PepsiCo Q3 2026 Earnings: $25.3 Billion Revenue, a $178 Million Tariff Refund and a Guidance Cut

PepsiCo reported third-quarter revenue of $25.3 billion on October 8, 2026, up 5.6%, and diluted EPS of $2.23, up 17%. Core operating profit rose 3%, or $140 million. Tariff refunds in the quarter were $178 million. Without them, core operating profit would have been slightly lower than a year ago. On the same morning, management cut its full-year outlook for core constant-currency EPS growth from the low end of 4% to 6% to a range of 1% to 2%, and said of its North America turnaround: "it is taking more time than we planned."

The Headline Numbers​

PepsiCo's fiscal year ends on the last Saturday of December, and its first three quarters are 12 weeks each. Q3 2026 is the 12 weeks ended September 5, 2026. Every figure below comes from the Form 10-Q, the earnings release and the prepared management remarks listed in Sources.

The release splits the 5.6% revenue growth into three parts: 3.1% organic growth, a 1.7-point net benefit from acquisitions and divestitures, and a 0.7-point benefit from foreign exchange. Organic growth was mostly price. The 10-Q puts effective net pricing at about 3 points and organic volume at about half a point.

Reported profit grew much faster than revenue, and most of that gap is last year's charges. The third quarter of 2025 carried $568 million of items PepsiCo excludes from core results: acquisition and divestiture charges, the Rockstar impairment, restructuring and a tax audit settlement in Latin America. This year the same items net to $17 million. Core operating profit, which leaves them out of both years, rose from $4,137 million to $4,277 million.

Our Q2 analysis said to watch two things in this quarter: whether North America foods returned to growth, and whether core operating margin stopped falling. Neither happened. North America foods revenue was flat to slightly down, and core operating margin fell another 35 basis points to 16.9%.

Revenue Deep Dive​

Segment revenue comes from the 10-Q. The organic and volume columns come from the release.

The two North America segments are 56% of revenue, and neither grew organically. Foods revenue slipped $22 million. The 10-Q says savory snacks volume rose 1% and other foods volume fell 4%, and that net pricing was unfavorable. PepsiCo is still paying for snack volume with lower prices, as it did in Q2.

North America beverages grew 5%, and the release attributes that growth primarily to "the benefits of acquisitions made in 2025." Acquisitions added $428 million of revenue in the quarter. Organic revenue was $7,289 million against $7,312 million a year earlier. Beverage volume fell 2%, an improvement on the 4% decline in Q2, with carbonated soft drinks down 2% and noncarbonated drinks down 3%.

The four international segments together brought in $11,064 million, 44% of revenue, and every one of them grew. This is where management's strongest language is. The prepared remarks say "International performance was robust during the third quarter with each segment delivering organic revenue growth," and that international organic growth "accelerated to 8 percent in the third quarter – the 22nd consecutive quarter of at least mid-single-digit organic revenue growth." The segment table supports both statements. Asia Pacific Foods volume grew 11%, led by India.

On new products, the remarks say: "We are encouraged by the performance of on-trend innovations such as NKD, Doritos Protein, Lays Baked with olive oil," and that poppi "delivered improved results and gained volume and value share in the third quarter." The 10-Q gives a second reading on poppi. PepsiCo owes the sellers a further $300 million if the brand reaches certain milestones by the third quarter of 2027. It now values that obligation at $12 million, after writing it down by $105 million this quarter and $266 million so far this year. The write-down is recorded as a reduction of selling, general and administrative expenses, so it raised reported operating profit. PepsiCo excludes it from core results.

For North America, the remarks are direct: "Our business in North America performed below our expectations and represents a meaningful opportunity for improvement."

The Margin Story​

Gross margin rose 85 basis points from a year ago, to 54.4%. Cost of sales grew 3.7% while revenue grew 5.6%. Part of the improvement is that last year's cost of sales included $46 million of acquisition-related charges. On a core basis, the release shows gross margin rising from 53.9% to 54.4%.

