The JDE Peet's acquisition lifted Q2 net sales 75.6% to $7.31 billion, but inventory step-up, deal costs, higher interest and new JV/preferred claims cut GAAP diluted EPS to $0.04 from $0.40; adjusted EPS rose 16.3% to $0.57 and 2026 guidance was reaffirmed.
Revenue
$7.3B
+75.6% YoY
Net income
$142M
-74.0% YoY
Diluted EPS
$0.04
-90.0% YoY
Operating margin
8.6%
Headline: sales jump 76% from a giant coffee acquisition, while GAAP profit collapses under deal costs and new financing
Keurig Dr Pepper's second quarter of 2026 (April–June) was the first to include JDE Peet's, the European coffee and tea company (Jacobs, L'OR, Peet's) it bought on April 1, 2026 for about €15.1 billion ($17.4 billion) in cash. That purchase alone explains most of the headline: net sales rose 75.6% to $7,309 million, and JDE Peet's contributed $2,802 million of that. Of the 70.4% sales growth that came from selling more (or a richer mix of) product, the company says 67.3 percentage points came from the acquisition.
Profit went the other way. Operating income (profit from running the business, before interest and tax) fell 30.1% to $628 million, net income attributable to KDP fell 74.0% to $142 million, and diluted earnings per share dropped from $0.40 to $0.04. Nearly all of that decline traces to one-off acquisition accounting and deal costs, plus the cost of the debt and new investors who funded the purchase — not to the underlying drinks business, which grew.
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$7,309M
$4,163M
+75.6%
Gross margin
41.9%
54.2%
-12.3 pts
Operating income
$628M
$898M
-30.1%
Operating margin
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Legacy KDP net sales growth, constant currency (excl. JDE Peet's)
+7.3%
—
—
Liquid refreshment beverage volume
—
—
+2.8%
Adjusted EPS is the company's own figure from its earnings release; it strips out items the company treats as one-offs (deal costs, inventory revaluation, mark-to-market swings). "Constant currency" means restated at last year's exchange rates, so currency moves don't flatter or hurt the growth rate.
Why GAAP profit fell while the business grew
Three acquisition-related items did most of the damage:
Inventory step-up ($314 million). Acquisition accounting requires the inventory KDP bought with JDE Peet's to be revalued up to fair value. When that coffee was then sold during the quarter, its cost of sales was $314 million higher than it would have been otherwise. This is a one-time, non-cash hit that disappears once the acquired stock is sold — and it is why the JDE Peet's segment shows a $62 million operating loss in the quarter.
Deal and integration costs. SG&A (selling, general and administrative expenses) rose 76.8% to $2,397 million. Adding JDE Peet's' own overhead explained 53 percentage points of that; transaction and integration costs for the acquisition and the planned break-up explained another 20 points. Unallocated corporate costs more than doubled, from $224 million to $468 million. Across the first half, acquisition, integration and financing costs totalled about $624 million before tax.
A tax charge. The effective tax rate rose from 23.8% to 31.1%, of which 9.2 points came from a non-cash revaluation of state deferred tax liabilities triggered by the deal.
Then comes the financing. Interest expense nearly doubled to $336 million on the new debt. And two new groups of investors now take a slice of profit before ordinary shareholders see anything:
From net income to EPS (Q2 2026)
$M
Net income
210
Less: non-controlling interests (mainly the new Pod Manufacturing JV partner)
(68)
Net income attributable to KDP
142
Less: net income allocated to convertible preferred investors
(82)
Net income attributable to common shareholders
60
Diluted EPS ($60M ÷ 1,364.5M shares)
$0.04
The $4 billion investment into a new K-Cup pod manufacturing joint venture and the $4.5 billion of convertible preferred stock were both part of how the deal was paid for. They are permanent features of the income statement for now, not one-offs: the JV partner took $64 million in its first quarter, and preferred holders were paid $54 million of dividends in the first half.
Segment results: drinks strong, U.S. coffee weak
Segment
Q2 2026 net sales
YoY
Q2 2026 operating income
YoY
Operating margin (vs. Q2 2025)
U.S. Refreshment Beverages
$2,925M
+10.0%
$857M
+14.9%
29.3% (28.0%)
U.S. Coffee
$918M
-3.2%
$149M
-36.1%
16.2% (24.6%)
KDP International
$664M
+19.6%
$152M
+6.3%
22.9% (25.8%)
JDE Peet's (new)
$2,802M
n/a
$(62)M
n/a
-2.2%
Unallocated corporate costs
—
—
$(468)M
+108.9%
—
What drove sales — volume/mix vs. price ("volume/mix" is selling more units or pricier products; "net price realization" is charging more per unit after discounts):
Segment
Volume/mix
Net price
FX
Total
U.S. Refreshment Beverages
+6.5%
+3.5%
—
+10.0%
U.S. Coffee
-8.2%
+5.0%
—
-3.2%
KDP International
+6.5%
+5.9%
+7.2%
+19.6%
Consolidated
+70.4%
+4.2%
+1.0%
+75.6%
U.S. Refreshment Beverages (Dr Pepper, Canada Dry, GHOST, Core Hydration) was the clear bright spot. Volume rose 2.4%, led by energy and sports hydration drinks, while the rest of the portfolio declined. Because the growth came in higher-priced categories, sales rose far faster (10.0%) than cases shipped. Operating income grew 14.9%; the filing credits sales growth (+21 points) and lapping GHOST integration costs from a year ago (+3 points), partly offset by higher ingredient and packaging costs including tariffs (-5 points) and higher transport and warehousing (-2 points).
