PEP · Q3 2025 Earnings

Cautious

PepsiCo

Reported October 9, 2025

30-second summary

Revenue grew 2.6% to $23.94B with organic growth of just 1.3% — at the bottom of the FY "low-single-digit" guide — as -3.0% organic volume was offset entirely by +4.0% pricing. Core cc-EPS fell 2.0% YoY despite the company reaffirming FY cc-EPS "approximately even with prior year," which now requires a Q4 step-up the operations have not yet shown. The visible upgrade is FX: management narrowed the FY core USD EPS decline to 0.5% (from 1.5%) on a smaller currency headwind, not on stronger underlying demand.

Headline numbers

EPS

Q3 FY2025

$2.29

Revenue

Q3 FY2025

$23.94B

+2.6% YoY

Gross margin

Q3 FY2025

53.6%

Operating margin

Q3 FY2025

14.9%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$23.94B	+2.6%	$22.73B	+5.3%
EPS	$2.29	—	$2.12	+8.0%
Gross margin	53.6%	—	54.7%	-110bps
Operating margin	14.9%	—	7.9%	+700bps

Guidance

PepsiCo improved full-year core EPS outlook by 1.0pp to a 0.5% decline (from 1.5%) on further FX tailwinds, while reaffirming low-single-digit organic growth and flat constant-currency EPS guidance.

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

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Core USD EPS change	FY 2025	1.5% decline vs. 2024	0.5% decline vs. 2024	+1.0 percentage point improvement (from -1.5% to -0.5%)	Raised
Foreign exchange impact	FY 2025	~1.5 percentage point headwind	~0.5 percentage point headwind	-1.0 percentage point (headwind reduced from 1.5pp to 0.5pp)	Raised

Reaffirmed unchanged this quarter: Organic revenue growth (low-single-digit increase), Core constant currency EPS change (approximately even with prior year), Core effective tax rate (approximately 20%), Total cash returns to shareholders ($8.6 billion ($7.6B dividends, $1.0B share repurchases))

Segment performance

Q3 FY2025

Segment	Q3 FY2025	YoY
PepsiCo Foods North America (PFNA)	$6.526B	—
PepsiCo Beverages North America (PBNA)	$7.327B	+2.0%
International Beverages Franchise (IB Franchise)	$1.291B	—
Latin America Foods (LatAm Foods)	$2.656B	+2.0%
Asia Pacific Foods	$1.115B	+2.0%

Platform metrics

Q3 FY2025

Segment	Q3 FY2025
Organic revenue growth (Q3)	1.3%
Effective net pricing impact (Q3)	4.0%
Organic volume change (Q3)	-3.0%
2025 FY guidance - Organic revenue growth	Low-single-digit

Profitability

Q3 FY2025

Segment	Q3 FY2025
Core operating margin (Q3)	17.3%
Core constant currency EPS change (Q3)	-2.0%
2025 FY guidance - Core constant currency EPS change	Approximately even with prior year

Other KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Europe, Middle East and Africa (EMEA)	$5.022B	+9.0%
Total cash returns to shareholders (2025)	$8.6B	—

Management tone

Q1 demand uncertainty → Q2 productivity-as-fuel → Q3 cost-structure pivot

Management's framing on cost structure stepped up materially. Q2 talked about productivity funding reinvestment; Q3 introduced explicit "aggressively optimize cost structure" and "right-sizing our entire cost base" language in the FY guidance commentary itself. Steve Powers (Deutsche Bank) elicited specifics on Q3: closing the oldest manufacturing nodes made redundant by recent capacity build, automating warehouses, and right-sizing go-to-market labor — with "significant H1 2026 carryover benefits." This is a clearer pivot to margin defense via overhead reduction than the prior quarter, where productivity was characterized as "fuel for long-term investment, not purely bottom-line accretion."

The volume inflection narrative tightened from "3-4 quarters" hedge to specific operational anchors. In Q2, LaGuarta conceded he didn't have "the magic ball" on the timeline. In Q3, the answer to Bonnie Herzog (Goldman) was specific: service levels now 97-98%, beverage volume actually grew in Q3, Pepsi grew volume/revenue/share, and Foods deliberately reduced volume by shifting from deep brand-specific investment to everyday low value across all brands. That last point is important — Q3's worsening volume (-3.0% vs -1.5%) was at least partly self-inflicted by a strategy change, not pure category weakness.

