PepsiCo PEP · USD

Debt ObligationsThe following table summarizes our debt obligations:2025(a)2024(a)Short-term debt obligations (b)Current maturities of long-term debt$4,030 $4,004 Commercial paper (3.8% and 4.5%)2,641 2,818 Other borrowings 190 260 $6,861 $7,082 Long-term debt obligations (b)Notes due 2025 (3.2%)$— $3,999 Notes due 2026 (3.6% and 3.7%)4,003 3,941 Notes due 2027 (3.2% and 3.1%)3,933 3,370 Notes due 2028 (2.4% and 2.1%)4,203 3,240 Notes due 2029 (4.3% and 4.6%)4,043 3,239 Notes due 2030 (3.2% and 2.6%)4,171 2,472 Notes due 2031-2060 (3.4% and 3.2%)25,956 20,928 Other, due 2025-204242 39 46,351 41,228 Less: current maturities of long-term debt obligations4,030 4,004 Total$42,321 $37,224 (a)Amounts are shown net of unamortized net discounts of $224 million and $267 million for 2025 and 2024, respectively.(b)The interest rates presented reflect weighted-average effective interest rates at year-end. Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments. See Note 9 for further information regarding our interest rate swap contracts.As of December 27, 2025 and December 28, 2024, our international debt of $272 million and $325 million, respectively, was related to borrowings from external parties, including various lines of credit. These lines of credit are subject to normal banking terms and conditions and are fully committed at least to the extent of our borrowings.In 2025, we issued the following senior notes:Interest RateMaturity DatePrincipal Amount(a)4.400 %February 2027$500 4.450 %February 2028$750 4.600 %February 2030$1,000 5.000 %February 2035$1,250 4.100 %January 2029$750 4.300 %July 2030$650 4.650 %July 2032$850 5.000 %July 2035$1,250 3.450 %July 2037€500 (b)4.050 %July 2055€500 (b)(a)Excludes debt issuance costs, discounts and premiums.(b)These notes, issued in euros, were designated as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper.In 2025, we entered into a new five-year unsecured revolving credit agreement (2025 Five-Year Credit Agreement), which expires on May 23, 2030. The 2025 Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $5.0 billion in U.S. dollars and/or euros, including a $0.

Income TaxesThe components of income before income taxes are as follows:202520242023United States$806 $2,590 $4,120 Foreign9,438 9,356 7,297 $10,244 $11,946 $11,417 The provision for income taxes consisted of the following:202520242023Current:U.S. Federal$299 $1,033 $1,133 Foreign1,583 1,406 1,201 State42 255 309 1,924 2,694 2,643 Deferred:U.S. Federal116 (306)(109)Foreign(116)(10)(212)State25 (58)(60)25 (374)(381)$1,949 $2,320 $2,262 A reconciliation of the U.S. Federal statutory tax rate to our 2025 annual tax rate is as follows:AmountTax RateU.S. Federal statutory tax$2,151 21.0 %State income tax, net of U.S. Federal tax benefit (a)25 0.2 Changes in valuation allowances12 0.1 Foreign tax effects IrelandStatutory income tax rate differential(119)(1.2)Other24 0.2 SingaporeTax incentive(113)(1.1)Other(26)(0.3)SwitzerlandChanges in valuation allowances(149)(1.5)Other32 0.3 BermudaStatutory income tax rate differential(310)(3.0)Other foreign jurisdictions21 0.2 Effect of cross-border tax laws (b)Transfer pricing adjustments128 1.3 Global intangible low-tax income (GILTI)115 1.1 Other(110)(1.0)Tax credits(29)(0.3)Changes in unrecognized tax benefits181 1.8 Nondeductible and nontaxable items, net(31)(0.3)Other147 1.5 Reported tax$1,949 19.0 %(a)State taxes in California, Illinois, New Jersey, Texas, Minnesota, Oregon, Wisconsin, Louisiana, Michigan, and Arizona make up the majority (greater than 50%) of the tax effect in this category.(b)Includes the impact of any tax credits.A reconciliation of the U.S. Federal statutory tax rate to our 2024 and 2023 annual tax rate is as follows:20242023U.S. Federal statutory tax rate21.0 %21.0 %State income tax, net of U.S. Federal tax benefit1.3 1.8 Lower taxes on foreign results(2.5)(2.5)Juice Transaction— (0.1)Other, net(0.4)(0.4)Annual tax rate19.4 %19.8 %A summary of income taxes paid in 2025 is as follows:AmountU.S. Federal$1,107 U.S. State and Local (a)243 ForeignIreland424 Mexico313 Russia237 Other759 1,733 Total$3,083 (a)No single state or local jurisdiction accounts for more than 5% of the total income taxes paid. Tax Cuts and Jobs ActAs of December 27, 2025, our mandatory transition tax liability was $965 million, which must be paid in 2026 and will represent our final payment under the provisions of the TCJ Act. We reduced our liability through cash payments by $772 million in 2025, $579 million in 2024 and $309 million in 2023.

