KO earnings analysis
What we found in KO's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Coca-Cola delivered a strong Q2: revenue increased 7% to $13.380 billion, operating income rose 9% to $4.672 billion, and operating margin expanded 80 basis points to 34.9%. Volume growth was healthy at 5% worldwide, with particular strength in Asia Pacific at 8%, while Latin America posted 16% revenue growth. Cash generation improved sharply, but the investment case retains material exposure to the $6.0 billion IRS deposit and a potential $14 billion subsequent-year tax liability, as well as BodyArmor impairment risk.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue accelerated on volume and FX
- Q2 net operating revenue rose $845 million, or 7%, year over year to $13.380 billion. This was driven by 4% volume, 2% price/mix and a 2% favorable FX effect, partly offset by a 1% acquisitions/divestitures impact; revenue also increased from $12.470 billion in Q1 2026.
- Year-over-year margin expansion
- Gross margin expanded 50 basis points year over year to 62.9%, while operating margin expanded 80 basis points to 34.9%. Sequentially, gross margin declined 10 basis points from 63.0% and operating margin declined 10 basis points from 35.0% in Q1 2026.
- EPS and operating income grew
- Diluted EPS was $1.03, up from $0.97 in Q2 2025 and $0.91 in Q1 2026. Operating income increased $392 million, or 9%, to $4.672 billion, exceeding the 7% revenue gain.
- Volume growth was broad based
- Consumer demand remained broad based: worldwide unit-case volume increased 5%, led by Asia Pacific at 8%, EMEA at 4%, and Latin America, North America and Bottling Investments each at 3% or better.
- Cash conversion rebounded strongly
- Six-month operating cash flow improved to $7.543 billion from an outflow of $1.391 billion a year earlier. After $684 million of capital expenditures, six-month free cash flow was approximately $6.859 billion, with capex equal to about 2.6% of $25.852 billion of six-month revenue.
- Liquidity supports debt reduction and buybacks
- Liquidity remained substantial, with cash, cash equivalents, short-term investments and marketable securities of $16.4 billion plus $6.6 billion of unused backup credit lines. The company repaid $1.559 billion of debt during the first six months and repurchased 7.3 million shares for $549 million.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- IRS litigation carries major contingent exposure
- The IRS dispute remains the largest contingent financial exposure: Coca-Cola has paid a $6.0 billion tax-litigation deposit for 2007-2009, has a related $514 million accrued-interest receivable, and estimates a potential additional $14 billion tax-and-interest liability for 2010-2025 if the Tax Court methodology is ultimately applied. The reserve rose to $529 million as of July 3, 2026.
- BodyArmor impairment risk remains elevated
- BodyArmor's trademark had a $960 million impairment in Q4 2025 and retains a $2.440 billion carrying value. Management states that failure to meet revised operating projections or an increase in discount rates could require an additional impairment charge.
- Asia Pacific mix and investment pressure
- Asia Pacific revenue grew only 1% despite 11% concentrate-sales-volume growth because unfavorable price/mix reduced revenue by 9%. Its six-month operating income fell to $1.192 billion from $1.271 billion, as unfavorable mix, commodity costs and marketing spending outweighed volume growth.
- Marketing and commodity costs pressure profits
- Marketing investment is a near-term margin headwind: Q2 advertising expense increased $237 million to $1.565 billion, and total SG&A increased $250 million, or 7%, to $3.720 billion. Higher commodity costs also partially offset pricing and FX benefits.
- Risk-factor section unchanged; tax exposure updated
- No new standalone Item 1A risk factors were added versus the 2025 10-K; however, the filing updates the tax reserve to $529 million and notes that the potential 2010-2025 tax-and-interest exposure increased by approximately $900 million during the first six months of 2026.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $1.03
- Gross margin
- 62.9%
- Operating margin
- 34.9%
- Segment
- EMEA: revenue +2% year over year; operating income $1.309 billion, down $16 million.
- Segment
- Latin America: revenue +16%; operating income $1.177 billion, up $220 million.
- Segment
- North America: revenue +7%; operating income $1.695 billion, up $74 million.
- Segment
- Asia Pacific: revenue +1%; operating income $656 million, up $9 million.
- Segment
- Bottling Investments: revenue +8%; operating income $91 million, up $32 million.
What they said about what is next.
The 10-Q does not provide numeric revenue or EPS guidance. Management expects favorable foreign-exchange effects on full-year 2026 revenue, operating income and operating cash flow based on current spot rates and hedges; it expects approximately $2.2 billion of 2026 capital expenditures.
The filing reads better than the one before it.
What came before.
- 10-Q · April 30, 2026
- Coca-Cola's Q1 2026 results showed strong financial performance, with revenue rising 5.0% year-over-year to $12.47 billion. Improved operating margins were evident, resulting in earnings per share (EPS) of $0.86,…
- 10-K · February 20, 2026
- The 2025 10-K emphasizes Coca‑Cola’s portfolio and global distribution moat — the Company sold 33.8 billion unit cases in 2025 (33.7 billion in 2024) and its brands deliver 2.2 billion servings per day. Management…
- 10-Q · October 24, 2024
- The Coca‑Cola Company reported Q3 net operating revenues of $11,854,000,000 (vs. $11,953,000,000 in Q3 2023), a slight year-over-year decline of $99 million, while operating income fell to $2,510,000,000 from…
- 10-Q · May 2, 2024
- Coca‑Cola reported Q1 net operating revenues of $11,300,000,000 (up from $10,980,000,000 a year ago) and diluted EPS of $0.74 (up from $0.72). Revenue and EPS gains were supported by a $1,513 million other income gain…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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