PG · Q1 2026 Earnings

Cautious

Procter & Gamble

Reported October 24, 2025

30-second summary

30-second take: P&G delivered Q1 core EPS of $1.99 on revenue of $22.4B (+3% YoY) with organic sales up just 2% — volume neutral, all price/mix — and FCF productivity of 102%. The real news is in the guide: the tariff headwind was halved from ~$800M to ~$400M after-tax and the commodity headwind cut from ~$200M to ~$100M, yet management held FY26 core EPS at $6.83–$7.09 and explicitly warned Q2 will be "the softest growth quarter for the year." The cost relief is being reinvested into innovation and demand creation rather than dropped to the bottom line, and the organic sales floor was quietly trimmed from "flat" to "in-line."

Headline numbers

EPS

Q1 FY2026

$1.99

Revenue

Q1 FY2026

$22.40B

+3.0% YoY

Gross margin

Q1 FY2026

51.4%

Free cash flow

Q1 FY2026

$4.20B

Operating margin

Q1 FY2026

26.2%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$22.40B	+3.0%	$20.89B	+7.2%
EPS	$1.99	—	$1.48	+34.5%
Gross margin	51.4%	—	49.1%	+230bps
Operating margin	26.2%	—	20.8%	+540bps
Free cash flow	$4.20B	—	—	—

Guidance

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

New guidance

Metric	Period	Guide	YoY
Interest expense and tax rate headwind	FY 2026	$250 million after-tax	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Organic sales growth	FY 2026	flat to up 4%	in-line to up 4%	Floor raised from flat (0%) to in-line (implied ~0-1%); functionally narrowed at low end	Lowered
Commodity cost headwind	FY 2026	~$200 million after-tax	$100 million after-tax	-$100 million after-tax (headwind reduced by 50%)	Lowered
Tariff cost headwind	FY 2026	~$1 billion before-tax (~$800 million after-tax)	$400 million after-tax	-$400 million after-tax (after-tax headwind cut by 50%)	Lowered
Organic sales growth headwind from discontinuations	FY 2026	30 to 50 basis points	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: All-in sales growth (1% to 5%), Diluted EPS growth (GAAP) (3% to 9%), Core effective tax rate (20% to 21%), Capital spending (4% to 5% of net sales), Adjusted free cash flow productivity (85% to 90%), Dividend payments (around $10 billion), Share repurchases (approximately $5 billion), Foreign exchange tailwind ($300 million after-tax)

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Beauty	$4.143B	+6.0%
Grooming	$1.817B	+5.0%
Health Care	$3.22B	+2.0%
Fabric & Home Care	$7.793B	+1.0%
Baby, Feminine & Family Care	$5.171B	+1.0%
Beauty Organic Sales Growth	6%	—
Grooming Organic Sales Growth	3%	—

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Organic Sales Growth	2%
Pricing Impact	+1%
Volume Impact	0% (neutral)

Profitability

Q1 FY2026

Segment	Q1 FY2026
Core Gross Margin	51.5%
Core Operating Margin	26.7%
Adjusted Free Cash Flow Productivity	102%

Management tone

Narrative arc: Q4 — "we need a bigger step forward" → Q1 — "the teams are on it."

The defensive posture from Q4 has not lifted, but the framing has shifted from acknowledging a problem to executing against it. Last quarter management conceded that incremental execution had stopped widening P&G's advantage; this quarter the language is "there are times when bigger steps are needed to bolster growth and value creation. The teams are on it." The phrasing is more confident, but the underlying admission — that 40 consecutive quarters of organic growth are not enough — has not been retracted.

The most consequential tone shift is on earnings cadence. In Q4 management framed FY26 as broadly back-half weighted; this quarter the language sharpened: "While we delivered strong EPS growth in quarter one, we expect modest earnings growth over the balance of the year as investments in innovation and competitiveness increase, particularly in the U.S. and in Europe." Translated: Q1 EPS strength will not extrapolate, and the freed-up tariff/commodity dollars are being spent, not banked. Investors reading the $400M tariff relief as a setup for an EPS raise are reading it wrong — management told them so.

