Constellation Brands, Inc. — Q2 FY2027 Form 10-Q
Reporting period: Quarter and six months ended August 31, 2026; comparisons are to the corresponding 2025 periods. Amounts are U.S. dollars. Filing dated October 7, 2026.
Business context and financial performance
Constellation produces and markets beer, wine, and spirits, reporting Beer, Wine and Spirits, and Corporate Operations and Other segments. The Beer business is the largest contributor to sales and operating income; Wine and Spirits is focused on higher-end brands following portfolio divestitures.
| Metric | Q2 FY2027 | Six months FY2027 |
|---|---|---|
| Net sales | $2.633 billion, up 6% | $5.066 billion, up 1% |
| Gross profit / margin | $1.393 billion / 52.9%, versus 52.8% | $2.714 billion / 53.6%, versus 51.6% |
| Operating income | $805 million, down 8% | $1.650 billion, up 4% |
| Net income attributable to CBI | $566 million, up 21% | $1.220 billion, up 24% |
| Diluted EPS | $3.32, versus $2.65 | $7.11, versus $5.55 |
| Operating cash flow | Not separately provided for the quarter | $1.479 billion, versus $1.489 billion |
| Capital expenditures | $176.9 million | $354.1 million |
Quarterly sales growth reflected shipment increases in Beer (5.5%) and Wine and Spirits (15.4%). Beer depletions declined 0.6% in the quarter; Wine and Spirits depletions rose 10.2%. For the six months, Beer shipments rose 3.7% while depletions declined 0.5%. Wine and Spirits reported shipments fell 44.2% due to the prior-year divestiture; organic shipments rose 11.5%.
Financial position and liquidity
At August 31, 2026, cash was $98.5 million; current assets were $2.960 billion and current liabilities $2.964 billion. Total debt, including short-term borrowings, was $10.316 billion, down $252.8 million from February 28, 2026. The company had $2.123 billion of unused revolving-credit capacity at quarter-end and reported compliance with debt covenants.
Six-month financing cash outflows included $353.8 million of dividends and $463.5 million for share repurchases and related excise tax. Cash ended the period at $98.5 million. Reported operating cash flow was nearly flat year over year; investing cash flow shifted from $464.8 million provided to $350.4 million used, largely because the prior-year period included proceeds from the 2025 Wine Divestitures.
Changes, outlook, and notable items
- Quarterly operating income fell despite higher sales, primarily due to $49.8 million of impairment expense, higher Beer marketing costs, and unfavorable incentive compensation accruals. Six-month operating income increased, supported by Beer growth, favorable commodity-derivative adjustments, lower tariff costs, and cost initiatives.
- The six-month effective tax rate was 15.8%, versus 27.6%; management expects a Fiscal 2027 reported effective tax rate of 11%–13%. This outlook includes an expected $100–$150 million tax benefit in the quarter ending November 30, 2026, from foreign tax reform enacted after quarter-end.
- Management expects Beer shipments generally to align with depletions for Fiscal 2027. Wine and Spirits shipments are expected to decline in the second half as the company works with distributors to reduce finished-goods inventory. Commercial production at the Veracruz Brewery is now expected to begin at the start of Fiscal 2028.
- The 2025 Restructuring Initiative is expected to generate over $200 million in net annualized savings by Fiscal 2028, with nearly $130 million of cumulative pretax costs when fully implemented; $127.4 million had been incurred through August 31, 2026.
- Quarter-period asset impairments totaled $49.8 million for the planned Nelson’s Green Brier divestiture; six-month impairments also included $18.3 million related to the New Zealand Wine Divestitures. The company acquired the remaining HOPWTR interest in April 2026 and acquired SpikedAde after quarter-end for $75 million upfront, with up to $278 million of performance-based consideration over five years.
- Management cites uncertain consumer demand, value-seeking behavior, inflation and other economic pressures, tariffs and trade policy, supply-chain and commodity costs, severe weather, and geopolitical risks. The company states that tariffs are expected to continue to negatively affect Fiscal 2027, although lower tariff costs benefited the reported periods. A putative securities class action remains pending; a motion to dismiss is unresolved.
Most important facts for investors to verify
- Whether Beer shipment growth converts into sustained consumer demand, given slightly negative year-to-date depletions and distributor inventory rebuilding.
- Whether the expected second-half Wine and Spirits shipment decline and inventory reductions affect sales, margins, or channel health.
- How much of the projected tax-rate improvement reflects the one-time $100–$150 million benefit versus ongoing tax economics.
- Execution and cost of brewery capacity projects, including the revised Veracruz production timetable, alongside debt maturities and capital-allocation commitments.
- Potential effects of tariffs, input costs, consumer weakness, and the Nelson’s Green Brier divestiture and SpikedAde contingent payments.