Keurig Dr Pepper Q2 Revenue Up 6 Percent

Keurig Dr Pepper (KDP -0.89%), the beverage company behind brands like Dr Pepper, Canada Dry, Snapple, and the Keurig single-serve coffee system, announced its results for the second quarter of fiscal 2025 on July 24, 2025. Non-GAAP revenue was $4.16 billion, slightly ahead of the $4.14 billion analysts had expected. Earnings per share (non-GAAP) came in at $0.49, matching estimates. The quarter’s performance was supported by continued strength in its U.S. Refreshment Beverages and International businesses, with signs of stabilization emerging in U.S. Coffee. Management reaffirmed its full-year financial guidance, suggesting steady operational momentum amid ongoing input cost and market pressures.

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

Business Overview and Focus Areas

Keurig Dr Pepper (KDP -0.89%) operates a diverse beverage business with over 125 brands, spanning soft drinks, specialty coffees, teas, waters, and more. These include Dr Pepper, Canada Dry, 7UP, Snapple, and the Keurig coffee system, which introduced single-serve pods (K-Cups) into homes across North America.

The company’s business is built around several key priorities: maintaining strong brands, leveraging a broad distribution network, driving product innovation, and managing costs. Recent years have seen investment in new beverages (including energy drinks), partnerships expanding its range, and targeted innovation in both coffee and soft drinks. Disciplined cost controls and robust logistics ensure products are delivered efficiently across the U.S. Canada, and Mexico. Regulatory compliance and adapting to a changing consumer landscape are also critically important for ongoing success.

Quarter Highlights: Segment Performance and Developments

During the quarter, U.S. Refreshment Beverages continued its strong run. Net sales in this segment reached $2.66 billion, up 10.5%, driven by a 9.5% boost in volume and mix, and a 1.0% increase from pricing. Notably, carbonated soft drinks -- including Dr Pepper, Canada Dry, and 7UP -- gained share, buoyed by new launches and expanded distribution. The GHOST energy beverage line contributed significantly following its acquisition, adding about 4.0 percentage points to segment volume/mix growth. The launch of Dr Pepper Blackberry, a new flavor innovation, quickly captured market share and is one of the strongest product introductions in several years.

Net sales for U.S. Coffee decreased 0.2% to $948 million, with management describing improving trends in the segment. Net sales dipped 0.2 % to $948 million as a 3.8% decrease in pod and brewer shipments offset a 3.6% rise from enacted price increases to counter green coffee cost inflation. Adjusted operating income grew 2.0%. Management described the category as showing “sequential progress” after a tough start to the year, citing ongoing soft consumer demand and timing of industry-wide price changes. The company continued investing in premium coffee brands and new cold coffee products and advanced its Keurig Alta and K-Rounds projects, both focused on next-generation systems and sustainability.

International operations reported net sales of $555 million, down 1.8% in reported dollars yet up 5.7% on a constant currency basis as currency headwinds masked underlying gains. Favorable net price realization of 5.3% contributed to constant currency net sales growth in the International segment, and volume was slightly positive. The company saw share gains in mineral water in Mexico and single-serve coffee in Canada. Operating margin in International stayed healthy despite the currency challenges, but continued exchange-rate swings remain a key watch point for this business line.

Adjustments in operating expenses and network optimization helped preserve company-wide adjusted operating margins, which held steady at 24.7%. Free cash flow for the first six months of 2025 was $427 million, lower than the previous year. The management leverage ratio stood at 3.3 times, modestly above the long-term target. On dividends, the company kept its payout unchanged, with no declared increase or cut during the period.

Looking Ahead: Guidance and Investor Watch Points

For fiscal 2025, management reaffirmed its outlook for mid-single-digit constant currency net sales growth and high-single-digit adjusted earnings per share growth. The anticipated currency headwind is about 0.5 percentage points. supported by its leading beverage lines, brand innovation, productivity efforts, and distribution gains. Leaders noted continued attention to cost mitigation as input costs and tariffs fluctuate through the year.

Investors should watch the trajectory of U.S. Coffee, where management sees more stabilization in coming quarters as the effects of industry price changes normalize. Monitoring free cash flow improvement is also important, especially with the leverage ratio above the long-term goal. Other critical factors include persistent input costs, the outcome of regulatory changes related to tariffs and food assistance programs, and ongoing foreign exchange challenges for international operations.

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