Executive Summary

Q2 FY25 delivered revenue of $20.2B (+4.5% YoY), GAAP diluted EPS of $0.82 (flat YoY), and adjusted EPS of $0.93 (+4.5% YoY); gross margin was 18.1% (-11 bps YoY) and operating margin 3.5% (-10 bps YoY) .
International and SYGMA drove strength: International adjusted operating income rose 26.5% to $129M and SYGMA sales rose 10.6% to $2.12B; U.S. Foodservice local case volume declined 0.9% .
FY25 guidance reiterated: net sales growth 4–5% and adjusted EPS growth 6–7%; buyback upsized to $1.25B (from $1.0B), lifting total cash return target to ~$2.25B (dividends ~$1.0B) .
Near-term catalysts: second-half $100M+ annualized savings (strategic sourcing, supply chain efficiencies, organizational optimization), clarified international modeling after Mexico JV divestiture (~$500M annualized sales impact, margin accretive) .

What Went Well and What Went Wrong

What Went Well
- International accelerating: “adjusted operating income up 26.5%,” driven by local case growth (+4.7%), procurement synergies, and assortment expansion .
- National sales resilience: volume up 4.3% with strong retention and new wins improving route density and fixed cost coverage .
- Capital returns raised: CFO announced upsized buyback to $1.25B and total cash return to ~$2.25B for FY25 .
What Went Wrong
- Local case softness: U.S. Foodservice local case volume fell 0.9%, with management citing hurricane impacts and unfavorable holiday timing as headwinds .
- Gross margin dilution YoY: 18.1% (-11 bps) from customer mix shift and timing of strategic sourcing contributions; Sysco Brand penetration eased (U.S. Broadline 36.0%, Local 46.1%) .
- First-half cash flow down: operating cash flow $498M and FCF $331M for first 26 weeks, down vs prior year due to working capital timing and opportunistic inventory purchases .

Financial Results

Metric	Q4 FY24	Q1 FY25	Q2 FY25
Revenue ($USD Billions)	$20.6B	$20.5B	$20.2B
Gross Profit ($USD Billions)	$3.8B	$3.8B	$3.7B
Gross Margin (%)	18.7%	18.3%	18.1%
Operating Income ($USD Billions)	$0.98B	$0.81B	$0.71B
Operating Margin (%)	4.8%	3.9%	3.5%
Diluted EPS (GAAP)	$1.23	$0.99	$0.82
Adjusted EPS (Non-GAAP)	$1.39	$1.09	$0.93

Segment	Metric	Q4 FY24	Q1 FY25	Q2 FY25
U.S. Foodservice	Sales ($USD Billions)	$14.41B	$14.36B	$14.04B
	Operating Income ($USD Millions)	$1,042M	$908M	$834M
	Adjusted Operating Income ($USD Millions)	$1,066M	$925M	$859M
International	Sales ($USD Billions)	$3.79B	$3.79B	$3.73B
	Operating Income ($USD Millions)	$115M	$101M	$95M
	Adjusted Operating Income ($USD Millions)	$164M	$130M	$129M
SYGMA	Sales ($USD Billions)	$2.04B	$2.05B	$2.12B
	Operating Income ($USD Millions)	$26M	$18M	$19M
Other	Sales ($USD Millions)	$310M	$282M	$263M
	Operating Income ($USD Millions)	$13M	$9M	$4M

KPI	Q4 FY24	Q1 FY25	Q2 FY25
U.S. Foodservice Case Growth (%)	3.5%	2.7%	1.4%
Local Case Growth (%)	0.7%	0.2%	-0.9%
Sysco Brand % of Cases – U.S. Broadline	36.6%	36.5%	36.0%
Sysco Brand % of Cases – Local	47.1%	47.0%	46.1%
EBITDA ($USD Billions)	$1.20B	$1.00B	$0.93B
Adjusted EBITDA ($USD Billions)	$1.30B	$1.10B	$0.97B
Net Debt / Adjusted EBITDA (x)	2.69x	2.74x	2.76x
Product Cost Inflation (Enterprise)	1.6%	2.2%	2.1%

Non-GAAP adjustments: Q2 adjusted EPS adds $0.06 for restructuring/transformational costs and $0.08 for acquisition-related costs, with tax impacts of -$0.02 each .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth	FY25	4–5%	4–5%	Maintained
Adjusted EPS Growth	FY25	6–7%	6–7%	Maintained
Adjusted Tax Rate	FY25	~25%	24.5–25%	Lowered slightly
Share Repurchases	FY25	$1.0B	$1.25B	Raised
Total Cash Return to Shareholders	FY25	~$2.0B	~$2.25B	Raised
Dividends	FY25	~$1.0B	~$1.0B; declared $0.51/share payable Apr 25, 2025	Maintained (timing updated)
Net Leverage Target	FY25	2.5–2.75x	2.5–2.75x	Maintained
International Reporting (Mexico JV)	FY25	Planned divestiture (announced)	Divested mid-Dec; ~($500M) annualized sales impact; margin accretive; no recast of prior	Implemented & clarified modeling

