Pepsi Soars and Emerges as One of the Market’s Top Defensive Plays
epsi, Coca-Cola’s main rival, reported fiscal fourth-quarter 2025 results that slightly exceeded Wall Street expectations.
Quick overview
- PepsiCo's shares rose over 4% after reporting quarterly earnings that exceeded Wall Street expectations.
- The company posted total revenue of $29.34 billion for Q4 2025, driven by price increases despite declining sales volumes in North America.
- Pepsi is implementing strategic initiatives, including price reductions and product line simplifications, to enhance competitiveness amid changing consumer demand.
- The company also announced a 4% dividend increase and a $10 billion share buyback program, reflecting confidence in its long-term growth.
Shares of PepsiCo rose more than 4% in a single session following the release of its quarterly earnings, reinforcing its position as one of the market’s strongest defensive plays.
Pepsi, Coca-Cola’s main rival, reported fiscal fourth-quarter 2025 results that slightly exceeded Wall Street expectations, pushing its stock sharply higher.
For the period ended December 27, 2025, the company posted total revenue of US$29.34 billion, up 5.6% year over year and above the analyst consensus of roughly US$28.9 billion. Adjusted earnings per share (EPS) came in at US$2.26, beating expectations by US$0.02.
Operating performance: what’s behind Pepsi’s growth?
Revenue growth was driven mainly by price increases and productivity gains, even as sales volumes continued to show signs of weakness. In North America, volumes declined by about 1% in snacks and nearly 4% in beverages, highlighting softer consumer demand in the company’s core market.
Pepsi attributed much of its resilience to stronger international demand, particularly in emerging markets, where localized flavors and targeted product categories helped offset slower momentum at home.
Strategic adjustments and market response
In response to shifting consumption patterns and pressure on demand, Pepsi announced a series of strategic initiatives aimed at improving competitiveness:
- Price reductions on key products, with suggested cuts of up to 15% on brands such as Lay’s, Doritos, Ruffles, and Tostitos, addressing consumer concerns over affordability after years of price hikes.
- Portfolio simplification and product line cuts, focusing on higher-growth and more profitable brands.
- Innovation in healthier and functional products, including offerings with added protein or functional benefits, alongside the repositioning of iconic brands such as Pepsi Prebiotic.
These moves are part of a broader strategy partly driven by pressure from activist investor Elliott Investment Management, which has pushed for operational improvements and a more aggressive focus on consumer value.
Outlook and shareholder returns
Alongside its solid quarterly results, Pepsi announced a 4% dividend increase and a US$10 billion share buyback program, signaling confidence in its long-term cash-generation capabilities.
For fiscal year 2026, the company reaffirmed its guidance for organic revenue growth of 2%–4% and adjusted EPS growth of 5%–7%, supported by productivity initiatives, innovation, and international expansion.
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