KO Coca-Cola Company 10-Q 2026-10-02 section summaries

Operating performance

For Q3 2026, Coca-Cola’s net operating revenue increased 7.4% to $13.380B from $12.455B. Cost of goods sold rose more slowly, 2.8% to $4.930B from $4.797B, lifting gross profit to $8.450B from $7.658B. Operating income increased to $4.465B from $3.982B; SG&A rose to $3.975B from $3.618B, while other operating charges declined to $10M from $58M. Net income attributable to shareowners was $4.009B from $3.696B (diluted EPS $0.93 from $0.86); consolidated net income was $4.056B from $3.683B.

For the first nine months of 2026, revenue was $39.232B from $36.119B, cost of goods sold $14.515B from $13.674B, and gross profit $24.717B from $22.445B. Operating income rose to $13.496B from $11.921B. Shareowner net income increased to $12.358B from $10.836B (diluted EPS $2.86 from $2.51); consolidated net income was $12.460B from $10.821B.

Q3 revenue by product and geography: concentrate operations generated $8.199B from $7.499B and finished-product operations $5.181B from $4.956B; U.S. revenue was $5.259B from $5.118B and international revenue $8.121B from $7.337B. Concentrate revenue was $2.475B U.S. and $5.724B international; finished-product revenue was $2.784B U.S. and $2.397B international.

Q3 segment results

Revenue and operating income, current period from prior-year period:

Operating-segment revenue was $13.534B from $12.674B, reduced by eliminations of $192M from $253M, with Corporate revenue of $38M from $34M, reconciling to consolidated revenue of $13.380B from $12.455B. Segment operating income was $4.857B from $4.253B; Corporate operating losses of $392M from $271M reconcile to consolidated operating income of $4.465B from $3.982B.

Balance sheet, cash flow and capital allocation

At October 2, 2026, total assets were $107.950B, versus $104.816B at year-end; total equity was $41.694B ($39.533B attributable to Coca-Cola shareowners and $2.161B noncontrolling interests), versus $34.275B at year-end. Goodwill was $15.408B and identifiable intangible assets other than goodwill—disclosed as trademarks with indefinite lives—were $12.459B. Shareowner equity less goodwill and those intangibles implies tangible equity of approximately $11.666B using shareowner equity, or approximately $9.505B using the chunk’s stated calculation; the latter figure reflects a different equity basis and should be read accordingly.

Cash and cash equivalents were $13.454B; marketable securities were $2.910B. Long-term debt was $36.623B, current maturities $4.923B and loans/notes payable $73M, for reported debt of $41.619B, down from $45.492B at year-end. Long-term debt including current portion had a separately disclosed carrying value of $41.546B and estimated fair value of $35.398B (year-end: $43.941B carrying value and $39.385B fair value). Assets held for sale were $6.275B, with related liabilities of $3.003B.

Nine-month operating cash flow rose to $12.471B from $3.652B, largely because the cash outflow from operating assets and liabilities was much smaller ($498M versus $8.040B). Capital expenditures were $1.063B from $1.230B (Q3: $379M from $479M). Financing cash outflow was $10.546B from $3.088B, including dividends of $6.842B from $4.391B and treasury-share purchases of $900M from $644M. Common shares outstanding were 4.302B at both the start and end of the nine-month period; Q3 began at 4.303B and ended at 4.302B. Q3 dividends were $2.280B ($0.53 per share), and repurchases were $238M.

Portfolio changes, earnings quality and risks

The planned sale of part of the African bottling business to Coca-Cola HBC remains subject to approvals and is expected to close by end-2026; HBC also has an option to acquire the remaining 25% within six years. The 2025 held-for-sale classification caused a $1.274B impairment, primarily from accumulated currency translation losses; revised estimates reduced it by $61M in the first nine months of 2026. Singapore, Malaysia and Myanmar bottling operations were classified as held for sale in Q3, with closing expected by mid-2027; no impairment was recorded. Held-for-sale assets included $3.347B of goodwill and a $1.201B allowance for reduction. Prior-year business disposals contributed $1.020B of nine-month proceeds, including gains on the CCEP stake sale and India bottling refranchising, versus just $1M of disposal proceeds in 2026.

Foreign-currency translation was a significant source of volatility: Q3 translation adjustments were negative $668M versus positive $437M, and nine-month adjustments negative $311M versus positive $2.159B. Shareowner AOCI was $(14.090)B at October 2, principally reflecting $(12.949)B of currency translation adjustments. Nine-month shareowner OCI was $41M versus $1.891B; total comprehensive income was $12.466B.

