PepsiCo, Inc. (PEP) Earnings & Analysis

Latest quarter

PepsiCo reported Q3 FY2026 revenue of $25.3 billion, compared with $23.9 billion in Q3 FY2025, while diluted EPS was $2.25, compared with $1.90. The company’s revenue as the consensus counts it was $25.3 billion, versus the consensus of $24.9 billion, and adjusted EPS as the consensus counts it was $2.34, versus $2.29.

PepsiCo reported gross margin of 54.4%, compared with 53.6% a year earlier, and operating margin of 16.9%, compared with 14.9%. The company reported free cash flow of $4.7 billion, compared with $407.0 million in the prior-year quarter.

The filing said some operations recorded revenue growth from organic volume growth and effective net pricing, while another business recorded a 5% revenue increase driven by acquisitions and divestitures and effective pricing, partly offset by lower organic volume. PepsiCo’s filing also said productivity savings, effective net pricing, tariff refunds and commodity-derivative gains contributed to operating-profit growth in one business.

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

What management said on the call

Ramon Laguarta said PepsiCo’s international business continued to perform well, while higher gasoline prices affected consumer behavior in the United States and internationally. He said the company saw a slowdown in the conversion of traffic into purchases at certain convenience stores and independent outlets, and said PepsiCo was working with customers on bundles, meal-linked offers and other purchase incentives.

Laguarta said PepsiCo continued affordability investments and was refining their execution by customer, channel and consumer. He said price-investment delays at certain customers had affected food-volume performance, but that those issues had been resolved. He also said the company was scaling portion-control offerings and newer portfolio platforms, while away-from-home execution had accelerated in Q3 after supply-chain and customer-execution issues slowed activity in Q2.

On international operations, Laguarta said the company was seeing broad-based performance and was using procurement capabilities and business agility to manage raw-material availability and inflation. Steve Schmitt said PepsiCo expected commodity inflation in the second half, particularly in EMEA, while teams had taken actions to mitigate it.

Schmitt said PepsiCo expected North American profit improvement to come faster from its beverage business than from foods. He said the company planned higher North American advertising and marketing expense in the second half versus the prior year, while it continued productivity work and growth investments.

Asked about quarterly timing, Schmitt said PepsiCo did not provide specific quarterly guidance. He said tariff-refund claims were expected to offset some commodity inflation, and he said a higher tax rate and the timing of costs and investments were expected to affect Q3 more than Q4.

Guidance

PepsiCo’s current FY2026 outlook calls for core constant currency EPS growth of +1% to +2% and core EPS growth of +2.5% to +3.5%. The company’s outlook calls for organic revenue growth of approximately +3% and net revenue growth of approximately +6%, including approximately +1.5% from foreign-exchange translation and approximately +1.5% from acquisitions net of divestitures. PepsiCo also expects free-cash-flow conversion of at least 80 percent, capital spending below 5% of net revenue, and a core annual effective tax rate of approximately 21%.