STZ · Q2 2026 Earnings

Bearish

Constellation Brands

Reported October 6, 2025

30-second summary

Net sales fell 15% reported (-8% organic; the gap is divestiture-driven) to $2.48B and management cut FY2026 comparable EPS to $11.30–$11.60 from $12.60–$12.90 — a ~10% midpoint reduction, with reported EPS cut ~18% to $9.86–$10.16. The bigger story is the beer business itself: the FY beer net sales guide flipped from 0% to +3% growth to a -2% to -4% decline, and beer operating income guidance was cut from 0% to +2% growth to a -7% to -9% decline. The "easier comps + new SKUs" defense of the FY plan that anchored last quarter has collapsed.

Headline numbers

EPS

Q2 FY2026

$3.63

Revenue

Q2 FY2026

$2.48B

-15.0% YoY

Gross margin

Q2 FY2026

52.8%

Free cash flow

Q2 FY2026

$1.08B

Operating margin

Q2 FY2026

35.2%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$2.48B	-15.0%	$2.52B	-1.4%
EPS	$3.63	—	$3.22	+12.7%
Gross margin	52.8%	—	50.4%	+240bps
Operating margin	35.2%	—	28.4%	+680bps
Free cash flow	$1.08B	—	$0.44B	+143.0%

Guidance

Constellation sharply cut full-year FY2026 comparable EPS guidance by ~10% and reported EPS by ~18%, with beer sales now expected to decline and enterprise organic growth turning negative, signaling material deterioration in demand environment since prior quarter.

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
Comparable EPS	FY 2026	$12.60 - $12.90	$11.30 - $11.60	-$1.30 to -$1.30 (midpoint down ~10.2%)	Lowered
Reported EPS	FY 2026	$12.07 - $12.37	$9.86 - $10.16	-$2.21 to -$2.21 (midpoint down ~18.1%)	Lowered
Operating Cash Flow	FY 2026	$2.7 - $2.8 billion	$2.5 - $2.6 billion	-$0.1 to -$0.2 billion (down 3.7-7.4%)	Lowered
Free Cash Flow	FY 2026	$1.5 - $1.6 billion	$1.3 - $1.4 billion	-$0.1 to -$0.3 billion (down 6.7-20.0%)	Lowered
Beer Net Sales Growth	FY 2026	0% to 3%	decline 2% - 4%	-2 to -7 percentage points (from +0% to -4% at midpoint)	Lowered
Beer Operating Income Growth	FY 2026	0% to 2%	decline 7% - 9%	-7 to -9 percentage points (from +0% to -8% at midpoint)	Lowered
Enterprise Organic Net Sales Growth	FY 2026	(2%) to 1%	decline 4% - 6%	-2 to -5 percentage points (from -0.5% to -5% at midpoint)	Lowered

Reaffirmed unchanged this quarter: Wine and Spirits Organic Net Sales Growth (decline 17% - 20%), Wine and Spirits Organic Operating Income Growth (decline 97% - 100%)

Segment performance

Q2 FY2026

Segment	Q2 FY2026	YoY
Beer	$2.345B	-7.0%
Wine and Spirits	$0.136B	-65.0%
Beer - Organic	$2.345B	-7.0%
Wine and Spirits - Organic	$0.136B	-19.0%

Platform metrics

Q2 FY2026

Segment	Q2 FY2026
Beer Shipments	117.4 million 24-pack case equivalents
Beer Depletions YoY	-2.7%
Beer Dollar Share Gains	#1 in U.S. beer category, outpacing category by ~2 percentage points
Modelo Especial Depletions	-4.1% YoY
Corona Extra Depletions	-7.1% YoY
Pacifico Depletions	+13.8% YoY

Profitability

Q2 FY2026

Segment	Q2 FY2026
Beer Operating Margin	40.6%
Wine and Spirits Operating Margin	-14.6%

Management tone

Narrative arc: Q1 "easier comps will carry us" → Q2 "defensive crouch, FY plan abandoned."

The "cyclical, not structural" defense has hardened — but the cost of holding that line is now visible in the numbers. Last quarter management framed Hispanic consumer occasion loss as durable-but-cyclical and defended the FY guide on math (easier comps) rather than recovery. This quarter, they cut the guide and reach for an even harder version of the same framing: "80% of surveyed Hispanic and non-Hispanic consumers continue to express concern about the socioeconomic environment we face, and 70% of those are specifically concerned about their personal finances." The thesis has migrated from "interest in beer is unchanged, occasions will return" to "the macro is broken and we are waiting for it to heal." That is a more honest framing, but it is also a concession that the Q1 plan did not survive contact with Q2 reality.

Capex flexibility — explicitly off the table last quarter — is now on it. The prior call's tone defended the Mexican capacity build. This quarter's call introduces "we are being very mindful in looking at ways that we could slow down or avoid CapEx, you know, if possible… we'll cover off on that later this year as we give guidance for FY27." Combined with the new "maintaining investment grade rating" language in the press release, the signal is that management is preparing to flex the balance sheet defense.

Margin guidance beyond FY26 has been explicitly deferred. Pressed on whether 39–40% beer operating margins are sustainable if volume stays weak, management said "we're not in a position where we want to give guidance beyond FY26 at this point. We want to see how the macroeconomic and socioeconomic conditions play out." Three months ago the operating model was defended as durable; today the operating model is conditional on a consumer recovery that management cannot date.

