EPS of $1.95 increased by 53.9% from previous year
Gross margin of 51.4%
Net income of 4.75B
"This marks 40 consecutive quarters of organic sales growth and keeps us on track for the tenth consecutive fiscal year of core EPS growth." - Andre Schulten
The Procter & Gamble Company (PG) QQ1 2026 Results Update: Durable Organic Growth Amidst Restructuring, Competitive Dynamic and Strategic Margin Expansion
Executive Summary
The Procter & Gamble Company (PG) delivered a solid start to fiscal 2026 with QQ1 results that reflect its enduring growth model, resilient cash generation and progress against a challenging macro and competitive backdrop. Reported revenue of $22.386 billion rose roughly 9% year-over-year, topping prior-year comps, while gross profit hit $11.499 billion and net income stood at $4.75 billion. Core earnings per share (EPS) rose 3% on a currency-neutral basis to $1.99, with reported EPS of $2.00 and diluted EPS of $1.95. The quarter marked 40 consecutive quarters of organic sales growth and reinforced P&G’s track record of core EPS growth for the tenth consecutive fiscal year, underscoring the durability of its integrated growth strategy, broad category leadership, and pricing/mix discipline. Net margins remained robust (net income margin ~21.2%), and operating margin was ~26.2%, driven by a 230bp productivity improvement and continued reinvestment in innovation and demand creation.
Management reaffirmed a disciplined, multi-vector strategy emphasizing portfolio superiority, productivity, and organizational restructuring to fund innovation and margin expansion. The company disclosed a two-year restructuring program designed to reduce up to 7,000 non-manufacturing roles (up to 15% of non-manufacturing headcount) and to realize up to $1.5 billion in pre-tax growth savings via Supply Chain 3.0 and related platforms. The actions are expected to bolster operating leverage, support faster decision-making, and free up capital for go-to-market investments and accelerated innovation. Management guided to maintaining all full-year ranges: organic sales growth in line to +4%, a roughly 2% value-based market growth, and core EPS growth in line to +4% for fiscal 2026, with a modest after-tax headwind from tariffs and commodities partially offset by FX tailwinds and savings from restructuring. The company also outlined an objective to return approximately $15 billion in cash to shareholders in fiscal 2026 (dividends around $10 billion and buybacks around $5 billion).
Key near-term considerations include elevated promotional intensity in North America and Europe as competitors respond to macro softness, a softer Q2 ahead given port-strike lapping effects, and ongoing disproportionate volatility in certain markets (notably Greater China and selected enterprise markets). Nonetheless, China and Latin America delivered meaningful gains (Greater China organic sales up mid-single digits to 5% with Baby Care up double digits; Latin America up 7%), signaling that targeted local-market innovations and revamped go-to-market approaches are starting to yield results. Looking ahead, the guidance embeds continued investment in innovation and productivity, with a plan to deliver mid-single-digit top-line growth and mid-single-digit earnings expansion while returning meaningful cash to shareholders. Investors should monitor: (1) the execution cadence of the restructuring and its impact on SG&A and overhead costs; (2) the sustainability of China and Latin American momentum; (3) the progression of Tide evo and other key innovations; (4) potential headwinds from tariffs, currency dynamics, and port-related disruptions; and (5) the pace of margin expansion as Supply Chain 3.0 scale benefits accrue and marketing productivity gains materialize.
Financial highlights (QQ1 2026, USD):
- Revenue: $22.386 billion, up 9.03% YoY; QoQ growth: 13.20% (from underlying quarterly base).
- Gross Profit: $11.499 billion; Gross Margin: 51.37% (0.5137).
- Operating Income: $5.856 billion; Operating Margin: 26.16% (0.2616); YoY operating income growth: ~50.7%; QoQ: 28.5%.
- Net Income: $4.75 billion; Net Margin: 21.22% (0.2122); YoY net income growth: ~51.4%; QoQ: 26.0%.
- EPS (diluted): $1.95; Reported EPS: $2.00; Core EPS: $1.99 (currency-neutral +3% YoY).
