PEPSICO INC (PEP) Q1 2025 Earnings Summary

Executive Summary

Q1 2025 organic revenue grew 1.2% with Core EPS of $1.48 and GAAP EPS of $1.33; management cut full‑year Core constant‑currency EPS from mid‑single‑digit growth to ~flat, citing tariffs, a weaker consumer, and subdued FLNA momentum, while reiterating low‑single‑digit organic revenue growth .
International remained the growth engine (mid‑single‑digit organic growth; several markets strong), while PBNA improved profitability; CFO noted the quarter included only two months of international results due to the fiscal calendar, which masked underlying top‑line momentum .
Revenue was modestly above consensus; EPS (Core/Primary) was roughly in line; estimate context below (S&P Global) .
Dividend increased 5% to an annualized $5.69 (quarterly $1.4225) and management advanced digital/AI initiatives via a multi‑year AWS agreement—both reinforcing medium‑term capital return and productivity/investment capacity .

What Went Well and What Went Wrong

What Went Well
- International growth and resilience: “largest growth engine,” with Europe, India, and Brazil highlighted positively; March implied company organic growth ~2% if included in Q1 .
- PBNA margin trajectory improving on sustained execution; Pepsi Zero Sugar, Gatorade, and functional hydration (Propel) highlighted as share gainers; Mountain Dew relaunch forthcoming .
- Strategic portfolio and digital execution: dividend raise, poppi acquisition to expand “better‑for‑you,” and AWS collaboration to accelerate AI and supply chain capabilities .
What Went Wrong
- Guidance cut driven by tariffs (new vs. February outlook), a weaker consumer backdrop, and FLNA’s subdued performance; mitigation plans underway but will take time .
- U.S. convenience channel traffic pressure impacting single‑serve and energy; management also flagged China consumer softness and some Mexico deceleration .
- Ingredient/color legislation complexity and SNAP policy uncertainty add incremental cost/volume risks, though management expects limited earnings impact near‑term .

Financial Results

Headline metrics vs prior periods and estimates

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue ($B)	$18.25	$27.78	$17.92
GAAP Diluted EPS	$1.48	$1.11	$1.33
Core EPS (Non‑GAAP)	$1.61	$1.96	$1.48
Organic Revenue Growth (%)	3.0%	2.0%	1.2%
Gross Margin (%)	54.8%	—	55.8%
Operating Margin (%)	14.9%	—	14.4%

Actual vs Wall Street consensus (S&P Global)

Metric (Q1 2025)	Consensus*	Actual	Surprise
Revenue ($B)	$17.73*	$17.92	+$0.19
EPS (Primary/Core, $)	$1.49*	$1.48	-$0.01

Values marked with * are from S&P Global; Values retrieved from S&P Global.

Segment breakdown – Q1 2025

Segment	Reported Net Revenue ($MM)	YoY Reported %	Organic %	Organic Volume Change (pp)
PepsiCo Foods North America (PFNA)	$6,213	(1)%	(2)%	(3)
PepsiCo Beverages North America (PBNA)	$5,876	0%	1%	(1)
International Beverages Franchise	$759	3%	7%	5
EMEA	$2,388	(2)%	8%	(8)
Latin America Foods	$1,661	(12)%	3%	(0.5)
Asia Pacific Foods	$1,022	(2)%	(1)%	3.5
Total	$17,919	(2)%	1%	—

Non‑GAAP adjustments in Q1 2025 (EPS): Core EPS reconciled from GAAP by restructuring and impairment ($0.14) and acquisition/divestiture charges ($0.01) .

