PepsiCo Cuts 2026 Profit Forecast as North America Volumes Fall Again, Promises More Cost Cuts

Since activist investor Elliott Investment Management disclosed a roughly $4 billion stake last year, PepsiCo has promised to fix its North American business. On Thursday, the company said that fix is taking longer than it planned.

PepsiCo reported third-quarter results for the period ended Sept. 5 that topped Wall Street estimates. It also cut its full-year profit forecast.

Net revenue rose 5.6% to $25.27 billion. LSEG analysts had expected $24.96 billion. Organic revenue, which strips out acquisitions, divestitures and currency, grew 3.1%.

Core earnings per share came in at $2.34, against an LSEG estimate of $2.29 and up 2% from a year earlier. Net income attributable to the company was $3.05 billion, or $2.23 a share, up from $2.6 billion, or $1.90 a share.

The guidance is where the damage shows. Core EPS growth for 2026, adjusted for currency, is now forecast at 1% to 2%. The prior outlook was the low end of a 4% to 6% range. On a reported basis, PepsiCo now expects core EPS growth of 2.5% to 3.5%, down from the low end of 5% to 7%.

Revenue guidance went the other way. PepsiCo now expects organic revenue growth of about 3%, narrowed from 2% to 4%. It expects net revenue growth of about 6%, the high end of its prior 4% to 6% range.

In North America, beverage volume fell 2% in the quarter and foods volume was flat. International carried the company. It accounts for 41% of net revenue so far this year, and PepsiCo said organic revenue grew in every international segment, including 9% in Asia Pacific Foods and 7% in Europe, Middle East and Africa.

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

Margins are the sharper issue. Core operating margin fell 35 basis points in the quarter and is down 25 basis points year to date, at 16.5% of revenue. After talks with Elliott in December, PepsiCo set a target of a 100-basis-point improvement over three years.

Schmitt did not soften it. "In North America, we remain committed to improving growth and core operating margin. However, it is taking more time than we planned," he said in prepared remarks. "Therefore, we expect North America's core operating margin performance to remain under pressure in the fourth quarter."

In February, PepsiCo cut prices by as much as 15% on brands including Lay's and Doritos to win back shoppers. Last month it said it would raise prices on some U.S. products to offset rising costs and rebuild North American profitability. Margins there have been hit by the affordability push, higher marketing spending and weak demand.

The company's own read is more upbeat: it said trends across North America improved sequentially, with lower net pricing helping volume and market share. Laguarta also pointed to early signs in North American convenient foods, which includes Doritos and Quaker, where organic revenue improved.

RBC Capital Markets analyst Nik Modi was less charitable about beverages. "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," he said.

PepsiCo said it is pursuing record productivity savings and will add more. "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," Laguarta said.

The company has not said how large the new cuts will be or where they will land.

PepsiCo is not alone. General Mills, McCormick and Conagra Brands are also spending more on promotions and affordability programs while absorbing higher input costs. PepsiCo's list of headwinds also includes inflation-weakened demand and the growing use of GLP-1 weight-loss drugs.

U.S. regular trading has not opened. Premarket indications were mixed: Reuters and CNBC reported shares up about 1% to 2%, while Quartz reported a dip of less than 1%. Those are premarket moves, not an opening price.

Laguarta is scheduled to discuss the results on CNBC at 10 a.m. ET. The unspecified new cost cuts, arriving as Schmitt warns of fourth-quarter margin pressure, will determine whether PepsiCo can keep the December 100-basis-point margin target on track.