KHC · Q1 2026 Earnings

Cautious

Kraft Heinz

Reported May 6, 2026

30-second summary

Kraft Heinz delivered a Q1 that materially beat its own FY2026 framework — organic sales -0.4% (vs FY2026 guide of -1.5% to -3.5%), revenue +0.8% YoY to $6.05B, share gains accelerating from 21% of the portfolio in FY2025 to 58% in March — yet reaffirmed FY2026 EPS at $1.98–$2.10 and guided Q2 FY2026 revenue to -3% to -5% YoY with a newly quantified 100bps SNAP headwind starting next quarter. The shape of the print is the story: management explicitly refused to embed Q1 outperformance into the guide ("we're being prudent... not embedding the first quarter over-delivery"), which is either genuine conservatism or an acknowledgment that Easter shift and pantry loading inflated the Q1 read.

Headline numbers

EPS

Q1 FY2026

$0.58

Revenue

Q1 FY2026

$6.05B

+0.8% YoY

Gross margin

Q1 FY2026

36.7%

Free cash flow

Q1 FY2026

$0.77B

Operating margin

Q1 FY2026

18.9%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$6.05B	+0.8%	$6.35B	-4.8%
EPS	$0.58	—	$0.67	-13.4%
Gross margin	36.7%	—	32.6%	+410bps
Operating margin	18.9%	—	17.1%	+180bps
Free cash flow	$0.77B	—	—	—

Guidance

Company reaffirms FY2026 EPS and core guidance while slightly lowering tax rate and interest expense; Q2 revenue guide signals sequential deceleration to -3 to -5% YoY with quantified 100 bps SNAP headwind.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	—	$6.047B	in-line	Met
Organic Net Sales	Q1 FY2026	-1.5% to -3.5% YoY (FY2026 full-year)	-0.4%	+1.1 to +3.1 pts above FY guidance range	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	-3% to -5%	-11.4% to -13.4%
SNAP headwind	Q2 FY2026	100 basis points	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Effective tax rate on Adjusted EPS	FY 2026	approximately 25.5%	approximately 25%	-50 basis points	Lowered
Interest expense	FY 2026	approximately $940 million	approximately $920 million	-$20 million	Lowered

Reaffirmed unchanged this quarter: Adjusted EPS ($1.98 to $2.10), Constant Currency Adjusted Operating Income (down 14% to down 18% YoY), Adjusted Gross Profit Margin (down 25 to down 75 basis points), Free Cash Flow Conversion (approximately 100%), Other expense/(income) (approximately $200 million income)

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Organic Net Sales Growth	-0.4%
Price Mix	+0.8 pp
Volume/Mix	-1.2 pp

Profitability

Q1 FY2026

Segment	Q1 FY2026
Adjusted Gross Profit Margin	34.1%
Adjusted Operating Income	$1.058 billion
Free Cash Flow	$0.766 billion
Free Cash Flow Conversion	111%
Operating Cash Flow	$1.006 billion

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
North America	$4.458B	-0.7%
International Developed Markets	$0.843B	+3.2%
Emerging Markets	$0.746B	+7.6%

Management tone

The first shift is from "the prior plan was wrong, here is the reset" to "the reset is working, but we won't bank it yet." Last quarter management staked the company on a $600M reinvestment and a 14–18% FY2026 CC operating-income decline; this quarter the early evidence (share gains 21% → 58%, taste elevation 24% → 87%) supports the strategy. The operational rationale from Cahillane: "for the last at least 60 days, this organization has been maniacally focused on growth and execution. Pausing the split freed up lots of resources." This validates the Q4 FY2025 pause decision in operational terms, but management's refusal to flow the beat into the guide — "we're being prudent in the way we think about the rest of the year and not embedding the first quarter over-delivery into our guidance" — signals concern that Easter shift and pantry loading are doing meaningful work in the Q1 print.

The second shift is on portfolio posture. Two quarters ago portfolio framing was defensive — a chronically challenged tail being triaged. This quarter management is moving brands actively between tiers: "we did downgrade frozen from win big to hold... we move that [hydration] from win to win big... we've moved cheese from hold to win." This is the first quarter in coverage where portfolio classifications have been treated as a live operating variable rather than a strategic decree, and the framing — "we reserve the right to continue to get smarter" — explicitly preserves optionality to keep moving.

The third shift is on pricing strategy. Management formalized productivity-first as the structural framework: "a business like ours would take about half of input cost inflation in price and then the rest in productivity... the consumer can only absorb so much price." The FY2026 guide assumes only 20% pass-through of inflation initially — a structural concession that the prior pricing-led model is gone.

The fourth shift is on consumer language. Through FY2025 management framed the consumer as challenged but stable; this quarter management was direct: "the consumer is under a tremendous amount of pressure... our goal to be affordable and be there for our consumers." Combined with the SNAP headwind quantification (100bps starting Q2 FY2026) and the acknowledgment that energy and resin inflation is now spiking from geopolitical conflict, the macro framing has hardened meaningfully — even as the operating data improved.

