Updated 2 December 2025
Diageo plc (LON: DGE, NYSE: DEO) – the global spirits and beer group behind Guinness, Johnnie Walker, Smirnoff and Don Julio – is ending 2025 in one of the toughest patches in its modern history. A profit warning, a CEO exit, a new turnaround boss and a share price down by around a third have turned what was once a dependable “quality compounder” into one of the FTSE 100’s most debated stocks. [1]
Below is a deep dive into Diageo’s latest results, guidance, leadership shake‑up, regional flashpoints, dividend profile, analyst forecasts and valuation as of 2 December 2025.
Where Diageo’s share price stands now
On the London Stock Exchange, Diageo shares recently traded around £17.4–£17.6 (1,740–1,760p). That leaves the stock roughly 33–35% below its 52‑week high near £26.20, hit in December 2024, and only about 5% above the 52‑week low of £16.64 reached after November’s profit warning. Over the past 12 months the London listing is down around 25–27%. [2]
On the New York Stock Exchange, Diageo’s ADRs (ticker DEO) recently closed around $92–93, against a 52‑week range of roughly $86.6–$132.3. That leaves the US line down about 30% from its high. [3]
Despite the share price slide, Diageo doesn’t yet trade like a “distressed” asset:
- Trailing P/E sits around 21x earnings on both listings.
- Forward P/E has compressed into the low‑teens (roughly 11–14x) on many estimates. [4]
- The dividend yield has risen to about 4.5–4.7%, with forward yields on some screens nearer 5%, among the higher yields in Diageo’s recent history and competitive within the FTSE 100. [5]
In valuation terms, Diageo has moved from “premium defensive growth stock” toward something closer to a moderately valued, income‑oriented consumer staple – but with very live business challenges.
What went wrong: 2025 results and a painful forecast cut
Fiscal 2025: modest growth, sharp profit drop
Diageo’s financial year to 30 June 2025 was technically in line with guidance, but it did little to reassure nervous shareholders. Headline numbers from the company’s 2025 Preliminary Results: [6]
- Reported net sales:$20.245bn, down 0.1% year‑on‑year.
- Organic net sales growth:+1.7%, driven by 0.9% volume growth and 0.8% price/mix.
- Reported operating profit:$4.335bn, down a steep 27.8%, mainly due to impairment and restructuring charges, currency headwinds and lower organic margins.
- Net profit:$2.538bn, down 39.1%.
- EPS (reported):105.9 cents, down 38.9%; EPS before exceptional items fell a milder 8.6%.
- Net debt:$21.9bn, implying leverage of 3.4x net debt to adjusted EBITDA.
Management highlighted solid growth from Don Julio tequila, Guinness and Crown Royal Blackberry, but admitted that broader portfolio momentum and margins were disappointing. [7]
“Accelerate”: cost cuts and cash focus
Alongside the results, Diageo increased its cost‑saving ambitions under the “Accelerate” programme:
- Cost‑saving target lifted from $500m to about $625m over three years.
- Goal to generate around $3bn of free cash flow in fiscal 2026.
- Commitment to bring leverage down to within a 2.5–3.0x net debt/EBITDA range by fiscal 2028, helped by “appropriate and selective disposals”. [8]
Those measures underline how the balance sheet – swollen by years of acquisitions and share buybacks – has become a priority as growth slows.
Q1 FY26 and the November 2025 profit warning
If FY25 was underwhelming, the real damage to market confidence came on 6 November 2025, when Diageo released its Q1 fiscal 2026 trading statement and cut guidance. [9]
Key points from Q1 (three months to 30 September 2025):
- Reported net sales:$4.875bn, down 2.2% year‑on‑year.
- Organic net sales:flat;
- Volume +2.9%
- Price/mix –2.8%, mainly due to weaker mix in Chinese white spirits.
- Growth in Europe, Latin America & Caribbean (LAC) and Africa was offset by declines in North America and Asia Pacific.
Critically, Diageo cut its fiscal 2026 outlook:
- Now expects organic net sales to be flat to slightly down.
