Alcohol beverage company Diageo Plc (NYSE:DEO) shares are tumbling on Wednesday after it released worse-than-expected H1 FY26 results and provided weak FY26 guidance.

• Diageo shares are retreating from recent levels. What’s weighing on DEO shares?

Earnings Snapshot

The company, which owns Smirnoff, Guinness, Tanqueray, among others, reported net sales of $10.5 billion, missing the street view of $11.11 billion for the half year ended December 2025.

Net sales declined 4% primarily due to an organic net sales decline of 2.8% and the unfavorable impact of asset disposal.

Organic net sales were impacted by an organic volume decline of 0.9% and an unfavourable price/mix of 1.9%.

”Strong performance in Europe, LAC and Africa, was offset by a weakening performance in NAM and continued weakness in Chinese white spirits in APAC,” said CEO Sir Dave Lewis. “U.S. Spirits performance reflected pressure on disposable income, and competitive pressure from more affordable alternatives addressing a more stretched consumer wallet.”

The company's operating profit also decreased by 1.2%, with its operating profit margin expanding 85bps on the positive impact of disposals.

Adjusted EPS of 95 cents, down 2.5%, missed the street view of 96 cents.

Operating cash flow stood at $2.1 billion, and free cash flow came in at $1.5 billion. As of Dec. 31, net debt stood at $21.7 billion.

The company said that its cost savings program is progressing well and now expects around 50% of accelerated savings in FY26.

Outlook

For FY26, given further weakness in the first half in the U.S., the company now expects organic net sales to decline 2%-3% (vs. flat to slightly down expected earlier), including the impact of Chinese white spirits (CWS).

Also, organic operating profit growth is anticipated to be flat to up low single-digit (vs. low to mid-single digit prior), including the revised organic net sales guidance and the impact of tariffs.

The company reiterated free cash flow guidance at $3 billion for the year.

DEO Price Action: Diageo shares are trading lower 13.60% at $88.21 at publication on Wednesday.

Photo: Evgeniyqw via Shutterstock