How have recent inflationary pressures and gas prices impacted U.S. consumer behavior, and what is the updated outlook for organic sales in the back half of the year?

Ramon noted that higher gas prices impacted impulse channels, slowing traffic-to-purchase conversion. The international business remains strong. The U.S. business is expected to accelerate in H2, with a line of sight to the low end of the 4-6% long-term organic sales range. Steve added that full-year guidance is reaffirmed, with tariff refunds providing a 1-point EPS benefit to offset commodity pressure and fund investments. “We continue to have a line of sight to the low end of our long-term 4% to 6% in the second half of the year.”

Given softer North America volumes, is there a need for greater spending or an earnings reset to revitalize organic sales growth in the long term?

Ramon highlighted the growing scale of the international business ($40 billion this year) as a key diversifier. He reaffirmed the three pillars for U.S. growth: affordability, portfolio transformation (permissible, portion control, non-sugar, functional hydration, energy), and Away From Home. He stated that no earnings reset is needed due to strong productivity, which funds growth investments. “we don't think we need any sort of reset because we have a very strong productivity, record productivity in the first half of the year.”

Clarification on H2 guidance, the $0.07-$0.09 EPS impact from tariff refunds, and the timing of EPS between Q3 and Q4, particularly regarding affordability investments and commodity pressures.

Steve explained that the 1-point EPS benefit from tariff refunds (likely in Q3) will offset commodity inflation and fund strategic investments. Q3 will see a higher tax rate YoY and timing of certain costs, while Q4 is expected to have more productivity and better profit performance. Ramon reiterated that these factors help maintain the full-year guidance despite new cost data points. “on the positive side, we continue to expect international to be strong. And we do expect, like you said, about approximately 1 point of EPS benefit from tariff refund claims likely in the quarter.”

PEP

PepsiCo (PEP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Staples· Jul 9, 2026

Source: earnings call transcript

Executive summary

PepsiCo Q2 FY26 — Strong International Growth Offsets North America Softness

PepsiCo delivered strong first-half revenue and volume growth, primarily driven by robust international performance and strategic volume gains in U.S. foods. However, North American businesses faced unexpected softness in Q2 due to inflationary pressures and higher gas prices impacting consumer behavior, particularly in impulse channels. Management is optimizing affordability investments and leveraging productivity to reaffirm full-year guidance, with a focus on portfolio transformation and international expansion.

Highlights

Company-wide revenue grew almost 7% in H1 FY26.
Global food volumes grew 3% and beverage volumes grew 2% in H1 FY26, the fastest growth since 2022.
International business continued very strong, growing 7% and is expected to cross $40 billion this year.
PFNA gained volume share in U.S. salty snacks, returning the category to volume growth.
Permissible portfolio in Foods is already $3 billion and growing almost double-digit.

Concerns

North America business was softer than expected in Q2 FY26, particularly PBNA volumes and impulse channels.
U.S. consumer behavior was impacted by rising inflationary pressures and higher gas prices.
PBNA operating margin was down about 90 basis points in Q2 FY26, driven by gross profit rate decline.
Commodity pressures are expected to increase in H2 FY26, particularly in EMEA.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year EPS	Reaffirmed, likely at the low end of the previously given range high materiality	FY26	High
Second half organic sales growth	Low end of long-term 4% to 6% range high materiality	H2 FY26	High
North America advertising and marketing expense	Increase versus prior year medium materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Company-wide (Consolidated) Revenue and volume growth figures are for the first half of FY26. Volume growth is the fastest since 2022. Global food volumes growth: 3%Global beverage volumes growth: 2%Reported EPS growth: 6%Constant currency EPS growth: 3%	—	almost 7%	—	—
International Business Revenue growth is for the first half of FY26. Operating margin growth is for Q2 FY26. This segment is seen as a key long-term growth driver. Beverage volumes: 2/3 of total company volumesFood volumes: over 50% of total company volumes	Expected to cross $40 billion	7%	—	Operating margin grew by a full point
PFNA (PepsiCo Foods North America) Achieved strategic goal of returning salty snacks category to volume growth. Permissible portfolio includes portion control. Volume share: Gaining in U.S. salty snacksPermissible portfolio revenue: $3 billionPermissible portfolio growth: almost double digit	—	—	—	—
PBNA (PepsiCo Beverages North America) Operating margin decline in Q2 FY26, driven by gross profit rate decline. About half of the gross profit rate decline was due to the Alani commercial arrangement, with additional impact from softness in the convenience and gas channel and product mix. Faster profit improvement expected in H2 FY26 than in Foods.	—	—	—	Down 90 bps

Deals & partnerships

Alani commercial arrangement

Commercial arrangement contributing to PBNA's gross profit rate decline in Q2 FY26.

