Skip to content
    PEP
    Earnings call· Jun 2026(Q2 FY26)

    PEPSICO Q2 FY26 earnings call PEP

    Jul 9, 2026 Source

    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

    5

    • 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

    4

    • 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

    3
    CategoryTargetConfidence
    Full-year EPS
    Reaffirmed, likely at the low end of the previously given range
    high materiality
    High
    Second half organic sales growth
    Low end of long-term 4% to 6% range
    high materiality
    High
    North America advertising and marketing expense
    Increase versus prior year
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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 billion7%—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

    Operational metrics

    6
    Productivity
    Record
    H1 FY26

    Achieved in the first half of the year, with new layers expected in the second half to fund growth investments.

    Tariff refund benefit
    1
    FY26

    Expected to help offset commodity pressures and fund investments, likely in Q3 FY26.

    North America Advertising & Marketing expense
    Increasevs prior year
    H2 FY26

    Projected to increase as part of continued offensive investment despite cost pressures.

    PBNA Operating Margin Decline Driver: Alani arrangement
    Approx. 45
    Q2 FY26

    Contributed to the 90 bps operating margin decline in PBNA.

    PBNA Operating Margin Decline Driver: Convenience & Gas channel softness
    Material
    Q2 FY26

    Contributed to the 90 bps operating margin decline in PBNA, particularly soft in the quarter.

    PBNA Operating Margin Decline Driver: Product mix
    Material
    Q2 FY26

    Contributed to the 90 bps operating margin decline in PBNA.

    Industry KPIs

    8
    MetricValueDetails
    Category brand shareGainingshare
    EPS organic EPS growth6%%
    Gross operating marginDown 90bps
    Organic revenue growth7%%
    Geographic regional mix7%%
    Unit case volume growth3%%
    Energy functional category healthGood
    Pack architecture pricing actionsWorking well

    Deals & partnerships

    4
    Alanicommercial arrangement

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

    CELSIUSpartnership

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

    Sieteacquisition

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

    Poppiacquisition

    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

    2
    Texoma Combined Mixing Centersscaling

    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 Fleettesting

    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

    4
    Rising inflationary pressures and higher gas pricesQ2 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 pressuresH2 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 declineQ2 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 customersQ2 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

    6

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.