Analysis
PepsiCo was significantly impacted by the "Liberation Day" and reciprocal tariffs introduced in April 2025, which primarily pressured the company's cost structure and led to a substantial reduction in full-year 2025 earnings guidance. The tariffs imposed a 25% charge on imported aluminum used for soda cans and a 10% import duty on beverage concentrate, which PepsiCo produces in Ireland for its flagship brands, including Pepsi and Mountain Dew. Unlike its primary competitor, Coca-Cola, which manufactures most of its concentrate within U.S. territories, PepsiCo faced direct exposure to these import levies across its North American beverage portfolio.
The financial impact was most visible in the company's revised 2025 outlook provided during the 1Q25 earnings call. PepsiCo lowered its core constant currency EPS guidance from "mid-single-digit growth" (approximately 5%) to "approximately even" with the prior year. This 500bps headwind, attributed primarily to tariffs and related supply chain friction, represented an estimated $560M hit to net income for the year. To mitigate these costs, the company accelerated its multi-year productivity initiatives, including headcount reductions and supply chain optimization, and adjusted its "price-pack architecture" to pass some costs to consumers.
Despite these headwinds, PepsiCo maintained its organic revenue growth guidance of "low-single-digit" for 2025, suggesting that the tariff impact was largely a margin and profitability challenge rather than a demand-destruction event. The company reported actual FY2025 core EPS of $8.14, effectively meeting its revised "flat" guidance relative to the $8.16 reported in FY2024. International momentum and strong productivity savings partially offset the roughly $0.41 per share tariff-related headwind.
As of May 2026, the forward-looking impact has shifted following a February 2026 U.S. Supreme Court ruling that found many of the tariffs imposed under the International Emergency Economic Powers Act (IEEPA) to be invalid. This ruling has effectively halted the collection of these specific duties, and PepsiCo is currently monitoring regulatory developments regarding potential refunds of tariffs paid during 2025. While the company continues to manage broader macroeconomic volatility and inflation, the direct headwind from the April 2025 tariff regime has been removed, providing a potential tailwind for 2026 earnings through lower input costs and potential administrative refunds.
Data
($M, except per share data)
| Metric | FY2024A | FY2025 Initial Guidance | FY2025 Actual | Tariff-Related Headwind |
|---|---|---|---|---|
| Core EPS | $8.16 | ~$8.57 | $8.14 | ($0.41) - ($0.43) |
| Core EPS Growth (%) | 9.0% | ~5.0% | (0.2%) | (5.2%) |
| Estimated Net Income Impact | -- | -- | -- | ~$560M |
Note: Guidance based on 1Q25 management comments; Headwind reflects the reduction from mid-single-digit growth to flat performance. Source: Transcript 1Q-2026, Earnings Press Release FY-2025, Marvin Labs
Financial Impact
- Cost Impact (Historic): $560M
Sources
The rationale behind the guidance adjustment that we announced today is really driven by three things... The first is tariffs. That is new news since we gave our initial guidance at the beginning of the year.
We have factored in what we know about tariffs today, and we have factored in mitigation plans, which we continue to work. Some of those we will be able to execute more quickly. Some of those will take more time.
The concentrate for Pepsi and Mountain Dew is made in Ireland and will be subject to a 10% import charge.