PepsiCo cuts 2026 EPS outlook to 2.5%-3.5% growth

PepsiCo cut its fiscal 2026 core EPS outlook on Oct. 8 to 2.5% to 3.5% growth, down from 5% to 7%, according to its third-quarter earnings call transcript.

The cut matters because PepsiCo still reported $25.274 billion in third-quarter net revenue, up 5.6% from a year earlier and more than three times its $7.7 billion PepsiCo Beverages North America revenue, according to Atlas360 calculations.

Guidance reset

Organic revenue rose 3.1% in the quarter, compared with 2.7% year to date. Core EPS was $2.34, up 2% from the prior year.

PepsiCo also narrowed its fiscal 2026 organic revenue guidance to about 3%, from a previous range of 2% to 4%. It lowered core constant-currency EPS guidance to 1% to 2% growth from a prior target at the low end of 4% to 6%.

Chief Financial Officer Steve Schmitt linked the guidance reduction to inflation and product mix. "Input costs are trending higher, and mix has been a headwind in particular," he said on the call, according to the transcript.

The pressure is most visible in North America beverages, where PepsiCo said net revenue was $7.7 billion, up 5% mainly because of acquisitions completed in 2025. Schmitt said a tariff-refund benefit that added 4 percentage points to core operating profit in the quarter "goes away" after the third quarter, which "puts some more underlying pressure on the North America beverages business."

Chief Executive Officer Ramon Laguarta also pointed to execution gaps in U.S. soft drinks. He said PepsiCo is "not competing well in soft drinks" in the United States, and the company is shifting costs to fund reinvestment in that category.

International offset

International performance provided support. PepsiCo said international organic revenue rose 8% in the quarter, helped by Europe, the Middle East, Asia and Latin America.

International operating margin expanded 105 basis points, and international segments accounted for 45% of total year-to-date profit. A basis point is one-hundredth of a percentage point.

Volumes improved in several areas outside the U.S. soft-drink weakness. Global beverage volume increased 3%, while global food volume rose 1%, or 4% excluding the impact of the grains business in South Africa.

PepsiCo Foods North America volume rose in the positive low single digits, reversing low-single-digit negative growth in the previous year. Management tied that improvement to price resets and innovation in portion-control and permissible products, categories where PepsiCo said revenue exceeds $3 billion each.

Cost actions

PepsiCo is pairing reinvestment with cost reductions. The company said U.S. advertising and marketing expenses rose by double digits in the quarter and that it is working with Publicis to improve returns from marketing spending through more data-driven targeting.

The company also said it is reviewing structural options for its North American business, including possible refranchising of bottling operations in some regions. Refranchising generally means transferring company-owned bottling assets to independent operators, which can change margins, capital intensity and execution control.

Acquisitions and divestitures are expected to add 1.5 percentage points to full-year net revenue growth, while foreign-exchange translation is projected to contribute about 1.5% to both net revenue and core EPS growth for the year. PepsiCo targeted at least 80% free cash flow conversion and $8.9 billion of cash returns to shareholders, including $7.9 billion in dividends and $1.0 billion in share repurchases.

What to watch

• Fourth quarter of fiscal 2026: PepsiCo said hedges that typically cover six to 12 months will roll off as commodity costs continue to rise, increasing attention on gross-margin pressure.

• Fiscal 2027 pricing: Management said it has set guardrails to keep next-year pricing below $25 for most take-home formats, a test of affordability as input costs rise.

• Full-year fiscal 2026: PepsiCo’s revised outlook calls for about 3% organic revenue growth and 2.5% to 3.5% core EPS growth, with acquisitions, divestitures and currency expected to contribute to reported growth.

Source: earnings call transcript, The Motley Fool, Oct. 9, 2026