The 2026 growth-algorithm return remains hedged but better-specified. To Morgan Stanley's question on "line of sight" to algorithm growth in 2026, management offered a 7-point list of brand interventions (Lay's/Tostitos now, Gatorade Q1-Q2 2026), platforms (away-from-home growing 2-3x retail, protein, GLP-1 Propel variant), and M&A contributors (POPI, Ciete, Sabra, Alani Energy). The Q2 read was that the inflection wasn't visible; Q3 management is more comfortable naming the levers, while still not committing to whether 2026 algorithm return arrives Q3 or Q4.

Q&A highlights

Bonnie Herzog · Goldman Sachs

How much are volume pressures in food and beverage driven by the pivot to smaller pack sizes versus category softening or market share losses? How should we think about volume growth going forward?

Beverages actually grew volume in Q3, with brands like Pepsi growing volume and share. Foods changed strategy in summer to provide everyday low value across all brands rather than deep investment in particular brands, impacting volume but improving revenue realization. Management is optimistic about volume inflection driven by improved service levels (97-98%), better field execution, and innovation pipeline rollout. International saw weather headwinds in summer but September was strong, returning to mid-to-high single-digit growth.

Beverage segment grew volume in Q3Pepsi brand grew volume, net revenue, and market shareService levels now at 97-98%International performance improved in September

Dara Moshidi · Morgan Stanley

Which areas will be most impactful for accelerating revenue growth in 2026? Timeline for material progress? Line of sight to returning to long-term top-line growth algorithm within 2026?

Management sees clear line of sight to returning to algorithm throughout 2026 (Q3 or Q4 timing unclear). Key drivers include: (1) being brilliant at basics (pricing, service, execution); (2) big brand interventions (Lay's, Tostitos, Gatorade relaunches); (3) accelerating growth platforms (away-from-home growing 2-3x retail, permissible snacks, functional hydration); (4) innovation in protein (relaunch Muscle Milk, Starbucks partnership, Doritos protein, GLP-1 Propel); (5) no-artificials move across portfolio; (6) new platforms (Naked brand with no colors/artificials, higher fiber, avocado oil versions); (7) strategic M&A (POPI, Ciete, Sabra benefits visible).

Lay's and Tostitos relaunches happening now; Gatorade Q1-Q2 timeframeAway-from-home growing 2-3x retail businessPropel growing double-digit CAGR for 5-6 yearsMuscle Milk relaunch in progress

Lauren Lieberman · Barclays

How will cost implications of innovation (protein, clean labels, functional benefits) impact margin structure? How will management ensure sufficient brand support for these relaunches into 2026?

Management expects continued margin improvement overall. Cost increases from innovation will be offset by higher pricing, making innovation accretive to business. Frito-Lay targeting margin expansion through supply chain and go-to-market fixed cost actions. International continues as margin accretive driver. PB&A margins expanding (Q3 impacted by tariffs, Q4 showing recovery). Frito-Lay/foods business bending the cost curve after recent investments. Internal reallocations of A&M resources will ensure new platforms get proper funding; cost reductions from fixed cost structure will be reinvested in A&M for growth acceleration.

Innovation expected to be accretive to business through pricing powerFrito-Lay supply chain and go-to-market interventions underwayInternational margin accretion continues into 2026PB&A margin expansion in Q4 after Q3 tariff impact

Steve Powers · Deutsche Bank

What are the specific interventions in Frito-Lay to right-size fixed costs? How far along at end of 2025 vs. remaining work in 2026? Status of One North America initiative?

Frito-Lay interventions target three areas: (1) closing least efficient, older manufacturing nodes made redundant by recent capacity expansion; (2) rationalizing warehouse infrastructure with automation and beverage business combinations; (3) right-sizing go-to-market labor as market stabilizes. Productivity per FTE already at levels from couple of years ago despite fixed cost reductions in last 6-7 months. More interventions continuing through balance of 2025 and into 2026, with significant carryover benefits in H1 2026. One North America being tested in Texas (state with low beverage share, high snack share). Solution will not be one-size-fits-all but nuanced by market. Benefits emerging from combined distribution and single warehouse serving from one point.

