PepsiCo's Profit Plunges 29% on Massive Intangible Asset Impairment

TL;DR

**PepsiCo's profit took a huge hit from a Rockstar brand impairment, signaling trouble in their acquisition strategy and making the stock look less appealing for growth.**

AI Summary

PepsiCo, Inc. reported a mixed financial performance for the 36 weeks ended September 6, 2025. Net revenue increased slightly to $64.582 billion from $64.070 billion in the prior year, a 0.8% rise. However, net income attributable to PepsiCo significantly decreased by 29.2% to $5.700 billion from $8.055 billion in the same period last year. This decline was primarily driven by a substantial increase in impairment of intangible assets, which surged to $1.993 billion for the 36 weeks ended September 6, 2025, compared to just $24 million in the prior year. Operating profit consequently fell to $7.941 billion from $10.637 billion, a 25.3% reduction. Diluted earnings per share also dropped to $4.15 from $5.84. The company experienced a significant pre-tax charge of $100 million in the 12 weeks ended September 6, 2025, related to the impairment of the Rockstar brand, with $83 million recorded in impairment of intangible assets. Net cash provided by operating activities decreased to $5.468 billion from $6.220 billion, while net cash used for investing activities substantially increased to $5.237 billion from $2.965 billion, largely due to acquisitions, net of cash acquired, and investments in noncontrolled affiliates totaling $3.176 billion.

Why It Matters

This filing reveals a significant drop in PepsiCo's net income, primarily due to a substantial impairment charge related to intangible assets, notably the Rockstar brand. For investors, this signals potential overvaluation or underperformance of acquired brands, impacting future profitability and dividend growth expectations. Employees might face increased scrutiny on brand performance and cost-cutting measures. Customers could see shifts in product focus or marketing as PepsiCo re-evaluates its brand portfolio. In the broader market, this impairment highlights the challenges in integrating and growing acquired brands in a competitive beverage and snack landscape, potentially influencing M&A valuations in the consumer staples sector.

Risk Assessment

Risk Level: high — The risk level is high due to the significant impairment of intangible assets, totaling $1.993 billion for the 36 weeks ended September 6, 2025, a massive increase from $24 million in the prior year. This includes a $100 million pre-tax charge related to the Rockstar brand impairment, indicating potential overvaluation of past acquisitions and a direct hit to profitability, with net income attributable to PepsiCo falling by 29.2% to $5.700 billion.

Analyst Insight

Investors should scrutinize PepsiCo's acquisition strategy and the performance of its acquired brands, particularly in the energy drink segment. Consider re-evaluating PEP's growth prospects given the significant impairment charges and the impact on net income and EPS. A wait-and-see approach might be prudent until management provides a clear strategy for improving returns on intangible assets.

Financial Highlights

revenue

$64.582B

operating Margin

12.3%

net Income

$5.700B

eps

$4.15

gross Margin

54.6%

revenue Growth

+0.8%

Revenue Breakdown

Key Numbers

• $64.582B — Net Revenue (Increased by 0.8% for 36 weeks ended 9/6/2025 compared to $64.070B in prior year.)
• $5.700B — Net Income Attributable to PepsiCo (Decreased by 29.2% for 36 weeks ended 9/6/2025 from $8.055B in prior year.)
• $1.993B — Impairment of Intangible Assets (Significantly increased from $24M in prior year, driving profit decline.)
• $4.15 — Diluted EPS (Decreased from $5.84 in prior year for 36 weeks ended 9/6/2025.)
• $7.941B — Operating Profit (Decreased by 25.3% from $10.637B in prior year for 36 weeks ended 9/6/2025.)
• $5.237B — Net Cash Used for Investing Activities (Increased from $2.965B in prior year, largely due to acquisitions.)
• $3.176B — Acquisitions, net of cash acquired (Significant investment in noncontrolled affiliates for 36 weeks ended 9/6/2025.)
• 1,367,340,122 — Common Stock Outstanding (As of October 2, 2025.)

