Coca-Cola Posts 3.6% EPS Growth in Q2

Key Points

• Non-GAAP earnings per share reached $0.87, surpassing analyst estimates by 4.8% (non-GAAP).

• Revenue (GAAP) totaled $12.535 billion, narrowly missing expectations on GAAP revenue but up 1% from the year-ago period.

• Free cash flow was negative due to a one-time $6.1 billion payment; underlying cash generation remained solid.

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Coca-Cola (NYSE:KO), the global beverage leader known for its flagship sodas and a broad range of drinks, reported results for Q2 2025 on July 22, 2025. Key numbers in the release show adjusted earnings per share (Non-GAAP) of $0.87, beating analyst estimates by $0.04, while revenue (GAAP) reached $12.54 billion, coming in slightly under the $12.57 billion consensus. The quarter's performance showed higher earnings and stronger margins, although GAAP revenue growth fell a bit short of expectations. Overall, the results point to solid profitability and continued brand strength, despite challenges in sales volumes and increased cash flow volatility from a major acquisition payment.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Recent Focus

Coca-Cola operates in more than 200 countries and territories, offering a portfolio of popular nonalcoholic beverages. Its best-known brands include sparkling soft drinks such as Coca-Cola, Sprite, and Fanta. The company also produces juices, water, sports drinks, coffee, and tea. Its business revolves around creating brands that consumers recognize and trust, which is a key factor in its global success.

The business relies on a vast network of bottling partners, distributors, and retailers to get its products to consumers worldwide. Recently, Coca-Cola has focused on product innovation, including the expansion of low and no-sugar drink options, single-serve affordable packs, and campaigns tailored for local markets. These moves are designed to drive growth despite evolving consumer preferences, health trends, and regulatory pressures.

Quarter in Detail: Financial and Operational Developments

The quarter saw distinct trends across Coca-Cola’s core operating segments. Despite only modest overall revenue growth, operating margin expanded significantly, reaching 34.1% under Generally Accepted Accounting Principles (GAAP), compared to 21.3% in Q2 2024. This margin improvement was attributed to higher pricing, delayed marketing spending, and ongoing cost control. Margins benefited even as top-line growth slowed.

Organic revenue (non-GAAP), which excludes currency impacts and structural changes, rose 5%. This was driven mainly by a 6% global increase in price/mix.—the combined positive effect of selling higher-priced products and optimizing package sizes. However, worldwide unit case volume dropped 1%, the first meaningful decline in recent quarters. Volume decreased in several areas, particularly in Latin America (down 2%) and Asia Pacific (down 3%). For example, price/mix climbed 15% in Latin America and 10% in Asia Pacific, compared to 3% in both North America and EMEA (Europe, Middle East, and Africa).

In North America, net revenue (GAAP) increased 3% but unit case volume declined by 1%. Marketing campaigns such as Diet Coke’s “This is My Taste” and Coca-Cola Zero Sugar helped stimulate demand, delivering growth for those specific product lines. For instance, Coca-Cola Zero Sugar -- a lower or no-sugar carbonated drink -- grew volume in double digits globally for the fourth consecutive quarter. Traditional sparkling soft drink volumes slipped 1%, with soft trends in the U.S. and Mexico attributed to both a viral video targeting the brand and shifts in consumer consumption habits.

Regionally, EMEA showed the strongest volume gains, up 3% in unit case volume, supported by targeted value and affordability offers, especially in countries such as Türkiye. In contrast, Latin America posted a 2% unit case volume decline, but price/mix growth supported results. The Bottling Investments segment, which includes bottling operations not yet independently refranchised, saw a sharp unit case volume decline of 5% and corresponding declines in operating income, a trend linked to specific country and refranchising actions.

The product portfolio highlighted opposing developments. Trademark Coca-Cola unit sales shrank 1%, while Coca-Cola Zero Sugar posted a 14% increase. Flavored sparkling drinks dropped 2%, and juice, value-added dairy, and plant-based beverage volumes dipped 4%. Water, sports drinks, coffee, and tea performed flat overall, with notable small gains in coffee (up 1%) and declines in sports drinks (down 3%), a trend Coca-Cola is actively pursuing in its R&D and marketing efforts.

A major one-time event in Q1 2025 was a $6.1 billion contingent consideration payment tied to the acquisition of fairlife, a high-protein dairy beverage business. This payment turned both operating cash flow (GAAP) and free cash flow (non-GAAP) negative on a headline basis, despite underlying free cash flow (excluding the payment) coming in at $3.9 billion. These figures highlight that underlying cash generation remained healthy and consistent with prior trends, but was obscured by the impact of this non-recurring cost.

Looking Ahead

For fiscal 2025, Coca-Cola projects organic revenue (non-GAAP) growth between 5% and 6% for the full year. Management expects adjusted (Non-GAAP) earnings per share to grow around 3% for the full year, with currency impacts expected to reduce comparable (Non-GAAP) EPS growth by about 5%. Management updated its guidance to reflect stronger foreign exchange headwinds while holding underlying expectations for revenue and profit growth steady. Free cash flow (non-GAAP, excluding the fairlife contingent consideration payment) is forecast to reach $9.5 billion. The company’s underlying effective tax rate (non-GAAP) will increase from 18.6% in 2024 to an estimated 20.8% in 2025, reflecting changes from new global tax regulations.

Continued product innovation in reduced sugar and functional beverages, and the potential impact from currency volatility, remain in focus. Overall, while short-term results were affected by extraordinary events and shifting consumer behavior, Coca-Cola retains a stable outlook, with ongoing initiatives aimed at health, affordability, and brand relevance.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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