Keurig Dr Pepper beats estimates as beverage sales offset coffee weakness

Keurig Dr Pepper’s beverage business did the heavy lifting in the first quarter, offsetting a weaker coffee division and helping the company top Wall Street’s sales and profit forecasts. Net sales rose 9.4% to $3.98 billion, above the $3.84 billion expected, while adjusted diluted earnings came in at 39 cents a share versus 37 cents. Shares climbed about 4% in early trading.

The strongest momentum came from cold drinks. U.S. refreshment beverages posted net sales growth of 11.9%, with segment operating income up 9.8%, as price increases and steady demand for core names such as Dr Pepper, Snapple and 7UP lifted results. Growth from Ghost and Electrolit also helped. At the company level, Keurig Dr Pepper said constant-currency sales rose 8.1%, driven by 5.5 percentage points of net price realization and 2.6 points from volume and mix.

Chief executive Tim Cofer called it a “solid first quarter,” highlighting strong momentum in cold beverages while saying coffee results tracked expectations. The split inside the business was clear: beverage consumers kept paying up for brands they wanted, while the coffee side showed more strain from softer at-home demand and retailer inventory cuts.

U.S. coffee net sales fell 2.3%, pod shipments dropped 7% and brewer shipments declined in the high single digits. Coffee operating income sank 21.3% as green coffee costs, tariffs, lower volume and higher marketing spending squeezed margins. Gross margin narrowed to 52.8% from 54.6% a year earlier, and management said overall gross margin contracted 220 basis points, which it expects to be the biggest year-over-year decline for the legacy KDP business in 2026.

The pressure comes as Keurig Dr Pepper absorbs a major strategic shift. The company completed its roughly $18 billion acquisition of JDE Peet’s on April 1 and said Rafael Oliveira, the Dutch coffee and tea company’s chief executive, will lead the future Global Coffee Co. Keurig Dr Pepper still plans to separate into two publicly traded companies, one beverage business and one global coffee company, by the end of 2026.

Management reaffirmed its full-year outlook and said it still expects low double-digit earnings growth in constant currency, with second-half profitability improving as cost pressures ease and integration progresses. Adjusted operating income fell 1.9% to $838 million, free cash flow was $184 million, and the company said it has indirect exposure to higher packaging, fuel and freight costs tied to the Middle East conflict, though it is largely hedged for 2026. For now, the quarter showed investors exactly what Keurig Dr Pepper wants to prove: its beverage franchise can still carry the story, even as coffee remains the harder business to defend.