Guidance Changes

Metric	Period	Previous Guidance (Feb 4, 2025)	Current Guidance (Apr 24, 2025)	Change
Organic Revenue Growth	FY 2025	Low‑single‑digit increase	Low‑single‑digit increase	Maintained
Core EPS Growth (Constant FX)	FY 2025	Mid‑single‑digit increase	~Flat vs prior year	Lowered
Core Annual Effective Tax Rate	FY 2025	~20%	~20%	Maintained
FX Translation Headwind (to reported rev/core EPS)	FY 2025	~3 ppts headwind	~3 ppts headwind	Maintained
Implied Core EPS YoY	FY 2025	Low‑single‑digit increase vs $8.16	~3% decline vs $8.16	Lowered
Total Cash Returns	FY 2025	~$8.6B (Div $7.6B, Buyback $1.0B)	~$8.6B (Div $7.6B, Buyback $1.0B)	Maintained
Dividend	Forward	Annualized $5.69 from $5.42	Quarterly $1.4225 declared for June 2025	Implementing increase

Management attributed the EPS change to tariffs (new since February), weaker consumer confidence, and FLNA’s subdued performance; tariff mitigation will take time .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24, Q4’24)	Current Period (Q1’25)	Trend
FLNA value/price‑pack architecture	Multi‑pronged reinvestment; leaning into affordability, portion control, and away‑from‑home; category normalization after outsized growth	Dual‑size strategy (<$2/>$2) boosting units where executed; 10‑count multipacks at lower entry points; SAP implementation behind them; continue investing	Stabilizing with targeted value; execution improving
International growth	Resilient; some geopolitical/consumer softness (China, Mexico), but Europe/India/Brazil strong	Continues as key growth/profit driver; March would lift Q1 organic to ~2%; expect mid‑single‑digit contributions	Positive; remains core pillar
PBNA margins/brands	Margin improvement path to mid‑teens; Gatorade/Propel strength; Pepsi Zero momentum	Continued operating excellence; Pepsi gaining CSD share; Mountain Dew relaunch; functional hydration gaining	Improving structurally
Tariffs/macro	Cautious consumer and geopolitics cited; guidance prudent	Tariffs are primary driver of EPS cut; consumer backdrop weaker vs 3 months prior	New headwind for FY25 EPS
GLP‑1/health trends	Portfolio evolution to permissible/portion control; minimal direct impact observed	GLP‑1 users keep brands, smaller portions; ramping hydration/fiber; innovating in protein	Manageable; portfolio adapting
Ingredient/color legislation; SNAP	—	Transition to natural colors (e.g., Lay’s by year‑end); SNAP exposure seen as limited	Emerging regulatory cost/choice lens
AI/technology	Digitalization/productivity platforms at scale	AWS collaboration to accelerate PepGenX gen‑AI, supply chain modernization, personalization	Accelerating digital transformation

Management Commentary

“We continue to expect low‑single‑digit organic revenue growth but now expect core constant currency EPS to be approximately even with the prior year... we previously announced a 5 percent increase in our annualized dividend.”
“The rationale behind the guidance adjustment... driven by tariffs... heightened macro and consumer uncertainty... and Frito’s subdued performance.”
“Where we have executed [dual‑size single‑serve]... we’re seeing a meaningful improvement in units... 10‑count [multipacks]... at a much lower price point... delivering good returns.”
“International... will continue to be a growth and profit key driver... and [is] accretive to the company.”
“Pepsi is starting to gain share of carbonated soft drinks... Gatorade is starting to regain share... powders and tablets [enhancers] gaining share.”

Q&A Highlights

Guidance bridge: Tariffs the largest new factor vs February, plus weaker consumer and FLNA performance; top‑line held given international momentum and calendar effects .
FLNA strategy: Price‑pack architecture (sub‑$2, portion control), lower‑count multipacks, improved execution post‑SAP; investing while protecting long‑term profitability .
PBNA: Multi‑year margin expansion continues; Pepsi Zero, Gatorade/Propel driving share gains; Mountain Dew relaunch to support category .
Regulatory/GLP‑1: Accelerating move to natural colors; GLP‑1 impact manageable with portion control and functional innovations (hydration, fiber; developing protein) .
International: Broad‑based resilience; some softness in China/Mexico, but Europe/India/Brazil strong; expecting steady mid‑single‑digit contribution .

Estimates Context

Q1 2025 revenue modestly beat consensus ($17.92B vs $17.73B*); Core/Primary EPS was roughly in line to slightly below ($1.48 vs $1.49*) .
Given the EPS guidance cut to ~flat Core constant currency, Street EPS models likely move down for FY25; top‑line estimates likely unchanged given reiterated low‑single‑digit organic growth and international momentum .