CELSIUS partnership

Partnership used to expand offerings to consumers and leverage PepsiCo's capabilities.

Siete acquisition

Integrated acquisition, part of strategy to transform portfolio. Experienced some ingredient issues in April-May that have been solved.

Poppi acquisition

Integrated acquisition, part of strategy to transform portfolio. Experienced distribution transition issues in early part of the year, now largely solved, and business is growing at a good pace.

Capital programs

Texoma Combined Mixing Centers scaling

Benefit:Increased flexibility to service customers, lowered cost

These combined mixing centers integrate inventory from two categories, providing flexibility and lowering costs. Part of broader productivity initiatives in the U.S.

Combined Delivery and Fleet testing

Benefit:Lowered cost, increased efficiency

Incremental ideas being tested to combine delivery and fleet operations, requiring systems and assets. Part of broader productivity initiatives in the U.S.

Risks & headwinds

Rising inflationary pressures and higher gas prices Q2 FY26, expected to continue into H2 FY26

Impacted U.S. consumer behavior, particularly in impulse channels, leading to a slowdown of traffic-to-purchase conversion.

Mitigation:Investing in affordability, optimizing pricing tactics by channel, working with customer partners on solutions (bundles, meal links), increasing productivity.

Commodity pressures H2 FY26

Expected to increase in the second half, particularly in EMEA.

Mitigation:Expected tariff refund claims (1 point EPS benefit) to help offset, continued productivity push.

PBNA gross profit rate decline Q2 FY26

Contributed to 90 bps operating margin decline in Q2 FY26.

Mitigation:Hoping for tailwinds from gas prices improving convenience & gas channel, continued productivity push.

Execution delays of price investment in some PFNA customers Q2 FY26, resolved for H2 FY26

Impacted Q2 volume, which was not as much as expected.

Mitigation:Delays have been solved, expecting acceleration in H2.

Q&A highlights

Despite affordability initiatives and innovation, PFNA volume was flat. What's working/not working, and should PepsiCo lean in further to drive volume growth?

Ramon Laguarta stated that the company's H1 revenue grew almost 7%, with global food volumes up 3% and beverages up 2%, the fastest since 2022. PFNA successfully returned the salty snacks category to volume growth and gained share. Affordability investments are working but require optimization in H2, while the permissible and portion-control portfolios are performing well.

“a category that was negative in volume now is positive in volume. We were losing share in volume. Now we're gaining share in volume, and that is all very, very positive.”

asked by Bonnie Herzog · answered by Ramon Laguarta

2 min read 5 chapters

Detailed narrative

North America Performance & Strategy

PepsiCo's North America business, particularly PBNA and impulse channels, experienced unexpected softness in Q2 FY26, attributed to rising inflationary pressures and higher gas prices impacting consumer behavior. Despite this, the strategic intent to drive volume growth in U.S. Foods (PFNA) was successful, with the salty snacks category returning to volume growth and PepsiCo gaining share.

Management is focused on optimizing affordability investments and improving execution in affected channels, with some commercial execution delays now resolved for the second half.

International Business Resilience

The international segment continued its strong performance, growing 7% in the first half and is on track to exceed $40 billion in revenue this year. This segment demonstrates significant resilience across various regions, including the Middle East, Asia, and Europe, despite global inflationary pressures.

The company views international markets as a key long-term growth driver, supported by ongoing investments and procurement agility, with Q2 operating margin growing by a full point.

Portfolio Transformation & Innovation

PepsiCo is actively transforming its portfolio, with the permissible and portion-control segments showing strong growth, including the $3 billion permissible foods portfolio growing at nearly double-digits. Innovation in non-sugar beverages, functional hydration, and energy drinks is performing well and will be scaled in the second half.

Recent acquisitions like Siete and Poppi, along with partnerships like Alani and CELSIUS, are critical to expanding offerings in new spaces and leveraging PepsiCo's capabilities.

Productivity & Cost Management

The company achieved record productivity in the first half and plans additional layers of productivity in the second half to fund growth investments without starving the international business. This includes expanding automation, digitalization, and optimizing logistics through initiatives like combined mixing centers in the U.S.

The expected tariff refunds for last year's payments will also provide approximately 1 point of EPS benefit, helping to offset commodity inflation and support continued strategic investments.

PBNA Margin Dynamics

PBNA's operating margin declined by 90 basis points in Q2 FY26, primarily due to a lower gross profit rate. This was influenced by the commercial arrangement with Alani (accounting for about half the decline), softness in the convenience and gas channel, and overall product mix.

The company aims for faster profit improvement in PBNA in the second half, contingent on improvements in the convenience channel and continued productivity efforts.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.