CocaCola Company (The) (KO) Earnings & Analysis

Latest quarter

Coca-Cola reported Q2 FY2026 revenue of $13.4 billion, up 6.74% from $12.5 billion in Q2 FY2025. Revenue exceeded the consensus of $13.1 billion, while adjusted EPS of $0.97 exceeded the consensus of $0.92.

The company reported diluted EPS of $1.03, up 17.0% from $0.88 a year earlier. Its filing said worldwide concentrate sales volume increased 4% and unit case volume increased 5%, while a weaker U.S. dollar favorably affected consolidated revenue by 2%. Coca-Cola said favorable pricing initiatives, foreign-exchange movements and the sale of its finished-product operations in Nigeria contributed to gross margin of 62.9%, compared with 62.4% a year earlier.

The filing reported operating income of $4,672 million, compared with $4,280 million a year earlier, citing volume, price/mix, lower operating expenses, lower other operating charges and foreign exchange, partly offset by commodity costs and marketing spending. Operating margin was 34.9%, versus 34.1%, and free cash flow was $5.1 billion.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Henrique Braun, chief executive officer, said the company faced an uneven consumer environment, with inflationary pressures, geopolitical uncertainty and economic challenges affecting consumers in some markets. He said consumers in the U.S. and Europe remained under pressure in aggregate, China spending was selective, and sentiment across Latin America was mixed.

Braun said second-quarter volume grew 5%, aided by an easier comparison a year earlier, while the two-year average volume-growth rate was 2%. He said the company used its portfolio, pricing and packaging to address both affordability and premiumization, particularly for lower-income consumers in North America. Braun said the company grew volume across all Asia Pacific operating units and nearly all beverage categories, while investing to expand its consumer base in the region.

John Murphy, president and chief financial officer, said organic revenue grew 6% and price/mix rose 2%, reflecting three points of pricing actions partly offset by one point of unfavorable mix, primarily from investment timing in Asia Pacific. Murphy said comparable gross margin increased approximately 120 basis points and comparable operating margin increased approximately 90 basis points, driven by underlying expansion and currency tailwinds.

In response to questions on investment and margins, Murphy said quarterly spending levels do not necessarily indicate the level of investment over time. He said the company remained committed to investing behind its brand portfolio and was focused on improving investment allocation through digital and AI-supported capabilities rather than providing a quarter-by-quarter investment target.

Murphy said commodity volatility continued to be monitored, although the company considered the overall cost-basket effect manageable based on current information. He said concentrate shipments were expected to lag unit case volume by one point in the third quarter and to slightly trail unit case volume for the full year. Braun said the company expected the second quarter to face a higher comparison and six fewer days, while describing continued momentum across operating units and categories.

Guidance

Coca-Cola raised its FY2026 organic revenue-growth outlook from 4% to 5% to approximately 5%. It raised comparable currency-neutral EPS growth excluding acquisitions and divestitures from 6% to 7% to 7% to 8%, and raised comparable EPS growth from 8% to 9% to 9% to 10%.

The company expects approximately $14.6 billion of operating cash flow and approximately $12.4 billion of free cash flow, compared with its prior expectations of approximately $14.4 billion and approximately $12.2 billion, respectively. Coca-Cola continues to expect an underlying effective tax rate of 19.9%.