As at: 19 October 2026

Executive Summary

Key highlights

In this report, we review DGE’s FY26 results released in August 2026, and assess the impact on our outlook:

Financial results at a glance:

• Group net sales declined by 3.0%, with like-for-like (LFL) net sales falling by 2.0%. North American LFL net sales decreased by 8.4%, while LFL volumes fell by 6.7%, reflecting weaker US demand, partly offset by Canada. European LFL net sales rose 3.4% on flat volumes, as Guinness offset weaker spirits performance. Asia Pacific LFL net sales fell 6.3%, with volumes down 2.4% due to weakness in Chinese White Spirits (CWS), partly offset by India. Latin American and Caribbean LFL net sales increased 7.7%, with volumes up 3.1%, driven by strong beer, Scotch and vodka sales. African LFL net sales grew 13.3%, with volumes rising 14%, supported by strong spirits and ready-to-drink sales.

• Group gross profit declined by 4.0% (margin down 66bps to 59.5%), driven by lower topline growth and an increase in costs.

• Group operating profit fell by 27.2% (margin down 535bps to 16.1%), with LFL operating profit up 2.0% (margin up 116bps to 28.9%), which excludes exceptional items. Reported group operating profit was lower, driven by brand impairment and other related charges increasing from $910 million to $1 489 million due to hyperinflation and the write down of some brands.

• North American LFL operating profit fell 10.0%, with margins down 66bps to 35.9%, reflecting weaker volumes and tariffs, partly offset by lower agave prices and productivity savings. European LFL operating profit rose 15.7%, with margins up 328bps to 31.6%, driven by cost efficiencies and targeted marketing. Asia Pacific LFL operating profit declined 5.4%, although margins increased 26bps to 25.4%, as lower marketing spend partly offset weaker Chinese White Spirits (CWS) demand and lower sales. Latin American and Caribbean LFL operating profit grew 15.8%, with margins up 210bps to 27.1%, supported by improved marketing efficiencies. African LFL operating profit rose 43.5%, with margins up 458bps to 21.7%, driven by productivity savings, improved fixed-cost absorption and targeted marketing. Group marketing costs fell 13.1%, reflecting more focused promotions and improved efficiencies.

• Reported basic EPS was declined 26.3%, primarily due to higher exceptional charges, while adjusted EPS rose 0.7%.

Analyst thesis

Our recommendation is based on:

• The portfolio includes some of the world's most recognised spirits brands, alongside Guinness as a leading beer brand. Together with its premium positioning and premiumisation as a growth driver going forward, this further strengthens Diageo’s (DGE) brand moat.

• High, stable profit margins reflect DGE’s premium positioning, although recent declines have been driven by tariffs, higher input costs, and marketing expenditure. Tariff pressures have eased, commodity pricing is being addressed through pricing and cost savings, and marketing expenditure is being reduced and more tightly targeted to improve efficiency and support demand, as seen in the recent results.

• DGE trades at a 25.0% discount to its five-year average NTM P:E. Considering the quality of the portfolio of brands and current margins, along with stronger performance from regions outside the US and China expected to offset weaker performance in these two markets, DGE is attractively priced.