PepsiCo Q3 2026 Earnings Call: Complete Transcript

PepsiCo (NASDAQ: PEP ) held its third-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

1%, with international markets driving an 8% increase in organic revenue and a 105 basis point expansion in operating margin. North American performance was mixed, with improvements in snacks volume due to strategic pricing, but challenges in the beverage segment, particularly in soft drinks. The company anticipates margin pressure in Q4 due to rising input costs and the expiration of tariff benefits, but plans to maintain investments in growth to stimulate long-term performance. Management emphasized a strategic focus on cost reduction and reinvestment in growth areas, particularly in North America, to address competitive pressures and improve execution.

Future outlook includes a focus on maintaining top-line momentum into 2027, with plans to provide more detailed guidance in February 2027, emphasizing continued investment in international expansion and strategic cost management. Full Transcript OPERATOR (Operator) Good morning and welcome to PepsiCo's 2026 third quarter earnings question and answer session. Your lines have been placed on listen-only until it is your turn to ask a question. Today's call is being recorded and will be archived at It is now my pleasure to introduce Mr.

Ravi Pamnani, Senior Vice President of Investor Relations. Mr. Pamnani, you may begin. Ravi Pamnani, Senior Vice President of Investor Relations Good morning everyone.

Thank you, Kevin. I hope everyone has had a chance this morning to review our press release and prepared remarks, both of which are available on our website. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our updated business plans, guidance and outlook.

Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, October 8, 2026 and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures which exclude certain items from reported results. com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. Joining me today are PepsiCo's Chairman and CEO Ramon Laguarta and PepsiCo's Executive Vice President and CFO Steve Schmidt.

We ask that you please limit yourself to one question and with that I will turn it over to the operator for the first question. OPERATOR (Operator) Thank you. In order to ask a question or make a comment, please press star followed by 1 on your touch-tone phone at any time. We will pause for a moment while we compile our Q&A roster.

Our first question comes from Dara Mohsenian with Morgan Stanley. Your line is open. Dara Mohsenian, Analyst at Morgan Stanley Hey, good morning. Ramon Laguarta — Chairman of the Board of Directors Morning, Dara.

Dara Mohsenian, Analyst at Morgan Stanley So Ramon, I thought first maybe we could just get a bit of a state of the union from you on the revenue side as we approach calendar year-end here. Obviously internationally, another strong set of results in the quarter. You did have some weather and World Cup boost, in theory. We are seeing a volatile environment.

So just would love your thoughts on the sustainability of the strong growth that you're seeing internationally and the forward growth opportunities. And then just shifting to NA again from a revenue standpoint, numerous strategy changes this year. Volume, I don't think it's responded as much as some had hoped, clearly in North America. So just look back on the efforts in ’26 so far.

Any plans to tweak pricing or plans from here? We've heard a lot about snacks pricing recently in the marketplace. So just any strategy tweaks going forward. And then Steve, if I can just slip in one on the margin side.

Obviously the earnings revision in Q4 is margin-driven with the top-line expectations holding. So just help us understand what changed there. But I think really the context is when you have a big Q4 revision, it may imply further pressure in ’27. So just as we look out to ’27, I know you won't give guidance, but just some of the key buckets: the margins as we look at the ’27 reinvestment to reinvigorate North American volumes, commodity pressure given that's a big change for Q4, any incremental cost savings thoughts?

Those would all be helpful just conceptually for ’27. Steve Schmidt — Executive Vice President and CFO Great. Hey Dara, this is Steve. Good morning and thanks for the question.

Good morning everyone. Maybe I'll start with the second question and then kick it to Ramon for the state of the union where you began your question. So before I get into the guidance revision, maybe I'll talk a little bit about the quarter, at least from a highlight standpoint. And the reality is that we're pleased with many aspects of our Q3 performance.

1%, reported revenue was north of 5, core operating profit increased 3% and EPS increased. Importantly, as we look at the health of the business around the world, global beverage volume was up 3%, global food volume was up 1% and it's actually up 4% if you exclude the grains business in South Africa. And overall International had really a stellar quarter. Organic revenue increased 8%, operating margin expanded 105 basis points.

Now shifting to the North America business. Our foods business in North America, organic sales improved from Q2 and our beverage business in North America decelerated. So if I turn to guidance, there are always a number of factors that go into how we think about guidance. The largest changes, and you mentioned we said in our prepared remarks, was margin performance is below where we expected it to be.