Key Players & Entities

• PepsiCo, Inc. (company) — registrant
• Rockstar (company) — impaired brand
• SEC (regulator) — filing authority
• Bloomberg (company) — publisher
• $64.582 billion (dollar_amount) — net revenue for 36 weeks ended 9/6/2025
• $5.700 billion (dollar_amount) — net income attributable to PepsiCo for 36 weeks ended 9/6/2025
• $1.993 billion (dollar_amount) — impairment of intangible assets for 36 weeks ended 9/6/2025
• $100 million (dollar_amount) — pre-tax charge for Rockstar brand impairment in 12 weeks ended 9/6/2025
• $3.176 billion (dollar_amount) — acquisitions, net of cash acquired, and investments in noncontrolled affiliates for 36 weeks ended 9/6/2025
• North Carolina (person) — state of incorporation

FAQ

Risk Factors

• Intangible Asset Impairment [high — operational]: A significant increase in impairment of intangible assets to $1.993 billion for the 36 weeks ended September 6, 2025, from $24 million in the prior year, severely impacted net income and operating profit. This includes a $100 million pre-tax charge related to the Rockstar brand impairment.
• Decreased Profitability [high — financial]: Net income attributable to PepsiCo fell by 29.2% to $5.700 billion, and operating profit decreased by 25.3% to $7.941 billion. This decline is directly linked to the substantial impairment charges.
• Increased Investing Activities [medium — financial]: Net cash used for investing activities rose significantly to $5.237 billion from $2.965 billion, primarily due to $3.176 billion in acquisitions and investments in noncontrolled affiliates, indicating a strategic shift towards expansion or consolidation.
• Reduced Operating Cash Flow [medium — financial]: Net cash provided by operating activities decreased to $5.468 billion from $6.220 billion, suggesting a potential tightening of operational cash generation or increased working capital needs.
• Income Tax Provision [low — regulatory]: The provision for income taxes decreased to $1.504 billion from $2.045 billion for the 36-week period, reflecting the lower income before taxes due to the impairment charges.

Industry Context

PepsiCo operates in the highly competitive global beverage and convenient foods industry. Key trends include increasing consumer demand for healthier options, sustainable packaging, and digital engagement. Major competitors include Coca-Cola, Keurig Dr Pepper, and various regional and private-label brands. The industry is characterized by significant marketing spend, complex supply chains, and evolving distribution channels.

Regulatory Implications

PepsiCo faces regulatory scrutiny related to advertising practices, product labeling (especially concerning health claims), environmental regulations concerning packaging and emissions, and labor practices. Changes in tax laws or trade policies could also impact international operations and profitability.

What Investors Should Do

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Key Dates

• 2025-09-06: End of 36-week reporting period — Marks the period for which the primary financial results (revenue, net income, EPS) are reported, showing a significant decline in profitability despite a slight revenue increase.
• 2025-09-06: Impairment of intangible assets recorded — A substantial $1.993 billion charge, including $83 million for the Rockstar brand, significantly impacted net income and operating profit, signaling potential overvaluation or declining value of acquired assets.
• 2025-09-06: Increased acquisition and investment activity — Company invested $3.176 billion in acquisitions and noncontrolled affiliates, contributing to a large increase in net cash used for investing activities, indicating strategic growth initiatives.
• 2025-10-02: Common Stock Outstanding — 1,367,340,122 shares outstanding, providing context for EPS calculations and market capitalization.

Glossary

Impairment of intangible assets

A charge taken when the carrying value of an intangible asset (like a brand name or patent) on the balance sheet is deemed to be higher than its recoverable amount, reflecting a permanent decline in its value. (A major driver of the significant net income and operating profit decline in the current period, with a substantial increase from $24 million to $1.993 billion.)

Noncontrolling interests

The portion of equity in a subsidiary that is not attributable to the parent company. It represents the ownership stake of outside shareholders. (Net income and comprehensive income attributable to noncontrolling interests are subtracted to arrive at the net income and comprehensive income attributable to PepsiCo.)

Acquisitions, net of cash acquired

The cost of acquiring another company or business, adjusted for any cash or cash equivalents that are part of the acquired entity. (A significant component of investing activities, totaling $3.176 billion, indicating strategic expansion or consolidation efforts.)

Operating Profit

Profitability measure calculated as Net Revenue minus Cost of Sales and Selling, General, and Administrative Expenses. It excludes interest and taxes. (Decreased by 25.3% to $7.941 billion, heavily impacted by impairment charges, indicating a significant reduction in core operational profitability.)

Diluted EPS

Earnings per share calculated using the weighted average number of outstanding common shares plus the effects of all dilutive potential common shares (like stock options and convertible securities). (Dropped to $4.15 from $5.84, reflecting the substantial decrease in net income attributable to PepsiCo.)

Year-Over-Year Comparison

Compared to the prior year's 36-week period, PepsiCo reported a slight 0.8% increase in net revenue to $64.582 billion. However, profitability metrics saw a significant downturn, with net income attributable to PepsiCo plummeting by 29.2% to $5.700 billion and operating profit falling 25.3% to $7.941 billion. This was primarily driven by a massive increase in impairment of intangible assets, soaring to $1.993 billion from just $24 million. Consequently, diluted EPS decreased from $5.84 to $4.15. Investing activities also increased substantially due to acquisitions, while operating cash flow saw a reduction.

