PepsiCo cuts earnings forecast as North American turnaround takes longer than expected

PepsiCo on Thursday reported quarterly earnings and revenue that topped analysts' expectations, fueled by international growth as its North American business continues to lag.

With one quarter left in 2026, the company also lowered its forecast for its full-year earnings, as its struggles in its home market weigh on profits. Pepsi expects core earnings per share to increase 2.5% to 3.5%, down from its previous projection of the low end of a range from 5% to 7%. It also now expects net revenue growth of about 6%, on the high end of its prior outlook of a range of 4% to 6%.

Shares of Pepsi rose about 2% in morning trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: $2.34 adjusted vs. $2.29 expected
• Revenue: $25.27 billion vs. $24.96 billion expected

Pepsi reported fiscal third-quarter net income attributable to the company of $3.05 billion, or $2.23 per share, up from $2.6 billion, or $1.90 per share, a year earlier.

Excluding items, the company earned $2.34 per share.

Net sales rose 5.6% to $25.27 billion. Organic revenue, which excludes acquisitions, divestitures and foreign exchange, increased 3.1% during the quarter.

The company reported volume growth of 3% for its beverages and 1% for its food for the quarter. Volume excludes pricing and currency fluctuations to reflect demand more accurately.

Pepsi's international markets were once again the bright spot. The company's international business has accounted for 41% of its net revenue so far this year, CEO Ramon Laguarta said in prepared remarks.

Pepsi saw volume growth in all but one of its international business units during the quarter. Only its convenient foods division in Europe, the Middle East and Africa reported declining volume, of 1%.

But in its home market, Pepsi once again struggled.

"Our business in North America performed below our expectations and represents a meaningful opportunity for improvement," Laguarta said.

Its North American beverage unit saw volume shrink 2%, while its North American food division reported flat volume.

The turnaround of its domestic business is moving more slowly than expected, CFO Steve Schmitt said in prepared remarks. So far, the strategy to fix the struggling divisions has focused on innovation and the company's advertising and marketing.

For its snacks, Pepsi has leaned into simpler ingredients, "alternative" oils and functional benefits, like protein and fiber.

In February, Pepsi lowered prices by as much as 15% on many of its snacks, including Lay's and Doritos. The move followed weak U.S. performance by its snack brands as budget-conscious shoppers, facing higher prices across the grocery store, skipped the chips.

The bet has paid off for the company, Laguarta said on the company's earnings conference call.

"We're happy with the turnaround in the volume performance," he said. "If you think about last year, that business was low single-digit negative volume growth. This year, we're low single-digit positive growth."

North American demand for Pepsi's snacks was weaker than expected this quarter, which Laguarta chalked up to "the consumer environment."

Pepsi executives are projecting "a new wave of inflation" caused by higher energy prices. Laguarta predicted that the company will implement "revenue management tactics," industry jargon that typically means price hikes. But he said that the company will have "guardrails" to make sure that retailers do not price its snacks too high for shoppers.

The North American beverage business was more disappointing, particularly the company's soft drinks portfolio, which includes its namesake soda, Mountain Dew and Poppi, among others. The company plans to stay focused on functional hydration, flavored soft drinks, energy drinks and zero-sugar options.

However, Laguarta said some recent trends show the company's efforts are working.

Pepsi's North American convenient foods business, which includes brands like Doritos and Quaker Oats, had its organic revenue improve sequentially. Its North American beverage unit, which includes its namesake soda and Gatorade, among other brands, saw organic volume trends pick up, thanks to its functional hydration and zero-sugar drinks. But Pepsi's carbonated soft drink portfolio lagged behind the overall category, including rival Coca-Cola.

Pepsi is planning cost reductions to cut down on redundancies and discretionary spending to pay for investments in innovation and marketing, Laguarta said in prepared remarks.

Correction: Pepsi's fiscal third-quarter net income attributable to the company was up from a year earlier. An earlier version misstated the direction.