The Hershey Company (HSY) Income Statement

The revenue trajectory is highly volatile, with quarterly growth rates ranging from -16.7% to +26.0% over the past ten quarters. The most recent quarter (2026Q2) shows a 6.6% increase, which is a deceleration from the prior quarter's 10.6% growth. This volatility likely reflects seasonal patterns and pricing actions, but the underlying trend appears to be stabilizing around mid-single-digit growth. Investors should monitor whether this reflects sustainable volume gains or is driven by price increases that could eventually dampen demand.

The gross margin decline from 54.0% to 45.3% over the past six quarters is substantial and suggests that the company is facing significant cost headwinds, likely from cocoa and other commodities. This compression is more severe than typical seasonal fluctuations and indicates that pricing actions have not fully offset input cost inflation. The company's ability to restore margins will depend on its pricing power and the trajectory of cocoa futures, which remain a key swing factor.

The operating margin has contracted by nearly 10 percentage points over the past six quarters, from 32.5% to 23.1%. This decline is driven by both higher COGS and increased SG&A spending, which has grown from $562.7M in 2024Q4 to $620.6M in 2026Q2. The company appears to be investing in brand support and innovation, but these costs are not being offset by revenue growth, leading to margin compression. This suggests that the company's cost structure is becoming less efficient, and investors should monitor whether these investments yield future growth.

The cost structure is heavily weighted toward COGS, which has increased by 15% over the past six quarters, while revenue has remained relatively flat. This suggests that the company is facing significant input cost inflation, particularly in cocoa, sugar, and dairy. The gross profit has declined from $1.6B to $1.3B over the same period, highlighting the margin pressure. Management's ability to manage these costs through pricing and productivity initiatives will be critical to restoring profitability.

The 2025Q2 quarter appears to be the trough in profitability, with gross margin at 30.5% and operating margin at 7.4%, the lowest levels in the ten-quarter period. This was likely driven by the sharp rise in cocoa prices, which hit the company's cost structure. Since then, margins have partially recovered, with gross margin improving to 45.3% in 2026Q2, but they remain below the levels seen in 2024. This inflection point highlights the company's vulnerability to commodity price spikes and the importance of hedging and pricing strategies.