How PEP (PepsiCo) Makes Money in 2026: A Deep-Dive With Income Statement
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Understanding how a beverage and snack food giant like PepsiCo makes money is essential for investors and anyone interested in the business of consumer goods. In this post, we break down PepsiCo's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows β what comes in, where it goes, and what's left as profit.
Quick PepsiCo Overview
 Income Statement Overview](https://blog.valuesense.io/content/images/2026/02/PEP_income_1771325859.png)
PepsiCo operates as a global leader in beverages and convenient snacks, producing and distributing iconic brands like Pepsi, Gatorade, Lay's, Doritos, and Quaker foods through its Frito-Lay, PepsiCo Beverages, and other segments. Revenue comes primarily from sales of these products across North America, Europe, Asia Pacific, and other international markets. The company's business model relies on a powerful portfolio of brands, extensive distribution networks, and continuous innovation in healthier and premium products.
Revenue Breakdown
- Total Revenue (Q4 2025): $29.3B (+5.6% YoY)
- Other: $29.3B (100% of total)
- Detailed segment reporting shows Quaker Foods North America, Asia Pacific/Australia/New Zealand, Europe, and Frito-Lay North America at $0.0B each in this aggregated view, with all revenue consolidated under Other.
- Growth is powered by strong brand demand, pricing actions, and volume gains in key snack and beverage categories.
Gross Profit and Margins
- Gross Profit: $15.6B (53.2% gross margin)
- Cost of Revenue: $13.7B (+4.1% YoY)
- PepsiCo maintains robust margins due to its scalable manufacturing, supply chain efficiencies, and favorable product mix shifts toward higher-margin snacks.
- Most costs come from raw materials like ingredients and packaging, manufacturing overhead, and distribution logistics.
Operating Income and Expenses
- Operating Income: $3.6B (+58.1% YoY, 12.1% margin)
- Operating Expenses: $12.1B (-2.3% YoY)
- R&D: Not separately reported β PepsiCo invests in product innovation through consolidated operating expenses.
- SG&A: $12.1B (-2.1% YoY, 41.1% of revenue) β covers selling, marketing, distribution, and administrative functions supporting global brand promotion and operations.
- PepsiCo continues to prioritize innovation/control costs while maintaining efficiency through cost-saving programs and productivity gains.
Net Income
- Pre-Tax Income: $3.0B (+65.8% YoY, 10.2% margin)
- Income Tax: $0.5B (15.3% effective tax rate)
- Net Income: $2.5B (+66.8% YoY, 8.7% net margin)
- PepsiCo converts a significant portion of sales into profit due to scalability, pricing power, and disciplined expense management.
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What Drives PepsiCo's Money Machine?
- Beverage and Snack Sales: 100%+ of revenue through brands like Pepsi, Mountain Dew, Gatorade in beverages, and Lay's, Cheetos in snacks.
- Volume and Pricing Growth: 5.6% YoY revenue increase reflects resilient consumer demand and effective pricing strategies amid inflation.
- Brand Investments: Ongoing spending on marketing and innovation to refresh portfolios with low-sugar and health-focused options.
- International Expansion: Growth areas like Asia Pacific and Europe, though consolidated here, offer future potential despite current segment reporting.
Visualizing PepsiCo's Financial Flows
The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.
- Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
- Even after significant costs, 8.7% of revenue drops to the bottom line.
Key Takeaways
- PepsiCo's money comes overwhelmingly from beverage and snack product sales
- High gross and net margins illustrate the power of PepsiCo's asset-light distribution and brand moat
- Heavy investment in marketing and innovation, balanced by efficiency in operating costs
- Ongoing growth is driven by pricing, volume, and portfolio expansion
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FAQ About PepsiCo's Income Statement
1. What is the main source of PepsiCo's revenue in 2025?
PepsiCo generates over 100% of its revenue from consolidated beverage and snack sales under Other. Additional revenue streams include international segments like Europe and Asia Pacific, though reported at $0.0B in this quarter's breakdown.
2. How profitable is PepsiCo in Q4 2025?
PepsiCo reported net income of $2.5B in Q4 2025, with a net margin of approximately 8.7%, reflecting strong profitability driven by gross margin expansion and operating leverage.
3. What are the largest expense categories for PepsiCo?
The biggest expenses on PepsiCo's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached embedded within $12.1B in Q4 2025, as PepsiCo prioritizes product innovation and brand marketing.
4. Why does Other operate at a loss?
Other, despite generating $29.3B in revenue, reflects overall profitability after costs; no specific loss noted, but operating income of $3.6B shows efficiency post-expenses. This is because PepsiCo aggressively invests in global expansion and supply chain, believing these will drive long-term growthβeven if margins are pressured today.
5. How does PepsiCo's effective tax rate compare to previous years?
PepsiCo's effective tax rate in Q4 2025 was 15.3%, consistent with previous years. This moderate rate is primarily due to tax benefits from international operations and deductions.