PepsiCo Inc. (NASDAQ:PEP)

The composition of intangible assets and goodwill exhibits distinct trends over the five-year period. Overall, total intangible assets decreased from US$37.046 billion in 2021 to US$32.335 billion in 2024 before increasing to US$33.982 billion in 2025. A significant portion of this fluctuation is attributable to changes in indefinite-lived intangible assets, primarily related to brands.

Amortizable Intangible Assets

Gross amortizable intangible assets generally decreased from US$3.201 billion in 2021 to US$2.857 billion in 2024, then increased to US$3.125 billion in 2025. This decrease is partially offset by accumulated amortization, which consistently increased from US$1.663 billion in 2021 to US$1.906 billion in 2025. Consequently, net amortizable intangible assets declined from US$1.538 billion to US$1.102 billion between 2021 and 2024, before rising to US$1.219 billion in 2025. Within the gross amortizable assets, acquired franchise rights remained relatively stable, while customer relationships experienced a decline followed by a notable increase in 2025.

Goodwill

Goodwill experienced a consistent decrease from US$18.381 billion in 2021 to US$17.534 billion in 2024. However, 2025 saw a substantial increase in goodwill, reaching US$18.916 billion. This suggests potential acquisitions or revisions in valuation during that year.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets demonstrated a significant decline from US$35.508 billion in 2021 to US$31.233 billion in 2024. The primary driver of this decrease was a substantial reduction in the value of brands, falling from US$7.883 billion in 2021 to US$4.404 billion in 2024. Other indefinite-lived intangible assets also decreased over this period. However, in 2025, indefinite-lived intangible assets increased to US$32.763 billion, largely due to a rebound in the value of acquired franchise rights and brands.

Reacquired Franchise Rights

Reacquired franchise rights remained relatively stable throughout the period, fluctuating between US$7.437 billion and US$7.548 billion. This indicates consistent investment in, or valuation of, these rights.

The fluctuations in brand value within the indefinite-lived intangible assets category are particularly noteworthy. The significant decrease between 2021 and 2024, followed by a partial recovery in 2025, warrants further investigation to understand the underlying factors influencing these valuations. The increase in goodwill in 2025 also merits attention, potentially signaling strategic shifts in the company’s portfolio.

An examination of the financial information reveals a significant adjustment related to goodwill and intangible assets impacting reported figures. The adjustments primarily affect total assets and shareholders’ equity, while net income remains unchanged in the adjusted figures.

Total Assets

Reported total assets experienced a slight decrease between 2021 and 2022, followed by substantial increases in 2023 and 2025. However, the adjusted total assets demonstrate a consistently lower value across all periods. The difference between reported and adjusted total assets widens from approximately $18.4 billion in 2021 to $18.9 billion in 2025, indicating a considerable amount of goodwill or intangible assets have been removed in the adjusted figures. The adjusted asset values show a more moderate growth pattern compared to the reported values.

Shareholders’ Equity

Reported shareholders’ equity generally increased over the period, with a slight dip in 2024. Conversely, adjusted shareholders’ equity began with a negative value in 2021 and 2022, becoming positive in 2023 and increasing through 2025. This suggests the removal of goodwill and intangible assets significantly reduces the reported equity value when adjustments are made. The gap between reported and adjusted equity is substantial, particularly in the earlier years, highlighting the impact of these adjustments.

Net Income

Reported net income attributable to the company fluctuates between approximately $7.6 billion and $9.6 billion. Notably, the adjusted net income is identical to the reported net income in each period. This indicates that the adjustments related to goodwill and intangible assets do not affect the reported earnings. The removal of these assets appears to be an accounting adjustment that impacts the balance sheet but does not alter the income statement.

In summary, the adjustments consistently reduce both total assets and shareholders’ equity, suggesting a substantial write-down of goodwill or intangible assets. While these adjustments have a material impact on the balance sheet, they do not affect reported net income. The trend indicates a deliberate effort to present a more conservative valuation of assets, potentially reflecting a reassessment of the value of acquired businesses or intangible properties.

