Why did reported EPS rise while adjusted EPS fell?

Reported diluted EPS of $0.49 (+8.9%) benefited from favorable year-over-year mark-to-market swings on commodity and currency derivatives (about +$0.28 vs. prior year) and lapping prior-year acquisition and restructuring costs. Adjusted EPS excludes these items, and on that basis it fell 14.5% at constant currency to $0.73 because of operating declines, higher interest expense, and lower benefit plan income. Investors should focus on the adjusted figure for underlying performance.

How significant is the cocoa cost headwind for 2025?

Management described cocoa cost inflation as unprecedented and is guiding to a roughly 10% decline in Adjusted EPS at constant currency for 2025. Adjusted gross margin fell about 680 bps in Q2 as higher input costs outpaced pricing gains. The company has said pricing and productivity are partial offsets, but the guidance implies those offsets are not sufficient to protect profit this year.

Is the dividend increase sustainable given weaker cash flow?

The quarterly dividend rises 6% to $0.50 per share. First-half free cash flow was $0.8B, and dividends paid were $1.2B, so the payout was not covered by free cash flow in the period. Management's $3B+ full-year free cash flow target implies a much stronger second half. Net debt rose $3.0B to $19.4B, so the dividend's sustainability depends on delivering that cash flow recovery.

What drove the revenue growth, and was it broad-based?

Growth was driven primarily by pricing, which contributed 7.1 percentage points, while volume/mix was negative at -1.5 points. Europe was the strongest region, with organic growth of 12.5% (pricing +13.8%, volume/mix -1.3%). Emerging markets grew 11.6% reported. North America declined 3.5%, and Latin America fell 3.1% on a reported basis. Reported growth also included about 1.3 points from the Evirth acquisition. Price-led growth with declining volumes can be sensitive to consumer pushback.

What one-time items affected the quarter?

The largest non-recurring item was a $282M non-cash pension charge (about $0.16 per share) from the settlement of a U.S. salaried employee pension plan, which was excluded from adjusted EPS. Mark-to-market gains and losses on derivatives, ERP System Implementation costs (about $37M in operating income this quarter, running through 2028), and acquisition-related items also affected GAAP results. Investors should review the reconciliation schedules when comparing reported and adjusted figures.

MDLZ 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 29, 2025. Cited figures are marked; the original filing is the authoritative source.

Mondelēz International reported Q2 2025 results that showed accelerated top-line growth but sharp profit compression.

Net revenues rose 7.7% to $8.98 billion^a, driven by 5.6% organic growth (almost entirely pricing, with volume/mix down 1.5%), incremental revenue from the Evirth acquisition, and favorable currency. Reported diluted EPS rose 8.9% to $0.49, but that was flattered by large non-recurring or non-operating items, most notably a $0.06 mark-to-market swing and a $0.16 non-cash pension settlement charge excluded from adjusted results. Adjusted EPS fell 14.5% on a constant currency basis to $0.73 (about $0.71 at constant FX reported in the schedules), and adjusted gross margin contracted roughly 680 basis points to 33.7%, reflecting cocoa and other raw material inflation, transportation costs, and unfavorable mix.

Cash generation was weak in the first half: operating cash flow was $1.4 billion^b versus $2.1 billion a year earlier, and free cash flow fell to $0.8 billion from $1.5 billion. Net debt rose $3.0 billion to $19.4 billion as the company returned $2.9 billion to shareholders through dividends and buybacks. Management reaffirmed its full-year outlook of roughly 5% organic net revenue growth, Adjusted EPS down about 10% on a constant currency basis, and free cash flow of $3 billion or more, and announced a 6% increase in the quarterly dividend to $0.50 per share.

For investors, the key takeaways are that the revenue story is improving but earnings quality is under pressure from cocoa costs, and that the reported EPS growth overstates underlying performance. The reaffirmed guidance implies a significantly weaker second half for cash flow and profitability, so the dividend increase is being paid out of a period of compressed margins and rising leverage.

02—Key points

Key Highlights

Net revenues up 7.7% to $8,984M; organic net revenue up 5.6%, driven entirely by pricing (+7.1pp) against volume/mix (-1.5pp).
Adjusted EPS fell 14.5% on a constant currency basis to $0.73, while reported diluted EPS rose 8.9% to $0.49 due to mark-to-market and pension-related items.
Adjusted gross profit margin fell about 680 bps to 33.7% on higher raw material (cocoa) and transportation costs and unfavorable product mix.
Adjusted operating income margin declined 360 bps to 14.3%, with Adjusted Operating Income down $239M at constant currency.
First-half operating cash flow of $1.4B (vs. $2.1B) and free cash flow of $0.8B (vs. $1.5B) fell sharply; net debt rose to $19.4B from $16.4B.
Returned $2.9B to shareholders in the first half; quarterly dividend raised 6% to $0.50 per share, payable October 14, 2025.
Full-year 2025 guidance maintained: ~5% organic net revenue growth, Adjusted EPS down ~10% at constant currency, and free cash flow of $3B+, with cocoa cost inflation cited as the main headwind.

03—Questions

Frequently Asked Questions

Why did reported EPS rise while adjusted EPS fell?
Reported diluted EPS of $0.49 (+8.9%) benefited from favorable year-over-year mark-to-market swings on commodity and currency derivatives (about +$0.28 vs. prior year) and lapping prior-year acquisition and restructuring costs. Adjusted EPS excludes these items, and on that basis it fell 14.5% at constant currency to $0.73 because of operating declines, higher interest expense, and lower benefit plan income. Investors should focus on the adjusted figure for underlying performance.
How significant is the cocoa cost headwind for 2025?
Management described cocoa cost inflation as unprecedented and is guiding to a roughly 10% decline in Adjusted EPS at constant currency for 2025. Adjusted gross margin fell about 680 bps in Q2 as higher input costs outpaced pricing gains. The company has said pricing and productivity are partial offsets, but the guidance implies those offsets are not sufficient to protect profit this year.
Is the dividend increase sustainable given weaker cash flow?
The quarterly dividend rises 6% to $0.50 per share. First-half free cash flow was $0.8B, and dividends paid were $1.2B, so the payout was not covered by free cash flow in the period. Management's $3B+ full-year free cash flow target implies a much stronger second half. Net debt rose $3.0B to $19.4B, so the dividend's sustainability depends on delivering that cash flow recovery.
What drove the revenue growth, and was it broad-based?
Growth was driven primarily by pricing, which contributed 7.1 percentage points, while volume/mix was negative at -1.5 points. Europe was the strongest region, with organic growth of 12.5% (pricing +13.8%, volume/mix -1.3%). Emerging markets grew 11.6% reported. North America declined 3.5%, and Latin America fell 3.1% on a reported basis. Reported growth also included about 1.3 points from the Evirth acquisition. Price-led growth with declining volumes can be sensitive to consumer pushback.
What one-time items affected the quarter?
The largest non-recurring item was a $282M non-cash pension charge (about $0.16 per share) from the settlement of a U.S. salaried employee pension plan, which was excluded from adjusted EPS. Mark-to-market gains and losses on derivatives, ERP System Implementation costs (about $37M in operating income this quarter, running through 2028), and acquisition-related items also affected GAAP results. Investors should review the reconciliation schedules when comparing reported and adjusted figures.

04—Continue

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