PEPSICO INC (PEP) Q3 2025 Earnings Summary

Executive Summary

Q3 2025 revenue grew 2.6% to $23.94B; Core EPS was $2.29 while GAAP EPS was $1.90, with organic revenue up 1.3% and core constant currency EPS down 2% due to charges and FX .
Guidance affirmed: low-single-digit organic revenue growth and core constant currency EPS approximately even with prior year; FX headwind improved to ~0.5pp from 1.5pp in Q2 and 3.0pp in Q1, implying a ~0.5% decline in 2025 core EPS vs $8.16 in 2024 .
Management cited improved PBNA momentum (volume growth excluding case-packed water) and high service levels (97–98%) as catalysts; PBNA margins were pressured by tariffs in Q3 but are expected to expand in Q4 to deliver positive full-year margin expansion .
Strategic narrative centers on innovation (protein, functional hydration, zero sugar), portfolio reshaping, and aggressive cost optimization including “One North America” tests and right-sizing fixed costs, with international weakness in the summer largely weather-related and improving in September .
Governance catalysts: new CFO Steve Schmitt (effective Nov 10, 2025) and ongoing constructive engagement with Elliott Investment Management following its $4B stake and strategic recommendations .

What Went Well and What Went Wrong

What Went Well

PBNA volume grew excluding case-packed water; Pepsi brand momentum (volume, net revenue, share) and zero sugar/flavor platforms gaining traction, supporting beverage top-line acceleration .
Service levels normalized to 97–98%, improving fill rates and execution; management expects balanced volume and price-driven top-line growth ahead .
International momentum recovered in September after weather-related weakness; management expects mid to high mid-single-digit performance into year-end .
Quote: “Beverages actually grew volume in the quarter… Pepsi grew volume, grew net revenue, grew shares” — Ramon Laguarta .
Quote: “Service levels are very high… 97%, 98%… driving growth” — Ramon Laguarta .
Quote: “September was strong, and we feel good about… mid to high mid-single digits” — Ramon Laguarta .

What Went Wrong

GAAP EPS declined 11% YoY to $1.90, reflecting intangible asset impairment (Rockstar, TBG-related items) and other charges; reported operating margin fell to 14.9% (from 16.6% in Q3 2024) and reported gross margin to 53.6% (from 55.4%) .
PFNA organic revenue declined 3% with volume pressure tied to a shift from deep promos to everyday value; foods volumes down with better revenue realization but near-term category impact .
PBNA margins were impacted by tariffs in Q3; while mitigants are in place and Q4 margins are expected to expand, tariffs remain a headwind variable .

Financial Results

Consolidated Results vs Prior Year, Prior Quarter, and Estimates

Metric	Q3 2024	Q2 2025	Q3 2025	YoY Δ	Seq Δ	Vs. S&P Consensus
Revenue ($USD Billions)	$23.32	$22.73	$23.94	+$0.62B (+2.6%)	+$1.21B (+5.3%)	$23.85* (estimate) vs $23.94 actual (small beat)*
GAAP Diluted EPS ($)	$2.13	$0.92	$1.90	-$0.23 (-11%)	+$0.98	—
Core EPS ($)	$2.31	$2.12	$2.29	-$0.02 (-0.9%)	+$0.17	$2.26* (estimate) vs $2.29 actual (beat)*

Note: Consensus EPS and Revenue reflect “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q3 2025; 15 EPS estimates, 13 revenue estimates. Values retrieved from S&P Global.*

Margins and Tax

Metric	Q3 2024	Q2 2025	Q3 2025
Gross Margin % (Reported)	55.4%	54.7%	53.6%
Gross Margin % (Core)	55.5%	55.1%	53.9%
Operating Margin % (Reported)	16.6%	7.9%	14.9%
Operating Margin % (Core)	17.9%	17.2%	17.3%
Effective Tax Rate (Reported)	20.3%	18.6%	21.4%
Effective Tax Rate (Core)	20.3%	20.8%	19.4%

Organic/FX/Volume Pricing KPIs

KPI (Q3 2025)	Value
Reported net revenue growth	2.6%
Organic revenue growth	1.3%
FX translation impact on revenue	+0.5pp
Organic volume change (Total)	-3%
Effective net pricing (Total)	+4pp

Segment Revenue and Organic Performance (Q3 2025)

