PepsiCo’s third quarter results reflected a mix of progress and persistent challenges across its food and beverage portfolio. Management attributed stable top-line performance to a blend of stronger beverage momentum, especially for core brands like Pepsi, and deliberate changes to pricing and promotional strategies within its food businesses. CEO Ramon Laguarta pointed out that while beverage volumes rebounded, food volumes were pressured by shifts in promotional tactics aimed at enhancing revenue realization rather than pursuing volume at any cost. On the call, executives acknowledged that cost optimization efforts and operational improvements were underway, particularly in areas where past investments no longer aligned with current demand signals.
Is now the time to buy PEP? Find out in our full research report (it’s free for active Edge members).
PepsiCo (PEP) Q3 CY2025 Highlights:
- Revenue: $23.94 billion vs analyst estimates of $23.86 billion (2.7% year-on-year growth, in line)
- Adjusted EPS: $2.29 vs analyst estimates of $2.26 (1.3% beat)
- Adjusted EBITDA: $4.96 billion vs analyst estimates of $4.97 billion (20.7% margin, in line)
- Operating Margin: 14.9%, down from 16.6% in the same quarter last year
- Organic Revenue rose 1.3% year on year vs analyst estimates of 2.2% growth (85.1 basis point miss)
- Sales Volumes fell 3% year on year (-2% in the same quarter last year)
- Market Capitalization: $206.9 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From PepsiCo’s Q3 Earnings Call
- Bonnie Herzog (Goldman Sachs) asked about continued volume declines and the likelihood of a rebound. CEO Ramon Laguarta explained the impact of smaller pack sizes and strategic promo changes, stating volume should improve with service levels and innovation.
- Lauren Lieberman (Barclays) questioned the cost implications of healthier product innovations. Laguarta replied that margin improvement is anticipated, as higher costs will be offset by pricing and ongoing productivity efforts.
- Steve Powers (Deutsche Bank) inquired about specific cost reduction measures and the timeline for right-sizing operations. Laguarta detailed manufacturing and warehouse rationalization, while CFO Jamie Caulfield highlighted expected carryover productivity benefits into next year.
- Peter Galbo (Bank of America) asked why the company is leveraging in-house brands for protein versus acquiring brands. Laguarta said existing platforms like Muscle Milk and Propel offer better returns, but acquisitions remain a tool for categories where PepsiCo lacks scale.
- Robert Ottenstein (Evercore ISI) probed the rationale behind cost focus and the external CFO hire. Laguarta confirmed both portfolio and cost transformation are essential, and the new CFO brings relevant experience from a key retail partner.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will watch (1) the pace of volume stabilization and brand relaunch performance across key snack and beverage lines, (2) the effectiveness of structural cost reductions and productivity improvements in supporting margins, and (3) the commercial success of new health-oriented products in both North America and international markets. We will also monitor any operational or strategic responses to activist investor engagement and leadership transitions.
PepsiCo currently trades at $151.07, up from $138.74 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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