SYY · Q1 2026 Earnings

Bullish

Sysco

Reported October 28, 2025

30-second summary

Sysco's Q1 FY2026 delivered the inflection it telegraphed last quarter: U.S. local case volume went from -1.4% in Q4 to -0.2% in Q1 (a 120bps sequential improvement at the USFS level), with September the strongest month, and adjusted EPS of $1.15 came in well above the implied ~$0.99–$1.03 quarterly run-rate embedded in the FY26 +1–3% growth guide. FY26 revenue ($84–85B) and EPS ($4.50–$4.60) reaffirmed; tax rate floor crept up 100bps (22.5%→23.5%), but D&A nudged down $20M. Q2 EPS guide of +4–6% growth (midpoint ~$0.98) keeps the operational momentum visible on the next print.

Headline numbers

EPS

Q1 FY2026

$1.15

Revenue

Q1 FY2026

$21.15B

+3.2% YoY

Gross margin

Q1 FY2026

18.4%

Free cash flow

Q1 FY2026

$-0.05B

Operating margin

Q1 FY2026

3.8%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$21.15B	+3.2%	$21.14B	+0.0%
EPS	$1.15	—	$1.48	-22.3%
Gross margin	18.4%	—	18.9%	-45bps
Operating margin	3.8%	—	4.2%	-42bps
Free cash flow	$-0.05B	—	—	—

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	Q1 FY2026	Expected to grow consistent with annual growth rate of 1% to 3%	1.15	Materially above prior guidance (which implied ~$0.99-1.03 based on FY growth midpoint applied to Q1)	Beat
Revenue	Q1 FY2026	3% to 5% growth; approximately $84B to $85B full-year (implies ~$20.9B-21.1B quarterly)	21.148	In-line; 3.2% YoY growth within the 3-5% guided range	Met

New guidance

Metric	Period	Guide	YoY
Other expense	FY2026	approximately $65 million	—
Dividend growth	FY2026	6% year-over-year increase on a per share basis	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Expected tax rate	FY2026	22.5% to 24%	approximately 23.5% to 24%	+100 bps (low end raised from 22.5% to 23.5%)	Lowered
Adjusted depreciation and amortization	FY2026	approximately $870 million	approximately $850 million	-$20 million (-2.3%)	Lowered

Reaffirmed unchanged this quarter: Adjusted EPS ($4.50 to $4.60), Sales growth rate (3% to 5%), Revenue ($84 billion to $85 billion), Adjusted EPS growth rate (reported) (1% to 3%), Adjusted EPS growth rate (excluding incentive comp headwind) (approximately 5% to 7%), Net leverage ratio target (2.5 to 2.75 times)

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
U.S. Foodservice Operations	$14.78B	+2.9%
International Foodservice Operations	$3.966B	+4.5%
SYGMA	$2.129B	+4.1%

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
U.S. Foodservice Volume Growth	0.1%
U.S. Foodservice Local Volume Growth	-0.2%
Product Cost Inflation	3.4%
Sysco Brand Sales as % of Cases - U.S. Broadline	35.6%
Sysco Brand Sales as % of Cases - Local	46.1%

Profitability

Q1 FY2026

Segment	Q1 FY2026
Adjusted Operating Margin	4.3%
Adjusted EBITDA	$1.1 billion
Net Debt to Adjusted EBITDA	2.9x

Management tone

Q3 hire-stabilization story → Q4 "July considerably better" hand-wave → Q1 measured inflection with September as proof point.

Three quarters ago, management was defending FY25's local volume drag as a "workforce stabilization" problem. Last quarter, the framing pivoted to "July is considerably better" — directional but unprintable. This quarter the inflection actually showed up in the numbers, and the rhetoric followed: "Most importantly, we have inflected positive in our US Broadline local business, and we are building momentum in our local business across the board. Our local volumes improved sequentially every month of the period." The shift from forward-looking promises to stated accomplished fact is the single most important tonal change in this print, and it materially raises the credibility of the Q2 guide of "at least 100bps sequential improvement."

Last quarter AI360 and Perks 2.0 were framed as initiatives baked into guidance that needed to work. This quarter they are described as production tools with measurable correlation: "Approximately 90% of our SEs are actively using the tool on a daily, weekly basis" with "strong correlation between high colleague engagement with the tool and improved volume and selling performance." Management has moved from "we are excited about this capability" to attributing customer onboarding gains to it — a shift from experiment to operating system.