U.S. Coffee (Keurig brewers and K-Cup pods) is the weak spot. Pod and coffee volume fell 12.8%. The filing gives three reasons: shoppers buying less after price increases ("price elasticity"), softness in the single-serve category, and a bookkeeping shift that now reports Peet's K-Cup pods in the JDE Peet's segment instead. Brewer volume rose 2.1%. Operating income fell 36.1%, driven by integration and separation costs (22 points), higher ingredient and material costs including tariffs (17 points), and lower sales (7 points). On the company's adjusted basis, which removes the integration costs, operating income still fell 24.7% to $225 million — so this is not just a deal-cost story.
KDP International (mainly Canada and Mexico) grew sales 19.6%, but 7.2 points of that was currency; in constant currency sales grew 12.4%. Profit rose only 6.3%, held back by higher IEPS taxes in Mexico (a special excise tax on sugary drinks) and higher input costs, and helped by favourable currency translation. Adjusted operating income was flat at $155 million.
JDE Peet's posted $2,802 million of sales and a $62 million GAAP operating loss, but the loss includes the $314 million inventory step-up. On the company's adjusted basis the segment earned $414 million, a 14.8% margin — below the U.S. drinks business, reflecting a lower-margin, more commodity-exposed global coffee business.
How to read the year-over-year comparisons
Because JDE Peet's was not owned a year ago, almost every consolidated growth rate this year compares a two-business company with a one-business company. Three ways to cut through that:
Legacy KDP only: excluding JDE Peet's, net sales grew 7.3% in constant currency (price +4.2%, volume/mix +3.1%).
Pro forma: the filing restates both years as if KDP had owned JDE Peet's all along. On that basis Q2 net sales were $7,309 million vs. $7,247 million a year earlier (+0.9%), and net income was $508 million vs. $470 million. The near-flat pro forma sales, set against 7.3% legacy growth, implies the acquired business sold less than in the prior-year quarter — though pro forma figures include accounting adjustments and are not directly comparable to the segment table, and the filing does not break out JDE Peet's' own year-over-year trend.
Adjusted: adjusted EPS rose 16.3% to $0.57, and adjusted operating income rose 42.9% in constant currency to $1,478 million (20.2% of sales).
The planned separation also shapes the numbers. KDP intends to split into two listed companies: a beverage company, and a global coffee company combining U.S. Coffee with JDE Peet's (the filing refers to it as Global Coffee Co.), via a tax-free spin-off expected in early 2027. Until then, costs to prepare two stand-alone companies keep flowing through results: the integration programme is expected to cost $325–400 million before tax through the first quarter of 2029, of which $140 million was booked this quarter, plus $19 million under JDE Peet's' own inherited restructuring programme.
Debt and leverage
Paying for JDE Peet's transformed the balance sheet:
Balance sheet item
June 30, 2026
Dec 31, 2025
Short-term borrowings + current portion of debt
$8,394M
$3,105M
Long-term obligations
$21,586M
$13,036M
Total debt (carrying value)
$29,980M
$16,141M
Cash and cash equivalents
$1,517M
$1,026M
Convertible preferred stock
$4,418M
—
Non-controlling interests
$4,196M
—
The funding mix was roughly $3.6 billion of term loan, about $6 billion of new bonds, the $4 billion pod JV investment and $4.5 billion of convertible preferred, on top of JDE Peet's' own bonds, which KDP assumed. Of the short-term debt, $3,185 million is drawn on a short-dated term loan facility (364 days, with a €2.6 billion portion extended to 15 months) and $1,978 million is commercial paper, so a meaningful slice needs refinancing within a year.
The company's "pro forma management leverage ratio" — debt minus cash, divided by a year of EBITDA (earnings before interest, tax, depreciation and amortisation), counting JDE Peet's for the full year — was 4.4x at June 30, on $28,868 million of net debt and $6,611 million of pro forma adjusted EBITDA. Moody's (Baa3) and S&P (BBB-) both downgraded KDP in March 2026 to their lowest investment-grade rung, with stable outlooks. The better news is cash: operating cash flow was $1,176 million in the first half, up from $640 million, and the company reported $714 million of free cash flow in Q2 alone.
Takeaway: Strip out the acquisition and KDP's U.S. drinks business is doing well — 10% sales growth, mostly from selling more energy and hydration drinks, not just raising prices. The GAAP collapse to $0.04 of EPS is mostly one-off deal accounting, but two things are not one-off: roughly $30 billion of debt at 4.4x leverage, and the new JV partner and preferred investors who together took $150 million of this quarter's profit before common shareholders. Meanwhile U.S. Coffee is shrinking in volume, with profit down even after excluding deal costs — the coffee company that gets spun off in 2027 starts from a weaker domestic base than its headline sales suggest.
Outlook
In its August 6 earnings release, KDP reaffirmed its 2026 guidance (constant currency, non-GAAP): net sales of $25.9–26.4 billion and adjusted diluted EPS growth in the low double digits. That breaks down into 4–6% sales growth and 4–6% adjusted EPS growth for the legacy business, plus the JDE Peet's contribution; currency is expected to add about one percentage point. Management targets a pro forma leverage ratio of about 4.1x at year-end, down from 4.4x, and expects the separation in early 2027.
Our read: the legacy guidance looks achievable given the 7.3% legacy sales growth in Q2 and U.S. Refreshment Beverages' momentum. The swing factors are U.S. Coffee — where price increases are now visibly costing volume and tariffs are squeezing margins — and whether cash flow is strong enough to cut leverage from 4.4x to 4.1x in two quarters while deal and separation costs keep running. GAAP earnings should improve from here as the $314 million inventory step-up does not repeat, but higher interest and the new profit-sharing claims will keep GAAP EPS well below last year's levels for the rest of 2026.
The full 10-Q was filed on August 10, 2026. Note also that in February 2026 the U.S. Supreme Court struck down certain IEEPA tariffs; KDP has begun filing refund claims but has recorded no receivable for them.