The unresolved IRS transfer-pricing dispute remains a major contingent exposure. The 2024 Tax Court decision reflected $2.7B of additional tax; Coca-Cola paid $6.0B including interest in September 2024 and appealed, with the Eleventh Circuit hearing held June 25, 2026. The company maintains its positions are more likely than not to prevail; its recorded reserve was $538M, and it reported $589M of accrued interest receivable on the payment. If the IRS methodology is upheld and applied, estimated remaining incremental tax and interest for 2010–2025 was approximately $14B as of year-end 2025; continued application added estimated exposure of $450M in Q3 and $1.4B in the first nine months of 2026. The company estimates 2026 application, including effects of the One Big Beautiful Bill Act, could increase its effective tax rate by approximately 3.8 percentage points. These are potential exposures, not recorded liabilities.

Derivative assets and liabilities were $316M and $249M, respectively. Foreign-currency cash-flow hedge notional was $11.041B; cash-flow hedge OCI moved to a nine-month pretax gain of $170M from a $711M loss. Non-designated hedge gains recognized in earnings were $145M for nine months versus $93M, creating potential mark-to-market volatility. Supplier-finance obligations classified in accounts payable were $1.576B, up from $1.363B; commercial paper borrowings declined from $1.495B to zero. The company says counterparties are investment grade and legal proceedings other than tax claims are not expected to materially affect it.

Coca-Cola (KO) — Q3 and 9M 2026

Revenue, demand and margins

Q3 2026 net operating revenue rose 7% to $13.380B from $12.455B; 9M revenue increased 9% to $39.232B from $36.119B. Q3’s estimated revenue bridge was volume +7%, price/mix +1%, FX +1%, and acquisitions/divestitures −1%. For 9M, the bridge was volume +6%, price/mix +1%, FX +2%, and acquisitions/divestitures −1%. Management expects FX to remain favorable to full-year revenue and operating income based on spot rates and hedging coverage.

Q3 worldwide unit case volume grew 5% and concentrate sales volume 6%; 9M growth was 4% and 6%, respectively. Q3 demand was broad-based in EMEA (+5%), Latin America (+6%) and Asia Pacific (+6%), while North America was flat. Trademark Coca-Cola grew in every region. North American declines in water, sports, coffee and tea and in sparkling flavors offset Trademark growth. Asia Pacific’s strong volume was partly offset by unfavorable price/mix and FX; India and Southwest Asia led its 9M growth. Latin America benefited from price/mix and FX. Revenue comparisons also reflect the 2025 sale of finished-product operations in Nigeria and refranchising of certain Indian bottling territories.

Segment revenue growth, Q3 / 9M, was: EMEA +4% / +6%; Latin America +25% / +18%; North America +3% / +7%; Asia Pacific +4% / +3%; Bottling Investments +13% / +11%. Pricing supported results across several regions, while unfavorable mix weighed on EMEA, North America and Bottling Investments, and affordability initiatives weighed on Asia Pacific.

Gross margin expanded to 63.2% from 61.5% in Q3 and 63.0% from 62.1% in 9M, supported by pricing, favorable FX, stabilized commodity costs and the Nigeria operations sale. Q3 SG&A increased 10% to $3.975B from $3.618B; 9M SG&A increased 8% to $11.167B from $10.322B. Higher marketing and incentive expense contributed; advertising expense was $1.777B from $1.523B in Q3 and $4.719B from $3.940B in 9M.

Operating performance

Q3 operating income rose 12% to $4.465B from $3.982B, with operating margin improving to 33.4% from 32.0%. 9M operating income increased 13% to $13.496B from $11.921B, and margin rose to 34.4% from 33.0%. Volume, price/mix, FX and lower operating charges supported growth; higher marketing and other operating expenses were offsets. Other operating charges were $10M from $58M in Q3 and $54M from $202M in 9M.

Q3 segment operating income was: North America $1.766B from $1.681B; EMEA $1.171B from $1.097B; Latin America $1.152B from $897M; Asia Pacific $563M from $521M; Bottling Investments $205M from $57M. Corporate operating loss was $392M versus $271M. These segment results, less the corporate loss, reconcile to consolidated operating income of $4.465B. Bottling Investments’ substantial improvement reflected volume growth and lower costs; Latin America benefited from volume, price/mix and FX. Lower commodity costs helped EMEA, while Asia Pacific’s gains were partly offset by adverse price/mix and FX.

Interest income increased 21% to $224M from $185M in Q3 and 17% to $644M from $553M in 9M, mainly on higher investment balances. Interest expense declined 9% to $354M from $391M in Q3 and 10% to $1.098B from $1.223B in 9M, primarily due to lower average short-term debt. Equity income was $653M from $644M in Q3 and $1.641B from $1.556B in 9M, reflecting improved investee results and favorable FX, partly offset by investee charges.