The macro framing inverted. In Q4, guidance "assumes industry foot traffic and macroenvironment similar to current conditions" — a soft acknowledgement the macro was not helping. This quarter Kevin went further, framing the improvement as driven by Sysco-specific initiatives within management's control rather than any external tailwind. Kenny reinforced that the majority of the 100bps Q2 step-up is within Sysco's control. This is explicit de-risking via internal attribution — bullish-sounding but defensive in structure. It also means there is no hidden macro upside being held in reserve.

Supply chain moved from a cost-management topic to a celebrated profit lever: "this is the strongest quarter our supply chain has delivered from a service and cost perspective." Prior calls treated supply chain as an operational stabilizer; this one positions it as a competitive differentiator and contributor to the operating margin step-up.

Recurring themes management leaned on this quarter:

Workforce retention and productivity inflection driving volume growth outpacing industryAI360 and Perks 2.0 tools enabling measurable sales conversion and account retentionLocal business positive inflection with 2x industry improvement rateSupply chain productivity gains and cost per piece compressionInternational segment delivering double-digit profit growth for 8 consecutive quartersShare gain strategy focused on specialty segment expansion and non-commercial resilience

Risks management surfaced:

Large national chain restaurants continuing to underperform with traffic down year-over-yearQSR segment weakness persisting despite independent restaurant strengthMacro environment remains 'less than compelling' requiring internal initiatives to drive growthNew sales hires still climbing productivity curve (12-18 month ramp) constraining full leverageIncentive compensation lapping headwind of ~$100M ($0.16 per share) in FY26

Answers to last quarter's watch list

U.S. local case volume inflection. Q1 printed -0.2%, a 120bps sequential improvement at the USFS total local level from Q4's -1.4% (Broadline-only improved 130bps to +0.4%), with each month of the quarter sequentially better and September the strongest. Q2 guide is for at least another 100bps of sequential improvement — putting local meaningfully positive by year-end if executed.

Resolved positively

Gap between new customer wins and customer losses. Management stated this quarter delivered "the highest increase of new customer onboarding," with the new/lost spread improving more than 220bps YoY and 40bps vs Q4.

Resolved positively

Gross margin sustainability. Q1 GM of 18.45% expanded 13bps YoY — sourcing held against 3.4% product cost inflation. No evidence price agility caused margin slippage.

Resolved positively

Net leverage progression. Held at 2.9x — no progress yet toward the 2.5–2.75x target. Capital return pace (~$1B dividends + ~$1B buybacks) reaffirmed, so deleveraging is a Q3/Q4 story dependent on EBITDA build.

Continue monitoring

International local case growth. International segment revenue +4.5% with local case volume up ~5% and eight consecutive quarters of double-digit profit growth. Supports the "continues and accelerates" thesis.

Resolved positively

Guest Worldwide. The company didn't disclose any update on Guest Worldwide on this print following the Q4 $92M goodwill impairment.

Continue monitoring

What to watch into next quarter

Whether U.S. local case volume crosses positive in Q2 FY2026. Management guided "at least 100bps sequential improvement" from Q1's -0.2%, which puts the implied Q2 USFS local print at roughly +0.8% or better. A positive print fully validates the inflection thesis; flat or negative reopens the FY26 risk window.

Q2 adjusted EPS vs the +4–6% growth guide (midpoint ~$0.98). Management explicitly tied the midpoint to consensus, so any miss here would be read as a sharp credibility setback after Q1's beat.

Gross margin holding the YoY expansion line through Q2. Product cost inflation at 3.4% remains above the 2% FY assumption; watch whether sourcing offset compresses as price agility rolls out further.

Tax rate creep. The low end of the FY tax range moved from 22.5% to 23.5%. If the midpoint drifts higher again next quarter, the path to the $4.55 EPS midpoint narrows.

Net leverage trajectory. Still at 2.9x against a 2.5–2.75x year-end target. A flat reading in Q2 would imply the entire deleveraging burden falls on H2 EBITDA — a high bar without curtailing the $2B capital return.

National sales back-half ramp. Management flagged signed wins with start-ship dates in H2. Watch for confirmation in Q2 that national volume actually accelerates as guided, since the FY plan has national and local growing in parity.

Sources

Sysco Q1 FY2026 press release, filed October 28, 2025: https://www.sec.gov/Archives/edgar/data/96021/000009602125000154/syy2026q1pressrelease.htm
Sysco Q1 FY2026 earnings call (prepared remarks).

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