Marketing spend posture is the one place management is leaning in. "We have no intention whatsoever to [pull back on marketing spend]. In fact, in many respects, we're spending more than we ever have." Counter-cyclical brand investment is consistent with the "we're share-gaining through the trough" thesis, but it is also what loads the operating income cut: -7% to -9% beer op income on -2% to -4% net sales tells you margin is being deliberately spent down to defend share.

Price pack architecture has been repositioned from offensive to defensive. Last quarter's Modelo Oro pricing adjustment was framed as an offensive move into high-end light beer. This quarter the framing shifted: "having the opportunity for the consumer who is financially constrained to find one of our iconic brands and at a price point which they can afford at the current time, is an important part of why price pack architecture is one of our key focuses." Same lever, very different story — affordability response, not premiumization.

Recurring themes management leaned on this quarter:

Cyclical macro/consumer pullback versus structural beer category declineHispanic consumer sentiment suppression due to immigration enforcement activity (ICE) and economic anxietyShare gain resilience despite volume headwinds (49 of 50 states; number one share gainer)Marketing investment maintenance during downturn (MLB, NFL, college football, digital positioning)Cost savings momentum ($500M+ cumulative; $100M+ YTD through sourcing, logistics, supplier optimization)Wine & spirits turnaround narrative (beating market 6 straight months; brand-specific wins)

Risks management surfaced:

Sustained macro consumer spending constraint and economic anxiety affecting purchasing powerHispanic consumer sentiment suppression from immigration enforcement activity (ICE)Tariff headwinds ($70M beer, $20M wine expected for FY26)California construction slowdown impacting demand (4,000-calorie jobs not materializing)Potential structural category headwinds (GLP-1, cannabis substitution, generational lower consumption) though management downplays severityOperating deleverage risk if volumes remain in low single-digit growth

Answers to last quarter's watch list

Beer depletion trajectory. Resolved negatively. Q2 depletions -2.7% vs. Q1 -2.6% — the easier-comp inflection did not arrive. Management formally cut FY beer net sales from +0% to +3% to -2% to -4%. Status: Resolved negatively

Beer operating margin under the new tariff assumption. Resolved positively on the metric, but the goalposts moved. Q2 beer operating margin printed 40.6%, comfortably above the 38.5% break-point flagged last quarter and above Q1's 39.1%. However, the FY beer operating income guide was still cut -7% to -9% — margin is holding but volume deleverage and reinvestment are dragging the dollar number anyway. Status: Resolved positively

Modelo Oro pricing and high-end light beer share. Partially addressed. Management confirmed Oro has been repositioned to a lower price point and described early Oro results as "quite positive" both in consumer takeaway and in features/displays, but did not quantify Nielsen/Circana share movement in the high-end light segment. STZ remains the #1 dollar share gainer in U.S. beer overall. Status: Continue monitoring

Wine & Spirits floor. Resolved positively in the technical sense — Q2 organic -19% sits inside the reaffirmed FY -17% to -20% range, and management held that range. But "held" here means reaffirming a near-100% operating income decline, so the floor is intact at a very low level. Status: Resolved positively

Buyback pace. The press release does not break out Q2 repurchase pace. YTD FCF of $1.08B against a cut FY range of $1.3–$1.4B implies a sharply back-loaded second half and limited cash flexibility for buybacks if the FY cut proves to be the floor rather than the new baseline. The guide cut itself confirms the worry that prompted this watch item. Status: Resolved negatively

What to watch into next quarter

Whether the cut $11.30–$11.60 FY comparable EPS guide holds for the back half. With Q1 comparable EPS of $3.22 and Q2 of $3.63 (H1 = $6.85), the H2 implied range is $4.45–$4.75. If Q3 depletions stay near -2.7%, hitting that requires margin expansion the company has just deferred guidance on.

Beer depletions inflecting toward zero. Q1 -2.6%, Q2 -2.7%. The new -2% to -4% FY beer net sales guide requires the back half to look like the front half. A Q3 print below -3% would mean the new guide is already at risk.

Capex decision for FY27. Management opened the door to slowing or avoiding Mexico capacity adds. An explicit pause announcement would confirm a multi-year demand reset; a reaffirmation would signal management still views this as cyclical.

Reported-vs-comparable EPS gap. The reported EPS cut (-18%) ran ~2x the comparable cut (-10%). Watch the Q3 10-Q for the specific impairment / restructuring charges driving the divergence — quietly increasing "one-time" items is how durable margin pressure gets reclassified.

Buyback pace against the cut $1.3–$1.4B FCF guide. Q1 ran $306M of repurchases. If Q3 disclosures show pace below ~$200M, management is reserving cash — either for further guide risk or for the investment-grade defense the press release just newly emphasized.

Pacifico's contribution math. Pacifico +13.8% is the only positive depletion line in the portfolio. If its growth decelerates while Modelo (-4.1%) and Corona (-7.1%) continue to fall, there is no offset left in the brand mix.

Sources

Constellation Brands Q2 FY2026 earnings press release (SEC 8-K exhibit, filed October 6, 2025): https://www.sec.gov/Archives/edgar/data/16918/000001691825000140/stzex991_83120258kearnings.htm
Constellation Brands Q1 FY2026 earnings press release (prior-quarter guidance baseline): https://www.sec.gov/Archives/edgar/data/16918/000001691825000074/stzex991_53120258kearnings.htm

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