Earnings, impairment and tax exposure

Other income (loss), net, was a $155M loss in Q3, improved from a $237M loss; the prior-year quarter included a $393M Nigeria held-for-sale charge. Q3 2026 included $194M of non-service pension costs, including a $167M settlement loss. 9M other income was $236M versus $229M; 2026 included $338M of securities gains and $115M of dividends, while 2025 included CCEP stake-sale and India refranchising gains, partly offset by the Nigeria charge and investee impairments.

A $960M BodyArmor trademark impairment was recorded in the quarter ended December 31, 2025, leaving a $2.440B carrying value. Weaker results, slower category growth, competition and a more focused innovation and rollout plan drove the write-down. Fair value approximated carrying value at October 2, 2026; further impairment remains possible if performance falls short or discount rates rise.

Q3 income tax expense was $777M at a 16.1% effective rate, versus $500M at 11.9%; 9M expense was $2.459B at 16.5%, versus $2.215B at 17.0%. The company expects an approximately 19.7% 2026 effective rate before significant items and excluding potential IRS litigation effects.

The IRS dispute concerns 2007–2009. Coca-Cola paid $6.0B in September 2024 after the Tax Court decision; it records the payment and accrued interest as an asset, including $589M of accrued interest receivable at October 2, 2026. The company believes it is more likely than not to prevail, but an adverse outcome could put the payment and interest at risk and lead to further liabilities. Estimated potential aggregate incremental tax and interest for 2010–2025 was approximately $14B at December 31, 2025; applying the IRS methodology would add an estimated $450M for Q3 and $1.4B for 9M 2026.

Cash flow, financing and capital allocation

9M operating cash flow was $12.471B versus $3.652B. The increase reflected stronger cash operating results, receivables factoring, lower tax and net-interest payments, FX and working-capital timing; comparisons are affected by the prior-year $6.069B fairlife milestone payment. Coca-Cola sold $10.629B of receivables through factoring versus $11.822B, with related costs of $41M versus $49M; factoring proceeds are classified as operating cash flow. PP&E purchases were $1.063B versus $1.230B. Full-year 2026 capital expenditures are expected to be approximately $2.2B.

Investing activities provided $1.161B versus $977M. Net inflows from marketable securities and short-term investments were $2.246B versus $1.008B. Acquisitions and investments were $204M versus $356M, while disposal proceeds were $1M versus $1.020B, reflecting prior-year CCEP stake-sale and refranchising proceeds.

Financing activities used $10.546B versus $3.088B, reflecting higher dividends and the absence of prior-year debt issuance and noncontrolling-interest sale proceeds. 9M debt payments were $3.165B; the prior year included $4.854B of debt issuance and $4.166B of payments. Dividends paid rose to $6.842B from $4.391B, partly because of payment timing. Share repurchases cost $787M for 10.0M shares at an average $78.77, versus $534M for 8.0M shares at $67.14. The October quarterly dividend was approved at $0.53 per share.

Cash, cash equivalents, short-term investments and marketable securities totaled $16.6B, with $6.6B of unused backup credit lines. The company’s capital priorities are business investment, dividend growth, consumer-focused acquisitions and then repurchases, which are intended to offset employee-compensation dilution.

Coca-Cola reported no material changes to its market-risk disclosures from its FY2025 Form 10-K for the year ended December 31, 2025, and identified no new material market-risk developments or metrics.

Disclosure Controls and Internal Control

As of October 2, 2026, the CEO and CFO concluded that disclosure controls and procedures were effective. No changes during the quarter materially affected, or were reasonably likely to materially affect, internal control over financial reporting. This section reported no financial or business performance metrics.

Risk Factors

The company refers investors to the risk factors in its Form 10-K for the year ended December 31, 2025. Those risks could materially affect its business, financial condition, or future results. The risks described in the current report and the 10-K are not exhaustive: risks that are currently unknown or considered immaterial could also materially adversely affect the company. This section identifies no specific new risks or changes from prior periods.

Trading Arrangements

During the fiscal quarter ended October 2, 2026, no directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement, except Coca-Cola CEO Henrique Braun. On August 28, 2026, Braun adopted a Rule 10b5-1 plan that may allow him to exercise vested stock options and sell up to 136,968 shares of the Company’s common stock, subject to the plan’s conditions. The plan expires on August 28, 2028, or earlier if all transactions are completed, and was adopted during an open trading window.