TLDR
- First-quarter adjusted earnings per share reached $1.61, surpassing analyst projections of $1.55.
- Total revenue hit $19.44 billion, exceeding Wall Street’s $18.94 billion expectation.
- The North American food segment posted 2% volume growth — marking its first positive quarter in more than two years following strategic price reductions on popular chip brands.
- PepsiCo reaffirmed its annual organic revenue growth outlook of 2%–4% and core EPS expansion of 4%–6%.
- Management highlighted increased economic volatility stemming from geopolitical tensions, particularly Middle Eastern conflicts.
Beverage and snack food giant PepsiCo delivered first-quarter financial results on Thursday that surpassed analyst expectations, marking a significant milestone for its North American food operations which have struggled for more than two years.
The company posted adjusted earnings of $1.61 per share, comfortably above the Street’s $1.55 projection. Total quarterly revenue reached $19.44 billion, surpassing the consensus estimate of $18.94 billion.
Net income for the period climbed to $2.33 billion, representing a substantial increase from $1.83 billion in the same quarter last year. Earnings per share rose to $1.70 from $1.33 year-over-year.
Total net sales increased 8.5% compared to the prior-year period, bolstered by the acquisition of prebiotic soda brand Poppi and expanded distribution arrangements for Alani Nu energy drinks. Excluding the impact of mergers, acquisitions, divestitures, and foreign exchange fluctuations, organic revenue expanded 2.6%.
Shares of PepsiCo gained approximately 0.8% during premarket trading following the earnings announcement.
Frito-Lay and Quaker Drive Volume Turnaround
In a significant development, Pepsi’s North American food operations — encompassing Frito-Lay snacks and Quaker Oats products — recorded positive volume growth for the first time in over 24 months. The segment experienced a 2% volume increase during the quarter.
This marks a meaningful reversal of fortune for the division. Following aggressive price increases implemented during the 2022 inflation surge, volume had consistently declined as consumers sought more affordable alternatives. In a strategic pivot this February, the company reduced prices on flagship brands including Lay’s, Tostitos, Doritos, and Cheetos by as much as 15%. The initial results suggest the pricing strategy is delivering the intended effect.
Meanwhile, the North American beverage division posted contrasting results, with volume declining 2.5% for the quarter. This segment encompasses Pepsi soft drinks, Starry, and the recently acquired Poppi brand.
To reinvigorate the Gatorade franchise, management announced Thursday it will expand marketing beyond traditional athletic positioning to emphasize broader hydration benefits, introduce reduced-sugar formulations, and eliminate artificial colorings from the product line.
The company is also capitalizing on consumer demand for functional nutrition. Recent product launches include Pepsi Prebiotic, Starbucks Coffee & Protein beverages, Doritos Protein chips, and enhanced SunChips Fiber varieties.
Annual Outlook Maintained Despite Global Headwinds
PepsiCo maintained its existing full-year financial guidance. The company continues to project organic revenue growth in the 2% to 4% range, with core constant currency earnings per share expected to increase between 4% and 6%.
However, management emphasized the increasingly challenging operating environment. Company executives pointed to persistent geopolitical tensions — particularly armed conflict in the Middle East — as contributors to mounting economic uncertainty.
“The macroeconomic environment has become more volatile and uncertain because of ongoing geopolitical conflicts,” the company said in prepared remarks.
Regarding input costs, leadership indicated that existing commodity hedging strategies should offer near-term insulation for certain raw materials. Nevertheless, escalating energy and packaging expenses linked to supply chain disruptions remain areas of ongoing concern.
CEO Ramon Laguarta struck a measured tone, saying the company was “encouraged with the resilience of the International business” while North America “continued to make progress.”
PEP shares have appreciated approximately 9% over the trailing twelve months — substantially underperforming the S&P 500’s 29% gain during the comparable timeframe.
