Procter & Gamble Company
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, in the following sections: “Management's Discussion and Analysis,” “Risk Factors” and "Notes 4, 8 and 13 to the Consolidated Financial Statements." These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, except to the extent required by law.
14 The Procter & Gamble Company
Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks, including foreign currency fluctuations, changes in global interest rates and rate differentials, currency exchange or pricing controls and tariffs; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to effect the expected share repurchases and dividend payments; (3) the ability to successfully manage uncertainties related to changing political and geopolitical conditions and potential implications such as exchange rate fluctuations, market contraction, boycotts, variability and unpredictability in trade relations, sanctions, tariffs or other trade controls; (4) the ability to manage disruptions in credit markets or to our banking partners or changes to our credit rating; (5) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to various factors, including ones outside of our control, such as natural disasters, conflicts or acts of war, terrorism or disease outbreaks; (6) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials and costs of labor, transportation, energy, pensions and healthcare; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy, packaging content, cyber incidents, supply chain practices, social or environmental practices or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, contract manufacturers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third-party information and operational technology systems, networks and services and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage demand, supply and operational challenges; (13) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits, evolving and more fragmented digital marketing and selling platform requirements and technological advances attained by, and patents granted to, competitors; (14) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Company’s overall business strategy and financial objectives, without impacting the delivery of base business objectives; (15) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited; (16) the ability to successfully manage current and expanding regulatory and legal requirements and matters (including, without limitation, those laws, regulations, policies and related interpretations involving product liability, product and packaging composition, manufacturing processes, intellectual property, labor and employment, antitrust, privacy, cybersecurity, data protection and data transfers, artificial intelligence, tax, the environment, due diligence, risk oversight, accounting and financial reporting) and to resolve new and pending matters within current estimates; (17) the ability to manage changes in applicable tax laws and regulations; and (18) the ability to continue delivering progress towards our environmental sustainability ambitions. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from those projected herein is included in the section titled "Economic Conditions and Uncertainties" and the section titled "Risk Factors" (Part I, Item 1A) of this Form 10-K.
Purpose, Approach and Non-GAAP Measures
The purpose of Management's Discussion and Analysis (MD&A) is to provide an understanding of Procter & Gamble's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and accompanying Notes. The MD&A is organized in the following sections:
•Overview
•Summary of 2026 Results
•Economic Conditions and Uncertainties
•Results of Operations
•Segment Results
•Cash Flow, Financial Condition and Liquidity
•Critical Accounting Policies and Estimates
•Other Information
Throughout the MD&A we refer to measures used by management to evaluate performance, including unit volume growth, net sales, net earnings, diluted net earnings per common share (diluted EPS) and operating cash flow. We also refer to a number of financial measures that are not defined under U.S. GAAP, including organic sales growth, Core earnings per share (Core EPS), adjusted free cash flow and adjusted free cash flow productivity. The explanation at the end of the MD&A provides the definition of these non-GAAP measures, details on the use and the derivation of these measures, as well as reconciliations to the most directly comparable U.S. GAAP measure.
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Management also uses certain market share and market consumption estimates to evaluate performance relative to competition despite some limitations on the availability and comparability of share and consumption information. References to market share and consumption in the MD&A are based on a combination of vendor-purchased traditional brick-and-mortar and online data in key markets as well as internal estimates. All market share references represent the percentage of sales of our products in dollar terms on a constant currency basis relative to all product sales in the category. The Company measures market shares through the most recent period for which market share data is available, which typically reflects a lag time of one or two months as compared to the end of the reporting period. Management also uses unit volume growth to evaluate drivers of changes in net sales. Organic volume growth reflects year-over-year changes in unit volume excluding the impacts of acquisitions and divestitures and certain one-time items, if applicable, and is used to explain changes in organic sales. In our presentation of data in tables or other charts, certain columns and rows may not add due to rounding.
OVERVIEW
P&G is a global leader in the fast-moving consumer goods industry, focused on providing branded consumer packaged goods of superior quality and value to our consumers around the world. Our products are sold in about 180 countries and territories primarily through mass merchandisers, digital commerce (including social commerce) channels, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, specialty beauty stores (including airport duty-free stores), high-frequency stores, pharmacies, electronics stores and professional channels. We also sell direct to consumers. We have on-the-ground operations in approximately 65 countries.
Our market environment is highly competitive with global, regional and local competitors. In many of the markets and industry segments in which we sell our products, we compete against other branded products as well as retailers' private-label brands. Additionally, many of the product segments in which we compete are differentiated by price tiers (referred to as super-premium, premium, mid-tier and value-tier products). We believe we are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position.
Organizational Structure
Our organizational structure is comprised of Sector Business Units (SBUs), Enterprise Markets (EMs), Corporate Functions (CF) and Global Business Services (GBS).
Sector Business Units
The Company's product categories are organized into five SBUs and five reportable segments (under U.S. GAAP): Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The SBUs are responsible for global brand strategy, product upgrades and innovation, marketing plans and supply chain. They have direct profit responsibility for markets (referred to as Focus Markets) representing the large majority of the Company's sales and earnings and are also responsible for innovation plans, supply plans and operating frameworks to drive growth and value creation in the remaining markets (referred to as Enterprise Markets). Throughout the MD&A, we reference business results by region, which are comprised of North America, Europe, Greater China, Latin America, Asia Pacific and India, Middle East and Africa (IMEA).
