Kraft Heinz lost $5.46B in Q2 2026 on $7.35B of brand and goodwill write-downs; organic sales fell 1.3% as North American volumes dropped, and heavier ad spending cut adjusted EPS 18.8% to $0.56.
Revenue
$6.3B
-1.4% YoY
Net income
-$5.5B
Diluted EPS
$-4.60
Operating margin
-102.7%
Overview
Kraft Heinz's second quarter of fiscal 2026 (the 13 weeks to June 27, 2026) produced a $5.46 billion net loss, almost entirely because the company wrote down the book value of its brands and acquired businesses by $7.35 billion. That is a non-cash charge (no money left the company), but it is a formal admission that brands such as Kraft, Oscar Mayer and Lunchables are worth less than the balance sheet said. Strip those write-downs out and the underlying business still went backwards: net sales fell 1.4% to $6.26 billion, adjusted operating income fell 18.4% to $1.04 billion, and adjusted EPS fell 18.8% to $0.56.
The sales story is the same one Kraft Heinz has told for several quarters: it raised prices, but people bought fewer of its products, especially in North America. What is new in 2026 is the spending. Management is putting roughly $700 million of extra money into advertising, sales and R&D this year to try to win shoppers back, and that spending is the main reason profit fell faster than sales.
On the corporate structure: the plan announced on September 2, 2025 to split Kraft Heinz into two listed companies is on hold. The 10-Q states that on February 11, 2026 the Board "decided to pause work related to the Separation", and that whether it will be completed is uncertain. Kraft Heinz is still one company and still the filer. (Separately, it moved its stock listing from Nasdaq to the NYSE on September 14, 2026, keeping the KHC ticker, per an August 2026 8-K.)
Key metrics
"Adjusted" figures are the company's own measures that exclude impairments, restructuring, separation costs, hedge timing effects and one-off debt gains; GAAP figures are the official accounting numbers.
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$6,262M
$6,352M
-1.4%
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Organic net sales (excludes currency and divestitures)
$6,207M
$6,287M
-1.3%
Price contribution
+1.3 pp
—
—
Volume/mix contribution
-2.6 pp
—
—
Gross margin (GAAP)
32.4%
34.4%
-2.0 pp
Adjusted gross margin
34.1%
34.1%
flat
Goodwill + brand impairment losses
$7,352M
$9,266M
-$1,914M
Operating income/(loss) (GAAP)
$(6,431)M
$(7,974)M
loss narrowed 19.4%
Operating margin (GAAP)
-102.7%
-125.5%
+22.8 pp
Adjusted operating income
$1,041M
$1,276M
-18.4%
Adjusted operating margin
16.6%
20.1%
-3.5 pp
Net income/(loss) (GAAP)
$(5,460)M
$(7,823)M
loss narrowed 30.2%
Diluted EPS (GAAP)
$(4.60)
$(6.60)
loss narrowed 30.3%
Adjusted EPS
$0.56
$0.69
-18.8%
Separation costs
$10M
$0
—
Free cash flow (first six months)
$1.7B
—
+10.3%
Price and volume/mix are the two parts of the organic sales change: "price" is what the company charged, "volume/mix" is how much it sold and whether the mix shifted toward cheaper or pricier items. GAAP and adjusted operating margins are calculated from the reported income statement and adjusted operating income.
Sales: higher prices, fewer items sold
Organic net sales — sales with currency swings and sold businesses removed, so you can compare like with like — fell 1.3%. Price added 1.3 percentage points; lower volume/mix took away 2.6 points. The company says prices went up mainly "to mitigate higher input costs, primarily in coffee and ready-to-drink beverages."
Two timing effects distort the quarter in opposite directions. Easter fell differently than last year, which the earnings release says cost about 1 point of volume/mix; retailers stocking up early ("inventory pull forward") added back about 0.8 points. Net, the underlying volume decline is roughly what the headline shows.
Segment
Net sales
Net sales change
Organic change
Price
Volume/mix
North America
$4,626M
-2.7%
-2.7%
+1.1 pp
-3.8 pp
International Developed Markets
$865M
-3.5%
-0.7%
+0.7 pp
-1.4 pp
Emerging Markets
$771M
+10.4%
+8.5%
+4.5 pp
+4.0 pp
Kraft Heinz
$6,262M
-1.4%
-1.3%
+1.3 pp
-2.6 pp
North America (74% of sales) is the problem. Volume/mix fell 3.8 points, "primarily due to declines in meats, spreads, and cheese", with meats and spreads partly hit by the Easter timing. The 10-Q also says changes to SNAP (US food-stamp benefits) under the 2025 tax law have reduced the number of participants and their benefits, which has had and may continue to have "a negative impact on consumers' demand for our products"; management's full-year sales outlook includes about a 1-point hit from SNAP.
International Developed Markets reported sales fell 3.5%, but most of that was the sale of the Italian baby-food business (Plasmon and Nipiol brands), a 4.9-point drag, partly offset by a 2.1-point currency tailwind. Organically, sales were down only 0.7%, with weakness in Australia and Western Europe tied partly to "negotiations with certain customers" (disputes with retailers over terms), offset by growth in France, Benelux and the UK.
Emerging Markets was the only growing segment: organic +8.5%, with both price (+4.5 points, mainly inflation-driven pricing in its West and East Emerging Markets unit) and volume (+4.0 points, led by Brazil, Venezuela and China, with Indonesia weaker). Venezuela and Turkey are high-inflation economies, so part of this price growth reflects local inflation rather than brand strength.
