Arcos Dorados Holdings Inc. (NYSE: ARCO), the largest McDonald's franchisee in Latin America, saw its stock price plummet by 15.93% in pre-market trading on Wednesday. The significant drop came after the company released its first-quarter 2025 financial results, which fell short of analyst expectations.

The fast-food chain operator reported quarterly earnings of $0.07 per share, missing the analyst consensus estimate of $0.13 by a substantial 46.15%. This represents a 50% decrease from earnings of $0.14 per share in the same period last year. Despite the earnings miss, Arcos Dorados posted quarterly sales of $1.08 billion, slightly beating the analyst consensus estimate of $1.05 billion by 2.14%. However, this revenue figure remained relatively flat compared to the $1.08 billion reported in the same quarter of the previous year.

While Arcos Dorados reported an 11.1% increase in systemwide comparable sales, investors appeared to focus on the disappointing earnings performance. The company's adjusted EBITDA for Q1 2025 came in at $91.3 million, with an adjusted EBITDA margin of 8.5%. Net income for the quarter stood at $13.9 million. The market's sharp negative reaction suggests concerns about the company's profitability and ability to convert sales growth into earnings, particularly in the face of potential cost pressures or operational challenges in the Latin American market.