Key Highlights
- PepsiCo exceeded Q1 earnings projections with adjusted EPS of $1.61 compared to analyst expectations of $1.55.
- Total revenue reached $19.44 billion, surpassing the forecasted $18.94 billion.
- North American food volumes expanded 2%, marking the first positive growth in more than two years following strategic price reductions on Doritos, Lay’s, and Cheetos.
- Annual organic revenue projections remain at 2%–4% expansion, while EPS growth targets hold steady at 4%–6%.
- Management highlighted increased economic volatility stemming from geopolitical tensions in the Middle East.
PepsiCo delivered first-quarter financial results Thursday that surpassed analyst projections, marking a significant turnaround for its North American food segment after an extended period of challenges.
The company posted adjusted earnings of $1.61 per share, exceeding the analyst consensus of $1.55. Total revenue of $19.44 billion also outperformed expectations set at $18.94 billion.
Net income attributable to PepsiCo increased to $2.33 billion from $1.83 billion in the prior-year period. Per-share net income rose to $1.70 from $1.33 last year.
Total net sales increased 8.5% on a year-over-year basis, supported by the Poppi acquisition and expanded distribution of Alani Nu energy drinks. When accounting for acquisitions, divestitures, and foreign exchange movements, organic revenue advanced 2.6%.
Shares moved approximately 0.8% higher during premarket trading following the earnings announcement.
North American Food Division Returns to Positive Territory
For the first time in over two years, Pepsi’s North American food operations — encompassing Frito-Lay and Quaker Oats brands — recorded positive volume growth. The segment saw volumes increase 2% during the quarter.
This marks a meaningful shift in trajectory. The division faced headwinds beginning in 2022 when inflation accelerated, prompting the company to implement multiple price increases that drove cost-conscious consumers toward lower-priced alternatives. In February, PepsiCo reduced prices on Lay’s, Tostitos, Doritos, and Cheetos by as much as 15% to recapture lost market share. Initial results indicate the strategy is gaining traction.
The North American beverage segment presented a contrasting picture, recording a 2.5% volume decline during the quarter. This division encompasses Pepsi, Starry, and the recently acquired Poppi brand.
Regarding Gatorade, management announced Thursday plans to broaden the brand’s appeal beyond athletic consumers by emphasizing hydration benefits, introducing a reduced-sugar formulation, and eliminating artificial colorings.
The company has also positioned itself to capitalize on consumer demand for protein and fiber-enriched products. Recent launches include Pepsi Prebiotic, Starbucks Coffee & Protein, Doritos Protein, and SunChips Fiber.
Annual Outlook Maintained Amid Rising Uncertainty
PepsiCo maintained its full-year financial guidance without adjustment. The company continues to anticipate organic revenue growth ranging from 2% to 4%, with core constant currency EPS projected to expand between 4% and 6%.
Management emphasized emerging challenges in the operating environment. Executives pointed to persistent geopolitical tensions — specifically the Middle East conflict — as contributors to heightened economic unpredictability.
“The macroeconomic environment has become more volatile and uncertain because of ongoing geopolitical conflicts,” the company stated in its prepared commentary.
Regarding input expenses, leadership indicated that commodity hedging strategies should offer near-term insulation for certain materials. However, increasing energy and packaging costs linked to supply chain disruptions remain areas of concern.
CEO Ramon Laguarta adopted a balanced perspective, noting the company was “encouraged with the resilience of the International business” while North America “continued to make progress.”
PEP shares have advanced approximately 9% over the trailing 12-month period — significantly lagging the S&P 500’s 29% gain during the same timeframe.