The financial performance, as indicated by several key ratios, demonstrates notable shifts when goodwill is removed from the calculation. Reported profitability margins exhibit relative stability between 2021 and 2023, with a slight decrease observed in 2025. However, the adjusted net profit margin shows a consistent increase from 2021 to 2023, remaining stable thereafter. Asset utilization, measured by total asset turnover, shows a modest increase from 2021 to 2022, followed by a slight decline and stabilization. A significant impact is observed on leverage and returns when goodwill is excluded, particularly from 2023 onwards.

Profitability

Reported net profit margin fluctuated between 9.59% and 10.43% from 2021 to 2024, decreasing to 8.77% in 2025. The adjusted net profit margin remained largely consistent with the reported margin until 2023, after which it diverged, showing a substantial increase in subsequent years. This suggests that the removal of goodwill has a material positive impact on calculated profitability.

Asset Efficiency

Reported total asset turnover showed a slight improvement from 0.86 in 2021 to 0.94 in 2022, followed by a stabilization around 0.91-0.92. In contrast, the adjusted total asset turnover consistently exceeded the reported value, increasing from 1.07 in 2021 to 1.17 in 2022, and remaining above 1.06 throughout the period. This indicates that excluding goodwill results in a higher assessment of asset utilization efficiency.

Financial Leverage

Reported financial leverage remained relatively stable, fluctuating between 5.26 and 5.76. However, the adjusted financial leverage figures, available from 2023, demonstrate substantial volatility, peaking at 161.60 in 2024 before decreasing to 59.38 in 2025. This dramatic change highlights the significant influence of goodwill on the company’s calculated leverage position.

Returns on Investment

Reported ROE and ROA exhibited similar trends, with ROE ranging from 40.38% to 53.09% and ROA from 7.67% to 9.67%. The adjusted ROE and ROA, beginning in 2023, show a massive increase, with ROE reaching 1,889.15% in 2024 and ROA reaching 12.04% in 2022. These substantial increases underscore the considerable impact of goodwill on the calculation of returns. The adjusted ROE and ROA values are significantly higher than their reported counterparts, indicating that the exclusion of goodwill substantially inflates these return metrics.

In summary, the removal of goodwill from the calculations leads to a notable increase in adjusted profitability, asset turnover, and returns on investment, while simultaneously causing significant fluctuations in adjusted financial leverage. These changes suggest that goodwill represents a substantial portion of the company’s assets and has a considerable impact on its financial ratios.

The reported and adjusted net income attributable to PepsiCo demonstrates an overall positive trend from 2021 through 2024, followed by a decrease in 2025. Both reported and adjusted net profit margins exhibit similar patterns over the five-year period. A detailed examination of the trends is presented below.

Reported Net Income and Margin

Reported net income attributable to PepsiCo increased from US$7,618 million in 2021 to US$8,910 million in 2022, and continued to rise, albeit at a slower pace, reaching US$9,074 million in 2023 and US$9,578 million in 2024. A decline is observed in 2025, with reported net income falling to US$8,240 million. Correspondingly, the reported net profit margin increased from 9.59% in 2021 to 10.31% in 2022, peaking at 10.43% in 2024 before decreasing to 8.77% in 2025. This decrease in 2025 aligns with the reduction in reported net income.

Adjusted Net Income and Margin

Adjusted net income attributable to PepsiCo mirrors the trend of reported net income, increasing from US$7,618 million in 2021 to US$8,910 million in 2022, US$9,364 million in 2023, and US$9,578 million in 2024, before decreasing to US$8,240 million in 2025. The adjusted net profit margin follows a similar trajectory, rising from 9.59% in 2021 to 10.31% in 2022, reaching 10.24% in 2023, peaking at 10.43% in 2024, and then declining to 8.77% in 2025. The adjusted net income and margin are identical to the reported figures for all years presented.

Comparison of Reported and Adjusted Metrics

The reported and adjusted net income and net profit margin values are consistent across all periods. This suggests that adjustments made to net income do not materially impact the overall profitability picture. The absence of significant adjustments indicates that the reported net income provides a reliable representation of the company’s financial performance.

Overall Trend

From 2021 to 2024, a positive trend in both net income and net profit margin is evident. However, the year 2025 shows a reversal of this trend, with both metrics experiencing a notable decline. Further investigation would be required to determine the underlying factors contributing to this decrease in 2025.

