Executive Summary

Q2 2025 was operationally solid with broad-based beats on revenue, adjusted EPS, and EBITDA versus Wall Street consensus, but headline GAAP results were dominated by a $9.3B non-cash impairment, yielding a GAAP operating loss of $8.0B and GAAP diluted EPS of $(6.60) .
Net sales of $6.35B fell 1.9% YoY while Organic Net Sales declined 2.0%; price was +0.7pp, volume/mix −2.7pp; Emerging Markets grew with price and volume while North America and International Developed declined .
Management reaffirmed FY25 guidance (Organic Net Sales down 1.5% to 3.5%; Constant Currency Adjusted OI down 5% to 10%; Adjusted EPS $2.51–$2.67; FCF flat, ≥95% conversion), but lowered margin expectations to the low end of the prior range; CFO highlighted tariff headwinds (~100bp in 2025; ~180bp annualized if unchanged) .
Cash generation and capital returns remain strong: YTD Free Cash Flow of $1.50B (+28.5% YoY), dividends paid $951M, and $435M in share repurchases; Board declared a $0.40 quarterly dividend payable Sept 26, 2025 .
Potential strategic transactions remain under evaluation; CEO emphasized discipline and long-term value creation—an ongoing narrative that could be a stock catalyst as options crystallize .

What Went Well and What Went Wrong

What Went Well

Strong beat vs consensus: Adjusted EPS $0.69 vs ~$0.64*, revenue $6.35B vs ~$6.27B*, and EBITDA ~$1.56B vs ~$1.47B*, reflecting cost discipline and Emerging Markets strength . Values retrieved from S&P Global*.
Emerging Markets delivered growth and margin expansion; management said it achieved its “highest OI margin ever” in EM and highlighted Heinz growth +18% YoY in EM .
Robust cash generation: YTD operating cash flow $1.93B (+12.6%), FCF $1.50B (+28.5%) with FCF conversion at 96% .

What Went Wrong

GAAP optics were very weak due to the $9.3B non-cash impairment driven by sustained share price and market cap declines, resulting in GAAP diluted EPS of $(6.60) .
Adjusted Operating Income fell 7.5% YoY to $1.28B, pressured by commodity cost inflation and unfavorable volume/mix despite pricing and lower SG&A .
North America continued to drag: segment net sales −3.3% YoY; management cited declines in cold cuts, coffee, Lunchables, frozen snacks, and powdered beverages, and noted pricing below inflation in NA .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Net Sales ($USD Billions)	$6.576	$5.999	$6.352
Gross Profit ($USD Billions)	$2.245	$2.064	$2.183
Adjusted Gross Profit Margin (%)	34.4%	34.4%	34.1%
GAAP Operating Income (Loss) ($USD Billions)	$(0.040)	$1.196	$(7.974)
Adjusted Operating Income ($USD Billions)	$1.385	$1.199	$1.276
GAAP Diluted EPS ($)	$1.76	$0.59	$(6.60)
Adjusted EPS ($)	$0.84	$0.62	$0.69

Segment Net Sales ($USD Millions)	Q2 2024	Q2 2025
North America	$4,921	$4,757
International Developed Markets	$885	$897
Emerging Markets	$670	$698
Total	$6,476	$6,352

Segment Adjusted Operating Income ($USD Millions)	Q2 2024	Q2 2025
North America	$1,341	$1,173
International Developed Markets	$126	$136
Emerging Markets	$66	$100
General Corporate Expenses	$(153)	$(133)
Adjusted Operating Income	$1,380	$1,276

KPIs and Cash Metrics	Q2 2025 YTD
Net Cash from Operating Activities ($USD Millions)	$1,929
Capital Expenditures ($USD Millions)	$(425)
Free Cash Flow ($USD Millions)	$1,504
Free Cash Flow Conversion (%)	96%
Dividends Paid YTD ($USD Millions)	$951
Share Repurchases YTD ($USD Millions)	$435
Remaining Buyback Authorization ($USD Billions)	~$1.5

Guidance Changes

Metric	Period	Previous Guidance (Q1 2025)	Current Guidance (Q2 2025)	Change
Organic Net Sales (%)	FY 2025	Down 1.5% to down 3.5%	Down 1.5% to down 3.5%	Maintained
Constant Currency Adjusted Operating Income (%)	FY 2025	Down 5% to down 10%	Down 5% to down 10%	Maintained
Adjusted EPS ($)	FY 2025	$2.51–$2.67	$2.51–$2.67	Maintained
Adjusted Gross Profit Margin vs PY	FY 2025	Down 25–75 bp	Down 25–75 bp, now expected at lower end	Lower end emphasized
Effective Tax Rate on Adjusted EPS	FY 2025	~26% (≈$0.23 headwind)	~26% (≈$0.23 headwind)	Maintained
Interest Expense ($USD Millions)	FY 2025	~$960	~$960	Maintained
Other Expense/(Income) ($USD Millions)	FY 2025	~(230)	~(230)	Maintained
Free Cash Flow	FY 2025	Flat; ~95% conversion	Flat; ≥95% conversion	Slightly raised conversion floor
Dividend	Q3 2025	N/A	$0.40 per share declared, payable Sept 26, 2025	Announced

Note: Versus initial FY25 outlook in Q4 2024, guidance was lowered in Q1 (Organic down to −1.5% to −3.5%; Adjusted EPS to $2.51–$2.67), then reaffirmed in Q2 .