- Weighted average shares (diluted): 2.4368 billion.
- Free Cash Flow (FCF): $4.208 billion; Operating Cash Flow: $5.408 billion; Capital Expenditures: $1.20 billion;
Free Cash Flow as a % of Revenues: sustained single-digit percentage, underpinning a robust balance sheet.
- Balance sheet snapshot (end of QQ1 2026): Total assets $127.599B; Cash and cash equivalents $11.172B; Total debt $35.946B; Net debt $24.778B; Total stockholders’ equity $53.551B; Goodwill and intangible assets total $63.462B; Current assets $27.118B; Current liabilities $37.995B; Non-current liabilities $36.053B.
- Dividend and buyback cadence: Dividends paid in the period around $2.549B; share repurchases around $1.25B; total cash returned to shareholders this quarter approximately $3.8B; annual guidance targets total cash deployment around $15B for fiscal 2026.
- Regional and category dynamics: North America volume essentially flat; price/mix contributing ~1 percentage point; Greater China organic sales up ~5% with Pampers and SK-II in double digits; Latin America up ~7%; 6 of 7 categories grew in QQ1; Tide evo and premium innovations expanding in U.S. and China; Baby Care and Fabric Care under pressure from higher promotional intensity but addressed through integrated superiority strategy.
- Margin and productivity: Core gross margin down ~50 bps sequentially, but overall core operating margin flat YoY; productivity improvements of about 230 bps supported reinvestments in innovation and demand creation; currency-neutral core operating margin up ~40 bps.
- Growth and guidance context: Organic sales growth expected to stay in line to +4% for the year; global market growth around 2% on a value basis; restructuring headwinds (30-50 bps from exits) offset by pricing and productivity gains; adjusted free cash flow productivity targeted at 85-90% for the year; estimated commodity headwind ~ $100M after tax, FX tailwind ~ $300M after tax, tariffs ~ $500M pre-tax; total expected after-tax headwinds around $250M; capex and capacity expansion in multiple categories.
Notes on interpretation:
- The QQ1 2026 results reflect PG’s focus on a balanced top-line growth plan and an emphasis on sustained value creation through product superiority, productivity, and disciplined portfolio management. The 40 consecutive quarters of organic growth and a near-term guidance range that preserves the growth trajectory indicate the resilience of the firm’s operating model despite a tougher macro/commercial environment.
- The quarterly numbers show a higher impact from pricing/mix and productivity initiatives than from volume growth, with management underscoring its integrated growth strategy across all five segments and major geographies.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
22.39B
9.03%
13.20%
Gross Profit
11.50B
12.91%
14.05%
Operating Income
5.86B
50.73%
28.48%
Net Income
4.75B
51.42%
26.03%
EPS
2.00
53.85%
26.58%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ1 2026 earnings call:
- Strategy and growth driver focus: The leadership emphasized 'integrated growth strategy' and 'superiority across all vectors' to drive category growth, consumer value, and shareholder value. The CFO Andre Schulten highlighted that this quarter marks '40 consecutive quarters of organic sales growth' and supports the 'tenth consecutive fiscal year of core EPS growth'.
- Innovation pipeline and category leadership: Management discussed Tide evo, Tide liquid upgrade (the biggest in 20 years), and the expansion of Tide evo into national markets; Baby Care restage (Pampers) and premium body wash innovations in Greater China (Safeguard, Olay) driving growth in multiple regions; emphasis on premiumization and multi-tier product strategies across Tide, Pampers, Olay, SK-II and other brands.
- Restructuring and productivity: The company detailed a two-year restructuring program targeting up to 7,000 non-manufacturing roles (up to 15% of nonmanufacturing workforce) and Supply Chain 3.0 to realize up to $1.5B pre-tax growth savings. Management framed this as an enabler for faster execution, higher organizational agility, and greater investment in innovation.
- Regional dynamics and share evolution: Greater China posted 5% organic growth; Latin America up 7%; U.S. competition intensity rising with increased promotions in Fabric Care and Baby Care; management stressed the need for an integrated approach to counter promotional intensity and to grow market share, citing sequential absolute share improvements in the U.S. and steady progress in Europe.
