PepsiCo's headquarters in Purchase, New York: low concrete office buildings behind a lawn and a curving driveway, with two flagpoles at the entrance · Peter Bond from Philadelphia, USA, via Wikimedia Commons · CC BY-SA 2.0

Article · 2026-10-09 · 8 min read · Snacks and beverages · Stocks

PepsiCo trims its 2026 profit outlook as North America lags

On Thursday 8 October PepsiCo reported third-quarter net revenue of $25.27 billion, 5.6 percent more than a year earlier, with organic revenue up 3.1 percent and international organic revenue up 8 percent; North American food volume was about flat and beverage volume was down 2 percent, the company lowered its outlook for per-share profit growth, narrowed its organic revenue outlook to about 3 percent for 2026, and said new structural cost reduction actions would take effect in the coming months.

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What PepsiCo reported

On Thursday 8 October PepsiCo, the maker of Lay's, Doritos, Pepsi and Gatorade, filed its results for the 12 weeks ended Saturday 5 September with the Securities and Exchange Commission. Net revenue was $25,274 million, against $23,937 million a year earlier, an increase of 5.6 percent. Operating profit was $4,260 million, against $3,569 million, 19 percent higher; the company said that mainly reflected a favorable net impact of acquisition and divestiture-related charges and credits and gains on commodity derivatives marked to market, which means valued at the market rate each quarter. Its quarterly report on Form 10-Q, filed the same day, ties part of that to its 2025 purchase of the soda brand poppi: the estimated value of a $300 million payment owed only if poppi hits performance milestones by the third quarter of 2027 was cut by $105 million in the quarter, which lowered expenses. ^{[1, 2]}

'Looking ahead, we remain focused on building upon the strength of the International business while acting with urgency to sustainably improve our performance in North America,' said Ramon Laguarta, chairman and chief executive, in the release. He added that 'additional structural cost reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input cost inflation.' Reuters reported the day as a cut to the annual core profit forecast alongside further cost cuts, and CNBC headlined it 'PepsiCo cuts earnings forecast as North American turnaround takes longer than expected'. ^{[1, 4, 7]}

Organic revenue and core profit, in plain words

Organic revenue is the company's own measure of how sales grew from the business it already owned: it strips out the effect of translating foreign currencies into dollars and the effect of companies bought or sold. By that measure revenue increased 3.1 percent in the quarter. The rest of the 5.6 percent came from a 1.7 percentage point net benefit from acquisitions and divestitures and a 0.7 point benefit from exchange rates, the release says. The company's prepared remarks call 3.1 percent 'the highest rate of growth since Q4 2023' and say it came from effective net pricing, the combined effect of price changes, promotions and the mix of packs sold, plus some growth in volume. ^{[1, 3]}

Core results are the company's figures with certain items taken out, among them restructuring charges, acquisition-related charges and credits and the commodity derivative gains. Core operating profit was $4,277 million, against $4,137 million, 3 percent higher, and core operating margin, core operating profit as a share of revenue, was 16.9 percent, 35 basis points lower; a basis point is a hundredth of a percentage point. The release credits a 4 percentage point favorable impact of tariff refunds, which the prepared remarks put at $178 million. The quarterly report explains them: after the US Supreme Court ruled many tariffs imposed under the International Emergency Economic Powers Act invalid, PepsiCo filed claims with US Customs and Border Protection and 'received substantially all of the refunds of such tariffs'. ^{[1, 2, 3]}

North America against the rest

PepsiCo Foods North America, the snack and food business in the United States and Canada, had net revenue of $6,504 million against $6,526 million a year earlier. The quarterly report says unit volume 'grew slightly', a 1 percent increase in savory snacks partly offset by a 4 percent decrease in other foods, while lower net pricing pulled revenue down; the release's summary table, which rounds to whole percents, shows the division's volume as flat. Operating profit was 13 percent lower, including a 4 percentage point impact from higher commodity costs, and the prepared remarks say the division's core operating margin was 280 basis points lower, reflecting 'the impact of affordability investments', higher advertising and the lap of an asset sale gain a year earlier. ^{[1, 2, 3]}

PepsiCo Beverages North America had net revenue 5 percent higher, which the company attributes mainly to acquisitions made in 2025; its organic revenue declined slightly. Unit volume was down 2 percent, with noncarbonated drinks down 3 percent and carbonated soft drinks down 2 percent. Operating profit was 45 percent higher, helped by the poppi credit and by a 23 percentage point favorable net impact of global tariffs, refunds included, and higher commodity costs taken together, the quarterly report says. ^{[1, 2]}

