Below is Dolphin Research's Trans of $Coca Cola(KO.US) Q2 FY26 earnings call.

I. Key takeaways

1. Raised FY guide: Organic revenue growth now seen at the high end of prior range, ~5%. Comparable currency-neutral EPS growth (ex-M&A and divestitures) is guided at 7%–8%, and comparable EPS growth at 9%–10% vs. the 2025 base of $3. The implied underlying effective tax rate for the year remains ~19.9%.

2. FX and divestiture impact: Based on current FX and hedges, expect a ~1ppt tailwind to comparable net revenue and ~3ppt tailwind to comparable EPS for the year. Divestitures are expected to be a 2%–3% headwind to comparable net revenue and ~1% headwind to comparable EPS, assuming the sale of Coca-Cola Africa is completed in late Q3 or Q4 pending regulatory approval.

3. Earnings and margins: Q2 comparable EPS was $0.97, up 11% YoY, including a 2ppt FX tailwind. Comparable GPM expanded ~120bps YoY and OPM expanded ~90bps, driven by underlying expansion and FX.

4. Cash flow and balance sheet: FCF was about $6.9bn, up YoY. Net debt leverage is 1.4x EBITDA, below the 2.0–2.5x target range, enhancing flexibility for buybacks and reinvestment.

5. Q4 call-outs: Due to the calendar, Q4 has six fewer days vs. Q4 2025. Q4 GP and OP margins will benefit from CCBA refranchising, and concentrate shipments are expected to slightly lag unit case volume for the full year.

II. Call details

2.1 Management commentary

1. Overall performance

a. Q2 volume rose 5%, partly on an easy comp, and organic revenue grew 6%, at the high end of the long-term model. The two-year volume CAGR of ~2% indicates a more balanced volume/price mix contribution to the top line.

b. Price/mix rose 2%. Pricing added 3ppt, partially offset by a 1ppt adverse mix, mainly due to the pacing of investments, especially in APAC, while concentrate sales lagged unit cases by 1ppt on shipment timing.

c. Management highlighted three advantages: a full beverage portfolio, a system that is both global and local, and the ability to adapt quickly to changing consumer needs.

2. Global consumer backdrop (uneven)

a. The U.S. and Europe are broadly stable, though many consumers remain pressured. China sentiment is cautious with more selective spending, while LatAm is mixed with improvement in Brazil and Central America but pressure in other core markets.

b. Lower-income consumers remain under pressure globally. The company is using its RGM toolbox to balance affordability and premiumization.

3. Regional performance

a. North America: benefiting from easy comps, volume, price and share all increased, with revenue and profit up and volume +3%. Trademark Coca-Cola, Fairlife, Powerade, Fresca, Smartwater and Simply performed strongly, and the relaunched Mr. Pibb grew over 20%.

b. LatAm: volume, price and share all rose, yielding balanced top-line growth and profit growth, with Mexico still challenging but Brazil improving.

c. EMEA: all operating units saw share and unit case growth, but profit declined due to investment pacing. Favorable weather in Europe supported volume, while Middle East geopolitics continued to disrupt.

d. APAC: volumes rose across operating units and nearly all categories. Comparable OP declined as the company invested ahead of demand to broaden the consumer base across socio-economic tiers, leveraging the full portfolio in China and RGM capabilities in India.

4. FIFA World Cup marketing (key highlight)

a. Operated under the 'four I's' framework — insights, innovation, intimacy and integration — spanning 180+ markets and over 20mn retail outlets.

b. Partnered with Panini to distribute over 1bn player stickers in 40+ markets, collected over 25mn new first-party data records, and generated 9bn+ digital and social impressions.

c. Average beverage penetration exceeded 80% at venues across the 16 host cities — roughly one drink per attendee and the highest in World Cup history — driving a 5% quarterly volume lift for Trademark Coca-Cola, the strongest ex-COVID-recovery in 17 years, and +8% global volume for Powerade.

5. Three strategic priorities and brands

a. Be more consumer-centric, maintain constructive dissatisfaction, and put digital at the core of every connection.

b. Make the 32 $1bn+ brands 'work harder', e.g., redesigning Coca-Cola Zero Zero to target evening occasions with early success in Europe and plans to scale to more markets.

c. Focus resources on selected consumers, customers and enterprise priorities, using AI and digital to improve agility and scale.