16 The Procter & Gamble Company
The following provides additional detail on our reportable segments and the product categories and brand composition within each segment.
| Reportable Segments | % of Net Sales (1) | % of Net Earnings (1) | Product Categories (Sub-Categories) | Major Brands | ||||||||||
| Beauty | 19% | 17% | Hair Care (Conditioners, Shampoos, Styling Aids, Treatments) | Head & Shoulders, Herbal Essences, Pantene, Rejoice | ||||||||||
Personal Care (Antiperspirants and Deodorants, Personal Cleansing) | Native, Old Spice, Safeguard, Secret | |||||||||||||
Skin Care (Facial Moisturizers, Cleaners and Treatments) | Olay, SK-II | |||||||||||||
| Grooming | 8% | 9% | Grooming (Appliances, Female Blades & Razors, Male Blades & Razors, Pre- and Post-Shave Products, Other Grooming) | Braun, Gillette, Venus | ||||||||||
| Health Care | 14% | 15% | Oral Care (Toothbrushes, Toothpastes, Other Oral Care) | Crest, Oral-B | ||||||||||
Personal Health Care (Gastrointestinal, Pain Relief, Rapid Diagnostics, Respiratory, Vitamins/Minerals/Supplements, Other Personal Health Care) | Metamucil, Neurobion, Pepto-Bismol, Vicks | |||||||||||||
| Fabric & Home Care | 35% | 35% | Fabric Care (Fabric Enhancers, Laundry Additives, Laundry Detergents) | Ariel, Downy, Gain, Tide | ||||||||||
Home Care (Air Care, Dish Care, P&G Professional, Surface Care) | Cascade, Dawn, Fairy, Febreze, Mr. Clean, Swiffer | |||||||||||||
| Baby, Feminine & Family Care | 24% | 24% | Baby Care (Baby Wipes, Taped Diapers and Pants) | Luvs, Pampers | ||||||||||
Feminine Care (Adult Incontinence, Menstrual Care) | Always, Always Discreet, Tampax | |||||||||||||
Family Care (Paper Towels, Tissues, Toilet Paper) | Bounty, Charmin, Puffs |
(1)Percent of Net sales and Net earnings for the fiscal year ended June 30, 2026 (excluding results held in Corporate).
Organization Design:
Sector Business Units
Beauty: The beauty categories in which we compete are hair care, personal care and skin care. We are a global market leader in the retail hair care market with about 20% global market share primarily behind our Head & Shoulders and Pantene brands. In personal care, we have the number two market share position with about 20% global market share, primarily behind our Old Spice, Native, Secret and Safeguard brands. In skin care, the Olay brand is one of the top facial skin care brands in the world with about 5% global market share.
Grooming: We are the global market leader in the grooming market, where we hold more than 50% share. Our global blades and razors market share is more than 60%, primarily behind our Gillette and Venus brands. Our appliances, such as electric shavers and intense pulse light devices, are sold primarily under the Braun brand. We hold nearly 30% of the male electric shavers market.
Health Care: We compete in oral care and personal health care. In oral care, we are a leader with a nearly 30% global market share behind our Crest and Oral-B brands. In personal health care, we are a global market leader among the categories in which we compete, including respiratory treatments, digestive wellness, sleep aids, vitamins and analgesics behind our Vicks, Metamucil, Pepto-Bismol and Neurobion brands.
Fabric & Home Care: This segment is comprised of a variety of fabric care products, including laundry detergents, additives and fabric enhancers; and home care products, including dishwashing liquids and detergents, surface cleaners and air fresheners. In fabric care, we generally have the number one or number two market share position and are the global market leader with over 35% market share in the markets in which we compete, primarily behind our Tide, Ariel and Downy brands. Our global home care market share is more than 30% across the categories in which we compete, primarily behind our Cascade, Dawn, Febreze and Swiffer brands.
Baby, Feminine & Family Care: In baby care, we are a global market leader and compete mainly in taped diapers, pants and baby wipes, with more than 30% global market share. We generally have the number one or number two market share position in the markets in which we compete, primarily behind our Pampers brand. We are the global market leader in the feminine care category with nearly 30% global market share. We compete in the menstrual care sub-category primarily behind our Always and Tampax brands with nearly 35% global market share. We also compete in the adult incontinence sub-category behind Always Discreet, with over 15% market share in the markets in which we compete. Our family care business is predominantly a
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North American business comprised primarily of the Bounty paper towel and Charmin toilet paper brands. North America market shares are nearly 40% for Bounty and over 25% for Charmin.
Enterprise Markets
Enterprise Markets are responsible for sales and profit delivery in specific countries, supported by SBU-agreed innovation and supply chain plans, along with scaled services like planning, distribution and customer management.
Corporate Functions
Corporate Functions provides company-level strategy and portfolio analysis, corporate accounting, treasury, tax, external relations, governance, human resources, information technology and legal services.
Global Business Services
Global Business Services provides scaled services in technology, process and data tools to enable the SBUs, the EMs and CF to better serve consumers and customers. The GBS organization is responsible for providing world-class services and solutions that drive value for P&G.