The fifth shift is on inflation defense. Management flipped the hierarchy: "the first line of defense is always going to be productivity... we wouldn't look at our investments, the $600M and otherwise as a way to protect profit." The investments are insulated from the inflation-offset role they might have played in the prior framework, which protects the FY2026 brand-investment plan from being cannibalized — but also means the gross margin guide of -25 to -75bps is unhedged if inflation runs hotter than the 4% currently modeled. Resin hedges only run through mid-Q3 FY2026, so the Q3/Q4 FY2026 setup is where this gets tested.

Recurring themes management leaned on this quarter:

Share trajectory inflection as evidence of underlying strengthMarketing investment concentration on high-return categories (taste elevation, hydration, meats)Productivity as primary inflation defense mechanismPortfolio rationalization and accountability simplification in North AmericaCautious near-term outlook despite Q1 beat (Easter shift, pantry loading)SNAP headwind materialization and lower-income consumer pressure

Risks management surfaced:

SNAP benefit reduction expected to be 100 bps headwind in H2 2026Energy and resin inflation spike from geopolitical conflict, partially hedged through mid-Q3Category softness limiting market share gains despite improved performanceMacro pressure on away-from-home business and consumer affordabilityExecution risk on $600M investment deployment and marketing ROI validation

Answers to last quarter's watch list

Q1 FY2026 organic sales versus the FY2026 -1.5% to -3.5% guide — Resolved positively. Q1 FY2026 organic landed at -0.4%, materially better than the FY2026 range. Volume/mix at -1.2pp. The credibility of the FY2026 guide is no longer the question — the question is now whether management is preserving conservatism for SNAP/inflation or whether Q1 FY2026 was inflated by Easter shift and pantry loading. Either reading makes the FY guide easier to hit.

Resolved positively

Magnitude and pacing of the $600M reinvestment plan — Continue monitoring. Management did not refresh a quantified H1/H2 split this quarter; Cahillane noted "the vast majority of our 600 million is still dry powder that is being deployed as we speak from now through the rest of the year." Maciel guided H2 cash flow lower as the step-up lands. The reaffirmed FY2026 -14% to -18% operating income guide is consistent with the bulk of the spend hitting later in the year, but no explicit pacing schedule was disclosed.

Continue monitoring

Value market share — Resolved positively. Management volunteered the most concrete share data in coverage: total business held or gained share in 21% of categories in FY2025, 35% in Q1 FY2026, and 58% in March FY2026. Taste elevation went 24% → 81% → 87%. The accountability metric was introduced with hard numbers, not rhetoric.

Resolved positively

Opening price point execution — Resolved positively. Volume/mix at -1.2pp on price of +0.8pp. Management cited share gains as validation, with Maciel noting share losses narrowed from -90bps entering FY2025 to -30bps YTD. The risk is that some of this is Easter shift rather than structural, which Q2 FY2026's -3% to -5% revenue guide will help adjudicate.

Resolved positively

Whether the separation pause becomes a separation cancellation — Not resolved. The press release did not refresh strategic-optionality language, and the Q&A framing was operational throughout. Cahillane's "pausing the split freed up lots of resources" suggests the pause is now functioning as the operating posture rather than a temporary state, but no explicit cancellation language was used.

Continue monitoring

What to watch into next quarter

Q2 FY2026 organic sales versus the -3% to -5% guide — management is guiding a 380–580bps sequential YoY swing. If Q2 FY2026 lands inside the guide, the prudent-guidance reading wins and the FY2026 framework is intact. If Q2 FY2026 lands below -5%, it confirms Q1 FY2026 was inflated by Easter shift and pantry loading, and the share-gain narrative loses durability.

SNAP headwind realization — management quantified 100bps starting Q2 FY2026 and persisting through the year. Maciel confirmed SNAP transactions are already running down. Watch whether the H2 organic walk (FY range implies ~-2% to -3% in H2) reconciles with the 100bps SNAP impact plus the Q2 step-down. If the math doesn't tie, FY guide is at risk.

Share-gain durability — March hit 58% of categories holding or gaining share, with taste elevation at 87%. Watch whether Q2 FY2026 disclosure refreshes this metric and whether the trajectory holds even as SNAP and consumer pressure bite. A drop back toward 35% would suggest Q1 FY2026 was a high-water mark.

Gross margin trajectory under spiking energy and resin costs — management flagged inflation now exceeding the 4% modeled, with resin hedges running only through mid-Q3 FY2026. Watch whether Q2 FY2026 adjusted gross margin holds near 34.1% (ex the 40–50bps Q1 non-recurring items, closer to 33.6–33.7% underlying) or compresses toward the FY guide implied floor.

Whether the EPS guide gets raised at Q2 or Q3 FY2026 — management held $1.98–$2.10 despite the Q1 FY2026 beat plus 50bps tax-rate and $20M interest-expense favorability. If those below-the-line favorables persist and Q2 FY2026 lands inside the revenue guide, a Q2 or Q3 FY2026 raise becomes the credibility test of whether the prudent-guidance framing was real conservatism or cover for known H2 headwinds not yet disclosed.

Sources

Kraft Heinz Q1 FY2026 Earnings Press Release, SEC EDGAR Filing — https://www.sec.gov/Archives/edgar/data/1637459/000163745926000020/ex991-erq12026.htm

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