Profit: the investment bill arrives
Adjusted operating income fell $235 million, or 18.4%, on sales that fell only $90 million. The company attributes it to "increased advertising expenses, unfavorable volume/mix, inflationary pressures in manufacturing and logistics costs... and higher variable compensation" (bonus accruals rising back after a weak 2025). Selling, general and administrative costs excluding impairments jumped 24% to $1,107 million from $891 million.
Notably, most of the damage is below the gross-profit line. Adjusted gross margin — the share of sales left after the cost of making the food, excluding hedge timing — was flat at 34.1%, so pricing roughly covered cost inflation. The GAAP gross margin fell 2.0 points to 32.4% largely because of a $101 million unrealized loss on commodity hedges (a paper loss on contracts used to lock in ingredient prices, versus a $16 million gain a year earlier), which the adjusted figure excludes.
Segment adjusted operating income
Q2 2026
Q2 2025
YoY
North America
$988M
$1,173M
-15.8%
International Developed Markets
$124M
$136M
-9.1%
Emerging Markets
$107M
$100M
+6.7%
General corporate expenses
$(178)M
$(133)M
+33.8%
North America's profit margin on this measure fell to 21.4% from 24.7%. Emerging Markets' gain was helped by "indirect tax recoveries within Brazil", which should not be assumed to repeat.
The $7.35 billion write-down
For the second year running, a falling share price forced Kraft Heinz to re-test whether its balance-sheet values were still justified — and they were not.
Goodwill impairments of $2.44 billion. Goodwill is the premium paid over the value of identifiable assets when businesses were acquired. Charges hit Western Europe ($788M), Hydration, Desserts and Meals ($656M), the former Elevation unit ($217M), Canada ($55M, leaving no goodwill there), and $725M on the newly separated Away From Home (foodservice) unit, which the company says has "a higher asset base supporting a lower margin business."
Brand (intangible asset) impairments of $4.91 billion, including about $3.4 billion on Kraft, $660 million on Oscar Mayer and $445 million on Lunchables, plus smaller charges on other brands.
The company's stated reason is revealing: the new cash-flow forecasts include the extra marketing, sales and R&D spending, and "the market remains uncertain as to the Company's ability to achieve the plan." In plain terms, the spending is already baked into the cost forecasts, and investors don't yet believe the payoff.
More write-downs are possible. After the tests, four goodwill units holding $18.2 billion of goodwill have less than 5% cushion between estimated fair value and book value, and $12.8 billion of brands have 20% or less cushion. The company also warns that its segment reorganization in Q3 2026 (combining its emerging-market units and moving remaining European countries into a new Europe and Pacific Developed Markets segment) could trigger further tests.
Below the operating line
A $265 million debt gain. Kraft Heinz bought back $1.4 billion face value of its 4.375% notes due 2046 for less than their book value, funded by issuing €1 billion of new euro notes due 2031 and 2034. The gain turned the quarter's interest line into $31 million of net income (versus $240 million of expense a year ago). It is excluded from adjusted EPS (a $0.14 per-share benefit removed).
Tax: a $916 million tax benefit on the pre-tax loss, an effective rate of 14.4%, held down because much of the goodwill write-down is not tax-deductible.
Separation costs fell to $10 million in the quarter (from $56 million in Q1; $66 million year to date), consistent with the split being paused.
Cash and dividend
Operating cash flow for the first half was $2.1 billion, up 8.2%, and free cash flow (operating cash less capital spending) was $1.7 billion, up 10.3% — driven by "improved payment terms" with suppliers (paying bills later), partly offset by higher inventory. That is a working-capital gain, not a sign of better underlying profit. Dividends paid were $949 million in the half; the Board declared another $0.40 quarterly dividend, and no shares were repurchased. Cash stood at $2.4 billion at quarter end.
Takeaway: The $5.5 billion loss is an accounting write-down, but the underlying picture is still weak: Kraft Heinz is selling fewer products in North America and deliberately spending more to reverse that, so adjusted profit is falling much faster than sales. The write-down itself says the market does not yet trust that spending to work — and with $18.2 billion of goodwill and $12.8 billion of brands sitting on thin cushions, another miss could bring another charge.
Outlook
Management raised its full-year 2026 sales outlook and narrowed its profit range (earnings release, August 5, 2026):
2026 guidance
Current
Prior
Organic net sales
-2.0% to -0.5%
-3.5% to -1.5%
Constant-currency adjusted operating income
-18% to -16%
-18% to -14%
Adjusted gross margin
-50 to -10 bps
-75 to -25 bps
Adjusted EPS
$2.03 to $2.09
$1.98 to $2.10
Free cash flow conversion
~110%
~100%
The incremental investment was raised by $100 million to about $700 million versus 2025. With $1.14 of adjusted EPS earned in the first half, the full-year range implies $0.89–$0.95 for the second half — a weaker back half, consistent with the extra spending weighing on the rest of the year.
Our read: The sales guidance increase is modest and still points to a decline, and the 0.8-point inventory pull-forward in Q2 may borrow from Q3. The case for Kraft Heinz rests on whether the heavier advertising turns North American volumes around in 2027; this quarter shows the cost but not yet the result. Until volume/mix in North America stops falling by 3–4 points a quarter, the risk of further brand write-downs remains high, and the paused separation removes one catalyst management had pointed to.