Strategic Focus
Procter & Gamble aspires to serve the world’s consumers better than our best competitors in every category and in every country in which we compete and, as a result, deliver total shareholder return in the top one-third of our peer group. Delivering and sustaining leadership levels of shareholder value creation requires balanced top- and bottom-line growth and strong cash generation.
Our strategy is to deliver and sustain value creation through five integrated choices: a portfolio of daily-use products where performance drives brand choice; superiority across product, package, brand communication, retail execution and value; productivity; constructive disruption of the entire value chain; and a highly efficient and effective organization structure.
The Company competes in daily-use product categories where performance plays a significant role in the consumer's choice of brands, and therefore, plays to P&G's strengths. Our focused portfolio of businesses consists of product categories where P&G has strong brands and consumer-meaningful product technologies with typically leadership market positions.
Within these categories, our strategic choices are focused on delighting and winning with consumers. Our consumers are at the center of everything we do. We win with consumers by delivering irresistible superiority across five key vectors - product performance, packaging, brand communication, retail execution and value. Winning with consumers around the world and against our best competitors requires superior innovation. Innovation has always been, and continues to be, P&G’s lifeblood. Superior products delivered with superior execution drive market growth, value creation for retailers and build share growth for P&G.
Ongoing productivity improvement is strategic and crucial to delivering our balanced top- and bottom-line growth, cash generation and value creation objectives. Productivity improvement enables investments to strengthen the superiority of our brands via product and packaging innovation, more efficient and effective supply chains, equity and awareness-building brand advertising and other programs and expansion of sales coverage and research and development programs. Productivity improvements also enable us to mitigate and manage through periods of challenging cost environments (including periods of increasing commodity, inflation and negative foreign exchange impacts). Our objective is to drive productivity improvements across all elements of the statement of earnings and balance sheet, including cost of goods sold, marketing and promotional spending, overhead costs and capital spending.
We act with agility and are constructively disrupting our highly competitive industry and the way we do business, including how we innovate, communicate and leverage new technologies, to create more value.
We are improving operational effectiveness and organizational culture through enhanced clarity of roles and responsibilities, accountability and incentive compensation programs.
The Company’s strategic framework has been delivering strong results over an extended period of time. As we observe changes in the markets in which we operate, we will adapt the execution of our core strategy. These market changes include evolving ways in which consumers are engaging with our brands across social media platforms, streaming services or AI based search. We observe changes in retail landscapes around the world, where retailers are selling across multiple platforms (digital and physical outlets) and building their own media platforms. Consumers are changing how they perceive value across their basket of goods as cumulative inflation impacts their shopping behavior. Lastly, technologies, including AI, offer new capabilities to innovate, produce and market our products and brands. We are embracing these changes, and to benefit from them, the Company can and will adjust the execution of its strategy.
Beyond the short-term interventions, the Company expects the delivery of the following long-term growth algorithm will result in total shareholder returns in the top third of the competitive, fast-moving consumer goods peer group:
•Organic sales growth above market growth rates in the categories and geographies in which we compete;
•Core EPS growth of mid-to-high single digits; and
•Adjusted free cash flow productivity of 90% or greater.
18 The Procter & Gamble Company
While periods of significant macroeconomic pressures may cause short-term results to deviate from the long-term growth algorithm, we intend to maintain a disciplined approach to investing in our business.
RECENT DEVELOPMENTS
Limited Market Portfolio Restructuring
In the fiscal year ended June 30, 2024, the Company started a limited market portfolio restructuring of its business operations, primarily in certain Enterprise Markets, including Argentina and Nigeria, to address challenging macroeconomic and fiscal conditions. During the period ended September 30, 2024, the Company completed this limited market portfolio restructuring with the substantial liquidation of its operations in Argentina and recorded incremental restructuring charges of $801 million after tax, comprised primarily of non-cash charges for accumulated foreign currency translation losses previously included in Accumulated other comprehensive income/(loss). The total incremental restructuring charges incurred under the program beginning in the three-month period ended December 31, 2023, through the three-month period ended September 30, 2024, were $1.2 billion after tax. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.
Intangible Asset Impairment
During the fiscal year ended June 30, 2024, the Company recorded a $1.3 billion before tax ($1.0 billion after tax) non-cash impairment charge on an indefinite-lived intangible asset acquired as part of the Company’s 2005 acquisition of The Gillette Company. The impairment charge arose from a reduction in the estimated fair value of the Gillette indefinite-lived intangible asset due to a higher discount rate, weakening of several currencies relative to the U.S. dollar and the impact of the non-core restructuring program described above. This impairment charge adjusted the carrying value of the Gillette indefinite-lived intangible asset to fair value. For a more detailed discussion of the Gillette impairment, refer to Note 4 to the Consolidated Financial Statements.
Focused Portfolio, Supply Chain and Productivity Plan
In June 2025, the Company announced a portfolio and productivity plan to streamline its portfolio and organization to improve its cost structure and invest in growth. The Company expects to incur approximately $1.5 to $2.0 billion in before-tax restructuring costs over a two-year period, including costs incurred as part of this plan and the ongoing plan. The Company incurred over half of the costs under this plan in fiscal 2026, with the remainder expected in fiscal 2027.