Segment	Reported Revenue ($USD Billions)	Reported YoY Δ	Organic Rev Δ
PFNA	$6.53	-$0.01B (~0%)	-3%
PBNA	$7.33	+$0.15B (+2%)	+2%
IB Franchise	$1.29	~$0.00B (~0%)	-1%
EMEA	$5.02	+$0.41B (+9%)	+5.5%
LatAm Foods	$2.66	+$0.04B (+2%)	+4%
Asia Pacific Foods	$1.12	+$0.02B (+2%)	+1%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic revenue growth	FY 2025	Low-single-digit (Q1)	Low-single-digit (Q3)	Maintained
Core constant currency EPS	FY 2025	Approx. even with prior year (revised in Q1 from mid-single-digit growth)	Approx. even with prior year (Q3)	Maintained from Q1 revision
FX headwind (rev/core EPS)	FY 2025	~3.0pp headwind (Q1)	~0.5pp headwind (Q3)	Improved (3.0pp → 1.5pp in Q2 → 0.5pp in Q3)
Implied core EPS vs 2024	FY 2025	~-3% (Q1)	~-0.5% (Q3)	Raised
Core annual effective tax rate	FY 2025	~20% (Q1/Q2)	~20% (Q3)	Maintained
Total cash returns	FY 2025	~$8.6B (dividends $7.6B, buybacks $1.0B) (Q2)	~$8.6B (same) (Q3)	Maintained
Dividend increase	FY 2025	+5% annualized beginning June 2025 (announced earlier)	Affirmed in cash returns	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
AI/technology & ERP/data	Multi-year investments in ERP/data; productivity to fund reinvestment	Apply technology/AI to cost transformation for agility; optionality discussed	Expanding use cases
Supply chain & “One North America”	Integration opportunity to synergize NA food/bev; multi-year productivity ramp	Testing One North America in Texas; nuanced regional solutions; warehouse/manufacturing rationalization	Piloting; cost takeout
Tariffs/macro	Tariffs drove guidance reset; consumer subdued; fixed-cost deleverage at PFNA	Q3 PBNA margins impacted by tariffs; expansion expected in Q4	Headwind moderating
Product performance (Pepsi/zero sugar; Gatorade/functional)	Pepsi Zero gaining; Gatorade share recovery; Propel functional hydration growth	Pepsi momentum in U.S. and international; zero sugar and flavors; Gatorade relaunch planned	Strengthening
International regions	Solid mid-single-digit growth; China softer; India double-digit; Europe/Middle East strong	Summer weather headwinds; September rebound; outlook mid to high mid-single digits	Improving
Regulatory/ingredients	Removing artificials; sodium/sugar initiatives; SNAP exposure limited	Continued portfolio relaunch (Lay’s/Tostitos) with no artificials	Accelerating reformulation
R&D/Innovation (Protein, fiber, oils)	Teased protein launches; functional hydration; permissible snacks expansion	Muscle Milk relaunch; Propel for GLP-1; higher fiber; avocado/olive oil variants	Broad pipeline
Health features (GLP-1)	Expect more protein/fiber/hydration consumption; portion control relevance	Propel innovation for GLP-1 consumers	Targeted offerings
Activism & oversight	Elliott stake and recommendations (Sept)	Constructive engagement acknowledged by CEO	Ongoing

Management Commentary

“We’re introducing a strong pipeline of innovation… sharpen[ing] our price pack architecture… and right sizing our entire cost base” — Ramon Laguarta (press release) .
“We see PBNA continue to expand margins at a good pace… Q3 was impacted by tariffs. We see already in Q4 an expansion of the margin again” — Ramon Laguarta .
“We’re relaunching Lay’s, Tostitos, and Gatorade… permissible snacks and zero sugar will continue to be a focus” — Ramon Laguarta .
“International is back to mid-single digit… September was very good” — Ramon Laguarta .
“Good collaboration [with Elliott]… most of [their] ideas are included in our strategy 2030” — Ramon Laguarta .

Q&A Highlights

Volume and pricing: PBNA volume grew excluding case-packed water; foods’ shift to everyday value pressured volume but improved revenue realization; service levels at 97–98% supported execution .
Cost/productivity: Right-sizing manufacturing nodes/warehouses, go-to-market labor, and leveraging global capability centers; 2026 carryover benefits expected .
Innovation: Muscle Milk relaunch and Propel functional hydration targeted at protein/GLP-1; zero sugar and flavors (e.g., Baja Blast platform expansion) to attract younger consumers .
International consumer: Weather was the primary Q3 drag; regional consumer health mixed (China soft; India/middle east stronger); Mexico tied to U.S. remittance dynamics .
Governance: CFO transition to Steve Schmitt (ex-Walmart U.S.) to support growth/omnichannel and cost discipline ; continued constructive engagement with Elliott .

Estimates Context

Q3 2025 actuals vs S&P Global consensus: Core/Primary EPS $2.29 vs $2.26 consensus (beat); revenue $23.94B vs $23.85B consensus (beat). 15 EPS estimates; 13 revenue estimates. Values retrieved from S&P Global.*
Implications: Given FX headwind improved to ~0.5pp and management inflection commentary (PBNA volume, Q4 margin expansion), FY 2025 consensus may drift modestly higher on core EPS trajectory and lower FX drag assumptions .

Metric	Q3 2025 Consensus	Q3 2025 Actual
Primary EPS ($)	2.26*	2.29
Revenue ($USD Billions)	23.85*	23.94

Note: Primary EPS Consensus Mean and Revenue Consensus Mean for Q3 2025; counts: EPS (15), Revenue (13). Values retrieved from S&P Global.*

Key Takeaways for Investors

Beverage momentum and brand health (Pepsi zero sugar/flavors) plus normalized service levels support near-term PBNA revenue and share gains .
Despite Q3 tariff pressure, PBNA margin expansion is expected in Q4, positioning for positive full-year margin trend — a potential estimate revision catalyst .
PFNA’s everyday value strategy and portfolio relaunch (Lay’s/Tostitos with no artificials) should stabilize volumes and mix over coming quarters; watch core margin trajectory as cost actions flow through .
International growth rebounded in September; expect mid to high mid-single-digit into year-end, with weather headwinds fading — supports consolidated top-line .
Guidance quality improved: FX headwind cut to ~0.5pp and implied core EPS decline reduced to ~0.5%; this de-risks FY EPS and could narrow valuation discount .
Strategic catalysts: Broad innovation pipeline (protein, functional hydration, fiber/oils), “One North America” logistics tests, and portfolio reshaping (Poppi, Siete, Sabra, Alani Nu) .
Governance/oversight: New CFO with omnichannel/retail expertise and constructive dialogue with Elliott increase probability of cost focus, target-setting, and accountability — potential multiple expansion driver .

Sources

Q3 2025 8-K press release and exhibits .
Q3 2025 earnings call transcripts and .
Q2 2025 press release, financials and call .
Q1 2025 press release, financials and call .
CFO appointment press release .
Elliott activist press release .

Note: Consensus estimates marked with an asterisk are values retrieved from S&P Global.*