Kraft Heinz (KHC -0.09%), a major food and beverage company known for brands like Kraft, Heinz, and Oscar Mayer, reported results on July 30, 2025. The most notable news was its non-GAAP earnings per share (EPS) of $0.69, topping analyst estimates of $0.64, and GAAP revenue of $6.35 billion, a slight beat versus the consensus of $6.27 billion. Despite these beats, both GAAP EPS and GAAP revenue fell compared to the prior-year period as sales and margins declined and the company posted a major non-cash impairment charge. Overall, the results highlighted short-term resilience in cash generation but emphasized ongoing struggles in core North American volume and persistent margin pressure.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.69 | $0.64 | $0.78 | (11.5 %) |
| Revenue (GAAP) | $6.35 billion | $6.27 billion | $6.48 billion | (1.9 %) |
| Adjusted Gross Profit Margin | 34.1 % | 35.5 % | (1.4 pp) | |
| Adjusted Operating Income | $1.28 billion | $1.38 billion | (7.5 %) | |
| Free Cash Flow (Non-GAAP) | $1.50 billion | $1.17 billion | 28.2 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Focus Areas
Kraft Heinz produces and markets food products and beverages around the world, with a broad lineup including cheese, sauces, cold cuts, and ready meals. Its portfolio houses some of the food sector's most recognized brands, as well as private-label and regional products.
In recent years, its strategy has centered on three main priorities: driving growth in emerging markets, managing raw material and packaging costs, and leveraging its collection of trademarks for brand strength. Success in these areas depends on effective marketing, supply chain efficiency, and steady product innovation. Volume performance in North America and the effectiveness of investments in areas like the Brand Growth System have been watched closely by investors and management alike.
Quarter Highlights: Core Trends and Critical Developments
Kraft Heinz beat modest expectations on both adjusted EPS (non-GAAP) and revenue (GAAP) in Q2 FY2025. Higher free cash flow (non-GAAP) and disciplined working capital management improved the company's liquidity in the first six months of FY2025. Net cash from operations (GAAP) reached $1.9 billion in the first six months of FY2025, marking a 12.6% increase from the previous year, while Free cash flow increased 28.5% versus the prior year period. These gains came despite a year-over-year decline in both GAAP net sales and adjusted gross profit margin, driven largely by cost inflation and lower volume in core categories.
Organic net sales, which strip out currency and acquisition/divestiture differences, declined by 2.0% in Q2 FY2025. This drop was mainly due to a 2.7 percentage point fall in volume/mix in Q2 FY2025, which measures changes in the number and type of products sold. North America posted a 3.3% decrease in net sales in Q2 2025, where pricing gains of 0.2 percentage points could not offset a 3.4 percentage point volume/mix drop in Q2 FY2025 (non-GAAP, Organic Net Sales). Product lines seeing weakness included cold cuts, Lunchables (packaged ready-to-eat snacks), coffee, frozen snacks, and powdered beverages. These declines underscore ongoing pressure from shifts in consumer behavior and promotional activity across the grocery landscape.
Emerging Markets were a relative bright spot, with net sales up 4.2% versus the prior year period, and organic net sales rising 7.6% in Q2 2025. Adjusted operating income in the region surged 52.3% in Q2 FY2025, though the base remains much smaller than in North America. International Developed Markets net sales increased 1.3% versus the prior year, but International Developed Markets organic net sales declined 2.2% versus the prior year. In North America, adjusted operating income declined 12.5% in Q2 FY2025, highlighting persistent local cost and volume headwinds.
Margins were a key story for the quarter. Adjusted gross profit margin slipped to 34.1%, down 1.4 percentage points in Q2 FY2025, as rising input costs for commodities like coffee and meat outpaced cost-efficiency initiatives. Operating income (GAAP) took a significant hit in Q2 FY2025 due to a $9.3 billion non-cash impairment charge, primarily driven by a sustained decline in the company's share price and market capitalization. This loss overshadowed underlying profitability, resulting in a net loss to shareholders for the quarter. Excluding this one-time event, adjusted operating income fell 7.5% in Q2 FY2025.
The company paid out $951 million in dividends and repurchased $435 million in shares year to date for FY2025. Share repurchases and capital returns were funded in part by reduced capital expenditure, with capex falling 21.8% year-over-year in the first six months of FY2025. These actions indicate a continued focus on shareholder returns even as earnings face pressure.
Looking Ahead: Guidance and Investor Watch Points
Kraft Heinz reaffirmed its full-year 2025 guidance. Management expects organic net sales to decline 1.5% to 3.5% and adjusted operating income to fall 5% to 10%, both on a constant currency basis in FY2025. The adjusted EPS range is set at $2.51 to $2.67 in FY2025, compared to $0.69 in Q2 FY2025. The company aims to keep free cash flow (non-GAAP) flat versus the prior year in FY2025, with a minimum Free Cash Flow Conversion of 95%. The effective tax rate on Adjusted EPS is expected to rise to 26% in FY2025, influenced by new global minimum tax requirements, which will impact Adjusted EPS by about $0.23 for the year.
No material change in the quarterly dividend was announced for the quarter. Looking further ahead, investors should monitor the outcome of Kraft Heinz's ongoing strategic review, including possible business spin-offs or restructurings. Continued softness in North American volume, movement in input costs, and the company's responses to changing consumer preferences will also be important for future results.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