Input costs are trending higher and mix has been a headwind in particular. But despite these pressures, I think it's important to note that we've decided to sustain key investments around the company to make sure that we stimulate growth and build momentum. This includes A&M, which increased in International. It also increased in North America, importantly.

So it's the margin piece that's driving the guide down in EPS. But sales, as you mentioned, we expect to be robust. Another mention, we're also identifying structural cost reduction areas and we're going to be using revenue management tools in the coming months to partially mitigate this margin pressure that we have in the fourth quarter. And these benefits should start helping as we turn the calendar year.

So that's how I think about guidance. The revision — you mentioned ’27, so maybe I'll touch on that too. In ’27 we have clear priorities. We certainly want North America to grow faster and more efficiently.

We're going to continue to fuel the International business and maintain momentum, and we're going to be very disciplined with costs and capital allocation. So as you imagine, we've been working through our ’27 plans for some time. We're just not in a position today to provide a complete view of what our expectations might be, and I'd rather not give a partial view now. So we'll give more detail on our 2027 expectations in February when we report the fourth quarter.

So I know that was a lot, but now I'll kick it over to Ramon and give a state of the union. Ramon Laguarta — Chairman of the Board of Directors Okay, so you guys got the framework there. So listen, we're pleased with the acceleration of the business going into the year. Our priority number one was to accelerate top line across the company.

1% in organic net revenue in Q3. That is the fastest rate of growth since Q4 ’23, so clearly an important milestone for us to cross the 3%. And we like the way that growth came, which was volume-led. Now, as Steve mentioned, 3% growth in global beverage volume and a 4% in snacks globally.

We had some large business in South Africa that are very heavy, kind of commodity-type, that impacted the overall global. So good — I would say very positive threshold. We crossed a threshold at 3% and obviously it is on its way to the long-term 4% that we want to get to. Now, International was a big driver of that and we're very pleased with the momentum that we've been building on International now for many quarters.

You mentioned weather and some tactic — I think it's much more structural. I think we're becoming much more competitive in both foods and beverages in more markets. The scale of the business now is to the point that we put on the remarks that year-to-date International is already 45% of our profit. So we keep building it and it's broad — it's broad-based.

It's in Europe, it's in Middle East, it's in Asia, it's in LatAm. So good performance overall. , and Steve mentioned. I would provide some nuance though.

The volume bet that we made in Snacks North America, especially with the price reset — we're happy with the turnaround in the volume performance. If you think about last year, that business was low single-digit negative volume growth. This year we're low single-digit positive volume growth. That is a major turnaround and it is the price, but it's also some of the innovation, some of the new platforms we're building aligned with the portfolio of the future.

So good progress there. We're going to keep investing in those platforms going forward. I think we can accelerate the category. We gained share in volume now for multiple quarters in Foods North America and Snacks North America.

We're starting to turn that into value share as well. So that was the playbook. As you said, less volume growth than what we had initially anticipated. It had to do with the consumer environment.

It had to do with some of the commercial execution. That's getting better, and we feel good now. We don't feel good about the beverage business. I think the beverage business, as we put in our remarks, we're competing well in some platforms like hydration, like energy.

We're not competing well in soft drinks. So we're putting all the urgency of the business and the focus in improving our performance in soft drinks. We're cutting costs in many areas of the business, including corporate unallocated, including overhead costs everywhere, to invest back into the beverage business — also the food business in North America. And we're looking at any other opportunities to improve our execution, because I think there's also an element of execution that can be [improved].

So that is the state of the union there for us. Priority, as Steve was saying going into next year, is to maintain the top-line momentum. S. this quarter.

We continue to invest in A&M going forward. We want to enter ’27 with a lot of momentum and make sure that we manage the business for the long term, which is what we're doing. OPERATOR (Operator) Thank you. One moment for our next question.

Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. Bonnie Herzog, Analyst at Goldman Sachs All right, thank you. Good morning everyone.

Good morning. I guess a follow-up on all of Dara's questions. Maybe just a question on PFNA; curious if you would consider accelerating SKU rationalization on some of the underperforming brands in that business, thinking about maybe in an attempt to redeploy investments behind SKUs that are actually showing signs of improvement or momentum. And I guess if not, could you just maybe walk us through the puts and takes of your current portfolio and why you believe you have the right brands in place, and then how should we think about you potentially supplementing growth as you potentially pursue M&A in that business to again kind of reignite growth?

