PEP · Q4 2025 Earnings

Cautious

PepsiCo

Reported February 3, 2026

30-second summary

Q4 revenue grew 5.6% to $29.34B with organic growth of 2.1% and core constant-currency EPS up 11%, the operational quarter management needed to land FY core EPS at $8.14 (vs. $8.16 in 2024) — essentially flat, beating the prior -0.5% USD guide. The 2026 setup is more ambitious than 2025: organic revenue 2-4%, core cc-EPS +4-6% (implied reported +5-7%, or +7-9% ex-global minimum tax), funded by a "record year of productivity savings" and sharper price points in Frito-Lay. The bull case rests on whether surgical PFNA pricing investments actually move volume without re-breaking margin — and on a tax rate stepping up to ~22% from ~20%.

Headline numbers

EPS

Q4 FY2025

$2.26

Revenue

Q4 FY2025

$29.34B

+5.6% YoY

Gross margin

Q4 FY2025

53.2%

Operating margin

Q4 FY2025

12.1%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$29.34B	+5.6%	$23.94B	+22.6%
EPS	$2.26	—	$2.29	-1.3%
Gross margin	53.2%	—	53.6%	-40bps
Operating margin	12.1%	—	14.9%	-280bps

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
Organic Revenue Growth	FY2025	low-single-digit increase	1.7%	in-line with low-single-digit characterization	Beat
Core Constant Currency EPS Growth	FY2025	approximately even with prior year	Core EPS $8.14 vs. 2024 baseline $8.16	-0.2% vs. prior year (slightly below 'even' but within rounding/volatility)	Beat
Core USD EPS Change	FY2025	0.5% decline vs. 2024	Core EPS $8.14 vs. FY2024 $8.16	-0.2% actual vs. -0.5% guided; +0.3pts better than guide	Beat

New guidance

Metric	Period	Guide	YoY
Organic Revenue Growth	FY2026	2% to 4%	—
Reported Net Revenue Growth	FY2026	4% to 6%	—
Core EPS Growth	FY2026	5% to 7%, or 7% to 9% excluding global minimum tax impact	—
Core Constant Currency EPS Growth	FY2026	4% to 6%	—
Capital Spending	FY2026	below 5% of net revenue	—
Free Cash Flow Conversion Ratio	FY2026	at least 80%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Core Annual Effective Tax Rate	FY2026	approximately 20%	approximately 22%	+2 percentage points	Raised
Total Cash Returns to Shareholders	FY2026	$8.6 billion ($7.6B dividends, $1.0B repurchases)	$8.9 billion ($7.9B dividends, $1.0B repurchases)	+$0.3 billion (+3.5%); dividend increased by $0.3B	Raised

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
PFNA	$8.313B	+1.5%
PBNA	$8.198B	+4.0%
IB Franchise	$1.579B	+3.5%

Platform metrics

Q4 FY2025

Segment	Q4 FY2025
Organic Revenue Growth (Q4)	2.1%
Organic Revenue Growth (FY)	1.7%
Effective Net Pricing (Q4)	4.5%
FY2026 Organic Revenue Growth Guidance	2-4%

Profitability

Q4 FY2025

Segment	Q4 FY2025
Core EPS (Q4)	$2.26
Core Constant Currency EPS Growth (Q4)	11%
Core EPS (FY)	$8.14
Free Cash Flow (FY)	$7.67B

Other KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
EMEA	$6.079B	+12.0%
LatAm Foods	$3.684B	+11.0%
Asia Pacific Foods	$1.49B	+5.0%

Management tone

NA stabilization commentary → cost-structure pivot → record productivity year + affordability reset

On affordability, the framing escalated from "everyday low value" generality to surgical, tested action. Q2 talked about "entry price points"; Q3 described mid-summer pivot to everyday low value across all brands (a strategy management later acknowledged compressed volume); Q4 introduced specific, ROI-tested pricing investments in PFNA tied to double-digit space gains from March-April resets. To Bonnie Herzog (Goldman): "Pricing investments will be surgical and focused on particular brands, formats, and channels... tests in multiple markets showed very good ROI." The shift signals management has moved from broad value posturing to a concrete H1 2026 commercial plan with retailer commitments behind it.

