Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

KHC · Q4 2025 Earnings

Kraft Heinz

Reported February 11, 2026

30-second summary

Kraft Heinz beat its own cut FY25 guide ($2.60 EPS vs $2.50–$2.57; 119% FCF conversion vs ≥100%) but the print is overshadowed by two strategic resets: the Mondelez-style separation announced in Q3 is paused, and the FY26 EPS guide of $1.98–$2.10 implies a 19–24% YoY decline as management funds a $600M stepped-up reinvestment plan. Q4 organic sales fell 4.2% (volume/mix -4.7pp), worse than the -3.7% threshold flagged in the prior watch list, and FY26 operating income is guided down 14–18% in constant currency. This is a reset year masquerading as a turnaround plan.

Headline numbers

EPS

Q4 FY2025

$0.67

Revenue

Q4 FY2025

$6.35B

-3.4% YoY

Gross margin

Q4 FY2025

32.6%

Operating margin

Q4 FY2025

17.1%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$6.35B	-3.4%	$6.24B	+1.9%
EPS	$0.67	—	$0.61	+9.8%
Gross margin	32.6%	—	31.9%	+70bps
Operating margin	17.1%	—	16.4%	+70bps

Guidance

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
Adjusted EPS	FY 2025	$2.50 to $2.57	$2.60	+$0.03 to $0.10 above guide	Beat
Organic Net Sales	FY 2025	down 3.0% to down 3.5%	-3.5%	at high end of guide	Met
Constant Currency Adjusted Operating Income	FY 2025	down 10% to down 12%	implied better than down 10% range	better than low end of prior guide	Beat
Adjusted Gross Profit Margin	FY 2025	down approximately 100 bps vs prior year	33.1%	margin performance better than expected contraction	Beat
Free Cash Flow Conversion	FY 2025	at least 100%	119%	+19 pp above guide low end	Beat

New guidance

Metric	Period	Guide	YoY
Adjusted EPS	FY 2026	$1.98 to $2.10	—
Organic Net Sales	FY 2026	down 1.5% to down 3.5%	—
Constant Currency Adjusted Operating Income	FY 2026	down 14% to down 18%	—
Adjusted Gross Profit Margin	FY 2026	down 25 to down 75 bps vs prior year	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Other Expense/(Income)	FY 2025	approximately ($250) million expense	approximately $200 million income	$450M swing to more favorable income	Raised
Effective Tax Rate on Adjusted EPS	FY 2025	approximately 26%	approximately 25.5%	-50 bps	Lowered

Reaffirmed unchanged this quarter: Interest Expense (approximately $940 million)

Platform metrics

Q4 FY2025

Segment	Q4 FY2025
Organic Net Sales Growth	-4.2%
Price/Volume Mix - Price	+0.5 pp
Price/Volume Mix - Volume	-4.7 pp

Profitability

Q4 FY2025

Segment	Q4 FY2025
Adjusted Gross Profit Margin	33.1%
Adjusted Operating Income	$1,164 million
Full Year Free Cash Flow	$3.7 billion
Full Year FCF Conversion	119%
Net Leverage	3.0x

Other KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
North America	$4.7B	-5.4%
International Developed Markets	$0.93B	+1.8%
Emerging Markets	$0.724B	+4.3%

Management tone

Q1 stabilization narrative → Q2 reaffirmed guide + $9.3B impairment → Q3 cut across the board + separation announced → Q4 separation paused + $600M reinvestment + FY26 reset

The first shift is the most material: separation is off, organic growth is on. One quarter ago management confirmed the Mondelez-style separation was on track to close H2 2026 with both entities targeted as investment grade. This quarter management framed the pause as discovery, not retreat: "job one right now and why we've made this decision is to put all of our attention and resource against this stepped-up plan to return the company to organic growth." The new CEO's pivot away from a previously endorsed strategy within a single quarter reveals either a material change in operational assessment or that the prior plan was never durable. Either reading is unfavorable.

The second shift is from "underinvestment is a structural constraint we accept" to "underinvestment is correctable through a $600M incremental spend." Last quarter management was defending the prior trajectory; this quarter the language is "we're really getting back to where we ought to be, not necessarily looking at the challenging environment and saying we need to do something different." That framing — internal correction, not competitive response — is significant because it implicitly admits the prior framework was wrong and the FY26 EPS reset to $1.98–$2.10 is the cost of fixing it.

The third shift is on pricing. Two quarters ago pricing was running ~100bps against 5–7% input inflation; the strategy was disciplined pass-through. This quarter management is committing to "opening price points... expected to impact about 40% of the categories" and selective base price reductions. The pivot from pricing-led to volume-led is now explicit: management's stated FY26 ambition is "volume-led profitable growth and have a much higher profitability percent of the portfolio gaining market share" — which is incompatible with a near-term margin recovery, and the FY26 guide confirms that (gross margin -25 to -75bps, operating income -14 to -18%).

