Coca-Cola Q2 2025 slides: Margins expand despite currency headwinds

Introduction & Market Context

Coca-Cola (NYSE:KO) presented its Q2 2025 margin analysis on July 22, 2025, revealing significant margin expansion despite ongoing currency challenges. The beverage giant’s stock traded down 0.88% to $69.45 in pre-market following the presentation, after closing at $70.07 the previous day. The company’s shares have shown strong momentum in 2025, with a 16.16% year-to-date return prior to today’s session.

The presentation follows Coca-Cola’s Q1 2025 results, which showed a slight earnings beat but a revenue miss. Today’s margin analysis provides deeper insights into the company’s financial performance and operational efficiency in the second quarter.

Quarterly Performance Highlights

Coca-Cola reported substantial margin improvements in Q2 2025, with gross margin reaching 62.4%, up from 61.1% in the same period last year. More impressively, operating margin jumped to 34.1% from 21.3% in Q2 2024, representing a dramatic year-over-year improvement.

The underlying gross margin expanded by approximately 160 basis points, driven primarily by organic revenue growth, though partially offset by higher commodity costs. This expansion occurred despite currency headwinds of approximately 90 basis points.

As shown in the following chart of quarterly gross margin progression:

The operating margin showed even more substantial growth, with underlying operating margin expanding by approximately 320 basis points. This improvement was primarily attributed to organic revenue growth, effective cost management, and the timing of marketing investments.

The following chart illustrates the Q2 operating margin progression:

Detailed Financial Analysis

On a year-to-date basis, Coca-Cola’s gross margin reached 62.5%, up from 61.8% in the comparable period of 2024. The underlying gross margin expanded by approximately 120 basis points, reflecting consistent performance across the first half of the year despite increasing currency pressures.

The year-to-date gross margin analysis is illustrated in this detailed breakdown:

The company’s year-to-date operating margin showed similarly impressive results, reaching 33.6% compared to 20.2% in the first half of 2024. The underlying operating margin expanded by approximately 270 basis points, driven by organic revenue growth, effective cost management, and strategic timing of marketing investments.

The following chart provides a detailed analysis of the year-to-date operating margin:

Coca-Cola’s margin improvements were partially offset by currency headwinds, which impacted the operating margin by approximately 130 basis points in Q2 and 110 basis points year-to-date. These currency challenges align with the company’s previous guidance from Q1, which anticipated a 2-3 point revenue impact and a 5-6 point EPS impact from currency fluctuations throughout 2025.

The company’s reconciliation tables provide additional clarity on the calculation of these margins:

Strategic Initiatives

A notable contributor to Coca-Cola’s structural changes was the refranchising of bottling operations in certain territories in India and the Philippines. This strategic move aligns with the company’s long-term asset-light model, which focuses on brand building while partnering with bottlers for manufacturing and distribution.

The refranchising efforts contributed a modest structural tailwind to the company’s margins, though the impact was relatively small at approximately 10 basis points for gross margin and neutral for operating margin in Q2 2025.

Forward-Looking Statements

While the presentation focused primarily on margin analysis rather than forward guidance, the strong Q2 performance supports Coca-Cola’s previously stated 2025 outlook. In its Q1 earnings, the company projected organic revenue growth of 5-6% and comparable currency-neutral EPS growth of 7-9% for the full year.

The significant margin expansion demonstrated in Q2 suggests that Coca-Cola is effectively executing its strategy despite macroeconomic challenges. The company’s ability to expand underlying margins while navigating currency headwinds indicates operational resilience and effective pricing strategies.

The consistent improvement in both gross and operating margins, combined with strategic structural changes, positions Coca-Cola favorably for the second half of 2025. However, investors should continue to monitor currency impacts and commodity costs, which remain potential headwinds for the remainder of the year.

Full presentation:

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