PepsiCo profit jumps on lower charges, volumes improve
The snack-and-beverage giant posted a 137% surge in second-quarter earnings per share.
The global snack-and-beverage company PepsiCo (PEP) reported second-quarter earnings per share that rose 137% from a year earlier, as lower impairment and restructuring charges masked a slowdown in core profit growth.
The quarter marked a sharp divergence between reported and underlying performance. While GAAP operating profit surged 125% and margin expanded 875 basis points to 16.6%, core operating profit grew only 4%, decelerating from 9% in the prior quarter. The gap reflected $1.86 billion in prior-year impairment charges tied to the Rockstar and Be & Cheery brands that did not recur.
Net revenue increased 6.4% to $22.5 billion, slowing from 8.5% growth in the first quarter. Organic revenue growth decelerated to 2.4% from 2.6% in the prior quarter, as 2% effective net pricing and 1% organic volume growth offset weaker performance in North American snacks. Volume trends improved from flat in the first quarter, the company said.
PepsiCo Foods North America saw organic revenue decline 2% as volumes fell 2% and effective net pricing softened. The division is closing three plants and cutting about 20% of U.S. SKUs by early 2026 to fund higher advertising and marketing investments. PepsiCo Beverages North America posted 1% organic revenue growth, with volumes down 2% but improving from a 4% decline in the prior quarter.
International segments delivered mixed results. Organic revenue growth accelerated to 9% in the International Beverages Franchise and 9% in Asia Pacific Foods, while slowing to 6% in Europe, the Middle East and Africa. Latin America Foods grew 4%, with volumes turning flat after a 2% decline in the first quarter.
PepsiCo reiterated its full-year guidance for 2% to 4% organic revenue growth and 5% to 7% core earnings-per-share growth, or 7% to 9% excluding the impact of the global minimum tax. The company also affirmed plans to return $8.9 billion to shareholders in 2026, including $7.9 billion in dividends and $1 billion in share repurchases.
The company announced a new $10 billion share-repurchase program through February 2030 and said it expects at least 100 basis points of core operating margin expansion over the next three fiscal years. Free cash flow conversion is targeted to reach at least 90% in 2027, up from a 2026 guidance of at least 80%.