9*$149.7 [Get from press: D&A + Op? Use estimates row only]-$3.2M (Miss)*
Normalized Net Income ($M)$85.0*$83.2 -$1.8M (Miss)*

Values retrieved from S&P Global.*

KPI and Operating Detail (Q3 2025)

KPIQ3 2024Q3 2025
Company Comps (%)8.5% 6.1%
Traffic Contribution (pp)—+4.3 pp
Check Contribution (pp)—+1.8 pp
Avg Weekly Sales – Company ($)$149,176 $157,325
Avg Weekly To‑Go Sales – Company ($)$18,914 $21,409
Restaurant Margin ($M)$202.1 $204.3
Restaurant Margin $ / Store Week$23,784 $22,513

Brand/Concept Highlights (Q3 2025)

MetricTexas RoadhouseBubba’s 33
Comps (%)6.3% 1.8%
AUV ($M, trailing definition)$2.104 $1.533
Weekly Sales – Comparable Units ($)$163,079 $117,470
Store Weeks (YoY %)6.3% growth 10.7% growth

Quarterly Trend (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($B)$1.448 $1.512 $1.436
Diluted EPS ($)$1.70 $1.86 $1.25
Comps (%)3.5% 5.8% 6.1%
Restaurant Margin %16.6% 17.1% 14.3%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Commodity InflationFY2025~5% (Q2 update) ~6% Raised
Effective Tax RateFY2025~15% ~14.5% Lowered
Wage & Other Labor InflationFY2025~4% ~4% Maintained
Store Week GrowthFY2025~5% ~5% Maintained
Total CapexFY2025~$400M ~$400M Maintained
Menu PricingQ4 2025—~1.7% increase implemented at Q4 start New update
QTD Comps (first 5 weeks)Q4 2025—+5.4% YoY Update
DividendDec 2025—$0.68/share payable Dec 30, 2025 Declared
Initial Commodity InflationFY2026—~7% New
Wage & Other Labor InflationFY2026—3–4% New
Effective Tax RateFY2026—~15% New
Total CapexFY2026—~$400M New
Store Week GrowthFY2026—5–6% incl. franchise acquisitions New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Beef/CommoditiesRaised 2025 commodity inflation to ~4% in Q1; to ~5% in Q2 on higher beef and tariff impacts 2025 commodity inflation to ~6%; 2026 ~7%; beef volatility remains elevated Worsening cost backdrop
Pricing PhilosophyPrice below commodity; price for structural costs; Q2 noted 1.7% price to start Q4 Took ~1.7% at Q4 start; next decision in April (period 4) with conservative approach Cautious, incremental
Labor/OperationsProductivity improving; labor hours growth < traffic; wage inflation ~4% Wage inflation ~4% 2025; 3–4% 2026; leverage possible if top line holds Stable to improving leverage
Technology (Digital Kitchen, Guest Mgmt)Rollout progressing (65–80%); intended to improve efficiency and to‑go capacity ~95% deployed, completion by year-end; balanced speed with guest experience Nearing full deployment
Demand/Traffic & MixComps regained momentum post-weather; alcohol mix negative; entree mix up Q3 comps +6.1% (traffic +4.3%); alcohol mix still negative; steak mix adds COGS pressure Healthy traffic; mix headwinds persist
Tariffs/Other OpExTariffs ~30 bps of 2025 commodity; minimal 2025 build cost impact in Q2 Possible 2026 other op growth low-single-digit; tariffs could flow through Manageable
Development & M&A~30 opens in 2025; franchise acquisitions ongoing (17 by Q2) 2025 ~30 opens on track; 2026 ~35 company opens; CA franchise buy (5 units) in 2026; 3 units acquired in Q4 Accelerating 2026 build

Management Commentary

  • “Our operators continued to drive strong traffic this quarter, which helped offset the impact of continued commodity inflation… we are committed to… maintaining our value proposition.” — Jerry Morgan, CEO .
  • “Inflation in the third quarter was above our expectation due to higher‑than‑anticipated beef prices… updating full year 2025 commodity inflation guidance to approximately 6%… 2026 commodity inflation guidance at approximately 7%.” — Interim CFO Keith Humpich .
  • “Approximately 95% of our restaurants are currently using a digital kitchen and upgraded guest management system. We expect the rollout… to be completed by year‑end.” — Jerry Morgan .
  • “More of our guests… are getting a steak… recognizing the value of our steak offerings relative to what they can do at home.” — Michael Bailen (IR) .

Q&A Highlights

  • Beef inflation/cycle: Management frames current beef inflation as cyclical (cattle cycle) vs structural; initial 2026 inflation ~7% with more pressure 1H than 2H .
  • Pricing cadence and MP compensation: Conservative pricing approach; next price decision targeted for April (period 4). Restaurant margin $/store week still ~35% above 2019 despite recent pressure .
  • Q4 to‑date trends: First five weeks comps +5.4%; Halloween shift was ~60 bps headwind; pricing ~3.1% with 50–60 bps negative mix yields ~2.5–2.6% check; traffic >3% .
  • Capital allocation & acquisitions: 3 franchises acquired at Q4 start; 5 CA franchises to be acquired at beginning of 2026; ~35 new stores in 2026; capex ~$400M (ex-CA acquisition cost) .
  • Other: Alcohol mix remains a negative headwind; mocktails and $5 beverage specials resonating; digital kitchen enhances throughput while maintaining ~54‑minute guest experience .

Estimates Context

  • Q3 2025 results vs S&P Global consensus: revenue beat by ~$7M; EPS missed by ~$0.03; EBITDA modest miss; normalized net income slight miss (see table above). Mix shift toward larger steaks and higher‑than‑expected beef costs in late quarter drove margin pressure vs expectations .
  • Forward estimates: Consensus for Q4 2025 EPS $1.542* and revenue ~$1.499B*; Q1 2026 EPS $1.734* and revenue ~$1.616B*. Target price consensus $189.68*; recommendation not provided in dataset. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Traffic remains the core differentiator; comps are traffic‑led and broad‑based, supporting potential leverage in labor/G&A if sales trends persist .
  • The near‑term margin narrative is dominated by beef; 2025 inflation raised to ~6% and 2026 guide ~7% implies continued COGS pressure until the cattle cycle turns .
  • Pricing remains measured; expect another decision in April. Management prioritizes value proposition and long‑term traffic health over chasing commodity spikes .
  • 2026 growth accelerates: ~35 company opens plus franchise acquisitions (including CA) drive 5–6% store‑week growth; capex held around ~$400M, signaling disciplined expansion .
  • Watch mix: ongoing shift to larger steaks boosts sales but pressures COGS % by ~20–30 bps; alcohol mix remains a headwind though partially offset by mocktails/soft beverages .
  • Model implications: Trim near‑term margin/EPS on higher beef and mix; maintain or lift sales/traffic assumptions; incorporate 14‑week lap headwind (~10% EPS impact) into Q4 YoY modeling .
  • Potential upside drivers: sustained traffic outperformance, full tech rollout benefits, and evidence of beef inflation moderation or favorable procurement in 2H26 .

Notes

  • Restaurant margin is a non‑GAAP metric; see company reconciliation in the Q3 8‑K .
  • Consensus and target price figures marked with an asterisk (*) are Values retrieved from S&P Global.