PepsiCo shares dropped 3.5% to $137.55 on Thursday. The company reported second-quarter results that beat expectations, but ongoing losses in its main North American business overshadowed the strong earnings. This decline happened even as most stocks rose due to easing worries about the Middle East.
PepsiCo reported adjusted earnings of $2.20 per share for the quarter, slightly above the $2.19 expected by analysts. Revenue grew 6.4% from last year to $24.18 billion, also beating the $23.95 billion forecast.
Even with these results, investors were concerned about the drop in North American beverage sales, which fell 4% from last year. This raised new doubts about PepsiCo’s ability to keep its market share in its key market. Most of the company’s growth came from international sales.
Analysts described the results as a lower-quality win, since most of the earnings boost came from lower interest expenses instead of stronger business performance. Organic sales growth was weaker than expected, even though overall results matched forecasts.
PepsiCo is still dealing with tough conditions in the U.S. market. Shoppers are careful about spending after years of high inflation and are choosing products with less sugar, simpler ingredients, and more protein or fiber. This trend is affecting many packaged-food companies.
Activist investor Elliott Investment Management is still urging PepsiCo’s board to make changes. They want lower prices on some products, more value-sized packs, updates to key brands like Lay’s and Tostitos, and new products such as Doritos with added protein.
PepsiCo has cut costs by closing plants and removing some manufacturing lines, which helped balance higher spending on advertising and marketing. The operating margin for the quarter was 16.6%, much higher than last year’s 7.9%, although last year’s number included special charges.
PepsiCo’s management confirmed their full-year 2026 outlook, aiming for organic revenue growth of 2% to 4% and core earnings growth of 4% to 6%. Analysts expect weaker U.S. demand and higher costs later this year, but think international growth and tariff refunds will help balance these challenges.