Earnings Call Themes & Trends

Topic	Q4 2024 (Prior)	Q1 2025 (Prior)	Q2 2025 (Current)	Trend
Pricing vs Inflation	Price +1.0pp; protect margins	Price +0.9pp; coffee inflation	Pricing ~1% while inflation ~5–7%; pricing below inflation in NA	Price restraint; consumer-sensitive
Marketing Investment	Commitment to invest in 2025	Building investments; variable comp lower	Media +20% YoY; Mktg to ≥4.8% of sales in 2H25	Stepping up spend
Tariffs/Macro	Macro caution	Monitoring tariffs/inflation	Tariffs ≈100bp 2025; ≈180bp annualized carry into 2026 if unchanged	Headwinds intensifying
Supply Chain/Costs	Manufacturing and labor cost pressure	Inventory rebuild, Easter timing	Commodity peaks in Q2; some recognition shifted to Q3 (30–40bp)	Near-term pressure; relief by Q4
Product Performance	Lunchables weakness	Lunchables decline; Easter shift	Declines in cold cuts, coffee, Lunchables, frozen snacks, powdered beverages	Mixed; renovations underway
Regional Trends	EM mixed; NA/Intl down	Broad volume declines	EM +8% top-line; “highest OI margin ever”	EM strengthening
Innovation/Renovation	Building pipeline	Brand Growth System expanding	Innovation now ~3% of sales (vs 1.6% in 2022); Capri-Sun, Taco Bell at-home, Heinz expansion	Accelerating
Strategic Transactions	None announced	Lowered FY guide; discipline	Board evaluating options; disciplined approach; no specifics	Ongoing; potential catalyst
Tax/Regulatory	Deferred tax asset in Q4	Global minimum tax raises ETR	ETR ~26% on Adjusted EPS; ~$0.23 headwind	Structural tax headwind

Management Commentary

CEO on quarter and outlook: “Our second quarter top line results… improving from the first quarter… We are generating strong cash flow, maintaining our target Net Leverage ratio, and returning capital to stockholders” .
CEO on strategic transactions: “Our board is working with urgency… Any actions, if any, will be consistent with… unlocking long-term shareholder value” .
CFO on tariffs: “Impact of approximately 100 basis points this year… if tariffs remain… full-year analyzed impact of approximately 180 basis points… carryover into 2026” .
CFO on investments cadence: “Built into the initial plan about $300 million of investments… concentrated… with product renovations hitting the market… media increases… second half” .
CEO on pricing posture: “We’re pricing well below inflation… expecting inflation… 5%-7% this year, and we’re only passing around 1% of the pricing” .
CEO on Emerging Markets: “Top line grew about 8%… growth from both volume and price… Heinz grew about 18% year-over-year” .

Q&A Highlights

Strategic options: Management reiterated disciplined evaluation with focus on long-term value; no specifics disclosed .
Impairment: $9.3B non-cash impairment triggered by sustained stock price decline; not tied to reporting changes for contemplated transactions .
Pricing and promotions: Pricing below inflation; incremental promotions and inflation recognition shifted from Q2 to Q3 (~30–40bp) due to inventory timing .
Gross margin trajectory: Commodity peaks in Q2 with some relief expected starting Q4; lingering pressure in beef and coffee; tariffs are additive headwinds .
Investment intensity vs peers: Company will step up investments if ROI warrants; focus on product superiority and brand attributes rather than price-led growth .

Estimates Context

Metric	Q1 2025 Consensus*	Q1 2025 Actual	Q2 2025 Consensus*	Q2 2025 Actual
Primary EPS ($)	0.601	0.62	0.636	0.69
Revenue ($USD Billions)	6.022	6.000	6.269	6.352
EBITDA ($USD Billions)	1.419	1.464	1.472	1.556
# EPS Estimates	16	—	16	—
# Revenue Estimates	11	—	12	—

Values retrieved from S&P Global*. Consensus Recommendation (Text) not available via our data pull.

Interpretation:

Q2 2025 delivered broad beats vs consensus across EPS (+$0.05), revenue (~~+$0.08B), and EBITDA (~~+$0.08B), reflecting EM strength and disciplined spending, despite commodity and tariff headwinds .

Key Takeaways for Investors

Operational beats vs consensus demonstrate resilience; focus on Emerging Markets and renovation/innovation are improving mix even as North America remains a drag .
Headline GAAP loss is non-cash and impairment-driven; investors should anchor on Adjusted metrics and cash generation (FCF and conversion) as the better indicator of underlying performance .
Tariff and commodity headwinds likely cap near-term margin expansion; monitor Q3 for shifted recognition effects and Q4 for potential commodity relief .
FY25 guide reaffirmed, but margin commentary nudged to the lower end; estimate revisions may modestly tighten around current ranges rather than materially change trajectory .
Strategic transaction review remains a potential catalyst; timing uncertain, but management emphasizes discipline and long-term value creation—follow disclosures for any portfolio actions (e.g., announced Italy baby foods divestiture) .
Marketing intensity and Brand Growth System expansion into 2H should support gradually improving NA retail trends as renovations hit shelves, with Capri-Sun, Mac & Cheese, Lunchables, and Heinz platforms highlighted .
Dividend remains intact ($0.40 declared), buyback authorization still meaningful (~$1.5B), underpinned by strong FCF—supportive of total return profile .

Kraft Heinz Co (KHC)·Q2 2025 Earnings Summary