PepsiCo Narrows 2026 Core Earnings Outlook
Organic revenue growth accelerated to 3.1% in the third quarter as the snack and beverage maker lifted full-year organic revenue to about 3% and cut core EPS growth to 2.5%–3.5%.
PepsiCo (PEP) reported third-quarter net revenue of $25.27 billion, up 5.6% from a year earlier, as organic revenue growth accelerated to 3.1% after 2.4% in the second quarter.
The snack and beverage maker said the organic pickup reflected effective net pricing and a contribution from organic volume growth across both global beverages and convenient foods. Chairman and CEO Ramon Laguarta said the results reflected the scale of the international business, an evolving global portfolio, and a stronger presence in underpenetrated channels.
Reported net revenue growth slowed from 6.4% in the second quarter. Foreign exchange added 0.7 percentage points, and acquisitions and divestitures added 1.7 percentage points to the 5.6% increase.
GAAP operating profit was $4.26 billion, and operating margin expanded 195 basis points to 16.9%, a smaller expansion than the 875 basis points recorded in the second quarter. The GAAP lift primarily reflected a favorable net impact of acquisition- and divestiture-related charges and credits and net mark-to-market gains on commodity derivatives. Core operating profit rose 3% to $4.28 billion, and core operating margin contracted 35 basis points to 16.9%. Core profit performance reflected productivity savings, effective net pricing, and a 4-percentage-point favorable impact of tariff refunds, partially offset by certain operating cost increases and higher advertising and marketing expenses.
Diluted earnings were $2.23 a share, up 17%. Core EPS rose 2% to $2.34. Core constant-currency EPS growth was 1.5%.
In North America, convenient foods net revenue trends improved sequentially, reflecting savory snacks volume growth and volume market share improvement, offset by lower effective net pricing. That followed a second-quarter decline in convenient foods net revenue. PepsiCo Foods North America organic revenue was $6.51 billion. The beverages business delivered 5% net revenue growth, primarily reflecting 2025 acquisitions. PepsiCo Beverages North America organic revenue declined 6%, and organic volume declined 2%, with effective net pricing up 3%.
International businesses each delivered strong net revenue growth. International Beverages Franchise organic revenue rose 7% on 5% organic volume growth and 2% effective net pricing. Europe, Middle East and Africa organic revenue rose 9% on 1% organic volume growth and 7% effective net pricing. Latin America Foods organic revenue rose 6% on 2.5% organic volume growth and 3% effective net pricing. Asia Pacific Foods organic revenue rose 9% on 11% organic volume growth, with effective net pricing down 2%. Laguarta said the company remains focused on building on the International business while acting with urgency to improve North America through innovation, brand building, and sharper marketplace execution by channel.
The company updated fiscal 2026 guidance. Organic revenue is now expected at approximately 3%, versus a prior range of 2% to 4%. Net revenue is expected at approximately 6%, versus 4% to 6%. Core EPS growth is now 2.5% to 3.5%, versus the low end of 5% to 7%. Core constant-currency EPS growth is now 1% to 2%, versus the low end of 4% to 6%. Foreign-exchange translation is now approximately 1.5% to net revenue and core EPS growth, and acquisitions net of divestitures are approximately 1.5% to net revenue growth. The core annual effective tax rate is now approximately 21%. Capital spending remains below 5% of net revenue, free cash flow conversion at least 80%, and cash returns to shareholders $8.9 billion.
Laguarta said additional structural cost-reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input-cost inflation.