PepsiCo, Inc. (NASDAQ:PEP) stock rose in Thursday's premarket trading after the company reported better-than-expected third-quarter earnings and revenue.

However, PepsiCo lowered its fiscal 2026 earnings outlook as its North American operations continued to face margin pressure. The company also outlined additional cost-cutting measures to offset rising expenses and support growth.

Meanwhile, recent price forecast cuts from RBC Capital, Wells Fargo and UBS in the first week of October highlighted concerns about the company's outlook.

PepsiCo Beats Third-Quarter Earnings and Revenue Estimates

PepsiCo's third-quarter net revenue rose 5.6% year over year to $25.27 billion, beating analysts' estimate of $24.96 billion. Core earnings per share increased 2% to $2.34, topping the $2.29 consensus estimate.

GAAP earnings per share rose 17% to $2.23.

Organic revenue grew 3.1%, its fastest pace since the fourth quarter of fiscal 2023. Acquisitions and divestitures contributed a net 1.7 percentage points to revenue growth, while foreign exchange added 0.7 percentage points.

Global organic volume increased 3% in beverages and 1% in convenient foods.

Operating profit jumped 19% to $4.26 billion, while operating margin expanded 195 basis points to 16.9%.

The GAAP profit increase reflected the favorable net impact of acquisition- and divestiture-related charges and mark-to-market gains on commodity derivatives.

However, core operating profit grew just 3% to $4.28 billion, while core operating margin contracted 35 basis points to 16.9%.

For the first nine months of fiscal 2026, net revenue increased 6.7% to $68.90 billion. GAAP earnings per share rose 47% to $6.10, while core earnings per share climbed 5% to $6.15.

PepsiCo ended the quarter with $10.68 billion in cash and cash equivalents, $9.22 billion in short-term debt and $42.66 billion in long-term debt.

North American Margins Remain Under Pressure

PepsiCo Foods North America reported a slight decline in organic revenue. Growth in U.S. savory and salty snack volumes was partly offset by weaker demand for other food products and softer performance in Canada.

PepsiCo Beverages North America's net revenue increased 5%, supported by acquisitions. However, organic revenue slipped slightly as lower volumes offset pricing gains.

Beverage volume trends improved sequentially, driven by functional hydration products and flavored carbonated soft drinks.

Convenient foods also showed sequential improvement, supported by higher savory snack volumes and market share gains. However, lower effective net pricing weighed on revenue.

PepsiCo attributed the decline in North American core operating margins to affordability initiatives, increased advertising and marketing spending, and unfavorable volume and channel mix.

Tariff refunds, pricing and productivity savings partly offset those pressures. The company expects North American margin pressure to persist in the fourth quarter.

International Business Delivers Strong Growth

PepsiCo's international operations remained a bright spot, with every segment reporting strong net revenue growth.

International organic revenue increased 8%, marking the 22nd consecutive quarter of at least mid-single-digit growth.

Revenue rose 8% in International Beverages Franchise and Europe, Middle East and Africa. Latin America Foods posted 14% growth, while Asia Pacific Foods revenue increased 10%.

International core operating margin expanded 105 basis points, supported by revenue growth and productivity savings.

PepsiCo Lowers 2026 Earnings Outlook, Plans Cost Cuts

PepsiCo moderated its fiscal 2026 guidance, forecasting organic revenue growth of approximately 3% and core earnings per share growth of 1% to 2% on a constant-currency basis.

The company lowered its adjusted earnings per share outlook to $8.34 to $8.43, below analysts' estimate of $8.55.

PepsiCo projected full-year sales of $99.56 billion, above the $98.88 billion consensus estimate.

The company also expects reported net revenue growth of approximately 6% and core earnings per share growth of 2.5% to 3.5%.

PepsiCo will focus on faster-growing product categories. In convenient foods, priorities include portion-controlled products, protein, fiber and simpler ingredients.

Its beverage strategy will emphasize functional hydration, zero-sugar drinks, energy products and protein beverages.

PepsiCo acknowledged that its carbonated soft drink business in North America underperformed the broader category during the third quarter, even as demand for functional hydration and zero-sugar beverages remained strong.

The company said reviving its soda business is a key priority and plans to increase marketing efforts, introduce new flavors and expand zero-sugar options to strengthen its competitive position in the U.S. market.

Looking ahead, Chairman and CEO Ramon Laguarta said PepsiCo will build on its international momentum while taking steps to improve its North American business.

The company plans to increase investments in innovation, brand development and sales execution. It is also identifying additional structural cost reductions to fund growth initiatives and offset rising input costs.

PEP Price Action: PepsiCo shares were up 1.72% at $125.86 during premarket trading on Thursday. The stock is near its 52-week low of $123.47, according to market data.