Mondelez (MDLZ) Q3 2026 Earnings: Cocoa Relief Lifts Profit 17%

Mondelēz International (MDLZ) reported third-quarter 2026 results on October 29, 2026, in its Form 8-K earnings release and Form 10-Q, and the Q3 2026 earnings showed lower cocoa costs starting to flow into profit growth [1][2]. Four questions framed the quarter: whether gross profit growth would accelerate, whether European volume would turn positive after price cuts, whether emerging markets would keep growing on volume, and whether North American biscuits would accelerate. Adjusted gross profit rose 14.0% at constant currency, and European volume/mix turned positive at +1.6 percentage points, although European pricing fell 3.7 points and organic revenue there still declined 2.1%. Emerging-market volume/mix accelerated to +2.2 points [1]. North America was the exception: organic growth slowed to 1.6% and adjusted segment operating income fell 6.4% [1]. Profit conversion improved clearly, but the third quarter was measured against a low base from the prior-year cocoa cost peak, and adjusted operating income for the first nine months was still down 3.7% at constant currency [1].

Mondelēz is one of the world's largest snack companies. Its brands include Oreo biscuits and Cadbury and Milka chocolate, and its products are sold in more than 150 countries [3]. The company sells to retail customers such as supermarkets, wholesalers, discounters and convenience stores, and no single customer accounted for 10% or more of revenue [4]. Its profit depends mainly on whether selling prices cover cocoa and other raw material costs, and on how much it spends on advertising and promotion.

Lower input costs pushed gross profit well ahead of spending

Adjusted gross profit grew much faster in the third quarter than in the second. Adjusted gross profit was $3.407 billion, up $414 million (+14.0%) at constant currency, and the adjusted gross margin was 34.2%, up 380 basis points year over year [1]. In the second quarter, adjusted gross profit rose only $92 million [5]. In the second quarter, management had warned that the timing of cocoa costs would be unfavorable in the third quarter [6]; the third-quarter result came in better than that warning implied.

The company's profit bridge shows that lower input costs were the main source of the gain. At constant currency, lower input costs contributed $329 million, volume/mix $54 million and net pricing $31 million, while selling, general and administrative expenses excluding items rose $227 million, driven mainly by advertising and consumer promotion [2]. The cost decline came mainly from cocoa, dairy and sugar, while packaging, nuts, edible oils and energy costs rose [2].

Because the gross profit increase was nearly twice the expense increase, operating income returned to growth. Adjusted operating income was $1.384 billion, up 17.0% at constant currency, and the adjusted operating margin was 13.9%, up 190 basis points [1]. In the second quarter, the same measure had fallen 6.1% at constant currency [7].

Two limits apply to this improvement. The prior-year adjusted gross margin was only 30.4%, so the low base magnified the growth rate [1]. The adjusted effective tax rate rose from 19.5% to 27.0%, and adjusted EPS of $0.78 grew only 5.5% at constant currency [1]. The 10-Q also cautions that cocoa costs are expected to remain above historical levels in the near and medium term [2].

North America growth slowed and profit fell

North America was the only region where adjusted segment operating income declined in the quarter. Organic growth in North America was 1.6%, down from 3.4% in the second quarter [8], and all of it came from pricing, with volume/mix flat [1]. Biscuits and baked snacks revenue was $2.430 billion, down 0.2% year over year [2]. Adjusted segment operating income was $511 million, down 6.4% at constant currency, and the margin was 18.0%, down 1.5 percentage points [1]. In the second quarter, the same measure had risen 4.3% [7].

The company attributed the decline in North American segment profit to higher advertising and consumer promotion costs and higher raw material costs [2]. North America is mostly a biscuit business, so it gains less from lower cocoa prices. The chief operating officer said the company did not cut prices and instead adjusted the depth and frequency of promotions, gaining share in biscuits, candy and bars; the chief executive said North American consumer confidence remains soft [9]. Share gains alongside flat volume indicate weak category demand, and the added spending has not yet bought volume. In the second quarter, management expected North America to accelerate in the second half [10], and that expectation was not met.

Conclusion

The quarter strengthens the view that profit conversion is recovering, though its durability still needs to be proven. Company-wide volume/mix was +1.8 percentage points and the pricing contribution fell to +0.3 points, so growth shifted toward volume [1]. The profit improvement relied mainly on lower input costs, and the North American investment has not yet paid off. Free cash flow for the first nine months was $1.659 billion, $423 million more than a year earlier; the company reaffirmed 2026 adjusted EPS growth of flat to 5% at constant currency and free cash flow of about $3 billion [1], which implies roughly $1.34 billion of free cash flow in the fourth quarter. The next tests are whether fourth-quarter gross profit keeps growing as the low-base effect fades, whether North American profit stops falling, and whether European volume stays positive as price declines narrow.

Sources

[1] MDLZ 8-K filed 2026-10-29 · Exhibit 99.1 Q3 2026 earnings release (2026-10-29, Mondelēz International Form 8-K, Exhibit 99.1 earnings release) https://www.sec.gov/Archives/edgar/data/1103982/000162828026068233/mdlzearningsreleasecontent.htm [2] MDLZ 10-Q filed 2026-10-29 · Q3 2026 MD&A excerpt (2026-10-29, Mondelēz International Form 10-Q quarterly report) https://www.sec.gov/Archives/edgar/data/1103982/000162828026068256/mdlz-20260930.htm [3] MDLZ 10-K filed 2026-02-04 · business overview (2026-02-04, Mondelēz International Form 10-K annual report) https://www.sec.gov/Archives/edgar/data/1103982/000162828026005345/ [4] MDLZ 10-K filed 2026-02-04 · customers (2026-02-04, Mondelēz International Form 10-K annual report) https://www.sec.gov/Archives/edgar/data/1103982/000162828026005345/ [5] MDLZ 8-K filed 2026-07-28 · Q2 2026 commentary (2026-07-28, Mondelēz International Form 8-K earnings release) https://www.sec.gov/Archives/edgar/data/0001103982/000162828026050157/mdlzearningsreleasecontent.htm [6] MDLZ Q2 2026 earnings call 2026-07-28 · H2 2026 EPS phasing (2026-07-28, Mondelēz International Q2 earnings call) [7] MDLZ 8-K filed 2026-07-28 · Q2 2026 Adjusted Operating Income by segment (2026-07-28, Mondelēz International Form 8-K earnings release) https://www.sec.gov/Archives/edgar/data/0001103982/000162828026050157/mdlzearningsreleasecontent.htm [8] MDLZ 8-K filed 2026-07-28 · Q2 2026 Organic Net Revenue by region (2026-07-28, Mondelēz International Form 8-K earnings release) https://www.sec.gov/Archives/edgar/data/0001103982/000162828026050157/mdlzearningsreleasecontent.htm [9] MDLZ Q3 2026 earnings call Q&A 2026-10-29 (2026-10-29, Mondelēz International Q3 earnings call Q&A) [10] MDLZ Q2 2026 earnings call 2026-07-28 · North America performance (2026-07-28, Mondelēz International Q2 earnings call)