Pricing is doing the work internationally and not in North America. The 10-Q shows effective net pricing of 7 points in Europe, Middle East and Africa, 3 points in Latin America and 3 points in North America beverages. North America foods pricing was down 1 point and Asia Pacific Foods down 2 points. The release describes consolidated growth as "the benefits associated with effective net pricing and a contribution from organic volume growth". Nothing in the release or the remarks says prices will keep rising. The CEO's statement says the opposite about costs: new cost reductions are meant to "mitigate the impacts of rising input cost inflation."

Reported operating margin reached 16.9%, up from 14.9% a year ago. Core operating margin moved the other way, from 17.3% to 16.9%. Both figures are in the release. The reported margin improved because last year's charges are gone. The core margin fell because North America foods earned less: its core operating profit dropped 12%, from $1,570 million to $1,382 million, and the remarks put its core margin decline at 280 basis points, citing "the impact of affordability investments, the lap of an asset sale gain in the prior year quarter and higher advertising and marketing investments."

Below the operating line, the quarter has one named charge. PepsiCo recorded a $144 million pension settlement charge after lump-sum payments from a U.S. pension plan passed the annual threshold that triggers settlement accounting (10-Q Note 6). That turned the pension line from $26 million of income a year ago into $114 million of expense. The charge cost $0.08 of EPS and is excluded from core EPS.

The One Big Question: How Much of the Quarter Was the Refund?​

The U.S. Supreme Court ruled this year that many tariffs imposed under the International Emergency Economic Powers Act were invalid. The 10-Q says PepsiCo filed recovery claims and "received substantially all of the refunds of such tariffs." It does not give a dollar amount. The prepared remarks do: "Tariff refunds amounted to $178 million in the third quarter."

PepsiCo keeps the refund inside core results. The release says core operating profit growth of 3% includes "a 4-percentage-point favorable impact of tariff refunds." The bridge below uses the release's reconciliation, then subtracts the refund.

Core operating profit without the refund is $4,099 million, about 1% below last year. The last two rows are our subtraction of two figures PepsiCo published. PepsiCo does not present a core figure excluding refunds.

The refund is concentrated in North America beverages. The 10-Q says that segment's 45% operating profit growth included "a 23-percentage-point favorable net impact of global tariffs (which includes tariff refunds) and higher commodity costs." Its core operating profit rose only 4%, to $1,012 million, and the remarks say its core margin still fell 15 basis points.

Split the six segments by geography and the quarter looks like two companies. International core operating profit rose 16%, from $1,998 million to $2,309 million. North America core operating profit fell 6%, from $2,545 million to $2,394 million, with the refund included.

That is why guidance came down. The full-year changes, from the release:

Revenue guidance went up and earnings guidance went down, so the cut is entirely about margin. The remarks say: "we expect North America's core operating margin performance to remain under pressure in the fourth quarter." A lower tax rate softens the cut. The 10-Q says substantially all of the tariff refunds have been received, so there is little left to book in later quarters.

Tracking a $93.9B company in plain text​

A double-entry ledger has to put every amount on a line, so a one-off is either visible or deliberately left inside a total. The transaction below is the quarter as pushed to open_ledger/pepsico, following how we model every company. Income is negative, expenses are positive, and the check line proves they sum to zero.

; FY2026Q3 Income Statement — 12 weeks ended September 5, 2026
; Net revenue 25274; cost of sales 11520; SG&A 9494; no impairment this quarter;
; operating profit 4260; other pension and retiree medical benefits expense 114
; (settlement charge 144 less 30 of other net benefit income);
; net interest expense and other 242; pre-tax 3904; tax 834; net income 3070.
; Check: -25274 + 11520 + 9494 + 144 - 30 + 242 + 834 + 22 + 3048 = 0 ✓
 
2026-09-05 * "PepsiCo, Inc." "FY2026Q3 Income Statement"
  Income:Revenue                         -25274 MUSD
  Expenses:CostOfRevenue                   11520 MUSD
  Expenses:SellingGeneralAdministrative     9494 MUSD
  Expenses:OtherNet                           144 MUSD  ; Note 6: pension settlement charge, U.S. qualified plan lump-sum distributions
  Expenses:OtherNet                           -30 MUSD  ; other pension and retiree medical benefits, before the settlement charge (114 as filed - 144)
  Expenses:OtherNet                           242 MUSD  ; net interest expense and other
  Expenses:IncomeTax                          834 MUSD
  Expenses:OtherNet                            22 MUSD  ; net income attributable to noncontrolling interests
  Equity:Adjustments                         3048 MUSD  ; net income attributable to PepsiCo offset (RE set by balance assertion)