The restructuring activities are being executed across the Sector Business Units as well as the Enterprise Markets, Corporate Functions and Global Business Services. These restructuring activities include a plan for a reduction of up to 7,000 non-manufacturing overhead personnel by the end of fiscal 2027. Consistent with our historical policies for ongoing restructuring-type activities, resulting charges are funded by and included within Corporate for segment reporting. Restructuring charges above the normal ongoing level of restructuring costs are reported as non-core charges. For more details on the restructuring program, refer to Note 3 to the Consolidated Financial Statements.
Glad Joint Venture Agreement
In January 2026, the Glad joint venture agreement between the Company and The Clorox Company (Clorox) expired. Under the terms of the agreement, Clorox purchased the Company’s minority interest in the venture at fair market value for $476 million. This transaction was accounted for as a dissolution of the Glad joint venture business and the Company recorded an after-tax gain of $261 million.
U.S. Tariffs
On February 20, 2026, the U.S. Supreme Court ruled that the tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were invalid. The Company previously paid approximately $200 million in IEEPA tariffs that may be recoverable. During the three-month period ended June 30, 2026, the Company recognized recovery of half of this amount in its Consolidated Financial Statements.
Thorne Acquisition
On August 4, 2026, the Company entered into an agreement to acquire Thorne, a premium wellness and supplement brand in the vitamins, minerals and supplements category for $3.8 billion. We anticipate the transaction to close in the second quarter of fiscal year 2027, with the timing subject to regulatory approval and customary closing conditions.
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SUMMARY OF 2026 RESULTS
| Amounts in millions, except per share amounts | 2026 | 2025 | Change vs. Prior Year | ||||||||||||
| Net sales | $ | 87,032 | $ | 84,284 | 3 | % | |||||||||
| Operating income | 19,748 | 20,451 | (3) | % | |||||||||||
| Net earnings | 16,144 | 16,065 | — | % | |||||||||||
| Net earnings attributable to Procter & Gamble | 16,046 | 15,974 | — | % | |||||||||||
| Diluted net earnings per common share | 6.62 | 6.51 | 2 | % | |||||||||||
| Core earnings per share | 6.89 | 6.83 | 1 | % | |||||||||||
| Cash flow from operating activities | 19,556 | 17,817 | 10 | % | |||||||||||
•Net sales increased 3% to $87.0 billion versus the prior year. Net sales increased high single digits in Beauty, mid-single digits in Grooming and Health Care and low single digits in Fabric & Home Care and Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 1%. Organic sales increased mid-single digits in Beauty and low single digits in Health Care, Grooming and Fabric & Home Care. Organic sales declined low single digits in Baby, Feminine & Family Care.
•Operating income decreased $703 million, or 3%, to $19.7 billion as the net sales increase was more than offset by a decrease in operating margin.
•Net earnings increased $79 million to $16.1 billion as the decrease in operating income was offset by higher non-operating restructuring charges in the prior year, primarily driven by the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina.
•Net earnings attributable to Procter & Gamble increased $72 million to $16.0 billion.
•Diluted EPS increased 2% to $6.62 due to an increase in net earnings and a reduction in shares outstanding. Core EPS, which excludes the gain from the dissolution of the Glad joint venture business and incremental restructuring charges, increased 1% to $6.89.
•Cash flow from operating activities was $19.6 billion.
◦ Adjusted free cash flow, which is defined as operating cash flow less capital expenditures and excluding payments for the transitional tax resulting from the 2017 U.S. Tax Act, was $15.8 billion.
◦ Adjusted free cash flow productivity, which is defined as adjusted free cash flow as a percentage of net earnings excluding the gain from the dissolution of the Glad joint venture business, was 100%.
ECONOMIC CONDITIONS AND UNCERTAINTIES
Global Economic Conditions. Our products are sold in numerous countries worldwide, with more than half our sales generated outside the United States. Our largest international markets are Greater China, the United Kingdom, Canada, Japan and Germany and collectively comprised approximately 21% of our net sales in fiscal 2026. As a result, we are exposed to global macroeconomic factors, geopolitical tensions and government policies. We are exposed to various risks due to economic, political and social instabilities, market volatility, natural disasters, debt and credit issues, currency controls, new or increased tariffs, foreign exchange, the availability and cost of materials and interest rate changes. These risks can negatively impact our net sales, net earnings and cash flows. For example, we are exposed to risks due to the conflict in the Middle East and the ongoing war between Russia and Ukraine. Our Russia business accounted for 1% of consolidated net sales, net earnings and net assets as of June 30, 2026.
Foreign Exchange. We have significant exposure to exchange rate fluctuations, both due to translation and transaction exposures. Translation exposures arise from measuring income statements of foreign subsidiaries with functional currencies other than the U.S. dollar. Transaction exposures involve impacts from 1) input costs that are denominated in currencies other than the local reporting currency and 2) revaluation of working capital balances denominated in currencies other than the functional currency. We have experienced significant foreign exchange impacts in the past due to the weakening of certain foreign currencies versus the U.S. dollar, which have negatively impacted net sales, net earnings and cash flows. In response to the devaluation of foreign currencies (including those deemed highly inflationary), any lags or inability (due to government restrictions) to implement price increases or the negative impacts of such actions on product consumption may lead to a decline in our net sales, net earnings and cash flows.