Share-Based CompensationOur share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. PepsiCo has granted stock options, RSUs, PSUs and long-term cash awards to employees under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan (LTIP). Executives who are awarded long-term incentives based on their performance may generally elect to receive their grant in the form of stock options or RSUs, or a combination thereof. Executives who elect stock options receive four stock options for every one RSU that would have otherwise been granted. Certain executive officers and other senior executives do not have a choice and are granted 66% PSUs and 34% long-term cash, each of which are subject to pre-established performance targets. The Company may use authorized and unissued shares to meet share requirements resulting from the exercise of stock options and the vesting of RSUs and PSUs. As of December 27, 2025, 89 million shares were available for future share-based compensation grants under the LTIP.The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses, and excess tax benefits recognized:202520242023Share-based compensation expense - equity awards$288 $362 $380 Share-based compensation expense - liability awards13 7 19 Restructuring charges(8)(5)(1)Total$293 $364 $398 Income tax benefits recognized in earnings related to share-based compensation$53 $68 $73 Excess tax benefits related to share-based compensation$3 $33 $36 As of December 27, 2025, there was $329 million of total unrecognized compensation cost related to nonvested share-based compensation grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of two years.Method of Accounting and Our AssumptionsThe fair value of share-based award grants is amortized to expense over the vesting period, primarily three years. Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, we use historical data to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

The fair value of share-based award grants is amortized to expense over the vesting period, primarily three years. Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, we use historical data to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest. We do not backdate, reprice or grant share-based compensation awards retroactively. Repricing of awards would require shareholder approval under the LTIP.

LeasesLesseeWe determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of which include options to extend the lease term for up to five years and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).Components of lease cost are as follows:202520242023Operating lease cost (a)$880 $788 $666 Variable lease cost (b)$185 $165 $146 Short-term lease cost (c)$570 $566 $582 (a)Includes right-of-use asset amortization of $727 million, $655 million, and $570 million in 2025, 2024, and 2023, respectively. (b)Primarily related to adjustments for inflation, common-area maintenance and property tax. (c)Not recorded on our balance sheet.In 2025, 2024 and 2023, we recognized gains of $291 million, $118 million and $52 million, respectively, on sale-leaseback transactions with lease terms of ten years or less.

LesseeWe determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of which include options to extend the lease term for up to five years and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).

Acquisitions and DivestituresAcquisition of poppiOn May 19, 2025, we acquired all of the outstanding equity interest in poppi, a prebiotic soda business, for cash consideration of $1.95 billion and contingent consideration with an acquisition date fair value of $0.2 billion. See Note 9 for further information on the contingent consideration. In connection with this acquisition, other payments may be incurred, subject to the achievement of certain conditions. We accounted for the transaction as a business combination in the second quarter of 2025. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our PBNA segment. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in this transaction as of the acquisition date primarily include goodwill and other intangible assets of approximately $2.0 billion. These preliminary estimates include management’s assumptions and are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible, but no later than the second quarter of 2026.Acquisition of SieteOn January 17, 2025, we acquired all of the outstanding equity interest in Siete, a Mexican-American foods business, for total consideration of $1.2 billion in cash.We accounted for the transaction as a business combination in the first quarter of 2025. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our PFNA segment. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in this transaction as of the acquisition date primarily include goodwill and other intangible assets of approximately $1.2 billion. These preliminary estimates include management’s assumptions and are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We will finalize these amounts in the first quarter of 2026.

We are regularly subject to cyberattacks and other cyber incidents. In response, we have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. Our enterprise risk management team collaborates with our Cybersecurity function, led by the Company’s Chief Strategy and Transformation Officer and the Company’s Chief Information Security Officer, to gather insights for identifying, assessing and managing cybersecurity threat risks, their severity, and potential mitigations. We assess PepsiCo’s Cybersecurity program using an industry-leading cybersecurity framework from the National Institute of Standards and Technology. To help assess and identify our cybersecurity risks, we maintain internal resources to perform penetration testing designed to simulate evolving tactics and techniques of real-world threat actors, engage with industry partners and law enforcement and intelligence communities and conduct tabletop exercises and periodic risk interviews across our business. We also engage an independent third party to perform internal and external penetration testing of PepsiCo’s environment periodically and engage other third parties to periodically conduct assessments of our cybersecurity capabilities. In addition, we continue to expand training and awareness practices to mitigate human risk, including mandatory computer-based training, internal communications, and regular phishing awareness campaigns that are designed to emulate real-world contemporary threats and provide immediate feedback (and, if necessary, additional training or remedial action) to employees. Our processes also address cybersecurity risks associated with our use of third-party service providers including suppliers, software and cloud-based service providers. We proactively evaluate the cybersecurity risk of a third party by utilizing a repository of risk assessments, external monitoring sources, threat intelligence and predictive analytics to better inform PepsiCo during contracting and vendor selection processes. Additionally, we require those third parties to agree by contract to implement appropriate security controls. Security issues are documented and tracked and periodic monitoring is conducted for third parties in order to mitigate risk.