PepsiCo earnings beat estimates as it cuts 2026 profit outlook on US woes

PepsiCo, the snacks and drinks maker, beat third-quarter estimates before the U.S. market opened on Thursday and cut its forecast for 2026 core earnings growth to 2.5% to 3.5%. The company said lifting margins in North America is taking longer than it planned.

The drinks and snacks giant said net revenue in the fiscal third quarter, the 12 weeks ended September 5, was $25.274 billion, up 5.6% from a year earlier and $314 million above the $24.96 billion estimate compiled by LSEG. Core earnings were $2.34 a share, up 2% from a year earlier and 5 cents above LSEG's $2.29 estimate.

Core earnings leave out items the company does not count in ongoing results. Previous expectation for full-year core earnings growth was the low end of a 5% to 7% range, so Pepsi's new 2026 forecast sits 1.5 to 2.5 percentage points below that 5% figure.

The cut is wider before currency translation, the effect of turning foreign results into dollars. PepsiCo had expected growth on that basis at the low end of 4% to 6%. It now expects 1% to 2%, a range that sits 2 to 3 percentage points below the 4% figure.

The outlook assumes currency translation will add about 1.5 percentage points to earnings growth, up from about 1 percentage point before. That extra half a percentage point is the difference between the two cuts.

Organic revenue, which leaves out currency moves and acquisitions, rose 3.1% in the third quarter.

North American slowdown

Pepsi pinned some of its woes on the North American market, particularly the drinks segment. North American drinks lost 0.15% of core margin as organic revenue declined slightly, reflecting lower volume offset by pricing, while reported revenue rose 5%, mostly from acquisitions.

"In North America, we remain committed to improving growth and core operating margin. However, it is taking more time than we planned," Steve Schmitt, executive vice president and chief financial officer, said in prepared remarks.

In February, PepsiCo cut the prices it suggests stores charge for Lay's, Doritos, Cheetos and other snacks by up to nearly 15%. Core operating profit in its North American snack business, which includes Frito-Lay, fell 12% this quarter, and the core operating margin fell 2.8 percentage points.

PepsiCo said organic revenue declined slightly, and it tied the margin drop to affordability investments, a tougher comparison with a gain on an asset sale a year earlier, and higher advertising, partly offset by productivity savings and a small rise in volume.

The firm said core operating profit rose 3%, to $4.277 billion from $4.137 billion in the three months to September, a gain of $140 million. However, the core operating margin fell 0.35 percentage points, to 16.9%.

Tariff refunds of $178 million added 4 percentage points to the profit comparison and helped offset the margin decline in North American drinks.

Global growth story

Outside North America, organic revenue growth accelerated to 8%, the fastest pace since the first quarter of 2024. Both the international drinks business and the international food business grew organic volume and revenue.

PepsiCo now expects organic revenue to grow about 3% this year, inside the 2% to 4% range it had been using. It expects reported revenue to grow about 6%, the top of its previous 4% to 6% range, with more help assumed from currency and from acquisitions than before.

Schmitt said the company expects North American core margins to stay under pressure in the fourth quarter. Chairman and chief executive Ramon Laguarta said additional structural cost cuts are being identified and will be put in place in the coming months, to fund investments aimed at growing sales and to offset rising input costs.

On Wednesday, PepsiCo shares touched $123.47, the lowest price in the past year, and closed at $123.73.

At 6:06 a.m. Eastern time on Thursday, shares were down less than 1% from that close in premarket trading. By 6:31 a.m. they were little changed. At 7:51 a.m., still before the opening bell, the midpoint of the bid and the ask was $126.35, up 2.1% from Wednesday's close of $123.73.

Laguarta and Schmitt take analyst questions at 8:15 a.m. Eastern time, the first chance to ask how long the North American repair will take and what the outlook assumes about tariff refunds.