PepsiCo shares fell about 5% on Thursday after the company reported quarterly results and warned that costs will become higher in the second half of the year. The company said commodity costs will rise in the coming months, even as it spends more money on promotions and lowers prices to attract customers looking for cheaper products.
Investors were disappointed because PepsiCo kept its full-year forecast unchanged instead of raising it, even though it beat revenue expectations. PepsiCo’s North American food business reported a 2% drop in sales, showing that demand for snacks remains weak in its biggest market.
Higher costs hit PepsiCo
Food and beverage companies are facing higher costs for packaging and transportation because the Iran war has kept oil prices high, making business more expensive, according to Reuters. Companies are also dealing with changing consumer habits, as shoppers now want healthier products while also looking for better value for money.
PepsiCo Chief Financial Officer Steve Schmitt said the company expects higher input costs in the second half of fiscal 2026. Schmitt added that tariff refund claims and productivity savings should reduce some of the financial pressure from rising costs. To win back customers, PepsiCo has cut prices by up to 15% on popular snack brands like Lay’s and Doritos in North America.
PepsiCo cuts prices
Many shoppers are buying cheaper brands and smaller pack sizes because inflation continues to affect household budget. CEO Ramon Laguarta said PepsiCo’s international business performed well, helping increase organic sales volumes, according to Reuters. Laguarta also said consumer budgets remain tight, and inflation continues to hurt demand for the company’s products, according to Reuters.
The company said high gasoline prices reduced consumer spending more than expected, leading people to buy fewer snacks and drinks. PepsiCo is changing its product lineup by launching foods and drinks without artificial colors or flavors to match growing demand for healthier choices. New products include lower-sugar Gatorade, Propel protein powder and Quaker Protein Rice Crisps, targeting health-conscious consumers.
Healthy products push
eMarketer analyst Suzy Davidkhanian said PepsiCo’s biggest challenge is keeping its famous brands relevant as consumer preferences continue to change, according to Reuters. Davidkhanian said shoppers are still spending money, but they now think more carefully before buying and expect trusted brands to offer more choices.
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PepsiCo did not change its outlook for fiscal 2026, keeping its forecast for organic revenue growth between 2% and 4%. The company also maintained its forecast for core constant-currency earnings per share growth of 4% to 6%.
PepsiCo earnings outlook
Schmitt said PepsiCo will increase advertising and marketing spending in North America during the second half of the year to support sales growth. He told analysts the company will continue to “play offense,” meaning PepsiCo plans to keep investing despite higher costs, according to Reuters.
PepsiCo’s quarterly revenue rose 6.4% to $24.18 billion, beating analysts’ estimate of $23.95 billion, according to LSEG data. Quarterly core earnings per share came in at $2.20, higher than $2.12 in the same quarter last year. Even though PepsiCo beat revenue and earnings estimates, investors focused more on weak North American snack sales, rising costs and unchanged guidance, which pushed the stock lower.
