PepsiCo Earnings Show Revenue Gain and U.S. Weakness

PepsiCo, Inc. reported on July 9, 2026, revenue growth and strong international volume gains but flagged weaker North America demand that limited core earnings per share (EPS) growth, prompting management to reaffirm fiscal-year 2026 guidance.

Consolidated Results and Profitability

PepsiCo’s second-quarter 2026 net revenue rose 6.4% year over year to $24.2 billion. Organic revenue increased 2.4%, with net revenue growth driven by 2.4 percentage points from organic growth, 2.2 points from foreign-exchange translation, and 1.8 points from acquisitions and divestitures.

Reported EPS jumped 137% year over year, reflecting operating-profit growth and the benefit of lapping prior-year impairment and lower restructuring charges. Operating profit rose 125%, and operating margin expanded 875 basis points. Core EPS increased 4% year over year, while core constant-currency EPS rose 1%. Core operating profit grew 4%, though core operating margin narrowed by 40 basis points due to higher operating costs partially offset by productivity gains and pricing benefits.

North America Softness and International Strength

International operations drove the quarter’s growth. International organic revenue rose 7% in Q2 and 6% year to date. International convenient foods and beverages organic revenue each increased 6% to 7%, with the International Beverage Franchise’s organic volume up 5%. International convenient foods account for about 70% of global convenient-foods volume.

In contrast, North America organic revenue declined 0.5%, falling short of internal expectations. Management attributed this softness to moderating U.S. food and beverage category performance and tightening consumer budgets amid rising inflation. PepsiCo Beverages North America posted net revenue growth of 7%, fueled by a 6-percentage-point contribution from acquisitions net of divestitures and 1% organic growth. Resilient demand for zero-sugar beverages and improving salty-snack sales partially offset broader North American weakness, which was pressured by high gas prices limiting trips and dampening impulse-channel demand.

Guidance and Capital Allocation

PepsiCo reaffirmed its fiscal 2026 guidance, expecting organic revenue growth of 2% to 4% and core constant-currency EPS growth of 4% to 6%. These assumptions imply net revenue growth of 4% to 6% and core EPS growth of roughly 5% to 7%, inclusive of anticipated global minimum tax impacts.

The company projects total cash returns to shareholders of approximately $8.9 billion, including about $7.9 billion in dividends and $1.0 billion in share repurchases. Capital spending is expected to remain below 5% of net revenue, free cash flow conversion at least 80%, and the core annual effective tax rate around 22%. Management anticipates gradual improvement in North America during the second half, while international markets continue as the primary growth drivers. Portfolio evolution toward zero-sugar beverages, portion control, and functional benefits remains central to sustaining organic volume gains.

"Results were tempered in the quarter as U.S. food and beverage category performance moderated with consumer budgets tightening due to rising inflationary pressures," management said in prepared remarks.