PepsiCo Inc. (PEP) reported third-quarter 2026 net revenue of $25.27 billion on October 8, up 5.6% from a year earlier. Core operating margin fell 35 basis points to 16.9% in the 12 weeks ended September 5, 2026. A basis point is one-hundredth of a percentage point, so that drop is 0.35 points. The release cites higher operating costs and heavier advertising as the offsets. The full-year outlook was also lowered on core earnings while the sales outlook moved up. The quarter shows a company growing overseas while operating costs and input inflation weigh on the core margin.

Where the revenue growth came from

The release attributes the 5.6% net revenue increase to 3.1% organic growth. Organic growth is the company's own measure that leaves out currency effects and portfolio changes. The gap between the two figures is not explained in the sections we reviewed, so this piece does not estimate it.

International segments carried the quarter. IB Franchise grew 7%, Europe, Middle East and Africa grew 9%, Latin America foods grew 6% and Asia Pacific foods grew 9%. Each of those segments posted strong net revenue growth in the release.

Chart series: Q3 2026 organic net revenue growth by segment, for the 12 weeks ended September 5, 2026. IB Franchise 7%, EMEA 9%, Latin America foods 6%, Asia Pacific foods 9% and total company 3%. View PepsiCo financial data

The two North American segments show a dash rather than a growth rate for the quarter. Year to date, PepsiCo Beverages North America is up 1%. That leaves the home market as the slowest part of the business in the figures we read.

Across the first 36 weeks of the year, the release shows international segments growing between 4.5 and 9%. Those results sit alongside the raised organic revenue guidance of about 3%.

Why the margin fell

Core operating profit rose 3% on 5.6% revenue growth. Reported operating profit rose 19% to $4.26 billion, and the reported margin reached 16.9% from 14.9% a year earlier. The core margin, which excludes the items the company adjusts for, moved the other way, from 17.3% to 16.9%. Both figures land on 16.9%, but they start from different bases, so the reported gain does not signal better underlying margins. Put plainly, sales grew faster than core profit in the quarter, and the margin line is where that gap shows up.

The release says a 4-percentage-point tariff refund helped core operating profit in the quarter. As calculated by Trend & Ticker, taking that 4 points out of the 3% core profit growth leaves a decline of about 1%. That is a rough subtraction of percentage points, not a restated figure from the company.

The company says it expects further cost reduction actions to help fund investments and to mitigate rising input cost inflation. The release does not quantify those actions, so their size cannot be checked from this filing. Advertising and marketing spending also rose, and the release names it as one of the offsets to core profit.

Chart series: core operating margin, Q3 2025 at 17.3% and Q3 2026 at 16.9%, a change of minus 35 basis points. Reported operating margin moved from 14.9% to 16.9% over the same two quarters. Our trailing twelve-month operating margin is 15.32%, a four-quarter figure that sits below the third-quarter level. View PepsiCo financial data

Earnings per share and the guidance cut

Reported earnings per share came in at $2.23, up 17% from $1.90. Core earnings per share reached $2.34, up 2% from $2.29. Core operating profit grew 3% over the same quarter, so core earnings per share grew a point less than core operating profit. The release does not break down that difference. Reported earnings per share includes items the core measure removes, so the two growth rates answer different questions.

The full-year changes are the more important number. Core earnings per share growth is now 2.5 to 3.5%, down from a low end of 5 to 7%. The top of the new range sits below the bottom of the old one. Core constant-currency growth moved to 1 to 2% from a low end of 4 to 6%.

Organic revenue guidance rose to about 3% from 2 to 4%. Net revenue guidance rose to about 6% from 4 to 6%. The company is raising its sales outlook and lowering its profit outlook in the same release.

Chart series: FY2026 guidance, previous range against the new range. Organic revenue 2 to 4% becomes about 3%. Net revenue 4 to 6% becomes about 6%. Core EPS low end 5 to 7% becomes 2.5 to 3.5%. Core constant-currency EPS low end 4 to 6% becomes 1 to 2%. View PepsiCo financial data

Cash generation and the balance sheet

Free cash flow here means operating cash flow less capital spending. Our trailing twelve-month free cash flow is $10.47 billion, on revenue of $98.24 billion and net income of $10.90 billion. As calculated by Trend & Ticker, that is 96.1% of net income and a free cash flow margin of 10.66%. The company's own guidance calls for conversion of at least 80%, and that guidance is unchanged. The trailing figure of 96.1% sits well above that floor. The floor is a company statement, not a forecast from this piece.

The release gives a 36-week cash flow picture. Operating cash flow was $7.95 billion and capital spending was $2.18 billion, which leaves $5.77 billion, as calculated by Trend & Ticker from those two lines. The release does not give a third-quarter-only free cash flow number.

Debt is the heavier side of the ledger. Our data lists $56.68 billion of debt against $11.16 billion of cash, which is net debt of $45.52 billion. As calculated by Trend & Ticker, net debt equals 4.35 times trailing free cash flow, and gross debt equals 5.41 times. Put another way, current free cash flow would take about four and a third years to cover net debt, before any change in debt. Our data also lists an annual dividend of $5.805 per share.

Our database stores these balance sheet and cash figures in millions of dollars. This piece converts them to billions and shows each calculation with its inputs, so a reader can rebuild every ratio from the numbers in the text.

Chart series: trailing twelve-month figures as of Q3 2026. Free cash flow $10.47 billion, net income $10.90 billion, cash $11.16 billion and debt $56.68 billion. View PepsiCo financial data

What the data cannot answer

The release does not say how much of the 4-point tariff benefit repeats in the fourth quarter. It also does not split the 36-week cash flow into a third-quarter figure. The quarterly report filed with the SEC is where the adjustment items behind the EPS gap would be itemized, and this piece did not open that document.

The open question is whether either North American segment returns to organic growth while input costs keep rising. The full-year guidance sets that test, and the next quarterly report will be the first place it shows up in the numbers. This piece does not state a date for that report, so readers should check the company's investor relations page for the schedule before relying on any timing.