PepsiCo Reports 5.6% Q3 Revenue Growth but Cuts Core EPS Growth Outlook

PepsiCo reported a 5.6% increase in third-quarter revenue on Thursday, but reduced its full-year profit-growth outlook as pressure on its North American businesses and operating costs persisted. The food and beverage company now expects core earnings per share to rise 2.5% to 3.5% in 2026, compared with its previous expectation for growth at the low end of a 5% to 7% range.

Net revenue reached $25.27 billion in the quarter ended September 5, up from $23.94 billion a year earlier. Organic revenue, which excludes the effects of acquisitions, divestitures and currency movements, increased 3.1%. Yet core earnings per share rose just 2% to $2.34 from $2.29, leaving a much smaller gain in the measure PepsiCo uses to assess underlying profitability than in reported sales.

The company also reduced its forecast for full-year core earnings growth on a constant-currency basis to 1% to 2%, down from the low end of its earlier 4% to 6% range, according to its third-quarter earnings release filed with the Securities and Exchange Commission. The two earnings forecasts are not interchangeable: core EPS incorporates foreign-exchange translation, while core constant-currency EPS is intended to remove that effect.

That distinction is central to the results. PepsiCo is still projecting a year of revenue growth, and international operations supplied substantial momentum during the quarter. The difficulty is converting higher sales into faster core earnings growth as it spends to improve its position in North America and absorbs pressure from input costs.

Higher revenue came with narrower core margins

Reported operating profit climbed 19% to $4.26 billion, and the reported operating margin widened to 16.9% from 14.9%. Those figures make the quarter look markedly stronger on a standard accounting basis. The more comparable core measures, however, showed operating profit increasing only 3% to $4.28 billion and the core operating margin shrinking to 16.9% from 17.3%, a decline of 35 basis points.

PepsiCo attributed the difference in the reported and core comparisons partly to the effects of acquisition- and divestiture-related items and gains on commodity derivatives. Its core measures exclude specified items that can make results across periods harder to compare. That makes the fall in the core margin particularly relevant to the lower earnings outlook, even though reported operating profit increased sharply.

Productivity savings and pricing helped core operating profit. The company also identified a favorable four-percentage-point contribution from tariff refunds in the quarter. These benefits were partly offset by operating cost increases and higher advertising and marketing expenses. The refunds supported the period’s results, but the earnings release does not establish that an equivalent benefit will be available in future quarters.

For the year to date, reported operating profit rose 45%, compared with 5% core operating-profit growth. The core operating margin for the first 36 weeks slipped 25 basis points to 16.5%. The gap is a reminder that the rate of reported profit growth should not be read as the rate at which the company’s ongoing operating economics are improving.

North American weakness contrasts with overseas gains

PepsiCo’s North American businesses remained the clearest constraint. Revenue at PepsiCo Foods North America was broadly unchanged from the prior-year quarter, as gains in savory-snack volumes and volume market share were offset by lower effective net pricing. Management said those trends represented a sequential improvement, but they did not produce overall reported revenue growth in the business for the quarter.

PepsiCo Beverages North America recorded a 5% increase in reported revenue, largely reflecting acquisitions completed in 2025. Organic revenue in that business was approximately flat and beverage volume fell 2%. For readers assessing consumer demand, the difference matters: purchased businesses can increase consolidated revenue even when sales generated by the existing operation do not grow at the same pace.

Performance was stronger outside North America. The International Beverages Franchise business increased reported revenue 8%, including 7% organic growth, with beverage volume up 5%. Asia Pacific Foods posted 10% reported revenue growth, 9% organic growth and an 11% rise in convenient-food volume. The figures point to genuine volume gains in some international markets rather than a companywide sales increase driven solely by prices or acquisitions.

Europe, Middle East and Africa also recorded 8% reported revenue growth and 9% organic growth, although its convenient-food volume declined 1% while beverage volume increased 4%. Latin America Foods reported a 14% increase in revenue and 6% organic growth. The regional mix was uneven, but the aggregate international performance provided a counterweight to slower growth in the company’s U.S. and Canadian operations.

Across the group, organic revenue increased 3.1% while reported net revenue grew 5.6%. The company estimated that acquisitions net of divestitures contributed about 1.7 percentage points to third-quarter revenue growth, with foreign exchange adding approximately 0.7 percentage points. Those benefits help explain why the headline sales rate was considerably higher than the organic rate.

Revenue for the first 36 weeks totaled $68.90 billion, up 6.7%, with organic growth of 2.7%. Core EPS increased 5% over that period to $6.15, compared with $5.88 in the same period of 2025. The latest quarter’s 2% core EPS increase was therefore slower than the year-to-date rate, providing further context for the reduction in the annual outlook.

Revised 2026 guidance favors sales growth over earnings

The latest guidance calls for approximately 6% reported revenue growth for the full year, toward the upper end of the previous 4% to 6% range. PepsiCo now expects organic revenue to rise approximately 3%, the midpoint of its earlier 2% to 4% range. Neither adjustment offsets the lowered earnings forecast: the company expects more sales growth than it did at the start of the year without the corresponding acceleration in core profit per share.

Currency assumptions have become more favorable. PepsiCo now anticipates foreign-exchange translation will add approximately 1.5 percentage points to both reported revenue and core EPS growth, up from the previously expected one-point contribution. Acquisitions net of divestitures are also expected to contribute about 1.5 percentage points to full-year reported revenue growth, compared with an earlier estimate of one point. These are contributions to reported growth, not extra organic growth.

The core constant-currency EPS range of 1% to 2% is particularly revealing because it strips out the currency tailwind. Its reduction from the low end of 4% to 6% indicates that the downgrade is not simply a mechanical adjustment for exchange rates. PepsiCo also reduced its estimated core effective tax rate to approximately 21% from 22%, another change that would ordinarily be supportive of after-tax results.

Other financial commitments were maintained. PepsiCo continues to project capital spending below 5% of revenue and free-cash-flow conversion of at least 80%. It also expects to return about $8.9 billion to shareholders during 2026, comprising $7.9 billion in dividends and $1 billion in share repurchases. These are company forecasts rather than spending or distributions already completed.

Chairman and Chief Executive Officer Ramon Laguarta said PepsiCo was identifying further structural cost reductions to help pay for innovation, brand support and improved execution in North America, while offsetting rising input costs. The release did not attach a quantified savings target or implementation schedule to those additional actions. Whether the planned spending can support sales volumes without further squeezing core margins will be an important measure of progress in the next earnings report.