Summary
Full summaryExecutive Assessment
PepsiCo reports 9% net revenue growth to $19.4B, net income up 27% to $2.3B, driven by productivity savings and favorable foreign exchange.
- Net revenue increased 9% YoY to $19.4B, with organic revenue growth of 3% after adjusting for foreign exchange and acquisitions/divestitures.
- Operating profit rose 24% to $3.2B, aided by productivity savings, net mark-to-market gains on commodity derivatives, and a favorable net impact of acquisition and divestiture-related charges/credits.
- Diluted EPS grew 27% to $1.70, reflecting higher net income and a slight reduction in weighted-average diluted shares outstanding.
- Operating cash flow turned positive at $41M from -$973M in the prior year, driven by improved working capital management.
Financial Highlights
| Metric | Current Period | Prior Period | Change | Investor Takeaway |
|---|---|---|---|---|
Net Revenue | $19.4B | $17.9B | +8.5% | Growth driven by effective net pricing, organic volume growth, and favorable foreign exchange translation (3pp). |
Gross Profit | $10.7B | $10.0B | +7.4% | Gross margin declined 60bps to 55.2%, reflecting certain operating cost increases and commodity cost pressures. |
Operating Income | $3.2B | $2.6B | +24.4% | Operating margin expanded 210bps to 16.5%, driven by productivity savings and favorable mark-to-market impacts. |
Net Income | $2.3B | $1.8B | +26.9% | Net margin improved to 12.0% from 10.2%, reflecting higher operating profit and stable tax rate. |
Diluted EPS | $1.7 | $1.3 | +27.8% | EPS growth outpaced net income growth due to a 0.4% reduction in diluted shares outstanding. |
Operating Cash Flow | $41.0M | -$973.0M | −95.8% | Significant improvement driven by lower cash used for working capital, particularly accounts payable and other current liabilities. |
Free Cash Flow (OCF - CapEx) | -$406.0M | -$1.6B | −74.2% | Negative free cash flow improved due to higher operating cash flow and lower capital expenditures. |
Profitability
- Gross margin contracted 60bps to 55.2%, as cost of sales grew faster than revenue, partly due to commodity cost increases.
- Core (non-GAAP) operating profit increased 9% YoY, or 5% on a constant currency basis, excluding mark-to-market impacts, restructuring, and acquisition-related items.
- Effective tax rate remained flat at 21.3%, with higher tax benefits from foreign results offset by the impact of the OECD global minimum tax.
Cash flow
- Net cash provided by operating activities was $41M, a $1,014M improvement YoY, primarily due to a smaller increase in accounts payable and other current liabilities.
- Investing cash outflows decreased to $477M from $1,232M, mainly due to lower acquisition spending (prior year included $1.2B for Siete acquisition) and reduced capital expenditures.
- Financing activities provided $1,662M, slightly lower than $1,768M in the prior year, with proceeds from debt issuances partly offset by debt repayments and dividends.
Balance sheet
- Total assets increased to $110.6B from $107.4B at year-end 2025, driven by higher cash and accounts receivable.
- Working capital deficit narrowed to -$3.6B from -$4.8B, with current ratio improving to 0.90x from 0.85x.
- Cash and cash equivalents rose to $10.5B, with 19% held in Russia, subject to currency controls.
Investment Risks & Concerns
Risk Factor
Commodity price volatility and supply chain disruptions may increase input costs and adversely affect margins.
EvidenceMD&A: 'A number of external factors, including volatile geopolitical conditions, the inflationary cost environment, import/export restrictions and tariffs, adverse weather conditions and supply chain disruptions, have impacted and may continue to impact commodity, transportation and labor costs.'
Risk Factor
Tariffs imposed or threatened by the U.S. and other countries could increase costs and disrupt supply chains.
EvidenceMD&A: 'The imposition of tariffs... have impacted and could continue to impact our supply chain resulting in increased input costs... The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain.'
Risk Factor
International operations expose PepsiCo to foreign exchange risk, geopolitical instability, and currency controls, particularly in Russia.
EvidenceMD&A: 'Russia accounted for 4% of our consolidated net revenue... 19% of our consolidated cash and cash equivalents and 40% of our accumulated currency translation adjustment loss as of March 21, 2026.'
Risk Factor
New or increased taxes and regulations on products, ingredients, or packaging could reduce demand or increase costs.
EvidenceMD&A: 'Certain jurisdictions... have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging.'
Management Strategy & Execution
Themes
- Productivity savings from the 2019 Productivity Plan are a key driver of operating profit growth, with $132M in restructuring charges incurred in Q1 2026.
- Favorable foreign exchange translation contributed 3pp to net revenue growth, primarily from appreciation of the Mexican peso, Russian ruble, and euro.
- Organic volume was flat overall, with growth in convenient foods offset by declines in beverages, particularly in PBNA.
- Acquisition of poppi and Siete are impacting segment results, with PBNA benefiting from a $114M credit related to poppi contingent consideration fair value adjustment.
