PepsiCo published its third-quarter 2026 results on October 8, before the market opened. The quarter ended September 5. Net revenue: $25.3 billion, up 5.6%, of which organic growth was 3.1%. Core earnings per share: $2.34, up 2%, while reported earnings per share rose 17% to $2.23. Together with the results, the company cut its full-year core EPS guidance.
There may be errors or inaccuracies. Found something that looks wrong? Write to me and I will fix it.
What was reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Net revenue | 25,274 | 23,937 | +5.6% |
| Organic revenue growth | +3.1% | ||
| Operating profit | 4,260 | 3,569 | +19% |
| Operating margin | 16.9% | 14.9% | +1.95 pts |
| Core operating profit | 4,277 | 4,137 | +3% |
| Core operating margin | 16.9% | 17.3% | -0.35 pts |
| Diluted earnings per share (dollars) | 2.23 | 1.90 | +17% |
| Core earnings per share (dollars) | 2.34 | 2.29 | +2% |
In millions of dollars, except per-share figures and ratios. The quarter is 12 weeks ended September 5. Source: PepsiCo's earnings release, Exhibit 99.1 to Form 8-K, October 8, 2026.
Organic growth: price versus volume
The 3.1% organic growth rests on price. Effective net pricing, price and mix, contributed 3 percentage points, and organic volume about 0.5 point. The release rounds the two components, so they do not add up exactly to 3.1%. On a separate measure, unit volume excluding acquisitions rose 1% in convenient foods and 3% in beverages. In the second quarter organic growth was 2.4%, and year to date it is 2.7%.
The bridge from organic growth to the 5.6% in net revenue includes two more components: currency added 0.7 percentage points, and acquisitions and divestitures, net, added 1.7 points (the components are rounded). Year to date, net revenue rose 6.7% to $68.9 billion.
North America versus international
The four international divisions grew organically 6% to 9%, and the two North America divisions did not grow. According to CNBC, international operations account for about 41% of net revenue year to date.
| Division | Revenue, reported change | Organic growth | Core operating profit, change |
|---|---|---|---|
| PFNA - North America foods | -0.3% | Flat | -12% |
| PBNA - North America beverages | +5% | Flat | +4% |
| IB Franchise - international beverages | +8% | +7% | +10% |
| EMEA - Europe, Middle East and Africa | +8% | +9% | +16% |
| LatAm Foods - Latin America foods | +14% | +6% | +20% |
| APAC Foods - Asia Pacific foods | +10% | +9% | +15% |
At the North America foods division, PFNA, volume was flat and pricing contributed minus one percentage point. Revenue fell 0.3% to $6,504 million, and core operating profit fell 12% to $1,382 million, versus $1,570 million. PFNA's core operating margin fell to 21.3%, from 24.1%.
At the beverages division, PBNA, beverage volume fell 2% and pricing contributed 3 percentage points. Reported revenue rose 5% to $7,706 million, but acquisitions contributed about 6 percentage points of that, so organic growth stayed flat. PBNA's core operating profit rose 4% to $1,012 million, and the margin fell to 13.1% from 13.3%. The division's reported operating profit rose 45%.
Abroad, each division looks different. IB Franchise grew organically 7%, as beverage volume rose 5% and pricing contributed 2 percentage points. In EMEA organic growth was 9%, pricing contributed 7 percentage points, beverage volume rose 4% and food volume fell 1%. In LatAm Foods organic growth was 6%, food volume rose 3% and pricing contributed 3 percentage points. In APAC Foods organic growth was 9%: food volume rose 11% and pricing contributed minus 2 points. Core operating profit rose in all four international divisions, by 10% to 20%.
Chairman and CEO Ramon Laguarta said in the release that the company is "acting with urgency to sustainably improve our performance in North America." According to him, the international business is strong and the portfolio is evolving, and North America needs more innovation, brand building and execution in the sales channels. He added that more structural cost cuts will come in the coming months, intended to fund growth and offset rising input costs. According to CNBC, his prepared remarks also said that the North America business performed below the company's expectations.
Core versus reported, and the tariff refunds
Reported operating profit rose 19% to $4,260 million, but core operating profit rose only 3%, and the core margin fell to 16.9% from 17.3%. The reported margin rose to 16.9% from 14.9%. A similar gap showed up in earnings per share: 17% reported versus 2% core, and excluding currency, core EPS rose 1.5%. Net income attributable to shareholders was $3,048 million, versus $2,603 million. The core tax rate rose to 21.2% from 19.4%. The reported gross margin rose to 54.4% from 53.6%, and the core gross margin to 54.4% from 53.9%.