6. Other items

a. Tax dispute: oral argument with the IRS was held at the 11th Circuit; management awaits a ruling, maintains its position and remains confident in a favorable outcome.

b. Fairlife: most lines across four U.S. plants have resumed, with minimal retail supply impact, and no impact in Q2 or expected in H2. The Webster plant will continue to ramp in H2.

2.2 Q&A

Q: It was a strong quarter on the easiest comp. How do you view the H2 global consumer setup and the distribution of strength and weakness?

A: We delivered on the guide set at the start of the year, with strong H1 and Q2 performance, and more importantly, a clear path to execution in a dynamic consumer environment by getting closer to consumers and sourcing growth from more markets, brands and categories. Lower-income and lower socio-economic tiers remain pressured globally, and we deployed the RGM toolbox in H1 and will continue in H2 to balance affordability with premiumization and stay close to the consumer. We see momentum built around these capabilities carrying into Q2.The change in H2 is tougher YoY comps and six fewer days, but momentum persists, and we are pleased that nearly every operating unit and almost every category grew in H1.

Q: How is Fairlife recovering near term? Is the Webster capacity ramp on plan, and where will incremental capacity help most — channel penetration, flavors, or packaging?

A: Starting with outcomes, Fairlife grew 18% in Q1, aligned with the plan to ramp Webster, and demand remains strong, supporting our view of improved availability this year. Operations have largely resumed across lines and plants with no supply disruption to consumers, and the full-year plan is unchanged.Our priority is to ensure availability and shelf placement for core SKUs given strong demand, with innovation to follow as capacity increases flexibility. We remain excited about the brand and pleased with how the team and system handled the incident with rigor.

Q: APAC and India leaned into price/mix for volume, and India lost value share. How do you view the region's long-term positioning and outlook?

A: This is fully aligned with our strategy. The region is a long-term, highly attractive opportunity where we will invest ahead of the curve to bring more consumers into the base the right way while enhancing RGM capabilities, with opportunities in both affordability and premiumization.In India specifically, we own seven of the top ten brands, and building those brand equities is the first priority. The ~9ppt decline in regional OPM can be split roughly into thirds: timing of investments, affordability initiatives such as cold-drink equipment to recruit consumers the right way, and geo-mix as faster growth in India and China vs. mature markets like Australia, Japan and Korea weighed on mix.India and China both delivered strong volume growth. Globally, this is shaping up to be a more balanced year between volume and price, and APAC lets us lay foundations to monetize later, much like we have done in relatively mature LatAm.

Q: What is the potential impact and timing of the tax case ruling, and how would you think about capital allocation if the outcome is favorable?

A: We held oral arguments in late Jun., and the timing of the appellate ruling is uncertain, with a prior estimate of 6–12 months still the best view. Beyond the arguments already disclosed, there is nothing new to add, and we remain confident in ultimately prevailing.In the best case, a favorable ruling would give us recourse to amounts deposited with the IRS, and the downside was detailed in our disclosures. We passed an important milestone in Jun. and will await the outcome and provide more context then; overall we are comfortable with our position and look forward to the next milestone.

Q: How much lift did the FIFA World Cup provide, will it carry into Q3, and how will the large first-party dataset power future marketing?

A: The World Cup showcased our next chapter of growth anchored in getting close to consumers via the four I's — the right insights, innovation driven by those insights, intimacy by market and team, and integration that can amplify any activation. We executed at global scale while preserving local intimacy.For example, co-packing 1bn Panini stickers globally was an innovative engagement mechanic, and 25mn new first-party records let us transfer learnings from one activation to the next and carry those consumers into upcoming campaigns such as 'Coke with meals' and 'Powerade moments'. It helped overall results, but effectiveness stemmed from preparation and system execution — ~80% venue penetration, a World Cup record at roughly one drink per attendee, with extensive pre-activation across pack sizes and formats.It is hard to quantify the total uplift precisely, but the priority is how we connect with consumers and carry that momentum into subsequent activations.

Q: After 34 years, you won back the Marriott contract. What drove the win, and how is collaboration with Monster helping volumes?

