Can Celsius Maintain Gross Margins Above 50% Amid Tariffs?

Celsius Holdings, Inc. (CELH) reported a gross margin of 51.5% for the second quarter of 2025, slightly below the 52% margin in the prior year. This result came despite the drag from Alani Nu’s lower-margin profile and a $21.7 million inventory step-up adjustment. Margin performance was supported by lower raw material costs, better production yields and a favorable product mix, while the use of first-in, first-out (“FIFO”) accounting helped delay the impact of tariff-related cost pressures.

Management acknowledged that this cushion is temporary. The tariffs did not materially affect the second-quarter results, but are expected to flow through in the third and fourth quarters as raw material costs rise. While FIFO may still provide some benefit in the third quarter, the back half of the year will reflect higher aluminum costs from tariffs and associated premiums.

Still, Celsius remains confident in maintaining a gross margin in the low 50s range, supported by vertical integration, procurement discipline and ongoing cost-saving initiatives. The company expects incremental benefits from higher-margin limited-time flavors and favorable channel dynamics to bolster its margin profile.

Celsius is also leaning on cost efficiencies, including vertical integration initiatives and securing $50 million in run-rate cost synergies from the Alani Nu integration over the next two years. The combination of tariff-driven input cost inflation and the reliance on ongoing operational improvements will determine whether Celsius can keep its gross margins firmly above 50% in the back half of the year.

How PepsiCo & Coca-Cola Stack Up Against Celsius

PepsiCo (PEP) reported a second-quarter 2025 core gross margin of 55.1%. The figure is slightly below last year’s 55.9%. PepsiCo’s core operating income also fell 5.1% year over year. Despite these pressures, PepsiCo continues to lean on portfolio breadth and cost-optimization programs.

The Coca-Cola Company (KO) posted a second-quarter 2025 comparable gross margin of 62.2%, up 80 basis points from last year. Comparable operating margin increased approximately 190 basis points in the quarter. Coca-Cola’s margin expansion was driven by underlying operational improvements, including faster realization of productivity initiatives. The company emphasized pricing actions, innovation and revenue growth management capabilities as key levers for Coca-Cola to support profitability in a dynamic environment.

CELH’s Price Performance, Valuation & Estimates

Celsius’ shares have gained 17.2% in three months compared with the industry’s 9.5% growth.

From a valuation standpoint, CELH trades at a forward price-to-earnings ratio of 41.56X compared with the industry’s average of 15.41X.

The Zacks Consensus Estimate for CELH’s 2025 and 2026 EPS indicates year-over-year growth of 54.3% and 28.6%, respectively.

Celsius sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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