Commodities and Supply Chain. Our costs are subject to fluctuations due to changes in commodity and input material prices, transportation costs, inflationary impacts and productivity efforts. We have significant exposures to certain commodities and input materials, in particular certain oil-derived materials like resins and paper-based materials like pulp. Volatility in the market price of commodities and input materials directly affects our costs. Disruptions in manufacturing, supply and distribution operations can lead to increased costs. Legal or regulatory requirements and sustainability initiatives may result in increased costs. We strive to implement, achieve and sustain cost improvement plans, including supply chain optimization and general overhead and workforce optimization. Increased pricing in response to certain inflationary or cost increases may also
20 The Procter & Gamble Company
offset portions of the cost impacts; however, such price increases may negatively impact product consumption. If we are unable to manage cost impacts through pricing actions and consistent productivity improvements, it may negatively impact our net sales, net earnings and cash flows.
Government Policies. We are exposed to changes in U.S. and foreign government legislative, regulatory or enforcement policies that can have a negative impact on net sales, net earnings and cash flows. These include tax policy changes (both U.S. and foreign), including those resulting from the current work being led by the OECD/G20 Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy”. Government controls such as currency exchanges, pricing and import authorizations as well as government policies related to environmental and climate change matters and changes to international trade agreements can also impact our financial performance.
For additional information on risk factors that could impact our business results, please refer to Risk Factors in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended June 30, 2026.
RESULTS OF OPERATIONS
The key metrics included in the discussion of our consolidated results of operations include net sales, gross margin, selling, general and administrative expense (SG&A), operating margin, other non-operating items, income taxes and net earnings. The primary factors driving year-over-year changes in net sales include overall market growth in the categories in which we compete, product initiatives, competitive activities (the level of initiatives, pricing and other activities by competitors), marketing spending, retail executions (both in-store and online) and acquisition and divestiture activity, all of which drive changes in our underlying unit volume, as well as our pricing actions (which can also impact volume), changes in product and geographic mix and foreign exchange impacts on sales outside the U.S.
Our cost of products sold and SG&A are variable in nature to some extent. Accordingly, our discussion of these operating costs focuses primarily on relative margins rather than the absolute year-over-year changes in total costs. The primary drivers of changes in gross margin are input costs (energy and other commodities), pricing impacts, geographic mix (for example, gross margins in North America are generally higher than the Company average for similar products), product mix (for example, the Beauty segment has higher gross margins than the Company average), foreign exchange rate fluctuations (in situations where certain input costs may be tied to a different functional currency than the underlying sales), the impacts of manufacturing savings projects and reinvestments (for example, product or package improvements) and, to a lesser extent, scale impacts (for costs that are fixed or less variable in nature). The primary components of SG&A are marketing-related costs and non-manufacturing overhead costs. Marketing-related costs are primarily variable in nature, although we may achieve some level of scale benefit over time due to overall growth and other marketing efficiencies. While overhead costs are variable to some extent, we generally experience more scale-related impacts for these costs due to our ability to leverage our organization and systems' infrastructures to support business growth. The main drivers of changes in SG&A as a percentage of net sales are overhead and marketing cost savings, reinvestments (for example, increased advertising), inflation, foreign exchange fluctuations and scale impacts.
For a detailed discussion of the fiscal 2025 year-over-year changes, please refer to the MD&A in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended June 30, 2025.
Net Sales
Net sales increased 3% to $87.0 billion in fiscal 2026 driven by favorable foreign exchange of 2% and pricing of 1%. Unit volume and mix were unchanged versus the prior year.
Net sales increased high single digits in Beauty, mid-single digits in Grooming and Health Care and low single digits in Fabric & Home Care and Baby, Feminine & Family Care. Organic sales, which exclude the impact of acquisitions and divestitures and foreign exchange, increased 1%. Organic sales increased mid-single digits in Beauty and low single digits in Health Care, Grooming and Fabric & Home Care. Organic sales declined low single digits in Baby, Feminine & Family Care.
Operating Costs
| Comparisons as a percentage of net sales; fiscal years ended June 30 | 2026 | 2025 | Basis Point Change | ||||||||||||
| Gross margin | 50.2 | % | 51.2 | % | (100) bps | ||||||||||
| Selling, general and administrative expense | 27.5 | % | 26.9 | % | 60 bps | ||||||||||
| Operating margin | 22.7 | % | 24.3 | % | (160) bps | ||||||||||
| Earnings before income taxes | 23.4 | % | 23.9 | % | (50) bps | ||||||||||
| Net earnings | 18.5 | % | 19.1 | % | (60) bps | ||||||||||
| Net earnings attributable to Procter & Gamble | 18.4 | % | 19.0 | % | (60) bps | ||||||||||
Gross margin decreased 100 basis points to 50.2% of net sales. The decrease in gross margin was due to:
•120 basis points of decline from unfavorable product mix,
•70 basis points of product and packaging investments,
•60 basis points of higher restructuring costs,
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•30 basis points of net tariff impact from higher costs and recognized recoveries,
•20 basis points of higher commodity costs,
•10 basis points of unfavorable foreign exchange impacts and
•10 basis points of other items and rounding.