Thank you. Ramon Laguarta — Chairman of the Board of Directors I think it's a good point, Bonnie. S. Foods business.

One is making sure that you provide the right value, right? So affordability, price points, entry points to the different categories, sub-segments, making sure that we're competitive in that space with a consumer that is clearly challenged, and we don't expect the consumer to suddenly become, you know, in a much better place in the next 12, 18 months. So value, affordability, price points, giving people the right format. The second one is, I guess, what you're referring to, which is the portfolio and the portfolio of the future and how we're evolving the portfolio to satisfy the various demand moments of that business.

Now there is, I think we have been investing in multiple platforms that position us very well for the future. The first one is portion control and affordability, and we talked about this in the past. We think that 100-calorie packs, 120-calorie packs, that is critical for the future. That business is already three-plus billion dollars.

We continue to invest in the permissible portfolio. We have over $3 billion as well of permissible portfolio, which is going to be the growth space for the future. I think we have great brands in that space. If you think about SunChips, Smartfood, Naked, Simply, PopCorners, and others that I forget at this point.

So that is a great portfolio that is growing. We're obviously launching Doritos Protein and some other variants that we see also having very good consumer momentum. So we're doing both things: trying to make sure the core is still very relevant with the right pricing, right advertising, right emotional connection with the consumer, and then building these new platforms. That is where the double-digit growth is, including—I wouldn't say—indulgence continues to be a great space.

Right. So if you think about Miss Vickie's with avocado oil or Baked with olive oil, those are spaces where we're also investing and where we can premiumize the brands. So listen, I think the portfolio is in a very good place from where the consumer is today and where the consumer is going tomorrow. Now, are there opportunities for M&A in small sub-segments?

You know, we've been looking at that for quite some time, both in foods and beverages. You know, we acquired Siete not too long ago. Poppi was another good example in the beverage business. And we keep looking at, you know, opportunities to complete the portfolio—smaller tuck-in opportunities that we never say no to if it has strategic value, it has financial returns, and it makes sense for the levers of growth that we can provide.

But I think we're in a good place for where the portfolio is going. Now, we need to put more investment in scaling up those platforms. That's what we're trying to do—taking cost from other parts of the portfolio, of the P&L, and investing in those growth platforms for the future. OPERATOR (Operator) Thank you.

One moment for our next question. Our next question comes from Peter Grom with UBS. Your line is open. Peter Grom, Analyst at UBS Great, thank you, operator.

So I wanted to ask, just on North America and maybe just carbonated soft drinks in general—and Ramon, it's pretty clear that you are not pleased with kind of the performance of the business. But as you take a step back, can you maybe unpack why performance has fallen short of expectations and, as you think about the path forward, what you plan to do differently? And then, Steve, just maybe more of a housekeeping question on the organic sales outlook. You know, approximately 3% growth can mean a lot of different things.

1% growth that we just saw in the third quarter and the fourth quarter. Thanks. Ramon Laguarta — Chairman of the Board of Directors Yeah, I would think about the—you know, starting from the last point, I would think that way. I think we're expecting sequential improvement as we go into Q4 and especially as we go into next year.

So we'll continue to invest. That's our number one priority: invest in growth. Invest in growth. Steve mentioned we didn't take any resources away from the business in Q4.

, to make sure that we continue the sequential improvement or acceleration of the business on the top line. So that's how we're thinking about top line. , right. , I think one important priority for us this year was to accelerate the hydration business.

That business has accelerated in volume and in net revenue. The overall category is very important for us—the hydration category, which has tailwinds given some of the eating habits and drinking habits of the population. So that was critical. We made that happen.

It's working well, and we continue to innovate in Gatorade and in Propel and invest in those brands to accelerate. So that part is a good one for us. Energy as well. I think the Alani and Celsius makes sense.

By the time we get the two brands into the business and well executed, that will be an important source of growth for us. Now in soft drinks, as you said, we're dissatisfied. I think there are two things that we're trying to do. One is increase investment behind the brands—so invest more behind Pepsi, Mountain Dew, and some of the other brands we have in soft drinks.

And the second one is improve the execution.