PepsiCo (PEP) Q1 2026 earnings summary

Executive summary

• Net revenue for the 12 weeks ended March 21, 2026, was $19.4 billion, up 8.5%–9% year-over-year, with operating profit rising 24% to $3.2 billion and net income attributable to shareholders increasing 27% to $2.3 billion.

• Diluted EPS grew 27% to $1.70, while core EPS rose 9% to $1.61, driven by productivity savings, net revenue growth, favorable mark-to-market gains on commodity derivatives, and positive foreign exchange impacts.

• Strong sequential improvement in North America Foods and continued acceleration in international markets, with growth driven by effective net pricing, innovation, and improved performance.

• Supply chain resilience and systematic hedging programs provide near-term cost visibility despite inflationary pressures.

• Free cash flow improved to $(393) million from $(1,444) million in the prior year, reflecting stronger operating profit and working capital improvements.

Financial highlights

• Gross profit increased to $10.7 billion from $10.0 billion year-over-year, with gross margin expanding to 55.6%.

• Operating margin rose to 16.5% from 14.4% in the prior year; core operating margin up 10 basis points to 15.7%.

• Net income attributable to shareholders was $2.33 billion, up from $1.83 billion.

• Net cash provided by operating activities was $41 million, a significant improvement from a $973 million outflow in the prior year.

• Capital spending was $447 million, down from $603 million year-over-year.

Outlook and guidance

• Fiscal 2026 guidance affirmed: organic revenue growth expected between 2–4%, with expectations to trend toward the upper end in the back half of the year.

• Core constant currency EPS growth expected at 4–6%; net revenue growth implied in the range of 4–6% for the year.

• Free cash flow conversion ratio expected at least 80%; capital spending below 5% of net revenue.

• Total cash returns to shareholders projected at $8.9 billion, including a 4% dividend increase.

• No impact from the Iran conflict assumed in current guidance due to lack of observed demand disruption.