These decreases were partially offset by:
•180 basis points of manufacturing productivity savings,
•40 basis points of increase due to higher pricing.
Total SG&A increased 6% to $23.9 billion and increased 60 basis points to 27.5% as a percentage of net sales due primarily to an increase in marketing spending as a percentage of net sales.
•Marketing spending as a percentage of net sales increased 80 basis points due to an increase in marketing spending, partially offset by productivity savings.
•Overhead costs as a percentage of net sales were unchanged as wage inflation headwinds and restructuring spending were offset by productivity savings.
•Other operating expenses as a percentage of net sales were unchanged.
Productivity-driven cost savings delivered 160 basis points of benefit to SG&A as a percentage of net sales.
Operating income decreased $703 million, or 3%, to $19.7 billion as the increase in net sales was more than offset by the decrease in gross margin and increase in SG&A spending. The operating margin decreased 160 basis points to 22.7% due primarily to the decrease in gross margin and increase in marketing spending.
Non-Operating Items
•Interest expense was $877 million, a decrease of $30 million versus the prior year.
•Interest income was $430 million, a decrease of $39 million versus the prior year.
•Other non-operating income/(expense), net increased $922 million to $1.1 billion primarily driven by the non-cash charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina in the prior year and the gain from the dissolution of the Glad joint venture business in the current year period.
Income Taxes
The effective income tax rate for fiscal year ended June 30, 2026, was 20.8%, compared to 20.3% for the fiscal year ended June 30, 2025. The increase in the effective tax rate was primarily driven by lower excess tax benefits of share-based compensation in the current year and unfavorable geographic mix impacts, partially offset by a decrease from discrete impacts related to uncertain tax positions and the prior year charge for accumulated foreign currency translation losses due to the substantial liquidation of operations in Argentina.
Net Earnings
Earnings before income taxes increased $210 million, or 1%, to $20.4 billion as the increase in other non-operating income/(expense), net, the components of which are described above, were partially offset by the decrease in operating income. Net earnings increased $79 million to $16.1 billion as the increase in earnings before income taxes was partially offset by the effective income tax rate increase discussed above.
Foreign exchange impacts increased net earnings by approximately $224 million due to a strengthening of certain currencies against the U.S. dollar. This impact includes both transactional charges and translational impacts from converting earnings from foreign subsidiaries to U.S. dollars.
Net earnings attributable to Procter & Gamble increased $72 million to $16.0 billion.
Diluted EPS increased $0.11, or 2%, to $6.62 due to an increase in net earnings and a reduction in shares outstanding.
SEGMENT RESULTS
Segment results reflect information on the same basis we use for internal management reporting and performance evaluation. The results of these reportable segments do not include certain non-business unit specific costs which are reported in Corporate and are included as part of the Corporate discussion. Additionally, we apply blended statutory tax rates in the segments. Eliminations to adjust segment results to arrive at our consolidated effective tax rate are included in Corporate. See Note 2 to the Consolidated Financial Statements for additional information on items included in Corporate.
22 The Procter & Gamble Company
The Procter & Gamble Company 23
Net Sales Change Drivers 2026 vs. 2025 (1) | |||||||||||||||||||||||||||||||||||||||||
| Volume with Acquisitions & Divestitures | Volume Excluding Acquisitions & Divestitures | Foreign Exchange | Price | Mix | Other (2) | Net Sales Growth | |||||||||||||||||||||||||||||||||||
| Beauty | 4 | % | 4 | % | 2 | % | 1 | % | — | % | — | % | 7 | % | |||||||||||||||||||||||||||
| Grooming | (1) | % | (1) | % | 3 | % | 2 | % | — | % | — | % | 4 | % | |||||||||||||||||||||||||||
| Health Care | (2) | % | (2) | % | 3 | % | 2 | % | 1 | % | — | % | 4 | % | |||||||||||||||||||||||||||
| Fabric & Home Care | — | % | — | % | 1 | % | 1 | % | — | % | — | % | 2 | % | |||||||||||||||||||||||||||
| Baby, Feminine & Family Care | (1) | % | (1) | % | 2 | % | — | % | — | % | — | % | 1 | % | |||||||||||||||||||||||||||
| TOTAL COMPANY | — | % | — | % | 2 | % | 1 | % | — | % | — | % | 3 | % | |||||||||||||||||||||||||||
(1)Net sales percentage changes are approximations based on quantitative formulas that are consistently applied.
(2)Other includes the sales mix impact from acquisitions and divestitures and rounding impacts necessary to reconcile volume to net sales.
BEAUTY
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Volume | N/A | N/A | 4% | ||||||||||||
| Net sales | $16,023 | $14,964 | 7% | ||||||||||||
| Net earnings | $2,672 | $2,715 | (2)% | ||||||||||||
| % of net sales | 16.7% | 18.1% | (140) bps | ||||||||||||
Beauty net sales increased 7% to $16.0 billion, driven by a unit volume increase of 4%, favorable foreign exchange of 2% and positive impact of higher pricing of 1%. Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 5%. Global market share of the Beauty segment decreased 0.3 points.
