PepsiCo Q2 Earnings Preview: Can It Weather the Tariff Storm and Reignite Domestic Growth?

PepsiCo ($PEP) is set to report its Q2 2025 earnings before the market opens on Thursday, July 17, and Wall Street is bracing for another quarter of declining sales and earnings. Consensus estimates call for revenue of $22.37 billion, down 0.6% from a year ago, and adjusted EPS of $2.03, representing an 11% drop.

A Soft Patch Continues

This would mark PepsiCo’s fourth straight quarter of revenue declines, as the company struggles with cost pressures, weakening consumer demand, and ongoing headwinds from tariffs. Its core North American snacks division—Frito-Lay North America (FLNA)—remains under pressure, facing slowing volume growth and shifting consumer preferences toward healthier options.

Last quarter, PepsiCo missed earnings estimates for the first time in over five years, and it has since cut its 2025 profit guidance, citing higher production costs and a stronger dollar. Analysts are now watching closely to see if the company can turn things around, especially in its home market.

North America Is the Key Concern

While international markets have offered some cushion, the real drag continues to be PepsiCo’s domestic performance. FLNA is facing not just inflation fatigue, but also backlash from earlier price hikes. As RBC analysts put it, “things may get worse before they get better” without a clear recovery in snack volumes.

Evercore’s Robert Ottenstein echoed this sentiment, warning that the stock may remain range-bound unless PepsiCo can revive domestic growth. His Q2 EPS forecast of $2.02 sits just below consensus, with organic sales growth expected at 0.9%—well short of the Street’s 1.8% estimate.

PBNA (PepsiCo Beverages North America) isn’t faring much better. Analysts expect revenue in this segment to rise just 0.5% YoY to $6.84 billion. Meanwhile, PFNA (PepsiCo Foods North America) shows a massive +1040% YoY change, though this is likely driven by accounting reclassifications rather than real growth. Latin America Foods, on the other hand, is expected to fall nearly 18% YoY.

Tariffs and FX Add to the Headwinds

PepsiCo is also feeling the sting of President Trump’s recent tariff policies, with management citing a 3 percentage point FX headwind to both top- and bottom-line growth. Add in higher interest expenses and muted consumer spending, and it’s no surprise analysts are growing more cautious. Over the past three months, EPS estimates have seen 13 downward revisions with none upward, while revenue estimates have been revised down six times.

Despite the challenges, not all analysts are bearish. UBS’s Peter Grom reiterated a Buy rating with a $169 price target, arguing that PepsiCo’s long-term fundamentals remain solid. While he expects a tough Q2, Grom believes international growth and productivity efforts will support mid- to high-single-digit EPS growth over time. He also noted the stock is trading at a 23% discount to large-cap peers, suggesting there’s room for upside.

Investor Sentiment and Valuation

PepsiCo shares have climbed 3% over the past month, likely due to some pre-earnings positioning, but they’re still down nearly 11% YTD. That compares unfavorably to the S&P 500’s 6.5% gain over the same period.

Despite the recent rebound, sentiment remains cautious. Both Wall Street analysts and quant models rate the stock a Hold for now. The average analyst price target sits at $147.70, modestly above the current price of $135.35.

Bottom Line

This quarter could be a turning point—not just in numbers, but in tone. Investors are less concerned with a minor earnings beat or miss, and more focused on whether PepsiCo can offer a clearer roadmap for stabilizing its core North American business. Commentary around inflation, tariffs, and future pricing strategies will likely matter more than headline results.