The fourth shift is the introduction of a new accountability metric. Management volunteered "we're going to be talking a lot about value market share and holding ourselves accountable to that" — a tell that absolute share gains are not coming and that the next several quarters will be litigated on a different yardstick.

The fifth shift is on portfolio. Last quarter management spoke of brand growth system rollout across the portfolio; this quarter the framing has hardened into a 20% chronically challenged tail that the company has effectively given up on growing: "20% of the portfolio that is more challenged. That's going to be the case in a portfolio like ours, but we need to make sure that we're doing portfolio management and optimization such that the winners far outpace the ones that are more challenged." That is a multi-quarter shift from portfolio-wide investment to triage.

Recurring themes management leaned on this quarter:

Pause of Mondelez separation to prioritize organic growthCorrecting structural underinvestment with $600M stepped-up planTaste elevation portfolio (sauces, cream cheese) as momentum driver gaining shareValue positioning through opening price points, promotional activity, and selective base price reductionsSNAP reduction headwind requiring consumer-centric mitigation strategiesCommercial capability buildup through sales and marketing hiring (SG&A investment)

Risks management surfaced:

SNAP funding reduction (100 basis points headwind forecasted)Portfolio quality gap versus competition on antiquated brandsNorth American grocery segment chronic underperformanceInvestment execution risk and consumer responsiveness uncertaintyCommodity cost volatility and competitor pricing reactions

Answers to last quarter's watch list

Q4 organic sales versus the -100 to -120bps incremental decline guided — Resolved negatively. Q4 organic landed at -4.2% versus Q3's -2.5%, a -170bps incremental decline — worse than the -120bps threshold management guided and the watch flagged. The FY guide held (FY organic -3.4%, within the -3.0% to -3.5% range) only because Q3's worst-case low end was already low enough to absorb the Q4 deterioration. The implied 2026 starting point is worse than expected, and the FY26 guide of -1.5% to -3.5% confirms it.

Resolved negatively

Separation restructuring cost disclosure — Not resolved. Management paused the separation entirely this quarter, which makes the cost-disclosure question moot. The underlying credibility issue — management's reluctance to quantify strategic transaction costs — was sidestepped rather than addressed.

Not resolved

Adjusted gross margin trajectory — Resolved neutrally. Q4 adjusted gross margin came in at 33.1% and FY landed at 33.5%, down ~120bps vs prior year — roughly in line with the ~-100bps FY guide rather than a meaningful beat. Operational margin performance is consistent with the broader deterioration narrative, not an offset to it. Status: Resolved neutrally

Indonesia stabilization — Continue monitoring. The press release does not refresh ex-Indonesia EM disclosure or quantify the Q4 EM ex-Indonesia growth rate. EM reported +4.3% in Q4, broadly consistent with Q3's +3.8% reported. The Q2/Q3 2026 recovery timeline management committed to last quarter remains intact but unverified.

Continue monitoring

Promotional spend versus volume/mix delta — Resolved negatively. Q4 volume/mix was -4.7pp, worse than Q3's -3.5pp, despite the H2 promotional ramp. Management has now formally pivoted to a different framework ($600M stepped-up plan, opening price points across 40% of categories, FY26 EPS reset) — i.e. the prior approach was conceded as not working, and the cost of the replacement is the 19–24% FY26 EPS decline.

Resolved negatively

What to watch into next quarter

Q1 2026 organic sales versus the FY26 -1.5% to -3.5% guide — Q4 just printed -4.2%. For the FY26 range to be credible, Q1 needs to land within the guided band or show clear evidence of sequential improvement. A Q1 print worse than -4% would signal the FY26 guide is already at risk and the back-half recovery management is leaning on becomes the whole story.

Magnitude and pacing of the $600M reinvestment plan — management said "most of the incremental resources related to price will show up more later in the year." Watch whether Q1 brings a quantified pacing schedule (how much hits in H1 vs H2) and whether the gross margin guide of -25 to -75bps is being weighted toward H1 absorption.

Value market share — management volunteered this as the new accountability metric. Watch whether Q1 brings actual value-share data points by category, or whether the metric is introduced rhetorically and then under-disclosed when results disappoint.

Opening price point execution — management said opening price points will affect ~40% of categories. Watch whether Q1 shows volume/mix narrowing from -4.7pp toward something closer to -2 to -3pp, which would be the minimum evidence that price architecture is working.

Whether the separation pause becomes a separation cancellation — management's framing was a pause, not a withdrawal. Watch whether Q1 disclosure language softens further ("evaluating strategic options" becoming "focused on the operating plan") or whether activist pressure forces a re-engagement. The longer the pause lasts without operational improvement, the higher the probability the strategic optionality the stock once embedded gets re-priced out.

Sources

Kraft Heinz Q4 2025 Earnings Press Release, SEC EDGAR Filing — https://www.sec.gov/Archives/edgar/data/1637459/000163745926000006/ex991-erq42025.htm

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.