The two one-offs are treated differently, and the reason is the filing. The pension settlement charge has its own posting because the 10-Q states the amount and the line it sits in. The two pension postings sum to the $114 million the income statement shows. The tariff refund has no posting of its own. PepsiCo gives its amount in the prepared remarks, but no filing says which income-statement line carries it. Posting $178 million against cost of sales would be a guess, so the ledger leaves the filed lines whole and records the refund in a comment in the period file.

The balance-sheet number that tells this quarter's story is retained earnings. It moved from $74,116 million at the end of Q2 to $75,140 million, an increase of $1,024 million in a quarter that earned $3,048 million. The difference is $2,024 million of dividends declared, $1.48 a share, or two-thirds of the quarter's profit. Share repurchases took another $267 million. Cash still rose from $10,251 million to $10,675 million and short-term debt fell from $10,602 million to $9,223 million. Operating cash flow for the first 36 weeks was $7,950 million, against $5,468 million a year ago. Goodwill is $18,884 million, down from $18,916 million at year-end, and the 10-Q attributes the decrease mainly to currency translation.

The Multi-Year Arc​

Over five fiscal years PepsiCo's revenue grew from $79.5 billion to $93.9 billion, about 4.3% a year, while net income moved between $7.6 billion and $9.6 billion depending on that year's impairments. Fiscal 2025 carried a $1,993 million impairment charge and ended with an 8.8% net margin.

Fiscal 2026 has no impairment so far. Through 36 weeks, revenue is $68,898 million and net income attributable to PepsiCo is $8,356 million, already above the full-year 2025 figure of $8,240 million. The fourth quarter is 16 weeks long. Whether the year finishes above a 10% net margin depends on that quarter carrying no new charge. PepsiCo's annual impairment review took place in the third quarter and, per the 10-Q, "resulted in no impairment."

The Verdict: Bull vs. Bear​

Bull Case

• International is growing on volume and price: all four international segments grew revenue between 8% and 14%, and their combined core operating profit rose 16% to $2,309 million.
• Organic growth accelerated: 3.1% is up from 2.4% in Q2, and the remarks call it "the highest rate of growth since Q4 2023."
• North America beverage volume is declining more slowly: down 2% in Q3 against 4% in Q2.
• Cash generation improved sharply: free cash flow for 36 weeks was $5,857 million against $3,241 million a year ago, close to the $5,935 million of dividends paid.
• Full-year reported profit is set to recover: 36-week net income of $8,356 million already exceeds all of fiscal 2025.

Bear Case

• Core profit growth was smaller than the refund: $140 million of core operating profit growth against $178 million of tariff refunds.
• North America did not grow: organic revenue was flat in both foods and beverages, and combined core operating profit fell 6%.
• Robust demand is an international statement only: management uses "robust" for international results and "below our expectations" for North America, and the segment numbers agree with both.
• Pricing in North America foods is negative: net pricing fell 1 point and core margin fell 280 basis points, so the volume gain was paid for.
• Earnings guidance was cut: core constant-currency EPS growth of 1% to 2%, from the low end of 4% to 6%, with North America margins expected to stay under pressure in Q4.
• The poppi earn-out is valued at $12 million of a possible $300 million: the remarks on poppi are positive, and PepsiCo's own valuation of the liability implies a low chance of payment.

Our Take

The quarter was weaker than its headline. Revenue growth was real and international growth was strong, but the 17% EPS gain came from last year's charges, and the 3% core profit gain came from a tariff refund that is already largely collected. In our Q2 analysis we leaned cautiously bullish and said the case depended on North America foods turning positive and core margin holding. Both tests failed, and management's guidance cut confirms it. We now read PepsiCo as an international growth business attached to a North America business that is losing margin faster than cost cuts can replace it. The next evidence is the 16-week fourth quarter: North America core margin without a refund behind it, and whether the promised cost reductions show up in selling, general and administrative expenses. The ledger will show both.