PepsiCo (PEP) Q3 2025 earnings summary

Executive summary

• Net revenue for Q3 2025 grew nearly 3% year-over-year to $23.9B, with organic growth in North America beverages and resilient international performance; operating profit declined 8% to $3.6B, and net income attributable to shareholders fell 11% to $2.6B.

• Portfolio reshaping included acquisitions (poppi, Siete, Sabra), a new Celsius agreement, and the transfer of Rockstar Energy ownership in the U.S. and Canada.

• Cost optimization and innovation initiatives are underway to address subdued packaged food demand, higher supply chain costs, and to drive operational excellence.

• Significant impairment charges, primarily related to Rockstar and Be & Cheery brands, and acquisition/divestiture-related charges impacted results.

• Constructive engagement with activist investors, with most recommendations already embedded in the 2030 strategy.

Financial highlights

• Gross margin for Q3 was 53.6%, down from 55.4% year-over-year; operating margin declined to 14.9% from 16.6%.

• GAAP EPS for Q3 was $1.90 (down 11%); core EPS was $2.29 (down 2%); year-to-date GAAP EPS was $4.15 (down 29%).

• Free cash flow for the 36 weeks was $3.2B, down from $3.5B in the prior year; cash and cash equivalents at period end were $8.2B.

• International business delivered 4% organic revenue growth in Q3 and 5% year-to-date, marking the 18th consecutive quarter of at least mid-single-digit growth.

• Higher supply chain costs created a 3 percentage point headwind to core EPS in Q3.

Outlook and guidance

• Full-year 2025 guidance remains for low-single-digit organic revenue growth and core constant currency EPS approximately even with the prior year.

• Total expected cash returns to shareholders in 2025: $8.6B ($7.6B dividends, $1.0B share repurchases).

• Core annual effective tax rate expected at 20%.

• Foreign exchange translation headwind for 2025 now expected at 0.5 percentage points, down from 1.5 points.

• Expectation to return to long-term net revenue growth algorithm during 2026, with margin improvement continuing.