KHC · Q2 2026 Earnings

Cautious

Kraft Heinz

Reported August 5, 2026

30-second summary

Q2 organic net sales declined only 1.3% versus management's own -3% to -5% guide — a 170–370bps beat that resolves the Q1 "was it Easter shift or structural" debate in favor of structural, and revenue of $6.26B beat consensus of $6.12B by 2.3%. Management raised FY2026 organic sales (-0.5% to -2.0%, from -1.5% to -3.5%), gross margin (down 10–50bps, from down 25–75bps), and FCF conversion (~110%, from ~100%), yet cut the low-end of FY2026 constant-currency operating income guidance to -16% to -18% (from -14% to -18%) as the incremental investment program was expanded by $100M to ~$700M for 2026. The GAAP loss of $5.46B reflects another non-cash impairment; the operating story is a top-line beat funded by margin sacrifice.

Headline numbers

EPS

Q2 FY2026

$0.56

+5.7% vs est.

Revenue

Q2 FY2026

$6.26B

-1.4% YoY

+2.3% vs est.

Gross margin

Q2 FY2026

32.4%

Free cash flow

Q2 FY2026

$1.66B

Operating margin

Q2 FY2026

-102.8%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$6.26B	$6.35B	-1.4%	$6.05B	+3.6%
EPS	$0.56	$0.69	-18.8%	$0.58	-3.4%
Gross margin	32.4%	34.4%	-200bps	36.7%	-430bps
Operating margin	-102.8%	-125.6%	+2280bps	18.9%	-12170bps
Free cash flow	$1.66B	$1.50B	+10.3%	$0.77B	+116.6%

Guidance

Company raised FY2026 organic net sales guidance and improved gross margin outlook despite lowering operating income guidance, signaling strong H1 demand offset by elevated investment spending and operating deleverage.

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 (Organic Net Sales YoY)	Q2 FY2026	-3% to -5% YoY	-1.4% YoY	+1.6 to +3.6 percentage points above guide	Met
Adjusted EPS	Q2 FY2026	—	$0.56	+5.7% above consensus estimate of $0.53	Beat

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue (Organic Net Sales)	FY2026	-1.5% to -3.5% YoY	-0.5% to -2.0% YoY	+1.0 to +1.5 percentage points improvement	Raised
Constant Currency Adjusted Operating Income	FY2026	-14% to -18% YoY decline	-16% to -18% YoY decline	-2 percentage points (range widened at the low-end)	Lowered
Adjusted Gross Profit Margin	FY2026	down 25 to 75 basis points	down 10 to 50 basis points	+15 to +25 basis points improvement (range narrowed and shifted upward)	Raised
Free Cash Flow Conversion	FY2026	approximately 100%	approximately 110%	+10 percentage points	Raised
Effective Tax Rate on Adjusted EPS	FY2026	approximately 25%	approximately 24.5%	-0.5 percentage points	Lowered
Interest Expense	FY2026	approximately $920 million	approximately $890 million	-$30 million	Lowered

Reaffirmed unchanged this quarter: Adjusted EPS ($2.03 to $2.09), Other Expense/(Income) (approximately $200 million income)

Segment performance

Q2 FY2026

Segment	Q2 FY2026
North America Adjusted Operating Income	$988 million
Emerging Markets Adjusted Operating Income	$107 million

Platform metrics

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Organic Net Sales Growth	-1.3%	-2.0%	—
Price/Mix Growth	+1.3 pp	—	—
Volume/Mix Decline	-2.6 pp	—	—

Profitability

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Adjusted Gross Profit Margin	34.1%	34.1%	—
Adjusted Operating Income	$1.041 billion	$1.3B	—
Free Cash Flow Conversion	123%	96%	—

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
North America	$4.626B	$4.757B	-2.8%
International Developed Markets	$0.865B	$0.897B	-3.6%
Emerging Markets	$0.771B	$0.698B	+10.5%

Management tone

Q3-25 guidance cut across the board → Q4-25 separation paused and $600M reinvestment → Q1-26 refuse to bank the beat → Q2-26 accelerate and expand investments to ~$700M, position for 2027

The first shift is from defensive prudence to offensive investment posturing. Last quarter management explicitly refused to embed Q1 outperformance into the guide: "we're being prudent... not embedding the first quarter over-delivery into our guidance." This quarter management raised the FY revenue guide AND expanded the incremental investment envelope by $100M to ~$700M in the same release, with the framing "by accelerating these investments, we position the business even more favorably as we enter 2027." That is a substantive change: the prudent-conservatism reading from Q1 has resolved into a management team that has now decided the underlying business is strong enough to fund a bigger swing at growth, at the cost of a further operating-income cut. The tell is that the investment envelope was expanded — not merely pulled forward — without waiting for H2 confirmation.

The second shift is on ambition framing. Q4-25 framed the reset as "return the company to organic growth"; Q1-26 framed it as "volume-led, sustainable and profitable growth"; Q2-26 hardens further to "we are ahead of plan and remain focused on our ultimate goal to return the company to volume-led, sustainable and profitable growth." "Ahead of plan" is new language in coverage — the first quarter where management has claimed the reinvestment strategy is outperforming its own internal case. The credibility test comes in H2 when SNAP headwinds bite and the now-$700M investment spend fully lands.

