PepsiCo (PEP) Q1 2026 earnings summary

Executive summary

• Net revenue for Q1 2026 was $19.44 billion, up 8.5%-9% year-over-year, with operating profit rising 24% to $3.21 billion and net income attributable to shareholders increasing 27% to $2.33 billion.

• Diluted EPS grew 27% to $1.70, driven by productivity savings, net revenue growth, favorable mark-to-market gains, and positive FX impacts.

• Delivered sequential improvement in Q1, with strong execution of growth and productivity strategies across all sectors, especially in North America Foods and international markets.

• International business delivered its 20th consecutive quarter of mid-single-digit organic revenue growth, with no significant demand impact from geopolitical conflicts.

• 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, with gross margin expanding to 55.6%.

• Operating margin rose to 16.5% (up 210 bps), and core operating margin increased by 10 basis points to 15.7%.

• Organic revenue rose 2.6% and core EPS grew 9% year-over-year.

• 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

• Organic revenue growth expected between 2%-4% for 2026, with expectations to reach the upper end in the back half of the year.

• Core constant currency EPS growth projected at 4%-6%; net revenue growth implied at 4%-6% and core EPS growth at 5%-7% for fiscal 2026.

• Guidance for 2026 remains unchanged, with a 4% increase in annualized dividend per share effective June 2026.

• Management expects to return approximately $8.9 billion to shareholders in 2026 through dividends and share repurchases.

• No impact from the Iran conflict assumed in current guidance, as no material demand or supply disruptions have been observed.