Analysis reveals distinct trends in both reported and adjusted total asset turnover ratios over the five-year period. While the reported total asset turnover exhibits relative stability, the adjusted ratio demonstrates a more pronounced pattern of fluctuation and overall higher efficiency. A comparison of the two metrics suggests the impact of goodwill and intangible assets on asset utilization.

Reported Total Asset Turnover

The reported total asset turnover ratio increased from 0.86 in 2021 to 0.94 in 2022, indicating improved efficiency in generating sales from total assets. This was followed by a slight decrease to 0.91 in 2023 and a marginal increase to 0.92 in 2024. The ratio concluded the period with a decrease to 0.87 in 2025. Overall, the reported ratio remained within a narrow range, suggesting consistent, though not dramatically changing, asset utilization.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio, which excludes the impact of goodwill and intangible assets, shows a more dynamic trend. It rose from 1.07 in 2021 to a peak of 1.17 in 2022, signifying a substantial improvement in asset efficiency when excluding these items. A subsequent decline to 1.11 in 2023 was followed by a slight increase to 1.12 in 2024. The ratio finished the period at 1.06 in 2025, still above the 2021 level but representing a decrease from the high achieved in 2022. This pattern suggests that the inclusion of goodwill and intangible assets in the reported total assets suppresses the apparent asset turnover efficiency.

Asset Base Comparison

Reported total assets experienced a slight decrease between 2021 and 2022, then increased significantly in 2023 and 2024 before continuing to rise in 2025. Adjusted total assets followed a similar pattern, but the magnitude of the changes was less pronounced. The difference between reported and adjusted total assets widened over the period, indicating a growing proportion of goodwill and intangible assets within the overall asset base.

The consistently higher adjusted total asset turnover ratio compared to the reported ratio highlights the potential impact of goodwill and intangible assets on the company’s overall asset efficiency. The observed trends suggest that excluding these items provides a clearer picture of the core operational asset utilization. The fluctuations in both ratios warrant further investigation into the underlying drivers of sales and asset management practices.

Analysis of the financial information reveals notable trends in asset values and associated leverage metrics over the five-year period. Reported total assets experienced moderate fluctuations, increasing from US$92,377 million in 2021 to US$107,399 million in 2025. Adjusted total assets followed a similar pattern, rising from US$73,996 million to US$88,483 million over the same timeframe. Reported shareholders’ equity demonstrated a consistent upward trend, growing from US$16,043 million to US$20,406 million. However, adjusted shareholders’ equity began with a negative value in 2021 and transitioned to positive figures by 2023, continuing to increase through 2025.

Reported Financial Leverage

Reported financial leverage remained relatively stable, fluctuating between 5.38 and 5.76 over the period. A slight increase was observed in 2024 before decreasing again in 2025. This suggests a consistent capital structure from a reported perspective.

Adjusted Financial Leverage

Adjusted financial leverage exhibited a significant increase beginning in 2023, reaching 106.80. This value peaked in 2024 at 161.60 before decreasing substantially to 59.38 in 2025. The initial absence of a value for adjusted financial leverage in 2021 and 2022, followed by the dramatic increase, suggests a substantial revaluation or adjustment to assets and/or equity impacting the leverage calculation. The subsequent decline in 2025 indicates a potential reversal or moderation of these adjustments.

The divergence between reported and adjusted financial leverage is substantial, particularly from 2023 onwards. This discrepancy warrants further investigation into the nature of the adjustments made to total assets and shareholders’ equity. The negative adjusted shareholders’ equity in the earlier years suggests the presence of significant off-balance sheet items or accounting adjustments that reduce the reported equity value when considered in the adjusted calculation. The large fluctuations in adjusted financial leverage highlight the sensitivity of this metric to changes in the adjusted asset and equity values.

Asset and Equity Adjustments

The difference between reported and adjusted total assets remained relatively consistent between 2021 and 2023, at approximately US$18-20 billion. However, this difference narrowed in 2024 and 2025, indicating a potential change in the nature or magnitude of the adjustments. The shift from negative to positive adjusted shareholders’ equity is a key observation, suggesting a change in the accounting treatment of certain items impacting equity.

Overall, the analysis indicates a stable reported financial position, but significant underlying adjustments to assets and equity are influencing the adjusted financial leverage. These adjustments require further scrutiny to understand their composition and potential implications for the company’s financial risk profile.