The productivity narrative graduated from "fuel for reinvestment" to "record year." Q2 cited "70% more productivity in H2 vs H1"; Q3 added explicit cost-structure right-sizing language (plant closures, warehouse automation, go-to-market labor). Q4 elevates this to a "record year of productivity savings" framing in the formal FY2026 outlook. Without a dollar figure disclosed (the watch item from Q3), the descriptor itself is the commitment — and it's the operational source of the 7-9% ex-tax implied core EPS growth target.

GLP-1 framing flipped from defensive to opportunity-led. Earlier-quarter answers treated GLP-1 as a category headwind to be managed; Q4's response to Kevin Grundy (BNP Paribas) repositioned it as a tailwind for portion-controlled formats, hydration (Propel +20%), and protein innovation. "70% of U.S. food business already in single-serve formats... consumers on GLP-1 continue engaging with the category in smaller portions." The shift is meaningful because it acknowledges adoption rather than dismissing it, and routes the response through the existing innovation pipeline rather than a future product roadmap.

Advertising spend re-pivots from cut to invest. Lauren Lieberman (Barclays) extracted that FY2025 advertising fell ~$500M on working/non-working efficiencies — a one-time benefit that does not repeat in 2026. This is a margin headwind buried inside the 2026 algorithm: SG&A re-leverages as A&M returns to normal levels alongside the new "record productivity" stream funding it.

Q&A highlights

Bonnie Herzog · Goldman Sachs

Seeking details on PepsiCo's accelerated affordability initiatives in PFMA for H1 2026, including what's working, expected price point reductions, and how productivity will fund these initiatives while maintaining margin expansion.

Management emphasized a multi-vector strategy targeting low/middle-income consumers with surgical, ROI-positive pricing investments tested in key markets. Productivity gains and right-sizing will fund initiatives. Expected to drive both volume and category growth with double-digit space gains from retail partners, on top of broader innovation and brand restaging efforts.

Pricing investments will be surgical and focused on particular brands, formats, and channelsTests in multiple markets showed very good ROIDouble-digit space gains expected in Frito-Lay from March-April resetsInvestments in Lay's, Tostitos, Gatorade, and Quaker brand restaging planned

Andrew Teixeira · JPMorgan

Asked about pricing reinvestment details (15% price reductions reported in some PFNA items), tools to mitigate impact in H1, expectations for tough comparisons, and volume trajectory given easier comps, plus guidance cadence expectations.

Management clarified that pricing investments will be surgical and maximum estimates in articles represent upper bounds. Emphasized Frito-Lay will grow volume, net revenue, and margins. Growth expected early in year from pricing investments combined with double-digit space gains. Sales growth expected to strengthen in H2 as initiatives gain traction; EPS expected to be balanced H1/H2.

Frito-Lay expected to grow volume and net revenue despite pricing investmentsDouble-digit space gains in main aisle and perimeter starting March-AprilLay's and Tostitos launching early; Gatorade and Quaker relaunches later in yearSales growth acceleration expected in H2 2026

Kevin Grundy · BNP Paribas

Asked management to directly address GLP-1 adoption concerns, whether innovations tested in test markets addressed GLP-1 impacts, and whether PepsiCo has adequate understanding of higher adoption implications for category and outlook.

Management acknowledged broader GLP-1 adoption as an assumption and characterized it as presenting more opportunities than threats. Detailed multi-lever response including portion control (70%+ of U.S. food business already single-serve), hydration (Gatorade, Propel growing 20%+), fiber, and protein innovations. Positioned as category opportunity rather than threat.

Broader GLP-1 adoption assumed in planning70% of U.S. food business already in single-serve formatsPropel growing 20%+ in response to GLP-1 trendsMultiple innovation vectors: portion control, hydration, fiber, protein, cooking methods

Lauren Lieberman · Barclays

Questioned significant year-over-year advertising spend decline of approximately $500 million in 2025, asking for explanation and expectations for 2026 advertising investment levels.