The third shift is the growing gap between top-line optimism and bottom-line concession. Two quarters ago the FY26 EPS reset to $1.98–$2.10 was the cost of the original $600M reinvestment plan. This quarter management raised revenue, raised gross margin, raised FCF conversion, and expanded the investment envelope by another $100M — and yet the EPS midpoint only moved +$0.02 (with the low end +$0.05 and high end -$0.01). That gap is the story: the reinvestment plan has grown, not shrunk, even as demand has improved. Either the FY revenue outlook has more upside management isn't yet banking (Q1 pattern repeating), or the operating deleverage from accelerated investment is more severe than the raised gross margin can offset.

Answers to last quarter's watch list

Q2 FY2026 organic sales versus the -3% to -5% guide — Resolved positively. Q2 organic landed at -1.3%, 170–370bps above the guided range. This resolves the Q1 debate: the beat was structural, not Easter-shift-inflated. Management moved directly to raise the FY2026 organic sales outlook to -0.5% to -2.0%, and cited "the progress we are seeing" as the trigger. The share-gain narrative just gained durability.

Resolved positively

SNAP headwind realization — Continue monitoring. The press release refreshed SNAP quantification, stating the FY outlook "includes an approximate 100 basis point impact from incremental SNAP headwinds" — consistent with the 100bps flagged last quarter. Given Q2 organic of -1.3% and the raised FY range of -0.5% to -2.0%, the implied H2 organic walk is roughly -0.3% to -2.5%; a Q3 print worse than -2% would suggest SNAP is now landing harder than the 100bps framework implies.

Continue monitoring

Share-gain durability — Continue monitoring. The press release did not refresh the specific share-gain percentage disclosure (58% of categories in March, 87% taste elevation). Absent transcript, the specific accountability metric management introduced last quarter is now under-disclosed on the print, though management's characterization that "share performance is improving" is directionally supportive.

Continue monitoring

Gross margin trajectory under spiking energy and resin costs — Resolved positively. Q2 adjusted gross margin held at 34.1%, flat with Q1 and consistent with the raised FY -10 to -50bps guide. Without the 40–50bps of non-recurring items that flattered Q1, the underlying run-rate has firmed. Management raised the FY gross margin outlook by ~20bps at the midpoint.

Resolved positively

Whether the EPS guide gets raised at Q2 or Q3 FY2026 — Resolved mixed. The FY EPS range was narrowed and the low end raised by $0.05, but the midpoint moved only +$0.02 (from $2.04 to $2.06) despite the beat on revenue and material below-the-line favorability (tax rate -50bps, interest -$30M). Management chose to redeploy the operational upside into an expanded ~$700M investment envelope rather than let it flow to EPS. This confirms the prudent-guidance framing from Q1 was cover for a larger reinvestment intention, not conservatism about known H2 headwinds. Status: Resolved (low end raised, midpoint held)

What to watch into next quarter

Q3 FY2026 organic sales versus the implied -0.3% to -2.5% H2 walk — the raised FY guide of -0.5% to -2.0% and H1 organic of -0.9% (per Schedule 3) implies H2 needs roughly -0.3% to -2.5% to hit the range. A Q3 print below -2% would signal SNAP is landing harder than modeled and the FY raise was premature. A print near -1% or better would confirm the reinvestment strategy is compounding.

International Developed Markets organic trajectory — Q2 organic flipped to -0.7% from Q1's +3.2%, and reported was dragged to -3.5% by divestiture lapping. Watch whether Q3 organic returns to positive growth or confirms a genuine underlying deceleration; if IDM organic stays negative, the FY revenue raise leans more heavily on EM outperformance and NA stabilization.

Volume/mix trajectory — Q1 -1.2pp → Q2 -2.6pp headline (approximately -2.4pp ex-Easter shift and inventory pull-forward net) is deterioration, not the "volume-led growth" management is staking the strategy on. Watch whether Q3 shows volume/mix improving back toward -1pp or worse. If price continues doing all the work while volume erodes, the underlying share-gain story loses credibility regardless of top-line beats.

Magnitude and phasing of the ~$700M 2026 investment envelope — management raised the envelope by $100M this quarter without providing sub-quarter phasing. Watch whether Q3 brings a further sizing update and a preliminary 2027 P&L framework, particularly whether the constant-currency operating income decline extends into 2027 or whether 2026 is confirmed as the trough.

Whether FY EPS gets raised at Q3 — the $2.03–$2.09 range is now defended by below-the-line favorability rather than operating strength. If Q3 delivers another organic beat and management again refuses to raise EPS meaningfully, that pattern becomes the base case: operational upside gets redeployed into investment spend rather than flowing to shareholders, and 2026 EPS becomes the floor investors underwrite rather than the bar management aims to beat.

Sources

Kraft Heinz Q2 FY2026 Earnings Press Release, SEC EDGAR Filing — https://www.sec.gov/Archives/edgar/data/1637459/000163745926000052/ex991-erq22026.htm

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