Lamb Weston (LW) Q2 2026: Restructuring Leads to Profit Turnaround

If you have ever ordered french fries at a major fast-food chain or bought a bag of frozen waffle fries at the grocery store, there is a good chance you have eaten a product made by Lamb Weston Holdings, Inc. (LW). As one of the world's largest producers of frozen potato products, they operate in a consolidated market, competing primarily with private giants like McCain Foods and J.R. Simplot.

Understanding the financials of a massive food processor offers a window into consumer demand and supply chain efficiency. In this post, we are going to dig into the company’s latest 10-Q filing for the quarter ended November 23, 2025. We want to see how the company is managing its costs and whether its recent restructuring efforts are finally bearing fruit in the form of bottom-line profits.

To visualize how money moves through Lamb Weston's operations this quarter, take a look at the flow diagram below. This chart traces revenue from sales down to net income, highlighting where expenses are incurred along the way.

From Red to Black: A Profitability Turnaround

The most striking aspect of this quarter's report is the swing in profitability. While Net Sales remained relatively flat, inching up just 1% to $1.62 billion, the bottom line tells a dramatic story.

Lamb Weston reported Net Income of $62.1 million for the quarter, a significant recovery from the $(36.1) million loss reported in the same period last year.

Two main factors drove this turnaround:

1. Gross Profit Expansion: Gross profit increased by 17% to $324.3 million. This suggests the company is getting better at managing the gap between what they sell fries for and what it costs to make them (potatoes, oil, labor, and energy).
2. Reduced Restructuring Costs: Last year, the company was heavily burdened by a "Restructuring Plan," incurring $74.6 million in expenses for things like closing facilities and terminating contracts. This quarter, those expenses dropped to just $14.1 million.

Note: Restructuring expenses are typically one-time costs associated with reorganizing operations to improve long-term efficiency, such as severance pay or writing off the value of closed factories.

Segment Breakdown: North America vs. International

Lamb Weston splits its reporting into two primary segments: North America and International. The performance between the two was notably divergent this quarter.

• North America: This is the company's bread and butter, accounting for roughly two-thirds of total sales. Revenue was effectively flat at $1.07 billion, but profitability improved. Segment Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization—a proxy for operational cash flow) rose 7% to $287.8 million. This indicates that the cost-saving measures mentioned earlier are effectively protecting margins in their home market.
• International: The picture overseas was mixed. While sales grew by 4% to $548.6 million, profitability took a hit. Segment Adjusted EBITDA plunged 44% to $27.2 million. While the top-line growth is encouraging, the drop in earnings efficiency suggests the company faced higher costs or pricing pressure in global markets compared to the prior year.

Cash Flow and Capital Discipline

Beyond the income statement, Lamb Weston’s cash management shows signs of a company tightening its belt. For the six months ended November 23, 2025, Net cash provided by operating activities grew to $530.4 million, up from $429.3 million the previous year.

Simultaneously, the company has drastically reduced its capital spending. Additions to property, plant, and equipment (CapEx) fell to $155.0 million, down from a massive $474.6 million in the prior year comparable period. This reduction likely signals the completion of major capacity expansion projects, allowing the company to focus on generating free cash flow rather than building new infrastructure.

Summary

Lamb Weston appears to be entering a stabilization phase. After a period of heavy restructuring and significant losses in the prior year, the company has returned to profitability despite stagnant revenue growth. The improved gross margins and disciplined capital spending are positive signals for investors looking for operational efficiency. However, the divergence between the robust North American margins and the struggling International segment remains a key area to watch as the fiscal year progresses.