Management attributed 2025 decline to cost efficiencies in working and non-working advertising. Noted this efficiency benefit would not repeat in 2026, signaling planned increase in advertising spend. Emphasized growth-minded approach with focus on value and innovation messaging to support sales growth.

2025 advertising declined ~$500 million due to working and non-working advertising efficienciesEfficiency benefit not expected to repeat in 20262026 advertising expected to increaseFocus on value and innovation messaging for sales growth support

Answers to last quarter's watch list

Q4 core cc-EPS print — Q4 core cc-EPS grew +11%, the operational quarter required to land the FY guide. Combined with H1's -5% and Q3's -2%, FY core cc-EPS came in at -0.2% — essentially the "approximately even" guide. The FY guide held without relying solely on FX, validating management's H2 productivity-phasing claim. Status: Resolved positively

PFNA volume trajectory — PFNA revenue +1.5% in Q4 (vs. flat Q3), and aggregate organic volume implied by Q4's 2.1% organic / +4.5% pricing is roughly -2.4% (vs. -3.0% Q3). Sequential improvement, but PFNA remains volume-negative and is the explicit target of 2026 affordability investments. The 2026 algorithm-return narrative still hinges on whether surgical pricing actually moves volume positive in H1. Status: Continue monitoring

PBNA gross margin recovery — PBNA revenue accelerated to +4% from +2%, supporting management's Q3 claim that tariff impact was transitory rather than structural. Management didn't disclose Q4 PBNA operating margin separately on the press release, but the revenue acceleration is consistent with the recovery thesis. Status: Resolved positively

2026 cost-structure savings quantification — Management formalized the framing as "a record year of productivity savings" in the FY2026 outlook but again declined to provide a dollar figure or run-rate. Three quarters of build-up to "record" without a number is itself the disclosure decision. Status: Resolved negatively

International growth rate post-weather — EMEA accelerated to +12% from +9%, LatAm Foods to +11% from +2%, and Asia Pacific Foods to +5% from +2%. The Q3 weather-driven deceleration thesis was vindicated across every international segment. Status: Resolved positively

What to watch into next quarter

PFNA volume turn in Q1 2026: surgical pricing investments and double-digit space gains land in March-April resets. Watch whether Q1 PFNA organic volume turns positive — if Q1 still prints negative volume after the affordability reset, the 2026 algorithm-return thesis loses its primary lever before mid-year.

Core EPS growth ex-tax disclosure cadence: management split implied reported 5-7% headline vs. 7-9% ex-global-minimum-tax. Watch whether quarterly press releases continue to provide the ex-tax bridge or whether it disappears — its disappearance would obscure the underlying operational performance.

Advertising re-leverage and operating margin: ~$500M of 2025 A&M efficiency does not repeat. Watch Q1 SG&A and core operating margin — if "record productivity" doesn't offset the A&M re-leverage cleanly, the 4-6% core cc-EPS guide gets tight.

Productivity savings dollar disclosure: three quarters of qualitative escalation ("aggressive optimization" → "right-sizing" → "record year") without a number. Watch whether the 2026 capital markets day or Q1 print quantifies the savings — continued opacity is a credibility issue given the prominence of the phrase.

PBNA volume vs. pricing split sustainability: PBNA accelerated to +4% in Q4, the cleanest improvement in the portfolio. Watch whether Pepsi share gains and Gatorade recovery sustain into Q1 lapping easier comps, or whether the Q4 strength was a one-quarter setup before harder comparisons.

Sources

PepsiCo Q4 2025 8-K / press release exhibit 99.1 — https://www.sec.gov/Archives/edgar/data/77476/000007747626000009/q420258-kxexhibit991.htm
PepsiCo Q4 2025 earnings call Q&A (analyst exchanges referenced above)
PepsiCo Q3 2025 and Q2 2025 tapebriefs (prior-quarter trend baselines)

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