PepsiCo tops earnings, raises dividend and unveils $10B buyback
Consumer goods giant snaps profit decline streak with strategic price cuts on flagship snack brands
PepsiCo delivered stronger-than-expected fourth-quarter results and committed to returning billions to shareholders, announcing a 4% dividend increase and a new $10 billion share repurchase program that extends through 2030. The beverage and snacks giant reported adjusted earnings per share of $2.26, topping analyst estimates of $2.24, while revenue reached $29.34 billion, exceeding the $28.97 billion consensus and growing 5.6% year-over-year.
The quarterly performance marks a significant turnaround for the company, snapping a streak of profit declines that had pressured the stock throughout much of 2025. The results were driven by strong productivity savings, expanded operating margins, and double-digit EPS growth, with solid performance across both North American and international markets.
In a notable strategic shift, management announced plans to reduce prices on flagship snack brands including Lay's, Doritos, Tostitos, and Cheetos. The move represents what executives termed a "strategic recalibration" in response to consumer resistance to previous price increases, which had accelerated volume declines in the second half of 2025, particularly for larger package sizes. The company aims to boost purchase frequency and expand in-store presence in the first half of 2026.
The price-cutting strategy follows pressure from activist investor Elliott Investment Management, which has urged PepsiCo to focus on affordability, accelerated innovation, and aggressive cost reduction. The activist campaign has pushed management to address volume pressures that emerged as consumers pushed back against years of price increases implemented during the inflationary period of 2023-2024.
The shareholder return initiatives underscore PepsiCo's confidence in its financial position. The 54th consecutive annual dividend increase brings the annualized payout to $5.92 per share, continuing one of the longest dividend growth streaks among large-cap consumer staples companies. Combined with the new buyback authorization, PepsiCo expects to return approximately $8.9 billion to shareholders annually.
Looking to 2026, the company provided preliminary guidance for organic revenue growth of 2-4% and core constant currency earnings per share growth of 4-6%. This outlook reflects management's expectations that the strategic pivot toward affordability will stabilize volumes while cost discipline drives margin expansion. The guidance sits slightly below historical growth rates, reflecting a more cautious posture amid ongoing macroeconomic uncertainty and shifting consumer behaviors.
Despite the earnings beat, PepsiCo shares experienced modest volatility in pre-market trading, reflecting investor concerns about the conservative guidance and the potential margin impact of price reductions. Analysts maintain a mostly neutral stance on the stock, with an average price target of $157.27 according to consensus data, suggesting limited upside from current levels.
The company's ability to execute on its affordability strategy while maintaining profitability will be closely watched by investors in the coming quarters. Early indicators from the fourth quarter show promise, with the beverage business demonstrating particular strength and international markets contributing to the revenue growth acceleration that exceeded analyst expectations.
PepsiCo's market capitalization stands at approximately $210 billion, with the stock trading at 28 times trailing earnings—a premium to broader market averages but more reasonable given the company's dividend yield of 3.7% and consistent shareholder returns. The low beta of 0.42 continues to make the stock a defensive play for investors seeking stability in volatile market conditions.