PepsiCo (PEP) Q1 2026 earnings summary

Executive summary

• Net revenue for Q1 was $19.4 billion, up 8.5%–9% year-over-year, with operating profit rising 24% to $3.2 billion and net income attributable to shareholders increasing 27% to $2.33 billion.

• Diluted EPS grew 27% to $1.70, driven by productivity savings, net revenue growth, favorable mark-to-market gains on commodity derivatives, and positive foreign exchange impacts.

• Sequential improvement was driven by strong execution in North America Foods and international markets, with North America Foods achieving 2% volume growth and Beverages reporting 9% total business growth.

• Growth was supported by innovation, effective net pricing, and robust commercial programs, with international business accelerating and no significant demand impact from geopolitical conflicts.

• Free cash flow improved to $(393) million from $(1,444) million in the prior year, reflecting stronger operating profit and working capital improvements.

Financial highlights

• Gross profit increased to $10.7 billion from $10.0 billion year-over-year, with gross margin expanding to 55.6%.

• Operating margin rose to 16.5% from 14.4% in the prior year; core operating margin up 10 basis points to 15.7%.

• Organic revenue rose 2.6% and core EPS grew 9% year-over-year.

• Net cash provided by operating activities was $41 million, a significant improvement from a $973 million outflow in the prior year.

• Capital spending was $447 million, down from $603 million year-over-year.

Outlook and guidance

• Fiscal 2026 guidance affirmed: organic revenue growth expected between 2–4%, with expectations to reach the upper end in the back half of the year.

• Core constant currency EPS growth targeted at 4–6%, with free cash flow conversion ratio expected at least 80%.

• Total cash returns to shareholders projected at $8.9 billion, including a 4% dividend increase.

• A new $10 billion share repurchase program was announced, effective through February 2030.

• No impact from the Iran conflict assumed in current guidance, as no material demand or supply disruptions have been observed.