PepsiCo’s (PEP) Q2 2025 performance reflects a period of modest revenue growth, pressured profitability, and an accelerating strategic pivot toward international markets. Net revenue rose slightly to $22.7 billion, a 1% increase on a reported basis (+2% organic), signaling stable demand despite headwinds. However, net income fell sharply to $1.26 billion from $3.08 billion a year ago, as the company absorbed a substantial $1.86 billion impairment—primarily tied to its Rockstar energy brand—dragging diluted EPS down to $0.92 from $2.23.

Margins contracted across the board. Gross profit slipped to $12.4 billion with a 54.7% margin, compared to 56.0% in Q2 2024, while operating profit plummeted to $1.79 billion from $4.05 billion, largely due to impairment and restructuring charges. The net income margin dropped to 5.6%, down from 13.7% a year ago.

Segment performance varied significantly following a new six-part reporting structure. PepsiCo Foods North America (PFNA) posted $6.48 billion in revenue, up 1%, as operational efficiencies and value-pack offerings cushioned volume pressures. PepsiCo Beverages North America (PBNA) was flat at $6.8 billion, but its $639 million operating loss reflected the brunt of the impairment. Despite this, underlying trends in PBNA showed promise, with share gains in Pepsi and Gatorade and ongoing margin improvement initiatives.

International segments delivered more robust results. The EMEA region led with 8% revenue growth and strong +11% net pricing, despite volume declines, while LatAm Foods saw reported revenue fall 7%, though organic growth reached +6% thanks to solid volume expansion (+4%). The IB Franchise grew 3%, aided by healthy international beverage demand. Asia Pacific Foods was nearly flat, with 6% volume growth offset by -6% net pricing.

Geographically, international operations now account for 41% of consolidated revenue, up from prior periods, with markets like Europe, India, and Brazil showing strong momentum. Conversely, North America—still PepsiCo’s largest region—remains under strain, particularly in the snack segment, where Frito-Lay North America is seeing volume declines and weak consumer sentiment. Management is focusing on value packs, entry-level price points, and pack-size innovation to revive growth.

Organic revenue growth stood at +2% globally, driven by +4% effective net pricing, though partially offset by a -1.5% decline in volume. EMEA (+7%), LatAm Foods (+6%), and IB Franchise (+5%) led the way, while PFNA (-2%) and Asia Pacific Foods (flat) showed weaker performance.

Beyond operating metrics, capital expenditures were down to $904 million, reflecting tighter investment pacing, while depreciation and amortization totaled $787 million. PepsiCo maintained a rising dividend of $1.4225 per share, up from $1.3550 last year, and continued modest share repurchases.

Looking ahead, PepsiCo reiterated its guidance for low single-digit organic revenue growth for the full year, though the earnings outlook was tempered by macroeconomic uncertainty, new tariffs, and softness in North American snacks. Management reaffirmed its long-term strategy centered on international expansion, portfolio transformation, and operational efficiency, positioning the company for a more balanced and resilient future despite current volatility.