Despite strong performance from its zero-sugar lineup and Q4 results slightly exceeding expectations, Coca-Cola's 2026 growth guidance appeared subdued amid cooling inflation and fading pricing power benefits, disappointing the market.

On February 10, global beverage giant Coca-Cola released its financial results for the fourth quarter and full year of 2025. The report showed Q4 revenue of $11.82 billion, a 2% year-on-year increase, with organic revenue growth of 5%. Comparable earnings per share (EPS) were $0.58, up 6% from the prior year, slightly above analysts' average expectations.

However, GAAP operating profit for the fourth quarter declined 32% year-on-year, impacted by a $960 million non-cash impairment charge related to the acquired sports drink brand BodyArmor.

The market reacted most strongly to the company's future outlook. Coca-Cola projected full-year 2026 organic sales growth in the range of 4% to 5%, with the lower end of this guidance falling below Wall Street's average expectation of 5.01%. After several years of growth driven primarily by price increases, investors are concerned that the consumer giant's growth engine is slowing as consumers become more price-sensitive.

Furthermore, Coca-Cola faces an increasingly complex macroeconomic policy environment. On one hand, the Trump administration has issued sharp warnings about the unhealthy nature of carbonated beverages; on the other, several U.S. states are implementing new programs that restrict the purchase of soft drinks by food assistance beneficiaries. Due to the weaker-than-expected guidance and macroeconomic concerns, Coca-Cola's stock fell as much as 4.1% in pre-market trading.

The most worrying aspect of the earnings report for investors was the 2026 performance guidance. Coca-Cola expects 2026 organic revenue growth of 4% to 5%, while analysts had generally anticipated average growth above 5%. For earnings per share, the company forecasts comparable EPS growth of 7% to 8% (including an approximate 3% currency tailwind) from the 2025 base of $3.00. This suggests a shift from the "pricing boom" driven by high inflation in recent years back to a more moderate, normalized growth pattern.

The challenge for incoming CEO Henrique Braun is to accelerate expansion into non-sugar beverages, sports drinks, and water categories as consumers shift from traditional high-calorie soft drinks to healthier options. Although the company remains optimistic, the soft guidance indicates that management is taking a cautious stance regarding the consumer environment for the coming year.

Looking at the specific performance in the fourth quarter of 2025, Coca-Cola demonstrated resilience in its core business, with its "sugar-free" strategy showing significant results:

Volume and Pricing: Global unit case volume grew 1%, while price/mix increased 1%. This indicates modest volume growth alongside maintained, though noticeably moderated, pricing power compared to previous years.

Category Performance: Coca-Cola Zero Sugar was again the star product, with Q4 volume surging 13% and full-year growth reaching 14%. In contrast, volume for traditional full-sugar sodas faced pressure due to weakening consumer demand. Diet Coke volume grew 2% in the quarter but was flat for the full year.

Other Categories: The water, sports drinks, coffee, and tea segment saw volume growth of 3% in the quarter, showing steady performance. However, juice, dairy, and plant-based beverage volumes declined 3%, primarily dragged down by weakness in the Asia-Pacific and EMEA (Europe, Middle East, and Africa) regions.

Despite reasonable revenue performance, the North American market's profitability faced an unexpected setback. The earnings report revealed that Q4 operating profit in North America plummeted 65% year-on-year, mainly due to a $960 million non-cash impairment charge related to the BodyArmor trademark.

BodyArmor was a major acquisition by Coca-Cola aimed at competing with PepsiCo's Gatorade in the sports drink market. However, the substantial impairment suggests that the brand's performance post-integration has fallen short of initial management expectations, with intense market competition forcing a reassessment of the asset's value.

Excluding the impairment and other one-time items, North American fundamentals remained strong, with Q4 unit case volume up 1%, price/mix growth of 4%, and comparable currency-neutral operating profit increasing by 15%.

Beyond the financial figures, Coca-Cola's report also alluded to external challenges. As health consciousness among consumers grows, sugary beverages face headwinds.

More pressing is policy-level pressure. Certain U.S. state programs now restrict the purchase of soft drinks using food assistance benefits, directly impacting the purchasing power of lower-income groups. Additionally, recent strong statements from the Trump administration regarding the health risks of soda could pose potential threats to brand image and long-term demand.

To address these challenges, Coca-Cola is accelerating the diversification of its product portfolio. The report indicates the company is actively promoting innovative products like Powerade Power Water and leveraging global sporting events (such as South American World Cup qualifiers) for marketing, aiming to offset the decline in traditional carbonated drinks by strengthening its sports and health attributes.