- Guidance and risk factors: The company reaffirmed full-year guidance with organic sales growth in line to +4% and core EPS growth in line to +4%, acknowledging headwinds from commodity costs and tariffs while noting FX tailwinds; port-strike dynamics were noted as a factor that could soften Q2 growth, with stronger growth expected in the back half. The management also highlighted the importance of maintaining the innovation investment cadence to offset near-term volatility.
This marks 40 consecutive quarters of organic sales growth and keeps us on track for the tenth consecutive fiscal year of core EPS growth.
— Andre Schulten
We will drive superiority in every part of our portfolio across all value tiers where we play, all retail channels and all consumer segments we serve to grow categories, provide value to consumers and customers and create value for shareowners.
— Andre Schulten
Forward Guidance
Assessment of the QQ1 2026 guidance and outlook: Procter & Gamble maintained its full-year ranges, signaling confidence in the multi-year growth framework while acknowledging near-term volatility. Key elements include:
- Organic sales growth guidance: In line to +4% for fiscal 2026, with value growth around +2% on a global basis; note the 30-50 bps headwind from portfolio exits tied to restructuring.
- Core EPS guidance: Growth in line to +4% for the year; implied EPS bridge to $6.83-$7.09 per share, center around $6.96.
- Profitability and margin trajectory: Expect modest earnings growth over the balance of fiscal 2026 as investments in innovation and competitiveness rise, with a commodity cost headwind of approximately $100M after tax and FX tailwind of approximately $300M after tax; tariffs add about $500M pre-tax cost, with offsetting savings from supply chain productivity and pricing actions.
- Cash generation and returns: Adjusted free cash flow productivity targeted at 85-90% for the year; capex supports capacity expansion; dividend payout around $10B and share repurchases around $5B, for a total cash return to shareholders of roughly $15B in fiscal 2026.
- Scenario considerations: The company cited potential volatility from currency, commodity costs, tariff policy, and geopolitical disruptions, but viewed these within the planned bands. The near-term drag from port strikes is expected to create a softer Q2, with stronger back-half growth as the year progresses.
- Investment thesis and monitoring: Investors should track (i) progress on restructuring execution (portfolio rationalization and network optimization), (ii) the productivity gains from Supply Chain 3.0 and overhead reductions, (iii) the pace and impact of Tide evo and Baby Care innovations on market share, (iv) China’s trajectory and macro demand in Western Europe and LATAM, and (v) the effectiveness of price/mix realignment and channel strategy to sustain premiumization and value-based growth across all tiers.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PG Focus
51.37%
N/A
N/A
N/A
CLX
45.80%
16.70%
1.65%
50.93%
CL
60.80%
22.20%
1.90%
27.76%
UL
1.00%
17.30%
9.21%
19.84%
CHD
45.00%
20.10%
4.84%
30.74%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
PG remains a top-tier, cash-generative compounder within Consumer Defensive. The QQ1 performance demonstrates resilience and the capacity to navigate a high-competition environment while continuing to fund a robust innovation pipeline and restructuring program designed to lift long-term margins. The near-term guidance suggests mid-single-digit top-line growth and 0-4% core EPS growth for FY2026, with a path to stronger earnings in the back half as restructuring benefits come through and Tide evo-driven demand materializes. Investors should monitor: (1) effectiveness of the restructuring in reducing overhead and enabling faster decision-making; (2) the trajectory of key growth initiatives (Tide evo, Pampers upgrades, Olay/SK-II premium lines) and their impact on market share; (3) regional momentum in Greater China and LATAM; (4) the sustainability of the US/EU promotional environment and the company’s ability to balance price, volume, and mix; and (5) tariff and currency headwinds and their impact on margins. Given the company’s liquidity position, disciplined capital allocation (dividends and buybacks) and growth investment, the medium-term outlook remains favorable, with potential upside if the globalization of premium offerings accelerates and productivity gains exceed plan. In sum, PG’s earnings power is supported by its diversified reach, scale economics, and a compelling innovation agenda, albeit with near-term headwinds that require continued execution discipline and market prudence.
