Darden Restaurants, Inc. (NYSE:DRI) fiscal first-quarter results landed just short of Wall Street’s numbers on both lines, adjusted EPS of $2.05 against a $2.06 estimate, and revenue of $3.20 billion against $3.21 billion expected, sending shares down as much as 5% before CEO Rick Cardenas’ comments on the earnings call pared that loss to roughly 2%.
The headline comp of 3.1% growth, with every segment positive, sits well below the 4.6% comp growth Darden posted just one quarter earlier, a deceleration that shapes most of what analysts are debating.
Darden’s latest quarter also highlights how restaurant operators are balancing comparable-sales growth with margins and changing consumer traffic. In our recent story, Could Brinker International (EAT) Stock Be the Restaurant Turnaround Story Investors Have Been Waiting For?, we examined Brinker’s recent sales growth, improving restaurant-level margins, and the factors shaping its turnaround.
The Case For Staying Constructive
The strongest evidence for staying constructive is that every business unit grew even through a quarter management said absorbed an 80 basis point hit from World Cup-related disruption and a Cyclospora-linked lettuce scare.
LongHorn Steakhouse again led the portfolio at 6.2% comp growth, and while that’s down from 9.5% in the fourth quarter, it has now clearly overtaken Olive Garden as Darden Restaurants, Inc. top performer.
Yard House, boosted by the World Cup, posted 10% comp growth and crossed $1 billion in annual sales for the first time, prompting 13 new locations in fiscal 2027, five of them converted from the shuttered Bahama Breeze chain.
Restaurant-level EBITDA held flat at 18.8% despite the disruption, evidence of real cost discipline, and management reiterated its full fiscal 2027 targets of $13.60 billion to $13.75 billion in sales and $11.10 to $11.35 in EPS without any change.
Freedom Capital maintains a Buy rating with a $260 price target, up from $255, and points directly to traffic accelerating through August and into September as the reason to stay bullish. Mizuho maintains an Outperform rating with a $245 price target, up from $235, and argues that the World Cup and Cyclospora drag are now behind the company. While Citi maintains a Buy rating with a $247 price target, down slightly from $248, it still considers the shares attractively valued despite trimming its model.
The Case For Caution
The softer read is that growth is decelerating almost everywhere at once, not just at the segments hit hardest by one-time events.
Olive Garden’s comp slowed to 1.1% from 2.4% a quarter earlier, and fine dining slowed to 1.6% from 1.9%, declines that outpace what the roughly 80 basis point World Cup and cyclospora drag alone would explain. Olive Garden was forced to scrap a planned campaign built around its “unlimited soup, salad and breadsticks” positioning, delaying the marketing push until the current quarter and creating a temporary lost opportunity tied directly to the produce-safety scare.
BMO Capital (Market Perform, $220, down from $225) points out that stronger restaurant margins are masking softer underlying demand, and says its reduced target reflects a more uncertain consumer backdrop rather than anything specific to this quarter’s execution. Fine-dining traffic also remains below pre-pandemic levels even with smaller price increases than the rest of the portfolio, and Cardenas himself conceded that “business spending is still low” in that segment.
What The Smart Money Sees
Hedge fund ownership fell to 32 funds from 39 in the second quarter of 2026. AQR Capital Management raised its stake 22% to $153.0 million, and Arrowstreet Capital added 9% to $149.5 million, while Quantinno Capital increased its position 360% to $52.9 million. Squarepoint Ops cut its stake 22% to $46.5 million.
Darden Restaurants, Inc. shares trade at 18.94 times forward earnings (as of September 25, 2026), below Texas Roadhouse’s 21.01 and above Brinker’s 16.21, with short interest at 7.23% of float as of September 15, 2026.
Takeaway
Darden Restaurants, Inc. quarter is a story of a clear divergence: LongHorn and Yard House still accelerating, Olive Garden and fine dining decelerating faster than the disclosed one-time headwinds fully explain. Whether September’s improving traffic, which management and Freedom Capital both point to, extends into a genuine second-quarter reacceleration across the whole portfolio, rather than just the brands already working, is what the next print will need to answer.
READ NEXT: Brinker International Vs Restaurant Brands: Here’s The One Jim Cramer Preferred and Jim Cramer Notes Oil Is Behind Pressure on Casey’s (CASY) and Texas Roadhouse (TXRH)
Hedge Fund Resource Center