PepsiCo Q3 Beats Expectations, Driven by Energy Drinks & Snack Resilience

Solid Quarter: PepsiCo Beats Top-Line and EPS Forecasts

PepsiCo edged past expectations in the third quarter of 2025, with revenue of $23.94 billion versus ~$23.83 billion consensus and adjusted EPS of $2.29 beating forecasts of $2.26.

Despite macro pressures, the company saw growth fueled by strong demand for energy drinks, “better for you” sodas, and salty snacks, particularly outside the U.S.

However, performance was mixed: volume declines in North America weighed on overall growth, while Latin America and Asia showed stronger momentum.

Underlying Strength & Hidden Pains

International Markets & Portfolio Execution

International segments continued to carry the load. PepsiCo’s expansion of prebiotic sodas, healthier labels, and reformulated snacks helped attract consumers in growth markets.

Rebrands of Lay’s, Tostitos, removal of synthetic dyes, and introduction of smaller packages also reflect a shift toward agility and consumer sensitivity.

U.S. Volume Pressure & Margin Constraints

In North America, snack volumes dropped 2–4%, and beverage volumes fell ~3% in Q3, reflecting consumer stress, promotional pressure, and category competition.

Net profit fell ~11% year-on-year, with reported net income of ~$2.6 billion, well below expectations of ~$3.1 billion, exposing margin compression from input costs, pricing constraints, and soft volume.

PepsiCo reaffirmed its full-year targets for organic revenue growth and core earnings per share on a constant currency basis, signaling confidence in stabilization.

Activism, Leadership & Strategic Pressure

Elliott’s Watchful Eye

Activist investor Elliott Management holds ~$4 billion worth of PepsiCo stock and is pushing for structural changes: re-franchising bottling, divesting non-core brands (like Quaker Oats), and streamlining operations.

The pressure is intensifying, especially as the company navigates a challenging North American backdrop.

CFO Exit & Succession

In a surprising move, CFO Jamie Caulfield will retire next month after less than two years in the role. He will be replaced by Steve Schmitt (currently Walmart U.S. CFO) effective November 10.

The timing raises questions about internal confidence, investor negotiation dynamics, and future financial strategy.

What to Watch Going Forward

1. North America rebound or further decline?
   The U.S. business is under pressure, any signs of volume stabilization or promotional discipline will be closely monitored.
2. Cost management & margins
   With inflation and input pressures ongoing, PepsiCo’s ability to protect margins will be tested in coming quarters.
3. Activist demands & capital allocation
   Will PepsiCo move to divest brands, restructure bottling, or return capital to shareholders in response to Elliott’s proposals?
4. International growth & innovation
   Success in emerging markets, new product categories (functional beverages, snacks), and agility in packaging will matter.
5. Leadership & credibility
   The CFO transition and board reactions will be viewed as signals about governance, credibility, and investor responsiveness.

PepsiCo’s Q3 2025 earnings beat delivers modest relief in a pressured environment: while energy drinks, healthier sodas, and snack strength carried performance, U.S. volume weaknesses and margin headwinds remain an important drag. With Elliott Management watching closely and leadership shifts underway, the real test lies ahead.