PepsiCo Q1 Earnings: Solid Resilience Amid Tariff Pressures, But Cautious EPS Outlook

PepsiCo delivered mixed Q1 results, reinforcing the company’s ability to weather macro headwinds but also revealing the drag from elevated supply chain expenses, trade uncertainty, and a hesitant consumer. While revenue modestly beat expectations and organic growth stayed positive, PepsiCo cut its core constant currency EPS outlook for the year, citing escalating tariff-related costs and macroeconomic volatility. Despite these pressures, the company reiterated its goal of low-single-digit organic revenue growth, continued its capital return program, and highlighted the strength in international operations and emerging categories such as zero-sugar and functional beverages.

Headline Results vs. Expectations

PepsiCo reported Q1 core earnings of $1.48 per share, narrowly missing the consensus estimate of $1.49. Revenue of $17.92 billion came in slightly ahead of estimates at $17.73 billion, although it represented a 1.8% year-over-year decline. Organic revenue increased by 1.2%, buoyed by international strength and improvements in beverage trends. However, these results were overshadowed by a notable guide-down: PepsiCo now expects core constant currency EPS to be flat year-over-year, down from prior expectations of mid-single-digit growth. This revision implies a roughly 3% decline in USD EPS, factoring in a 3-point FX headwind.

Tariff and Cost Impact

Tariffs are proving to be a meaningful headwind in 2025. CEO Ramon Laguarta warned that evolving global trade policy, especially tariffs on inputs and ingredients, will weigh on supply chain costs for the remainder of the year. The company is planning mitigation strategies, including alternative sourcing, cost discipline, and price-pack adjustments to offset these pressures, but the guidance shift underscores how persistent and material these trade frictions have become. Laguarta emphasized that these actions are being calibrated to avoid disruption to consumer relationships and long-term brand equity.

Pricing, Volumes, and Cost Discipline

PepsiCo’s pricing discipline was evident, but volume softness remains a concern. In the North American beverage segment, organic revenue rose 1% despite a 3% drop in volume, suggesting strong pricing power, especially in categories like zero sugar and functional hydration. Meanwhile, the Foods North America division saw a 2% revenue decline and a 1% dip in volume, as snack demand was pressured by cautious consumer behavior and lingering effects from last year’s product recall. Expenses also crept up, notably due to fixed cost deleverage in PFNA and the uneven timing of productivity investments, which weighed on core operating margins.

Segment and Regional Breakdown

In PepsiCo Beverages North America (PBNA), the quarter was a clear bright spot. Core operating profit grew 14% with a 125-basis-point expansion in margin, led by strength in Pepsi Zero Sugar, Gatorade Zero, and Propel. Market share gains in both carbonated soft drinks and sports drinks supported top-line performance, and new launches like the national rollout of Baja Blast showed promise. Foodservice revenue also contributed positively.

In contrast, PepsiCo Foods North America (PFNA) struggled, posting a 2% revenue decline. Frito-Lay underwhelmed, though Quaker rebounded with strong organic growth following a product recall in the prior year. While value-focused consumers challenged broad-based snack sales, niche brands like Gamesa, Chester’s, and Quaker rice cakes delivered growth. However, core profit fell 7%, with the company citing fixed cost drag and ongoing investments in the segment.

International Business Delivers Again

International remains PepsiCo’s most consistent performer, delivering 5% organic revenue growth—marking the 16th straight quarter of mid-single-digit or better expansion. Beverages led the charge with 11% growth, powered by strength in China, India, Egypt, and Mexico. Foods rose a more modest 2%. The international division also posted 4% constant currency profit growth, though this was a slowdown from last year’s 19% pace, impacted in part by FX pressures and a tougher macro backdrop.

Outlook and Strategic Focus

Looking ahead, PepsiCo maintained its 2025 revenue guidance but trimmed EPS expectations to flat on a constant currency basis. Key priorities include investing in high-growth platforms like prebiotic soda brand Poppi (pending approval), expanding into underpenetrated channels, and continuing a multi-year productivity push through automation and digitalization. FX headwinds are expected to remain a 3-point drag on both revenue and EPS. The company reaffirmed plans for $8.6 billion in cash returns to shareholders, including a 5% dividend increase.

Conclusion

PepsiCo’s Q1 results reflect operational steadiness in an unstable world, with strength in global beverages and productivity gains helping offset volume challenges and tariff headwinds. However, the EPS guidance cut signals a more cautious tone amid elevated cost pressures. As consumer sentiment remains fragile and trade friction intensifies, the company’s ability to stay nimble with pricing, innovation, and global execution will be critical to sustaining its premium valuation and long-term growth goals.