PepsiCo 10-Qquarter ended 2026-06-13

Restructuring

Volume gains in India beverages and Asia Pacific Foods drove growth, while North American beverages lost volume and foods faced pricing pressure.

Filed 2026-07-08 17:52 ET

Key figures · Q2 FY2026 · period ended 2026-06-13

  • Revenue$24.2BYoY +6.4%QoQ +24.4%
  • Operating income$4.0BYoY +124.9%QoQ +25.2%
  • Net income$3.0BYoY +136.0%QoQ +28.1%
  • Total assets$112.2BYoY +6.5%QoQ +1.4%
  • Total debt
    How total debt adds up
    Long-Term Debt Obligations$42,612M
    + Short-term debt obligations$10,602M
    Total debt$53,214M

    Lines as the filer presents them on its balance sheet.

    $53.2BYoY +3.6%QoQ +0.9%
  • Shareholders' equity$22.1BYoY +20.0%QoQ +3.3%
  • Tangible book value−$12.2BYoY +24.2%QoQ +4.8%

How this filing reads

  • Health−0.1Debt rose 8.2% to $53.2B as $4.39B distributions exceeded $1.10B free cash flow.
  • Momentum+0.4H1 organic revenue rose 2.5%, while core operating profit increased 6%.
  • Outlook−0.2North American beverage volume fell 4%, and food revenue declined 1.7% amid pricing pressure.
  • Restructuring“H1 restructuring charges fell to $182M from $426M”

Executive Summary

PepsiCo’s Q2 growth was led by beverages and international markets, but organic revenue increased only 2%, and North American demand remained uneven. The sharp GAAP earnings rebound primarily reflects prior-year brand impairments; core operating profit grew a more modest 4%. Productivity savings and portfolio expansion offer upside, while declining North American beverage volumes and food-pricing pressure challenge growth quality. Cash generation improved, but H1 shareholder distributions exceeded free cash flow and debt increased, making operating execution—not the headline earnings rebound—the key investor test.

Key Financial Highlights

Q2 covers 12 weeks and H1 covers 24 weeks ended 6/13/2026. Balance-sheet figures are at that date.

Metric Q2 2026 H1 2026 / period-end Investor interpretation
Net revenue $24.2B; +6.4% Y/Y $43.6B; +7.3% Y/Y Organic growth of 2% and 2.5%, respectively, was materially lower.
Gross profit $13.1B; +5.5% Y/Y $23.8B; +6.4% Y/Y Cost of sales outpaced revenue, compressing gross margin.
GAAP / core operating profit $4.02B / $4.07B $7.24B / $7.12B Core growth of 4% / 6% better represents underlying improvement.
Net income attributable to PepsiCo $2.98B; +136% Y/Y $5.31B; +71% Y/Y Prior-year impairments inflate growth comparisons.
GAAP / core diluted EPS $2.18 / $2.20 $3.88 / $3.81 Core EPS increased 4% / 6%, respectively.
OCF / FCF — $2.37B / $1.10B FCF is OCF less $1.27B capital expenditures.
Total assets / total equity — $112B / $22.3B Goodwill and intangible assets dominate equity backing.
Net tangible assets — $(31.1)B Total equity less goodwill and intangible assets.
Total debt — $53.2B; +8.2% vs year-end Borrowings increased while distributions exceeded FCF.
  • Earnings quality: Prior-year pretax impairments were $1.86B. H1 restructuring charges fell to $182M from $426M, while poppi contingent-consideration remeasurement generated a $158M credit vs an $87M charge; these comparison benefits are distinct from operating improvement.
  • Cash conversion: H1 OCF trailed net income attributable to PepsiCo, reflecting receivable, inventory and payable-related outflows of $1.86B, $802M and $1.20B, respectively, plus the final $965M mandatory transition-tax payment.
  • Capital returns: Dividends of $3.91B and repurchases of $479M exceeded FCF. Common shares declined only slightly, from 1.367B to 1.366B, indicating limited net share-count reduction.

Business Developments

  • Growth mix: North American foods’ Q2 revenue fell 1.7%, with flat volume and unfavorable pricing. North American beverages grew 6.6% despite a 4% volume decline; pricing and portfolio effects supported sales, but weaker physical demand limits the strength of that growth.
  • International expansion: International Beverages Franchise revenue grew 11%, led by volume growth in India; Asia Pacific Foods combined 12% revenue growth with 10% volume growth. Latin America Foods’ 15% revenue increase benefited substantially from currency movements despite slightly lower volume.
  • Portfolio repositioning: Siete’s $1.25B purchase price and poppi’s $2.12B price expand the food and beverage portfolios. Poppi’s contingent liability declined to $117M; the earnings credit from remeasurement should not be treated as evidence of commercial progress.
  • Transformation: Management’s productivity plan combines automation, supply-chain optimization and shared processes through 2030, with ≈$6.15B in expected pretax charges. Phased enterprise resource planning implementations materially affected financial-reporting controls, without a reported adverse effect.

Risk Assessment

  • Demand and pricing: North American beverage volume declines and unfavorable food pricing expose PepsiCo to consumers resisting price increases and switching products, weakening revenue and margins.
  • Input costs: Commodity pressure reduced North American beverage core operating-profit growth by 6 percentage points in Q2; tariffs, transportation and labor costs could further constrain pricing-led growth.
  • Financing: Commercial paper of $6.1B and variable-rate exposure of ≈17% of total debt increase refinancing and rate sensitivity, although $10B of unused revolving facilities provides liquidity.
  • Russia and geopolitics: Russia held 21% of consolidated cash and generated 5% of H1 revenue; sanctions and transfer restrictions could limit cash access or trigger write-offs.
  • Asset valuation: Goodwill of $19.1B and indefinite-lived intangibles of $33.1B create impairment exposure; the Celsius investment also recorded a $371M H1 unrealized loss.
  • Execution and regulation: Acquisition integration, systems migration and changing beverage, ingredient and packaging rules could raise costs or disrupt operations.

This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.

Strategic Outlook and Investor Actionables

Management is betting that portfolio expansion, international growth and productivity savings can offset mature-market demand pressure. The opportunity is broader, more efficient growth; the threat is that pricing and accounting benefits obscure persistent volume weakness while capital returns increase financing needs.

  • North American recovery: Starting from beverage volume down 4% and foods revenue down 1.7% in Q2, watch for improving volume and pricing alongside portfolio expansion; continued declines would weaken the growth thesis.
  • International durability: Asia Pacific Foods volume grew 10%, while Latin America Foods volume slipped despite 15% revenue growth; sustained volume gains would validate expansion, whereas currency-led growth alone would not.
  • Productivity delivery: Cumulative charges reached $3.79B; success means core profit improves while revenue holds, rather than costs and sales falling together.
  • Cash coverage: H1 FCF of $1.10B lagged $4.39B of distributions; later filings should show improved cash coverage rather than continued debt growth.

Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.

Model 006 · prompt 3de311c12b

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