Productivity per FTE normalized despite recent cost cutsOne North America pilot in Texas showing benefitsManufacturing node closures targeting oldest, least efficient facilitiesWarehouse rationalization ongoing with automation investments

Filippo Filorni · Citi

Q3 impacted by weather, but September improved. What is the health of the consumer in key markets (Latin America, Asia-Pacific, India) given macro pressures mentioned by peers? What drives confidence in acceleration?

Most Q3 deceleration linked to weather. September strong; confidence in return to mid-to-high single-digit international growth. Consumer stressed globally but company managing to keep consumers in brands and developing per capita. Market-specific dynamics: China (stressed consumer), India (weather-impacted but growing, competitive beverage pressures for few quarters), Middle East (consumer feeling good), Eastern Europe (better than Western Europe), Mexico (linked to U.S., Hispanic cohort impacted by remittances), Brazil (strong, close to double-digit September).

International returning to mid-to-high single-digit growth post-SeptemberIndia growing despite weather impactsBrazil close to double-digit growth in SeptemberChina consumer stressed but company maintaining share

Answers to last quarter's watch list

PFNA organic volume — Did not turn positive; got worse. PFNA revenue was flat (vs. +1% in Q2) and aggregate organic volume deteriorated to -3.0% from -1.5%. Management framed part of this as a deliberate Foods strategy pivot to everyday low value across all brands, but the print still shows volume-negative, price-dependent growth two quarters into the year. Lay's and Tostitos relaunches are now in flight; Gatorade follows in Q1-Q2 2026. Status: Resolved negatively

LatAm Foods stabilization — Sharp recovery: -7% in Q2 to +2% in Q3, validating that the Q2 trough was geographic/transitory rather than structural. Management did not call this out explicitly but the print speaks for itself. Status: Resolved positively

Implied H2 EPS bridge — Q3 core cc-EPS came in at -2.0% YoY, an improvement from H1's -5% but still negative. FY cc-EPS guide of "approximately even" now requires Q4 cc-EPS to grow meaningfully — a step-up the operations have not delivered. The FX-driven USD EPS upgrade (-0.5% from -1.5%) is the only buffer if cc-EPS misses. Status: Continue monitoring

Away-from-home channel disclosure — Management characterized it as growing 2-3x the retail business but again declined to provide an absolute size or revenue contribution. Two quarters of asking, two quarters of directional answers only. Status: Resolved negatively

PBNA pricing/volume split — Beverages turned: PBNA revenue accelerated to +2% (from 0% in Q2) and management said beverage volume grew in Q3, with Pepsi growing volume, revenue, and share. This is the cleanest operational positive on the print. Status: Resolved positively

What to watch into next quarter

Q4 core cc-EPS print: with FY guide reaffirmed at ~flat and H1+Q3 running at ~-4% YTD, Q4 needs a positive cc-EPS quarter to land the FY. A second negative-cc-EPS Q4 would expose the guide as FX-dependent and force a 2026 reset.

PFNA volume trajectory: aggregate organic volume of -3% with PFNA flat is the operational soft spot. Watch whether the Lay's/Tostitos relaunch and "everyday low value" strategy produce sequential volume improvement in Q4 — if volume stays at -3% or worse, the 2026 algorithm-return narrative loses credibility before it starts.

PBNA gross margin recovery: management said Q3 margin compression was tariff-driven and Q4 recovers. The print will reveal whether tariffs were transitory or whether they leave a structural margin step-down into 2026.

2026 cost-structure savings quantification: management promised "significant H1 2026 carryover benefits" from Frito-Lay manufacturing closures, warehouse automation, and go-to-market right-sizing. Watch whether Q4 brings a dollar figure or savings run-rate — the absence of one would be telling given how prominently the cost-structure pivot was emphasized.

International growth rate post-weather: management said September returned to mid-to-high single-digit growth after weather-impacted summer. EMEA print Q4 should confirm whether 9% Q3 was an artificial low or whether the trajectory genuinely accelerates back to 8-10%.

Sources

PepsiCo Q3 2025 8-K / press release exhibit 99.1 — https://www.sec.gov/Archives/edgar/data/77476/000007747625000055/q320258-kxexhibit991.htm
PepsiCo Q3 2025 earnings call Q&A (analyst exchanges referenced above)
PepsiCo Q2 2025 tapebrief (prior-quarter trend baseline)

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