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24 and Q1 FY25)	Current Period (Q2 FY25)	Trend
Technology/operational efficiency	Transformation initiatives cited; supply chain productivity gains; business technology strategy changes	Route optimization, colleague retention improving on-time/in-full; ongoing tech deployment in international	Improving
Supply chain/service levels	Fully staffed supply chain; rising productivity; NPS momentum emerging	Customer-facing fill rates and on-time delivery improved; NPS up QoQ/YoY	Improving
Tariffs/macro	Restaurant traffic down but improving through Q1; cautious macro optimism	Operating in normalized ~2% inflation; center-of-plate inflation risks; tariffs excluded from 2% outlook	Mixed (inflation manageable; tariff risk)
Product mix/Sysco Brand	Strong program; slight penetration easing YoY driven by national brand fill rates	Penetration stable-to-easing; trade management actions to lift mix	Stabilizing
International growth	Strong FY24 and Q1 growth; margin expansion	Adjusted OI +26.5%; local case +4.7%; Canada +5%, GB +8% local case growth	Strengthening
Labor/compensation	New sales comp model rollout; transitional Q1 turnover but stabilizing	Retention stabilized; cohorts maturing; new customer win rate rising	Improving
Regulatory/legal	—	Listeria-related supplier recall and halted purchases from facility	Addressed promptly

Management Commentary

CEO: “Our International segment… adjusted operating income up 26.5%. Our local business is beginning to show signs of progress, with improvements to our new customer win rate and our Net Promoter Scores” .
CFO: “We are now on target to return over $2.25 billion to shareholders through share repurchase and dividends in FY ’25” and upsized buyback to $1.25B .
CEO on second-half trajectory: “We have a direct line of sight… $100 million of annualized savings to benefit both the gross profit line and the operating expense line” .
CFO on leverage/cash: “We ended the quarter at a 2.76x net debt leverage ratio… operating cash flow ~$498M and free cash flow ~$331M for the first half” .

Q&A Highlights

Second-half tailwinds: Management expects stronger adjusted EPS growth in H2, driven by strategic sourcing, supply chain efficiencies, and organizational optimization (~$100M annualized savings) .
Local case dynamics: Q2 local cases down 0.9%; headwinds from hurricanes and holiday timing; cohorts maturing and new customer wins set to improve H2 local growth .
Inflation outlook: Enterprise product cost inflation ~2.1%; higher center-of-plate inflation (dairy/eggs/proteins); outlook excludes potential tariffs .
Compensation model: Q1 disruption behind them; top performers “earning more,” retention stabilized; intentional pacing of sales hires by market ROI .
International cadence: Broad-based margin expansion across markets; continued runway for EBIT margin improvement, with bolt-on specialty additions aiding growth .

Estimates Context

S&P Global consensus estimates could not be retrieved due to provider limits (Daily Request Limit exceeded). As a result, we cannot assess beat/miss versus Wall Street consensus for Q2 FY25 revenue and EPS at this time [GetEstimates error].

Key Takeaways for Investors

International strength and SYGMA momentum offset local weakness; second-half mix improvements and strategic sourcing should support margin expansion .
Upsized buyback ($1.25B) and ~$2.25B total cash return underpin support for TSR; dividend cadence reaffirmed (recent $0.51/share declaration) .
Near-term local volume recovery hinges on salesforce retention, cohort maturation, and service-level improvements—watch H2 local case growth trajectory and Sysco Brand mix .
Modeling note: Mexico JV divestiture reduces reported international sales (~$500M annualized) but is margin accretive—monitor reported vs underlying trends with management’s disclosure .
Cash flow softness in H1 tied to working capital/inventory timing; management guides FY25 conversion of ~70% adjusted EBITDA to operating cash and ~50% to FCF—track H2 cash conversion .
Macro remains manageable with ~2% inflation; center-of-plate inflation elevated; tariff risk remains an external variable excluded from current assumptions .
Stock narrative likely driven by H2 execution on $100M+ savings, improving local cadence, and continued international margin expansion—near-term prints that show sequential local improvement and sourcing benefits should serve as catalysts .

SYSCO CORP (SYY)·Q2 2025 Earnings Summary