The gap between the two measures is the items the company strips out of the core figure. In the quarter, operating profit carried restructuring and impairment charges of $192 million, 0.8 percentage points of the margin ($373 million year to date). Alongside them came a $96 million credit for acquisitions and divestitures, related to poppi, and a net gain of $79 million from mark-to-market adjustments. Those two improve the reported figure. Below the operating profit line, other pension expense was $114 million, versus income of $26 million a year earlier, and it includes a settlement charge. The adjustment to the core figure for that item was $179 million. In the comparison base, the third quarter of 2025, there were impairment and other charges of $100 million and an $82 million item for a tax audit in Latin America.
According to the 10-Q, charges of about $500 million are expected in the rest of 2026 under the company's productivity plan. The plan totals about $6.15 billion, of which $4.0 billion has already been recorded.
Tariff refunds. According to the release, core operating profit growth includes a favorable impact of 4 percentage points from tariff refunds - more than the whole of the growth, which was 3%. The 10-Q states that the company received substantially all of the refunds of invalidated IEEPA tariffs. According to the earnings call transcript published by Motley Fool, the tariff benefit at the North America beverages division does not continue after the third quarter.
The outlook
The company cut its full-year core earnings guidance: core earnings per share are expected to grow 2.5% to 3.5%, and core constant-currency earnings per share 1% to 2%. On the revenue side there was no cut: organic growth was narrowed to 3%, the middle of the previous range, and net revenue was pinned to the top of the range.
| Previous guidance | Updated guidance | |
|---|---|---|
| Organic revenue growth | 2% to 4% | About 3% |
| Net revenue growth | 4% to 6% | About 6% |
| Currency impact | About 1% | About 1.5% |
| Acquisitions impact, net | About 1% | About 1.5% |
| Core tax rate | About 22% | About 21% |
| Core EPS growth, constant currency | Low end of 4% to 6% | 1% to 2% |
| Core EPS growth | Low end of 5% to 7% | 2.5% to 3.5% |
Capital expenditures under 5% of revenue, free cash flow conversion of at least 80% and cash returns to shareholders of $8.9 billion - dividends of $7.9 billion and buybacks of $1.0 billion - were left unchanged. The release presents the previous EPS guidance as the low end of a range; the July 9 release showed the full ranges, 4% to 6% and 5% to 7%.
The new range leaves the fourth quarter with core earnings per share of about $2.19 to $2.27, versus $2.26 in the fourth quarter of 2025. The basis: core earnings of $8.14 a share in 2025, and $6.15 accumulated year to date.
The CFO said on the call, according to the transcript, that margin is the reason for the cut: input costs are rising and mix is a headwind. Structural cost actions and revenue management are meant to offset part of the margin pressure in the fourth quarter, and the benefit from them is expected from 2027. Management is also open to expanding the sale of the U.S. bottling operations to franchisees (refranchising). The release does not include a new acquisition or divestiture.
Versus expectations, and the stock
According to CNBC, which cites a survey by LSEG, analysts expected adjusted earnings of $2.29 a share and revenue of $24.96 billion. Core earnings of $2.34 are 5 cents above that, and revenue of $25.27 billion is about $0.3 billion above.
The stock closed on the day of the report at $128.34, up 3.73% from the previous close of $123.73 - the same day the company cut its earnings guidance.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What interests me in this report is the gap between two numbers. Core operating profit grew 3%, and tariff refunds contributed 4 percentage points of it, according to the release. The refunds are larger than all of the growth. That is real money that came in, but according to the call transcript the benefit in North America does not continue, and management itself is cutting the guidance and pointing to the margin.
There are two ways to read this. One, North America is a lasting problem: beverage volume is falling, foods are not growing and profitability there is eroding, and the international business, about 41% of revenue, is not enough to make up for it. Two, the company shows international growth of 6% to 9%, and it has a cost-cutting program whose benefit is expected from 2027, so what we see now is a transition period and not a permanent state. Both readings fit the same numbers, and the stock's rise on the day the guidance was cut does not reveal which one the market chose.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
