AB InBev (BUD) Q1 2026 earnings review
Volume Growth Reverses the Trend, But Marketing Spend Caps Margins
AB InBev started 2026 with a decisive break from recent quarters: volumes finally reversed their decline, growing 0.8% globally. Combined with premiumization (revenue per hl +4.5%), organic revenue accelerated to an impressive 5.8%. The growth was driven by Middle Americas (+9.4% revenue) and surging adjacent categories like Beyond Beer (+37%). However, this top-line acceleration came at a cost. While gross margins expanded by 76 basis points, management aggressively reinvested those gains into sales and marketing to fuel the momentum, which—alongside FX headwinds—compressed Normalized EBITDA margins by 15 bps to 35.6%. Despite the margin squeeze, robust revenue and deleveraging pushed Underlying EPS up nearly 21% to $0.97.
🐂 Bull Case
After multiple quarters of volume declines (-2.2% in 25Q1, -1.9% in 25Q2), total volume grew 0.8%. Beer specifically grew 1.2%, signaling that consumer sentiment and brand investments are finally translating into actual unit growth.
The BEES ecosystem is becoming a massive standalone driver. BEES Marketplace GMV (third-party products) surged 55% YoY to $1.1B for the quarter, proving the platform's stickiness and high-margin potential.
🐻 Bear Case
Despite a healthy 76 bps gross margin expansion, Normalized EBITDA margins contracted by 15 bps. The company is having to spend heavily on SG&A (+6.5%) to generate top-line growth, diluting operational leverage.
Asia Pacific volumes fell 0.4%, dragged down by a 1.5% volume drop and a 3.9% revenue drop in China. Rebuilding momentum in the Chinese in-home channel is proving costly and slow.
⚖️ Verdict: 🟢
Bullish. The return to positive volume growth is the inflection point investors have been waiting for. While EBITDA margin compressed slightly, the 21% Underlying EPS jump proves the company's deleveraging and premiumization strategies are generating immense bottom-line value.
Key Themes
Middle and South Americas Power the Volume Turnaround
The Middle Americas segment was the undisputed growth engine, accelerating with a 4.8% volume increase and 9.4% revenue jump, driven by record highs in Mexico and Colombia. South America added to the strength with a 9.0% revenue increase (Brazil beer volumes +1.2%), proving the company's pricing power and premiumization strategy in emerging markets remain intact.
Beyond Beer and No-Alcohol Hit Escape Velocity
The 'Balanced Choices' and adjacent categories are dramatically outperforming core beer. The No-Alcohol portfolio grew revenue by 27% (led by Corona Cero), and Beyond Beer accelerated to a massive 37% revenue jump, driven largely by Cutwater's triple-digit growth in the US and the global launch of Flying Fish. These segments are successfully capturing new occasions and driving significant positive mix.
Margin Squeeze from Sales & Marketing Reinvestment
A reversing trend appeared in operating efficiency. While the company achieved a stellar 7.2% organic gross profit increase (margin +76 bps), Normalized EBITDA margins contracted by 15 bps to 35.6%. Management cited 'transactional FX headwinds' and 'increased sales and marketing investments.' Essentially, it is costing more to acquire this top-line growth than in previous quarters.
North America Shipments Disconnect
North America remains a stable laggard. While revenue managed a 0.9% increase on strong pricing (+4.4% rev/hl), total volumes dropped 3.1%. A troubling disconnect persists between Sales-to-Retailers (STRs +0.3%) and Sales-to-Wholesalers (STWs -3.2%). While management blames comparable shipment phasing, US volumes are still structurally soft.
China's Costly Pivot
China is decelerating financially even as volumes show slight sequential improvement. Overall volumes declined 1.5%, but revenue fell much harder (-3.9%), pulling regional EBITDA down by 11.8%. The company is actively sacrificing pricing (Revenue per hl -2.5%) and increasing marketing spend to rebuild its presence in the in-home channel after a prolonged on-trade weakness.
Other KPIs
Accelerating significantly. Up 20.8% YoY from $0.81 (or 8.8% on a constant currency basis). This highlights the compounding effect of organic EBITDA growth, lower net finance costs due to deleveraging, and positive mix.
Accelerating. Up 76 basis points YoY. Shows incredible pricing power (revenue per hectoliter +4.5%) overriding any raw input cost inflation. The fact that EBITDA margins still contracted makes this metric a critical indicator that the top-line health is strong, but OPEX is heavy.
Reversing slightly from the $984 million expense in 1Q25. While net interest expense actually improved (from $621M down to $613M) due to deleveraging, accretion and other financial results weighed on the line item.
Guidance
Stable. The company maintained its medium-term growth outlook. Given the 5.3% organic delivery in Q1, the midpoint of 6% looks highly achievable, particularly if summer and FIFA World Cup activations yield expected returns.
Stable. Consistent with previous year targets, showing disciplined capital allocation that leaves ample room for free cash flow generation and the ongoing $6B share buyback program.
Stable. In line with the normalized rate realized throughout FY25. Excludes potential future legislative changes.
Key Questions
Marketing Spend Trajectory
You absorbed a 15 bps EBITDA margin contraction this quarter due to FX and marketing investments. As we head into the FIFA World Cup, should we expect SG&A to remain elevated, keeping EBITDA margins flat or slightly down for the remainder of the year?
China Restructuring Costs
EBITDA in China fell 11.8% as you invested heavily in the in-home channel and lowered prices. How long is this transition phase expected to last before we see a return to positive operating leverage in APAC?
US STW vs STR Convergence
In North America, STWs lagged STRs by 350 basis points. You mentioned this should converge over the full year—does this imply a massive catch-up in wholesale shipments expected in Q2 ahead of the summer season?
BEES Marketplace Profitability
With BEES Marketplace GMV up 55% to $1.1 billion, what is the margin profile of this third-party product revenue today compared to your core beer portfolio, and how is it impacting consolidated EBITDA?