Portfolio language continued to escalate. Q4 introduced the two-year restructuring; this quarter management added "surgical exits of some categories, brands, and product forms in individual markets," citing Pakistan and SEMCARE specifically. The withdrawal of the 30–50 bps organic sales headwind from discontinuations suggests either the discontinuation list is still being finalized or its drag is being absorbed inside the broader "in-line to +4%" range — management did not clarify which.

Competitive intensity in North America was acknowledged more directly than in Q4. On the call: heightened promotional activity in baby care, fabric care, and oral care; Europe seeing "competitive reactivation." Response is integrated superiority via innovation (Tide Liquid called the biggest upgrade in 20 years, Tide Evo, Luvs Platinum, Baby Dry mid-tier) rather than promotion. The strategy is consistent with prior quarters; the candor about the pressure is new.

China continued to brighten — SK-II +12%, fabric care +5%, baby care +20%, second consecutive quarter of improvement — which management positioned as evidence that structural interventions (distributor incentive overhaul, premium innovation, retailer collaboration) are durable rather than cyclical.

Recurring themes management leaned on this quarter:

Integrated superiority strategy execution across innovation, supply chain, and marketingDefensive margin expansion through aggressive productivity and restructuringPortfolio rationalization with 'surgical exits' to improve profitability and focusTariff and commodity cost headwinds requiring offsetting pricing and efficiency actionsInnovation investment to defend core franchises and drive competitive differentiationWorkforce reduction and organizational agility to enable faster decision-making

Risks management surfaced:

Heightened competitive activity in the US and EuropeGeopolitical disruptions not anticipated in guidance rangesSignificant additional currency weakness beyond current assumptionsCommodity or other cost increases beyond forecastMajor supply chain disruptions or store closures

Q&A highlights

Dara Messinian · Morgan Stanley

How is the June restructuring announcement being received internally, and what does the reorg do for P&G's competitiveness in a challenging CPG environment?

Management confirmed restructuring is on track across portfolio, supply chain, and manufacturing headcount (up to 7,000 roles). New org design creates smaller, digitally-enabled brand teams focused on consumers. Supply chain 3.0 with automation and digital tools is underway. Short-term cost savings will fuel 12-18 month innovation investment.

Up to 7,000 manufacturing headcount reductionPortfolio changes in Pakistan and SEMCARE announcedInvestment cycle planned for next 12-18 monthsNew org designs customized by category but consistent in objective

Peter Galbo · Bank of America

What competitive dynamics are management seeing in North America fabric care and baby care categories?

Management acknowledged heightened competitive environment with increased promotional activity in both categories. Response is integrated superiority through innovation, retailer support, and meaningful claims rather than pure promotion. Specific successes noted: baby care innovations (swatters, cruisers 360, Love Platinum value tier, Baby Dry mid-tier launch); fabric care Tide Liquid (biggest 20-year upgrade) and Tide Evo (new form).

Tide Liquid described as biggest upgrade in 20 yearsLove Platinum innovation driving share growth in pressured value tierBaby Dry mid-tier launch coming fall and springTide Evo adding new form to category

Lauren Lieberman · Barclays

Global market share down 30 bps with only 24 of 50 category-country combinations holding or gaining share—what are the hotspots and drivers?

Management contextualized global share decline as improvement trend (past month flat at -0.1 bps). Highlighted US absolute share improving sequentially (33.6% → 34.9% over time periods). Identified hotspots: US (promotional intensity in baby care, fabric care, oral care), Europe (competitive reactivation), China (strong progress with SK2 +12%, fabric care +5%, baby care +20%), Latin America (7% growth).

Global share past month -0.1 bps (flat)US absolute share increased from 33.6% to 34.9% sequentiallyChina SK2 up 12%, fabric care +5%, baby care +20%Latin America growth 7% quarter

Steve Powers · Deutsche Bank

Elaborate on China's 5% Greater China growth: what has evolved on the ground, entry vs. exit trends, and sustainability?

Management attributed growth to fundamental business model changes: go-to-market transformation (distributor incentive system), consistently strong local-insight-driven innovation, and enhanced consumer communication/retailer collaboration. Emphasized two consecutive positive inflection points but cautioned volatility remains. Examples: SK2 (brand discipline, premium launch, +12%), fabric care streamlined (+5%), hair care innovation, Olay mass skin care growing.