Filing Documents

• pep-20250906.htm (10-Q) — 2614KB
• pep-20250906_g1.jpg (GRAPHIC) — 78KB
• exhibit15-q32025.htm (EX-15) — 12KB
• exhibit22-q32025.htm (EX-22) — 3KB
• exhibit31-q32025.htm (EX-31) — 20KB
• exhibit32-q32025.htm (EX-32) — 9KB
• 0000077476-25-000053.txt ( ) — 13614KB
• pep-20250906.xsd (EX-101.SCH) — 81KB
• pep-20250906_cal.xml (EX-101.CAL) — 96KB
• pep-20250906_def.xml (EX-101.DEF) — 481KB
• pep-20250906_lab.xml (EX-101.LAB) — 838KB
• pep-20250906_pre.xml (EX-101.PRE) — 691KB
• pep-20250906_htm.xml (XML) — 2825KB

Financial Information

Part I Financial Information

Condensed Consolidated Financial Statements 2

Item 1. Condensed Consolidated Financial Statements 2 Condensed Consolidated Statement of Income – 12 and 3 6 Weeks Ended September 6, 2025 and September 7, 2024 2 Condensed Consolidated Statement of Comprehensive Income – 12 and 36 Weeks Ended September 6, 2025 and September 7, 2024 3 Condensed Consolidated Statement of Cash Flows – 36 Weeks Ended September 6, 2025 and September 7 , 2024 4 Condensed Consolidated Balance Sheet – September 6, 2025 and December 28, 2024 6 Condensed Consolidated Statement of Equity – 12 and 36 Weeks Ended September 6, 2025 and September 7, 2024 7 Notes to the Condensed Consolidated Financial Statements 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Report of Independent Registered Public Accounting Firm 51

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 52

Controls and Procedures

Item 4. Controls and Procedures 52

Other Information

Part II Other Information

Legal Proceedings

Item 1. Legal Proceedings 53

Risk Factors

Item 1A. Risk Factors 53

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54

Other Information

Item 5. Other Information 54

Exhibits

Item 6. Exhibits 54 1 Table of Contents

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Condensed Consolidated Financial Statements

ITEM 1. Condensed Consolidated Financial Statements. Condensed Consolidated Statement of Income PepsiCo, Inc. and Subsidiaries (in millions, except per share amounts, unaudited) 12 Weeks Ended 36 Weeks Ended 9/6/2025 9/7/2024 9/6/2025 9/7/2024 Net Revenue $ 23,937 $ 23,319 $ 64,582 $ 64,070 Cost of sales 11,113 10,396 29,343 28,563 Gross profit 12,824 12,923 35,239 35,507 Selling, general and administrative expenses 9,122 9,027 25,305 24,846 Impairment of intangible assets (see Notes 1 and 4) 133 24 1,993 24 Operating Profit 3,569 3,872 7,941 10,637 Other pension and retiree medical benefits income 26 41 91 155 Net interest expense and other ( 264 ) ( 219 ) ( 788 ) ( 655 ) Income before income taxes 3,331 3,694 7,244 10,137 Provision for income taxes 713 749 1,504 2,045 Net income 2,618 2,945 5,740 8,092 Less: Net income attributable to noncontrolling interests 15 15 40 37 Net Income Attributable to PepsiCo $ 2,603 $ 2,930 $ 5,700 $ 8,055 Net Income Attributable to PepsiCo per Common Share Basic $ 1.90 $ 2.13 $ 4.16 5.86 Diluted $ 1.90 $ 2.13 $ 4.15 5.84 Weighted-average common shares outstanding Basic 1,369 1,373 1,370 1,374 Diluted 1,372 1,378 1,373 1,379 See accompanying notes to the condensed consolidated financial statements. 2 Table of Contents Condensed Consolidated Statement of Comprehensive Income PepsiCo, Inc. and Subsidiaries (in millions, unaudited) 12 Weeks Ended 36 Weeks Ended 9/6/2025 9/7/2024 9/6/2025 9/7/2024 Net income $ 2,618 $ 2,945 $ 5,740 $ 8,092 Other comprehensive income/(loss), net of taxes: Net currency translation adjustment 39 ( 512 ) 1,436 ( 961 ) Net change on cash flow hedges 23 ( 24 ) 27 21 Net pension and retiree medical adjustments 21 21 12 41 Net change on available-for-sale debt securities and other 410 ( 351 ) 540 ( 219 ) Total other comprehensive income/(loss), net of taxes 493 ( 866 ) 2,015 ( 1,118 ) Comprehensive income 3,111 2,079 7,755 6,974 Less: Comprehensive income attribut