Outside North America, organic revenue increased 8 percent, which the prepared remarks call the highest rate since the first quarter of 2024. Reported net revenue was 8 percent higher in the International Beverages Franchise and in Europe, Middle East and Africa, 14 percent higher in Latin America Foods and 10 percent higher in Asia Pacific Foods, where volume was up 11 percent. Through the first 36 weeks the international business made up 41 percent of PepsiCo's net revenue and 45 percent of its core segment operating profit, the remarks say. ^{[1, 3]}

Reuters reported North American food volumes as flat and beverage volumes as down 2 percent, and noted that the company cut prices by up to 15 percent on products such as Lay's and Doritos in February and said last month that it would raise some prices to keep pace with input cost inflation. The one difference among the sources is the food volume: the quarterly report says it grew slightly, while the release's rounded table and Reuters call it flat. ^{[2, 4, 5]}

The new outlook and the cost cuts

For fiscal 2026 the company now expects organic revenue growth of approximately 3 percent, against a previous range of 2 to 4 percent, and net revenue growth of approximately 6 percent, against 4 to 6 percent, with exchange rates and 2025 acquisitions each adding about 1.5 percentage points. It lowered its outlook for growth in core earnings per share, which the prepared remarks say 'reflects the margin pressures we expect in the North America business'. 'In North America, we remain committed to improving growth and core operating margin. However, it is taking more time than we planned,' said Steve Schmitt, chief financial officer, in the remarks, adding that North America's core operating margin was expected 'to remain under pressure in the fourth quarter'. The plan to return $8.9 billion to shareholders in 2026, $7.9 billion in dividends and $1.0 billion in share repurchases, is unchanged; through 36 weeks the company paid $5,935 million in dividends and spent $739 million on repurchases. ^{[1, 3]}

The prepared remarks say the new structural cost reduction actions 'reduce redundancies and curtail discretionary expenditures', give 'reductions in corporate costs' as an example, and say they 'begin to take effect in the coming months', on top of the existing productivity program. That program, the 2019 Productivity Plan extended through 2030, is expected to cost about $6.15 billion before tax, of which $4.0 billion had been incurred by 5 September and about $500 million more is expected in the rest of 2026, the quarterly report says. Its charges in the quarter were $185 million, with severance and other employee costs of $148 million against $46 million a year earlier; $48 million fell in North American foods and $53 million in North American beverages. ^{[2, 3]}

On costs the quarterly report says tariffs 'have impacted and could continue to impact our supply chain resulting in increased input costs, including the cost of certain raw materials and packaging', and that the administration 'initiated new tariffs and may impose additional tariffs'. Reuters reported that the company faces high input costs, an inflation hit to demand and the threat of GLP-1 weight-loss drugs, and that its core operating margin was 16.5 percent for the year to date, 25 basis points lower. Reuters also reported that the turnaround began after activist investor Elliott Investment Management took a roughly $4 billion stake a year earlier, and that in December, after talks with Elliott, PepsiCo targeted a 100 basis point margin improvement over three years. Food Dive reported on 9 December 2025 that the plan cut nearly 20 percent of the products PepsiCo sells and aimed for 'a record year of productivity savings in 2026', with Elliott's Marc Steinberg saying the firm backed it. ^{[2, 4, 5, 6]}

What settles it next

The quarterly report names the dated items still to come: about $500 million of productivity plan charges in the rest of 2026, an expected pre-tax gain of $50 million in the fourth quarter from hedging an investment converted into shares after the quarter ended, and the poppi milestone payment that is owed only if targets are met by the third quarter of 2027. The prepared remarks say the structural cost actions begin to take effect in the coming months and that North America's core margin is expected to stay under pressure in the fourth quarter; the fourth-quarter and full-year report will show both. The documents read do not give its date. ^{[2, 3]}

Who it reaches

PepsiCo (PEP) is the reporter: the figures, the guidance and the cost actions are its own. Celsius Holdings (CELH) is reached through PepsiCo's balance sheet and shelves: PepsiCo's quarterly report carries its Celsius convertible preferred shares at $1,482 million on 5 September, and its prepared remarks say the Celsius partnership holds nearly 20 percent of the energy drink category within the North American beverage business. ^{[2, 3]}

Sources

Every stock is a company; the desk grades the company behind the stock. This article describes; it does not recommend. Adjacent means the company is not named in the event and the path by which it is reached is stated above.

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