Key Highlights

  • Q2 organic net Revenue grew 2.2% and adjusted EPS was $0.73, down 2.7% at constant currency.
  • Mondelez raised 2026 organic growth guidance to at least 2% but kept adjusted EPS growth at flat to 5% at constant currency as it steps up advertising.
  • Adjusted Operating Margin fell 120 basis points to 13.1% on raw material costs and higher marketing; management expects Earnings to be weighted toward Q4 due to cocoa cost timing.
  • Shares closed at $61.08 on Sep 22, within a 52-week range of $51.20 to $66.65, and the stock offers a Dividend Yield of about 3.4% on its $2.08 annualized payout.

Mondelez International (NASDAQ:MDLZ) is balancing cocoa costs and Marketing spend by using stronger-than-planned sales to fund heavier Brand investment, rather than letting the extra revenue fall to the bottom line. When it reported second-quarter results on July 28, the Oreo and Cadbury maker raised its 2026 organic net revenue growth outlook to at least 2%. It kept its adjusted Earnings Per Share growth target at flat to 5% on a constant currency basis, a signal that upside on the Top Line is being reinvested.

The trade-off shows in the margins. Adjusted Operating Income margin fell 120 basis points to 13.1% in the quarter, which the company attributed mainly to higher raw material costs, higher selling and administrative expenses and higher Advertising and consumer promotion spending, partly offset by pricing and productivity. Management said on the Earnings Call that it plans to step up advertising and consumer support in the second half.

Cocoa remains the swing factor. Prices have eased after a record-breaking rally over the past two years. But Mondelez said the timing of its cocoa costs means 2026 earnings will be weighted toward the fourth quarter. The stock closed at $61.08 on Sep 22, within a 52-week range of $51.20 to $66.65.

Second-Quarter Numbers in Detail

Net revenues rose 4.1% to $9.36 billion, and organic net revenue grew 2.2%, with 1.5 percentage points from pricing and 0.7 points from Volume and mix. Adjusted gross margin edged up 20 basis points to 34.0%, helped by pricing and Manufacturing productivity. Adjusted EPS was $0.73, flat in reported terms and down 2.7% at constant currency.

Reported figures looked far stronger. Diluted EPS jumped 144.9% to $1.20, driven mostly by favorable mark-to-market gains on Commodity and currency hedges, which the company excludes from adjusted results. For the first half, adjusted EPS was $1.40, down 8.8% at constant currency, and adjusted operating income fell 12.8% at constant currency.

The full-year outlook calls for about $3 billion of free cash flow, compared with $0.7 billion generated in the first half. Mondelez returned $1.5 billion to shareholders in the first six months and announced a 4% increase in its quarterly dividend. The company flagged greater than usual Volatility from geopolitical, trade and regulatory uncertainty and commodity prices.

Where Growth Is Coming From

The regional mix explains much of the strategy. Latin America organic revenue rose 8.4%, and Asia, Middle East and Africa grew 7.1%, with volume and mix contributing 5.2 points in that region. North America grew 3.4%, and CEO Dirk Van de Put pointed to strong growth and improved execution there. Emerging markets as a group grew 4.4%, compared with 0.7% for developed markets.

Europe was the weak spot. Organic revenue fell 3.5%, including a 2.1-point drag from volume and mix, and adjusted segment operating income dropped 21.8%. An unprecedented heat wave temporarily pressured chocolate consumption. Management expects European volumes to turn positive in the second half as the company laps earlier price increases. Van de Put said share trends in Europe were showing early positive signs.

How the Cocoa Strategy Is Evolving

Mondelez is working on cocoa exposure from several angles. Management noted that industry cocoa coverage of about 10 months and a significant Supply surplus give a more stable backdrop than in early 2024. It is also pursuing a less cocoa-reliant portfolio by pushing biscuits, baked snacks and non-chocolate fillings. Management said it expects strong EPS growth in 2027, arguing the Bottom Line is largely insulated from commodity swings through productivity and AI-enabled efficiencies.

Supply chain moves support the same goal. On Sep 11, Mondelez opened a $22 million Facility in Shah Alam, Malaysia, to produce chocolate crumb for Cadbury products locally instead of importing it from Australia and South Africa. A company supply chain executive said the change cuts at least two months from lead times and reduces Import and transport costs.

At the Barclays (NYSE:BCS) Global Consumer Staples Conference on Sep 9, COO Luca Zaramella and CFO Amit Banati, who took the finance role in July, presented and highlighted a major Oreo relaunch and supply chain modernization as supports for EPS growth by 2027.

Marketing and Innovation as the Reinvestment Engine

The extra marketing money is going into a "fewer, bigger bets" innovation approach, with focus on functional snack bars, gluten-free Options and premium chocolate. The Lotus Biscoff Partnership is a central piece, and management described it as a potential $500 million to $1 billion collaboration over the coming years. On Sep 22, Mondelez announced the global launch of Toblerone Diamond Truffles with Biscoff. Recent Oreo and Chips Ahoy! limited-edition campaigns fit the same pattern of spending to drive engagement.

Mondelez competes with Hershey (NYSE:HSY), Nestle, Ferrero and Lindt in chocolate, and with PepsiCo's (NASDAQ:PEP) snack brands and private label in biscuits. Across packaged food, companies have been leaning on value packs and targeted promotions as lower-income shoppers trade down. Management described a K-shaped North American consumer who wants both value formats and premium options.

Risks That Could Upset the Balance

The strategy carries clear risks. Cocoa prices have been highly volatile, and a renewed spike could squeeze margins before hedges roll off. Heavier advertising only pays if it produces volume. If Europe does not recover as expected, the company would be spending more for little sales gain. Mondelez also cited the Middle East conflict as a headwind to both revenue and costs, along with currency swings and possible Tariff changes to USMCA-compliant trade, which its outlook does not reflect.

On the other side, the raised revenue outlook, improving North American share and strong emerging-market momentum provide room to invest. The stock also offers a dividend yield of about 3.4% based on the current $2.08 annualized payout.

The Second-Half Balancing Act

The next ex-dividend date is Sep 30. Third-quarter results are expected around late October, with an estimated date of Oct 27 that the company has not yet confirmed. Investors will look for evidence that second-half marketing is lifting volumes, especially in Europe, and for updates on cocoa cost timing and fourth-quarter earnings weighting. Any change to the flat-to-5% adjusted EPS range, or early commentary on 2027 growth, would show whether the company's balancing act is working.