- Organic operating profit is expected to grow only low‑ to mid‑single digits, versus earlier guidance of mid‑single‑digit growth and at least flat sales. [10]
The culprits look familiar:
- United States: softer spirits consumption, intense tequila competition and consumers trading down, with US spirits organic net sales down about 4% in recent periods. [11]
- China and Asia‑Pacific: double‑digit declines in Chinese white spirits, with the company estimating that weakness in China shaved about 2.5 percentage points off group net sales in Q1. [12]
Investors reacted brutally: the shares dropped to levels last seen around 2015, extending what several commentators have described as a roughly 30%+ slide during 2025. [13]
Leadership shock and the arrival of “Drastic Dave”
Debra Crew’s abrupt exit
In July 2025, CEO Debra Crew stepped down “with immediate effect” after roughly two years in the job, following a period of weakening sales, new trade tariffs and a sliding share price. CFO Nik Jhangiani stepped in as interim CEO, while former Diageo finance chief Deirdre Mahlan returned as interim CFO. [14]
The surprise exit added to market unease, especially given that Crew herself had taken the helm only after the death of long‑time CEO Sir Ivan Menezes in 2023.
Sir Dave Lewis appointed CEO
After several months of uncertainty, Diageo’s board named Sir Dave Lewis – the former Tesco boss known in the City as “Drastic Dave” – as the new CEO on 10 November 2025. His appointment takes effect on 1 January 2026, with Jhangiani reverting to the CFO role at year‑end. [15]
Lewis built his reputation by stabilising and turning around Tesco between 2014 and 2020, using a playbook of ruthless cost control, range simplification and a renewed focus on customers and suppliers. The Financial Times and other outlets expect him to bring similar discipline to Diageo:
- Reviewing a portfolio of more than 200 brands and potentially disposing of weaker labels such as some rum and whisky lines.
- Re‑examining Diageo’s roughly €10bn minority stake in Moët Hennessy.
- Accelerating cash generation to tackle a ~$22bn debt pile. [16]
The market’s initial verdict was positive: Diageo shares jumped around 5–7% on the day of the announcement – their biggest single‑day gain in years – though the move only clawed back a fraction of 2025’s losses. [17]
Lewis inherits a business facing both cyclical and structural headwinds: pressured consumers, changing drinking habits, new regulations and fierce competition in premium spirits.
Strategy and portfolio moves: from vodka to tequila, defending Guinness
The 2025 results and Q1 update give a clearer view of how Diageo is trying to respond.
The “Accelerate” programme
As noted, Accelerate aims to deliver around $625m of cost savings over three years, through:
- Simplifying the operating model and product range.
- Supply chain efficiencies.
- Tighter overheads and prioritised brand investment. [18]
The company also reiterated its goal of $3bn free cash flow in FY26 and a return to its target leverage range by FY28, partly funded by selective disposals. [19]
Portfolio reshaping: Cîroc out, Lobos tequila in
In April–June 2025, Diageo executed a notable portfolio swap: it transferred its majority interest in Cîroc vodka in North America into a partnership with Main Street Advisors and, in return, took a stake in Lobos 1707 tequila and mezcal, a fast‑growing agave brand backed by LeBron James. Cîroc in North America is now treated as an associate rather than a fully consolidated brand. [20]
The move underlines Diageo’s strategic tilt away from a challenged vodka category and further toward tequila and agave spirits, which have been key drivers of global premium spirits growth – though they’ve recently cooled in the US.
Guinness and Moët Hennessy: assets under the microscope
Media speculation early in 2025 suggested Diageo might consider selling or spinning off Guinness or even its 34% stake in Moët Hennessy to unlock value. Management publicly dismissed the idea that Guinness is for sale, calling it a core asset, noting that the brand (including Guinness 0.0) has delivered strong, often double‑digit growth in recent years. TS2 Tech+2The Guardian+2
However, several commentators expect Sir Dave Lewis to review the company’s broad portfolio and consider further portfolio pruning and/or capital recycling from non‑core stakes over time. [21]
Regional picture: US and China weak, Europe, Latin America and Africa stronger
Diageo’s global spread is both a strength and a source of complexity. The Q1 FY26 update shows a sharply divergent picture by region. [22]
North America – tequila hangover
North America accounts for roughly 38% of Diageo’s net sales. In Q1 FY26: [23]
- Organic net sales fell 2.7%.
- US spirits net sales dropped 4.1%.
- Tequila saw double‑digit declines amid tough comparisons, weaker category growth and intense price competition.
