Key facts
- PepsiCo is implementing additional cost reduction actions to accelerate organic revenue growth and mitigate rising input costs.
- North America's core operating margin is expected to remain under pressure in the fourth quarter.
- Third-quarter volumes in PepsiCo's North American food business were flat, while beverage volumes dipped 2% year-on-year.
- PepsiCo adjusted its 2026 organic revenue forecast to approximately 3% growth.
- The company also lowered its 2026 core earnings per share forecast to a 1% to 2% increase, down from previous expectations of 4% to 6%.
PepsiCo cut its annual core profit forecast and announced plans for additional cost cuts, as efforts to improve its North American business are taking longer than anticipated. The company is identifying structural cost reduction actions to fund investments that aim to accelerate organic revenue growth and mitigate rising input costs.
In prepared remarks, CFO Steve Schmitt stated, "In North America, we remain committed to improving growth and core operating margin. However, it is taking more time than we planned. Therefore, we expect North America’s core operating margin performance to remain under pressure in the fourth quarter." PepsiCo's third-quarter revenue exceeded market expectations, but the company adjusted its 2026 organic revenue forecast to about 3% from a prior view of 2% to 4%. However, it flagged slow progress and profitability struggles in North America. The company's core operating margin dropped 35 basis points in the third quarter from a year ago and was down 25 basis points year to date at 16.5% of revenue. In December, PepsiCo had targeted a 100-basis-point uptick over three years. The company also cut its fiscal 2026 forecast for core earnings per share after adjusting for currency fluctuations to an increase of 1% to 2%, compared with previous expectations for the low end of the 4% to 6% range. CEO Ramon Laguarta said in a statement that "Additional structural cost reduction actions are being identified and will be implemented in the coming months to help fund investments that aim to accelerate organic revenue growth and mitigate the impacts of rising input cost inflation.
Packaged food makers such as General Mills, McCormick and Conagra Brands are also spending more on promotions and affordability initiatives to revive demand while contending with higher input costs. PepsiCo's international business continues to perform well, but North America weakness, where third-quarter volumes in food were flat and dipped 2% in beverages from a year ago, remains a persistent pain point. Analyst Nik Modi at RBC Capital Markets noted that "The beverage business continues to disappoint, and we expect PepsiCo will continue to be a source of share to both Coca-Cola and Keurig Dr Pepper."