What the company does 🌍
PepsiCo is a global consumer staples company, meaning it sells everyday products people buy regularly regardless of the economy (food, snacks, and beverages). It operates a diversified snacks-and-beverages platform with well-known brands and broad global distribution.
- Convenient Foods: snacks and packaged foods
- Beverages: soft drinks, juices, sports drinks, water, and ready-to-drink options
A key point for beginners: PepsiCo is not only a soda business. Its snack portfolio helps diversify demand across categories.
Financial Highlights 📊
- Revenue increased in FY 2025 versus FY 2024 (steady top-line growth).
- Operating profit declined in FY 2025, driven by higher costs and larger impairment charges.
- Impairment is an accounting write-down when the reported value of certain assets (often brands or other intangible assets) is reduced.
- Net interest expense increased, meaning interest costs on debt were a bigger headwind for earnings.
- Operating cash flow remained strong, supporting dividends, buybacks, and investment spending.
Key Risks ⚠️
The company’s 10-K emphasizes risks that are specific to its business and industry.
- Shifting consumer preferences: changing demand toward different health, nutrition, or sustainability expectations.
- Intense competition: pressure from competing brands and private-label products across snacks and beverages.
- Input and supply chain volatility: changes in availability or costs of ingredients, packaging, and logistics.
- International and currency exposure: results can be affected when foreign earnings translate into U.S. dollars.
- Regulatory and legal requirements: food safety, labeling, marketing, and environmental rules can increase compliance costs.
- Brand and product safety: reputational damage from quality issues, recalls, or negative publicity can reduce demand.
MD&A 🧭
In the MD&A section, management highlighted a year where sales increased, but profitability weakened. Key themes included cost pressures, the impact of impairment charges, and higher interest expense. Management also emphasized continued cash generation, investment in operations, and returning cash to shareholders through dividends and repurchases.
Liquidity (the ability to meet short-term obligations) was described as supported by cash, operating cash flow, and access to financing.
Takeaway ✅
PepsiCo’s FY 2025 results show a business with steady demand and revenue growth, supported by well-known brands and broad distribution. At the same time, the year reflected profit pressure from higher costs, impairment charges, and higher interest expense. For beginner investors, the core picture is a large, cash-generative consumer staples company where sales resilience can coexist with margin and cost challenges.
Income Statement Summary 💵
Round percentages to one decimal place. Values are in millions ($m). EPS is in $.
| (Unit: $m, EPS in $) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Revenue | 91,471 | 91,854 | 93,925 |
| Cost of Goods Sold | 41,881 | 41,744 | 43,066 |
| Gross Profit | 49,590 | 50,110 | 50,859 |
| SG&A | 36,677 | 37,190 | 37,368 |
| Operating Income | 11,986 | 12,887 | 11,498 |
| Non-Operating Income/Expense | 250 | (22) | (133) |
| Interest Income/Expense | (819) | (919) | (1,121) |
| Income Before Tax | 11,417 | 11,946 | 10,244 |
| Income Tax | 2,262 | 2,320 | 1,949 |
| Net Income | 9,074 | 9,578 | 8,240 |
| EPS | 6.6 | 7.0 | 6.0 |
Plain English: Revenue grew modestly into FY 2025, but Operating Income fell versus FY 2024. A major driver is the jump in impairment charges in FY 2025, which reduced profitability even as sales increased. Also, net interest expense rose, which further pressured bottom-line results. (SG&A means selling, general and administrative costs—day-to-day operating costs like marketing, logistics overhead, and corporate expenses.)
Key Financial Ratios 🔎
| Ratio | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| ROE (%) | 50.9% | 52.4% | 42.9% |
| ROA (%) | 9.4% | 9.6% | 8.0% |
| ROTC (%) | 19.1% | 20.7% | 16.5% |
| ROIC (%) | 18.2% | 19.3% | 15.4% |
| Gross Margin (%) | 54.2% | 54.6% | 54.1% |
| Operating Margin (%) | 13.1% | 14.0% | 12.2% |
| Pretax Margin (%) | 12.5% | 13.0% | 10.9% |
| Net Margin (%) | 9.9% | 10.4% | 8.8% |
| Debt-to-Equity Ratio (D/E) (%) | 238.4% | 245.6% | 241.0% |
| Net Debt / EBITDA (x) | 2.3x | 2.2x | 2.7x |
| Interest Coverage Ratio (x) | 14.6x | 14.0x | 10.3x |
| Current Ratio (%) | 85.2% | 81.9% | 85.3% |
| Quick Ratio (%) | 65.8% | 62.1% | 64.2% |
| Fixed Asset to Long-term Capital Ratio (%) | 48.2% | 50.7% | 47.7% |
Plain English: Profitability ratios (ROE/ROA/ROIC) declined in FY 2025, consistent with the lower Operating Income and Net Income. Gross margin stayed stable, but operating and net margins dropped, meaning costs and one-time items (like impairments) weighed more heavily on profits. Leverage remains meaningful (high D/E), and Net Debt / EBITDA increased in FY 2025, while interest coverage fell—still solid, but moving in the wrong direction versus FY 2024.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 PepsiCo, Inc. (PEP) FY 2025 10-K Analysis (Filed 2026) | Explained for Beginners