Go-to-market model completely changed including distributor incentive systemSK2 +12%, travel retail turned positiveBaby care +20% driven by superior consumer insightsSkin and personal care in aggregate +8%

Rob Odenstein · Evercore

Has affordability become a bigger driver of consumer choice? How does P&G address affordability beyond innovation?

Management reframed issue as 'value' (price over integrated performance), not affordability. Emphasized consumers continue trading up where value equation is attractive; private label declining. Approach includes price-tiered ladders, channel optimization (mass, club, online), and innovation across all value tiers. Stated consumers seek both premium offerings and low promoted prices for paycheck-to-paycheck needs.

Private label share down 50 bps, below 16% historical threshold for first timePrice mix positive in US; mix positivePremium channel growth outpacing value in some categoriesStrong price ladders developed across different pack sizes

Answers to last quarter's watch list

Whether Q1 FY26 core EPS confirms management's stated back-half weighting — Q1 core EPS of $1.99 came in stronger than the back-half-weighted framing implied, and management responded by reinforcing rather than relaxing the cadence guide: "we expect modest earnings growth over the balance of the year." Q2 is now flagged as the softest growth quarter for the year.

Continue monitoring

Whether US/Europe category growth stays at ~1.5% or stabilizes — Management did not re-quantify US/Europe category growth on the print but described the competitive environment as "heightened" with promotional intensity rising. The +1% net sales growth in Fabric & Home Care and Baby/Feminine/Family Care is consistent with category growth remaining at the lower end of the prior 1.5% range rather than stabilizing higher.

Resolved negatively

Tariff exposure updates — Tariff headwind cut in half from ~$800M to ~$400M after-tax, and commodity headwind halved from ~$200M to ~$100M. This is the cleanest positive of the quarter, removing roughly $500M after-tax of pressure from the FY26 setup.

Resolved positively

Beauty segment inflection — Beauty organic sales accelerated to +6% from +1% in Q4, driven by SK-II +12% and aggregate skin/personal care +8%. The clearest single-segment improvement in the brief; Olay and SK-II both contributing.

Resolved positively

Restructuring disclosure cadence — Management confirmed up to 7,000 non-manufacturing role reductions (~15% of non-manufacturing workforce) over FY26 and FY27, with specific portfolio exits cited (Pakistan, SEMCARE) and Supply Chain 3.0 automation underway. The 30–50 bps organic sales discontinuation headwind was withdrawn from guidance without a replacement figure, leaving some ambiguity on the discontinuation list scope.

Continue monitoring

What to watch into next quarter

Q2 organic sales growth and core EPS — management explicitly flagged Q2 as the softest growth quarter; a Q2 organic print at or below +1% would validate the "in-line" floor of the trimmed FY26 range and pressure the midpoint. A Q2 core EPS down YoY would confirm the reinvestment thesis is real and second-half-loaded.

Whether Beauty +6% organic sustains — SK-II +12% laps progressively tougher comps through FY26. Watch whether Beauty stays above +4% organic or reverts; structural inflection requires at least two more quarters of mid-single-digit organic.

Fabric & Home Care response to Tide Liquid and Tide Evo — both are described as the biggest innovation cycle in 20 years; if F&HC organic does not move from +1% toward +3% by Q3, the innovation-over-promotion thesis weakens materially.

Discontinuation drag re-quantification — management withdrew the 30–50 bps organic sales headwind from FY26 guidance without replacement; watch for a refreshed figure on the Q2 call, which would clarify the scope of "surgical exits" being executed.

Investment intensity disclosure — management said incremental innovation and demand creation spend will be heaviest in Q2 in the US and Europe. Watch for explicit dollar quantification of the reinvestment of the ~$500M after-tax tariff/commodity relief.

Sources

P&G FY26 Q1 8-K Exhibit 99.1 — earnings press release (SEC): https://www.sec.gov/Archives/edgar/data/80424/000008042425000240/fy2526q1jas8-kexhibit991.htm
P&G Q1 FY26 earnings call — prepared remarks and Q&A

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