Capital allocation
- Capital expenditures were $447M, down from $603M, with spending focused on PBNA and PFNA segments.
- Dividends declared per share increased to $1.4225 from $1.3550, with $1,966M paid in cash dividends.
- Share repurchases totaled $182M, similar to prior year, with 1M shares repurchased.
- Net debt increased as proceeds from long-term debt issuances (€2.5B) and commercial paper were used for general corporate purposes.
“Operating profit increased 24%, primarily driven by productivity savings, net revenue growth, a favorable impact of net mark-to-market gains on commodity derivatives, a favorable net impact of acquisition and divestiture-related charges/credits and a 4-percentage-point favorable impact of foreign exchange translation.”
— Management (MD&A)
Business Segment Analysis
| Segment | Revenue | Change | Commentary |
|---|---|---|---|
| PepsiCo Foods North America (PFNA) | $6,332M | +1.9% | Organic volume grew 2%, driven by savory snacks, but operating profit fell 7% due to operating cost increases and unfavorable net pricing. |
| PepsiCo Beverages North America (PBNA) | $6,391M | +8.8% | Revenue growth driven by acquisitions (poppi) and effective net pricing; organic volume declined 4%. Operating profit surged 60% due to productivity savings and a favorable acquisition-related credit. |
| International Beverages Franchise | $824M | +8.6% | Effective net pricing and favorable FX drove growth; organic volume declined 3%. Operating profit up 16%. |
| Europe, Middle East and Africa (EMEA) | $2,823M | +18.2% | Strong organic volume growth (6%) and 12pp FX tailwind from Russian ruble. Operating profit up 27%, partly offset by a dairy-related inventory reserve. |
| Latin America Foods | $1,934M | +16.4% | 13pp FX benefit from Mexican peso; organic volume declined 2%. Operating profit up 24% on effective net pricing and productivity. |
| Asia Pacific Foods | $1,139M | +11.4% | Organic volume grew 10%, led by India and China. Operating profit up 36% on volume growth, lower commodity costs, and productivity. |
Liquidity & Capital Structure
Leverage: Total debt obligations were $52.7B ($10.2B short-term, $42.6B long-term) as of March 21, 2026, with approximately 16% subject to variable rates after swaps. Net debt to equity is elevated; shareholders' equity was $21.4B.
Liquidity: Cash and cash equivalents were $10.5B, with $5.0B in commercial paper outstanding. The company has access to revolving credit facilities and working capital lines. Operating cash flow improved significantly YoY to $41M.
Shareholder returns
- Dividends declared per share increased 5% to $1.4225; $1,966M paid in Q1 2026.
- Share repurchases of $182M in Q1 2026, consistent with prior year.
- No new share repurchase program disclosed; existing authority not quantified in filing.
Forward Outlook & Investment Implications
Not disclosed—no specific quantitative guidance for future periods provided in the filing excerpts.
Drivers
- Management expects to incur the majority of remaining 2019 Productivity Plan charges and cash expenditures through 2027, with total pre-tax charges of approximately $6.15B.
- Continued monitoring of tariff impacts, commodity costs, and foreign exchange volatility, with actions to mitigate unfavorable impacts.
Watch items
- Potential refunds of previously paid tariffs remain uncertain and subject to legal and regulatory developments.
- OECD global minimum tax implementation increased income tax provision and may further impact future periods.
- Russia operations: 4% of net revenue, 19% of cash, and 40% of accumulated currency translation loss; subject to geopolitical and currency risks.
Notable Footnotes
| Item | Impact |
|---|---|
| Acquisition of poppi (Note 11) | Acquired in May 2025 for $1.95B cash plus contingent consideration; preliminary goodwill and intangibles of ~$2.0B. Contingent consideration fair value decreased by $116M in Q1 2026, recorded as a credit in PBNA operating profit. |
| 2019 Productivity Plan (Note 3) | Extended through 2030; $132M in charges in Q1 2026. Plan-to-date charges of $3.7B. Expected to drive future productivity savings but will incur additional restructuring costs. |
| Net Investment Hedges (Note 8) | Designated €4.5B of existing and €2.9B of newly issued euro debt as net investment hedges to offset FX exposure on foreign subsidiaries. |
| Supply Chain Financing (Note 12) | $1.6B of accounts payable to suppliers participating in voluntary supply chain finance agreements; no material impact on liquidity. |
3-Year Investment Perspective
Not disclosed—the filing provides only two periods of comparative data (Q1 2026 vs. Q1 2025). No three-year trend data is available in the excerpts.
Inflections
- Not disclosed—insufficient historical data to identify multi-year inflections.
Prior-period comparison
- Net revenue growth accelerated from prior year's Q1 (9% vs. not disclosed prior year growth rate), driven by favorable FX and acquisitions.
- Operating profit growth of 24% significantly outpaced revenue growth, reflecting margin expansion from productivity and one-time items.
- Operating cash flow turned positive after a large outflow in the prior year, indicating improved working capital management.
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AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.