A: We are delighted to win back Marriott. We lost it years ago by not being sufficiently consumer- and customer-centric, and we won it back by being more so than ever, welcoming new partners while valuing long-standing ones.The team demonstrated collaboration, bringing our global brands and unique customer value proposition to the table, and we are getting better at serving each customer and consumer with more precision and personalization while managing global complexity. We always aim to land the full portfolio with customers — sometimes it takes time — and including energy with our partner Monster presents a broad opportunity to expand together.We are most excited to see system-wide focus — bottlers and company — on being truly consumer- and customer-centric.

Q: OP margin likely hit a record this quarter. Beyond the structural benefit from the CCBA refranchising, how will you keep lifting underlying OPM over the next 12–18 months?

A: This is embedded in our long-term algorithm. In recent years, a key tailwind has been a structurally lighter model, alongside higher-quality top line, resilient and adaptable supply chains, and a willingness to invest ahead of the curve, all underpinning confidence in the margin agenda.FX, a headwind for years, finally turned into a tailwind this year and is providing a bit of help in the quarter, year-to-date and full year. The critical test in coming quarters is sustaining high-quality top line and managing the cost and investment base accordingly to preserve it over time; do that and the margin expansion implicit in the algorithm will come through.

Q: North America delivered strong organic growth again. What are you seeing in consumers and channels, did behaviors change intra-quarter, and how might this evolve?

A: Consumer engagement with the category remains healthy, and growth reflects that, though it is on easier comps. We are pleased with the run-rate, with almost every category growing.Lower-income consumers remain pressured, and the key is value, not just price. North America is winning by making brands cherished, relevant and worth choosing, offering strong brands and entry price points via pack architecture — for example, multi-pack mini-cans as a more premium convenience offer at retail, and single mini-cans at the lowest entry price at c-stores, fully leveraging RGM.On innovation, Mr. Pibb grew 20% on clear insights driving a higher-caffeine, bolder cherry profile, and 'Sprite with tea' — a U.S. innovation — has traveled to Asia with momentum. Consumers remain engaged, value matters more than just price, and with brand positioning and engagement, North America is set to carry the right momentum into H2.

Q: How was momentum exiting the quarter? What was FIFA's impact on at-home vs. away-from-home, and could higher oil prices disrupt consumers globally and skew the H2 mix?

A: Volume growth this quarter was among the strongest in recent years, supporting our view that 2026 is a more balanced year between volume and price. As consumer disposable income and perceptions evolve, we are providing options on both affordability and premiumization, which showed up in H1 and will continue in H2.Note that while volume was strong in the quarter, the two-year run-rate is ~2%, and from 2017 to now roughly in line with history. The most important point is that we are sourcing growth from more markets and more categories, increasing the degrees of freedom in the algorithm — by design.The World Cup was one factor, not the only one. The real driver was the underlying capabilities I described, and our focus remains on sustainable, balanced top-line growth.

Q: Looking back over ten years of revenue growth, given portfolio evolution — pruning 'zombie' brands and the mix of new and core — should the base case sit at the high end of the long-term algorithm rather than the past decade's range?

A: Because we are now getting growth from more markets and categories, we have more degrees of freedom — to use my engineering background — to control delivery of the enduring algorithm. Do not judge by a single quarter; it is better to step back and look at the full year.If we execute well, this year should be more balanced between volume and price, which we are seeing now. H1 benefited from six extra days, the World Cup and weather, and we were ready to capture them and build momentum into H2, but H2 will have six fewer days as planned.Everything aligns with what we said at the start of the year. We are excited about volume growth, but there is even more opportunity to source growth from more markets and brands.

(John) Remember the long-term algorithm is indeed long-term, anchored first in typical industry growth of 3%–4% over 30 years outside a few anomalous years. The second pillar is the differentiated capabilities we have built to win more than our fair share, placing us in the 4%–6% range.That is the range articulated in our long-term model, and we aspire to sustain performance at the high end.

Q: The raised guide implies more bottom-line leverage for the year. What are the drivers, will H2 investments be lower than H1, and how will ad strategy evolve?

A: There is no change in strategic commitment to support the brand portfolio and stay close to consumers. As seen many times, a given quarter's P&L may not reflect that quarter's investment level; over time, we invest ahead of the curve, which means some quarters run above gross profit and others below.We focus intensely on investment quality, leveraging AI and digital to expand capabilities and drive higher returns through better mix within the marketing portfolio, rather than just spending more. For the rest of the year, we expect some below-the-line benefits, which are embedded in the guide and anticipated to flow in H2.

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