Key Investment Factors
Growth Potential
- Sustained growth trajectory supported by a broad, innovation-led portfolio: Tide evo and other Go-To-Market enhancements across Baby Care, Fabric Care, Personal Health, and SK-II in China and other emerging markets. The business remains leveraged to multi-year opportunities: U.S. value-to-premium tier optimization, Europe market penetration improvements, and Latin American growth across Brazil, Mexico, and other markets. The 2-year productivity program and 3-year rolling productivity master plans aim to deliver up to $1.5B pre-tax cost savings, which should support stronger margins and higher ROI on new product launches. The company’s structural advantage in scale and distribution remains a key growth engine across all channels and consumer segments.
Profitability Risk
- Near-term margin pressures from intensified promotions in high-competition regions (U.S. Fabric Care, Baby Care) and ongoing currency volatility; tariff policy shifts and potential new cross-border restrictions; port-disruption risk impacting timing of orders and inventory flow; China’s macro volatility and regulatory environment; reliance on continued success of key innovations (e.g., Tide evo, premium SK-II/Olay lines) for sustainable top-line gains; strategic portfolio exits and reallocation risk in some markets may create short-term headwinds if validated opportunities do not materialize as expected.
Financial Position
- Strong liquidity and cash generation: QQ1 2026 cash at year-end around $11.17B; net debt ~$24.78B; total debt ~$35.95B; net debt to EBITDA profile remains manageable given a high-quality, diversified portfolio. The company generated $5.41B operating cash flow and $4.21B free cash flow in the quarter, supporting ongoing dividends and share repurchases and enabling up to $15B annual cash return target. The restructuring and productivity programs are designed to improve margin structure and free up capital for innovation and strategic investments, maintaining balance sheet strength while funding growth initiatives.
SWOT Analysis
Strengths
Broad, iconic brand portfolio with leadership in five segments (Beauty, Grooming, Health Care, Fabric & Home Care, Baby/Feminine & Family Care).
Long history of organic sales growth (40 consecutive quarters) and sustainable core EPS growth (10-year track record).
Strong cash generation and high dividend/return-of-capital culture; large-scale manufacturing and distribution footprint.
Robust pricing/mix discipline and a resilient, multi-channel go-to-market model.
Significant productivity program and Supply Chain 3.0 initiatives aimed at reducing costs and increasing capacity for innovation.
Weaknesses
Near-term margin pressure from intensified promotions in North America and Europe and higher promotional activity in key categories.
High exposure to macro volatility (tariffs, currency movements, geopolitical risk) and port-strike timing, which can create quarterly volatility.
Execution risk associated with large-scale restructuring (potential disruption during transition of ~7,000 non-manufacturing roles).
China earnings and growth remain volatile; ongoing regulatory and market dynamics add uncertainty.
Opportunities
Launch and scale Tide evo and other category-leading innovations to drive category growth and share gains.
Expand personal care growth in Greater China and Emerging Markets through premiumization and targeted distribution gains.
Leverage productivity gains to fund demand creation and accelerate innovation across all value tiers.
Expand enterprise markets and urban/e-commerce distribution to accelerate penetration in Western Europe, LATAM, and other regions.
Further optimize portfolio in select markets to exit underperforming categories and reallocate resources to higher-potential segments.
Threats
Heightened promotional activity and macro-driven consumer caution could pressure near-term top-line growth.
Tariffs, commodity cost volatility, and FX swings could erode margins if not fully offset by pricing and productivity.
Geopolitical tensions and supply chain disruptions could impact production and distribution networks.
Sustained competitive intensity in key categories (Fabric Care, Baby Care) may pressure market share and profitability.
The Procter & Gamble Company (PG) QQ3 2025 Results: Modest Organic Growth in a Turbulent Macro Environment with Margin Expansion via Productivity and ...