•Hair Care net sales increased high single digits driven by positive impacts of a unit volume increase, favorable foreign exchange and innovation-based pricing (primarily in North America and Latin America), partially offset by unfavorable geographic mix. The increase in unit volume was driven by growth in Latin America, Europe and Asia Pacific (all due to innovation), partially offset by a decline in North America (due to competitive activity). Organic sales increased mid-single digits driven by double-digit growth in Latin America, high single-digit growth in Europe and Asia Pacific, partially offset by a low single-digit decline in North America. Global market share of the hair care category decreased 0.5 points.
•Personal Care net sales increased high single digits driven by positive impacts of a unit volume increase, favorable foreign exchange and higher pricing (primarily in North America), partially offset by unfavorable geographic mix. The volume increase was across all regions, led by growth in Greater China, North America and Europe (all due to innovation). Organic sales also increased high single digits led by high-teens growth in Europe and mid-single-digit growth in Greater China and North America. Global market share of the personal care category increased 0.2 points.
•Skin Care net sales increased mid-single digits driven by positive impacts of favorable product mix (due primarily to the increase of the super-premium SK-II brand, which has higher than category-average selling prices) and favorable foreign exchange, partially offset by a unit volume decrease. The volume decrease was driven by Greater China (due to competitive activity). Organic sales increased low single digits due to a double-digit growth in Asia Pacific and a mid-single-digit growth in Greater China, partially offset by a low single-digit decline in North America. Global market share of the skin care category decreased 0.6 points.
Net earnings decreased 2% to $2.7 billion due to a 140 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. The gross margin decline of 100 basis points was driven by unfavorable product mix and higher commodity costs, partially offset by productivity savings. SG&A as a percentage of net sales increased due to an increase in marketing spending, partially offset by a decrease in overhead spending.
GROOMING
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Volume | N/A | N/A | (1)% | ||||||||||||
| Net sales | $6,918 | $6,662 | 4% | ||||||||||||
| Net earnings | $1,529 | $1,577 | (3)% | ||||||||||||
| % of net sales | 22.1% | 23.7% | (160) bps | ||||||||||||
Grooming net sales increased 4% to $6.9 billion driven by the positive impacts of favorable foreign exchange of 3% and higher pricing (primarily in North America and Europe) of 2%, partially offset by a 1% decrease in unit volume. The unit volume decrease was driven by declines in IMEA (due to distribution loss) and North America (due to market contraction), partially
24 The Procter & Gamble Company
offset by a unit volume increase in Latin America (due to increased distribution). Excluding the impact of acquisitions and divestitures and foreign exchange, organic sales increased 1% driven by low single-digit growth in Europe and North America, partially offset by a high single-digit decline in Asia Pacific. Global market share of the Grooming segment decreased 0.4 points.
Net earnings decreased 3% to $1.5 billion due to a 160 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in the effective tax rate, partially offset by an decrease in SG&A as a percentage of net sales. The gross margin decrease of 90 basis points was driven by unfavorable product mix, partially offset by higher pricing and productivity savings. SG&A as a percentage of net sales decreased due to a decrease in overhead spending, partially offset by an increase in marketing spending. The higher effective tax rate was driven by unfavorable geographic mix.
HEALTH CARE
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Volume | N/A | N/A | (2)% | ||||||||||||
| Net sales | $12,456 | $11,998 | 4% | ||||||||||||
| Net earnings | $2,404 | $2,440 | (1)% | ||||||||||||
| % of net sales | 19.3% | 20.3% | (100) bps | ||||||||||||
Health Care net sales increased 4% to $12.5 billion driven by favorable foreign exchange of 3%, higher pricing of 2% and favorable product mix of 1%, partially offset by a 2% decrease in unit volume. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 1%. Global market share of the Health Care segment increased 0.4 points.
•Oral Care net sales increased low single digits due to the positive impacts of favorable foreign exchange and favorable product mix (due to growth of premium paste and power brushes, which have higher than category-average selling prices), partially offset by a unit volume decrease. The unit volume decrease was due to a decline in Greater China (due to market contraction and competitive activity) and North America (due to competitive activity), partially offset by an increase in IMEA (due to market growth). Organic sales were unchanged as a low single-digit increase in Europe was offset by a mid-teens decrease in Greater China. Global market share of the oral care category was unchanged.
•Personal Health Care net sales increased mid-single digits due to the positive impacts of higher pricing (driven by North America) and favorable foreign exchange, partially offset by a decrease in unit volume. The unit volume decrease was driven by a decline in North America (due to lower average incidence of cough and cold), partially offset by an increase in IMEA (due to innovation). Organic sales increased low single digits due to high single-digit growth in IMEA and Latin America, partially offset by low single-digit growth in North America and Europe. Global market share of the personal health care category increased 0.5 points.
Net earnings decreased 1% to $2.4 billion due to a 100 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. The gross margin decrease of 30 basis points was driven by unfavorable product mix, partially offset by productivity savings and higher pricing. SG&A as a percentage of net sales increased due to increased marketing spending, partially offset by decreased overhead spending.