Reported net income attributable to PepsiCo demonstrates an increasing trend from 2021 to 2023, peaking at US$9,074 million, before slightly increasing to US$9,578 million in 2024 and decreasing to US$8,240 million in 2025. Adjusted net income follows a similar pattern, with a notable increase in 2023 to US$9,364 million. Reported total common shareholders’ equity generally increased over the period, rising from US$16,043 million in 2021 to US$20,406 million in 2025, with a slight dip in 2024 to US$18,041 million. However, adjusted total common shareholders’ equity exhibits a significantly different trajectory, starting with a negative value in 2021 and becoming positive in 2023, then increasing through 2025.

Reported Return on Equity (ROE)

Reported ROE shows an overall increase from 47.48% in 2021 to 53.09% in 2024, followed by a decrease to 40.38% in 2025. This fluctuation appears to correlate with the changes in reported net income and shareholders’ equity.

Adjusted Return on Equity (ROE)

Adjusted ROE is not available for 2021 and 2022. Beginning in 2023, Adjusted ROE is exceptionally high, reaching 1,208.26% and peaking at 1,889.15% in 2024 before decreasing to 553.02% in 2025. The substantial increase in Adjusted ROE is directly linked to the shift from negative to positive values in adjusted total shareholders’ equity, and the relatively stable adjusted net income. The magnitude of these percentages suggests a significant impact from the adjustments made to shareholders’ equity.

The divergence between reported and adjusted ROE, particularly the dramatic increase in adjusted ROE starting in 2023, warrants further investigation. The adjustments to shareholders’ equity appear to be the primary driver of this difference, and understanding the nature of these adjustments is crucial for a comprehensive assessment of the company’s financial performance. The decrease in both reported and adjusted ROE in 2025, coupled with the decline in reported net income, suggests a potential shift in profitability or capital structure that should be examined.

Analysis reveals distinct trends in reported and adjusted financial performance over the five-year period. While reported net income generally increased from 2021 to 2023, it experienced a decline in 2025. Adjusted net income mirrored this pattern, with a similar decrease in the final year. Total assets, both reported and adjusted, exhibited an overall upward trajectory, though with some fluctuation year-over-year. The key divergence lies in the return on assets calculations, highlighting the impact of adjustments made to net income and total assets.

Reported Return on Assets (ROA)

Reported ROA demonstrated an initial increase from 8.25% in 2021 to a peak of 9.67% in 2022. It subsequently decreased to 9.03% in 2023 before recovering to 9.63% in 2024. A notable decline to 7.67% was observed in 2025, coinciding with the decrease in reported net income. This suggests that the company’s profitability, as conventionally measured, is sensitive to fluctuations in net income.

Adjusted Return on Assets (ROA)

Adjusted ROA consistently exceeded reported ROA throughout the period. It increased from 10.30% in 2021 to 12.04% in 2022, indicating improved efficiency in utilizing assets when considering the adjustments. The adjusted ROA remained relatively stable between 11.31% and 11.69% from 2023 to 2024. Similar to the reported ROA, a decrease was observed in 2025, falling to 9.31%. The magnitude of the decline, however, was less pronounced than that of the reported ROA, suggesting the adjustments mitigated some of the negative impact on profitability.

The consistent difference between reported and adjusted ROA suggests that the adjustments to net income and total assets are material. The adjustments appear to smooth out some of the volatility in profitability, providing a potentially more stable view of underlying performance. The decline in both reported and adjusted ROA in 2025 warrants further investigation to determine the underlying causes and assess their potential impact on future performance.

Asset Trends

Reported total assets remained relatively flat between 2021 and 2022, then increased significantly in 2023 and 2025. Adjusted total assets followed a similar pattern, though the magnitude of the increases and decreases differed. The difference between reported and adjusted total assets grew over the period, indicating an increasing amount of adjustments being made to the reported asset base.

In conclusion, the analysis indicates a generally positive trend in profitability until 2025, when both reported and adjusted ROA experienced a decline. The adjustments made to net income and total assets have a significant impact on the calculated ROA, providing a different perspective on the company’s financial performance. Continued monitoring of these trends, along with a deeper understanding of the nature of the adjustments, is recommended.