BUD Q2 Deep Dive: Volume Pressure and Market Shifts Offset Margin Progress

Beer powerhouse Anheuser-Busch InBev (NYSE:BUD) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 2.1% year on year to $15 billion. Its non-GAAP profit of $0.98 per share was 3.5% above analysts’ consensus estimates.

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StockStory’s Take

Anheuser-Busch’s latest quarter was marked by a negative market reaction, as sales fell short of Wall Street’s expectations, despite non-GAAP profit per share coming in slightly above consensus. Management pointed to continued volume declines in key regions, particularly China and Brazil, as the main challenge, while highlighting improved margin performance and ongoing investment in premium brands. CEO Michel Doukeris acknowledged, “This volume was not where we would like to be,” referencing soft industry conditions in several large markets and a cautious consumer backdrop.

Looking ahead, management is focusing on leveraging its global footprint, investing in premiumization, and expanding in underpenetrated channels to support growth. The company sees opportunities to rebound from current volume weakness by shifting more resources toward high-growth segments like non-alcohol beer and ready-to-drink beverages. CFO Fernando Tennenbaum noted that ongoing cost discipline and portfolio optimization are expected to drive further margin gains, even as market uncertainties persist. Doukeris emphasized, “We remain confident on the business and the strategy that we are executing,” underscoring a long-term commitment to brand investment and digital expansion.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to persistent volume weakness in Brazil and China, partially offset by strength in premium brands and ongoing efficiency efforts.

• Premium brands outperform: Global megabrands like Michelob Ultra and Corona continued to drive share gains, with Corona’s revenue rising 7.7% outside Mexico and Michelob Ultra gaining scale across all 50 U.S. states. These brands benefited from targeted marketing and new product innovations, including Michelob Ultra Zero and seasonal launches like Busch Light Apple.
• Volume declines in key markets: Management cited adverse weather and economic pressure as primary drivers behind volume drops in Brazil and China. In China, industry volumes declined in the on-premise channel, and Anheuser-Busch’s performance lagged the broader market. In Brazil, weather and pricing actions contributed to lower sales.
• Non-alcohol beer expansion: The non-alcohol portfolio delivered 33% revenue growth, led by Corona Cero. Management highlighted that 65% of this growth came from new consumers and occasions, emphasizing the strategic importance of the segment for category development.
• Digital platform momentum: The BEES B2B marketplace accelerated, with gross merchandise value up 63% year over year to $785 million. Direct-to-consumer digital platforms also supported incremental revenue growth by connecting with consumers for new consumption occasions.
• Margin improvement initiatives: Operating margin expanded across four of five regions, reflecting productivity efforts and disciplined resource allocation, even in the face of volume headwinds. Free cash flow and deleveraging improved, giving management more flexibility for future capital allocation.

Drivers of Future Performance

Management’s outlook centers on premium brand investment, digital expansion, and navigating persistent volume headwinds in certain regions.

• Premiumization and innovation focus: The company is increasing marketing spend and product launches in premium and non-alcohol segments, aiming to offset volume softness and tap into changing consumer preferences. Management sees brand-led growth as essential to sustaining revenue and margin expansion.
• Channel and geographic shifts: There is a strategic push to grow off-premise (retail) sales in China and expand in underpenetrated markets like India. Doukeris mentioned that the company is realigning its salesforce and product mix to capture these opportunities, particularly as on-premise channels remain weak in Asia.
• Cost discipline and capital allocation: Ongoing operational efficiencies, productivity initiatives, and balance sheet optimization are expected to support margin resilience, even amid external pressures. Tennenbaum signaled that increased cash generation and lower leverage provide flexibility to respond to market shifts and invest for growth.

Catalysts in Upcoming Quarters

In upcoming quarters, our analysts will be monitoring (1) the pace of recovery in volumes across Brazil and China, (2) the continued momentum of premium and non-alcohol brands in both developed and emerging markets, and (3) the effectiveness of digital and direct-to-consumer initiatives in driving incremental revenue. How Anheuser-Busch adapts its product mix and geographic focus will also be critical to longer-term growth.

Anheuser-Busch currently trades at $61.67, down from $66.54 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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