FABRIC & HOME CARE
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Volume | N/A | N/A | —% | ||||||||||||
| Net sales | $30,314 | $29,617 | 2% | ||||||||||||
| Net earnings | $5,632 | $5,848 | (4)% | ||||||||||||
| % of net sales | 18.6% | 19.7% | (110) bps | ||||||||||||
Fabric & Home Care net sales increased 2% to $30.3 billion driven by favorable foreign exchange of 1% and higher pricing of 1%. Unit volume was unchanged. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales increased 1%. Global market share of the Fabric & Home Care segment was unchanged.
•Fabric Care net sales increased low single digits driven by favorable foreign exchange and favorable product mix. Unit volume was unchanged as the volume increase in North America (due to innovation) and Latin America (due to market growth) was offset by the volume decrease in Europe (due to competitive activity). Organic sales were unchanged as a mid-single-digit increase in Latin America and a low single-digit increase in North America were offset by a low single-digit decrease in Europe. Global market share of the fabric care category decreased 0.4 points.
•Home Care net sales increased low single digits driven by higher pricing (primarily in North America) and favorable foreign exchange. Unit volume was unchanged as increases in Latin America and Asia Pacific (both due to innovation) were offset by a decline in North America (due to competitive activity). Organic sales also increased low single digits as a
The Procter & Gamble Company 25
high single-digit growth in Latin America was partially offset by low single-digit growth in Europe and North America. Global market share of the home care category increased 0.3 points.
Net earnings decreased 4% to $5.6 billion due to a 110 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin, partially offset by a decrease in SG&A as a percentage of net sales. The gross margin decrease of 140 basis points was driven by unfavorable product mix and higher commodity costs, partially offset by productivity savings. SG&A as a percentage of net sales decreased due primarily to a decrease in overhead spending as a percentage of net sales and lower foreign exchange transactional charges, partially offset by an increase in marketing spending.
BABY, FEMININE & FAMILY CARE
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Volume | N/A | N/A | (1)% | ||||||||||||
| Net sales | $20,401 | $20,248 | 1% | ||||||||||||
| Net earnings | $3,930 | $4,013 | (2)% | ||||||||||||
| % of net sales | 19.3% | 19.8% | (50) bps | ||||||||||||
Baby, Feminine & Family Care net sales increased 1% to $20.4 billion driven by favorable foreign exchange of 2%, partially offset by a unit volume decrease of 1%. Excluding the impact of foreign exchange and acquisitions and divestitures, organic sales decreased 1%. Global market share of the Baby, Feminine & Family Care segment decreased 0.2 points.
•Baby Care net sales increased low single digits driven by favorable foreign exchange and a unit volume increase. The unit volume increase was driven by increases in Greater China (due to innovation) and IMEA (due to market growth), partially offset by a decrease in North America (due to competitive activity). Organic sales also increased low single digits as a 20% increase in Greater China and a mid-single-digit increase in IMEA were partially offset by a low single-digit decrease in North America. Global market share of the baby care category increased 0.3 points.
•Feminine Care net sales increased low single digits driven by positive impacts of favorable foreign exchange, favorable geographic mix and higher pricing (primarily in North America), partially offset by a decrease in unit volume. The unit volume decrease was driven by IMEA and Europe (both due to competitive activity) and Greater China (due to market contraction). Organic sales were unchanged as low single-digit growth in North America was offset by a high single-digit decline in IMEA and a low single-digit decline in Europe. Market share of the feminine care category decreased 0.2 points.
•Net sales in Family Care, which is predominantly a North American business, decreased low single digits driven by lower pricing (due to merchandising investments) and a unit volume decrease (due to competitive activity). Organic sales also decreased low single digits. North America's share of the family care category decreased 0.7 points.
Net earnings decreased 2% to $3.9 billion due to a 50 basis-point decline in net earnings margin, partially offset by an increase in net sales. Net earnings margin decreased due to a decrease in gross margin and an increase in SG&A as a percentage of net sales. Gross margin decreased 40 basis points due to unfavorable category mix, partially offset by lower commodity costs and productivity savings. SG&A as a percentage of net sales increased due to an increase in marketing spending, partially offset by a reduction in overhead spending.
CORPORATE
| ($ millions) | 2026 | 2025 | Change vs. 2025 | ||||||||||||
| Net sales | $919 | $794 | 16% | ||||||||||||
| Net earnings/(loss) | $(23) | ||||||||||||||
Next expected filings
- ~2026-10-25 10-Q expected by 2026-11-13 (in 68 days)
- ~2027-01-24 10-Q expected by 2027-02-12 (in 159 days)
- ~2027-04-25 10-Q expected by 2027-05-14 (in 250 days)
- ~2027-08-04 10-K expected by 2027-09-11 (in 351 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-08-04 10-K Annual Report
- 2026-07-29 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-07-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-24 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-24 10-Q Quarterly Report
- 2026-01-23 10-Q Quarterly Report
- 2026-01-22 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-15 8-K Officer/Director Change
- 2025-11-04 8-K Other Events; Financial Statements and Exhibits
- 2025-11-03 8-K Other Events; Financial Statements and Exhibits
- 2025-10-24 10-Q Quarterly Report
- 2025-10-24 8-K Earnings Release; Financial Statements and Exhibits
- 2025-10-16 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits
- 2025-08-14 8-K Officer/Director Change
- 2025-08-04 10-K Annual Report