- By contrast, Scotch (especially Johnnie Walker) and ready‑to‑drink formats such as Smirnoff Ice and cocktail collections delivered good growth.
Put simply, the US – once Diageo’s growth engine – is now a drag, with premium consumers more cautious and retailers rationalising shelf space.
Europe – Guinness and Baileys shine
Europe, roughly 25% of group net sales, was a bright spot in Q1: [24]
- Organic net sales grew 3.5%, with price/mix up 5.3%.
- Guinness continued to post high‑single‑digit organic net sales growth, including strong demand for Guinness 0.0.
- Baileys and Scotch also performed well in key markets such as Great Britain and Türkiye.
Europe shows that, where categories and price points are aligned with consumer budgets, Diageo’s brands still have plenty of pull.
Asia‑Pacific – Chinese white spirits slump
Asia‑Pacific, about 18% of net sales, remains the biggest headache: [25]
- Organic net sales fell 7.5% in Q1.
- Chinese white spirits saw a strong double‑digit volume and sales decline, as policy changes and weaker demand hit the baijiu category. Diageo estimates that China’s white spirits weakness alone reduced group net sales by about 2.5 percentage points in the quarter.
- Elsewhere in the region, India delivered double‑digit growth despite new excise increases in the state of Maharashtra.
Latin America & Caribbean (LAC) and Africa – still growing
Contrasting with the US and China: [26]
- LAC organic net sales grew 10.9%, led by Brazil, where both volume and price/mix were strong.
- Africa delivered 8.9% organic net sales growth, with robust trends in East Africa and South, West & Central Africa, particularly for beer and ready‑to‑drink products.
These regions remain important growth engines, albeit with higher volatility and currency risk.
India: ESG leader, regulatory flashpoint
India is becoming increasingly central to Diageo’s story – for both positive and negative reasons.
ESG outperformance
Through its listed subsidiary United Spirits, Diageo India has published ESG data showing: [27]
- A 93% reduction in greenhouse gas emissions from operations since 2020.
- 99% of energy now sourced from renewables, supported by around 2.6–2.7 MW of in‑house solar capacity – exceeding its 2030 renewable energy target years early.
- Zero waste to landfill in direct operations and a high share of recyclable and recycled packaging.
This positions Diageo as a leader among global consumer companies on climate metrics in India and offers some support for ESG‑driven investors.
Maharashtra tax shock and lawsuit
At the same time, Diageo India is at the heart of a major tax dispute in Maharashtra, one of India’s richest states. In mid‑2025 the state: [28]
- Created a “Maharashtra Made Liquor” category with a lower 270% tax rate reserved for locally headquartered firms with no foreign investment.
- Raised taxes on “affordable premium” brands made by companies such as Diageo and Pernod Ricard from 300% to 450%.
- Applied the higher rate to brands including Diageo’s McDowell’s, one of India’s largest‑selling whiskies.
Industry groups say sales of impacted brands in Maharashtra have dropped 35–40% since the hike. Maharashtra accounts for roughly 7% of India’s premium spirits consumption, so the stakes are meaningful. Diageo and peers, via their industry association, have sued the state; India’s Mumbai High Court is due to hear the case in December 2025. [29]
The episode underlines both the growth potential and regulatory unpredictability of India – a market Diageo clearly sees as strategic.
Dividends, cash flow and balance sheet
Dividend profile
For the year ended June 2025, Diageo recommended a full‑year dividend of 103.48 US cents per share, split into: [30]
- Interim: 40.50c (31.48p), paid in April 2025.
- Final: 62.98c (47.91p), with the sterling equivalent confirmed at 47.91p per share and due for payment on 4 December 2025.
In sterling terms, that’s about 79.39p per share for FY25, marginally above FY24’s 79.28p. [31]
Based on the current London share price, the trailing yield sits around 4.5–4.7%, with forward yield estimates closer to 5% – high by Diageo’s own historical standards and competitive in the UK large‑cap universe. [32]
Cash generation and leverage
From the FY25 results: [33]
- Net cash flow from operating activities increased to $4.3bn.
- Free cash flow rose slightly to $2.7bn.
- Net debt was $21.9bn, implying a leverage ratio of 3.4x adjusted EBITDA.
Management aims to:
- Deliver c.$3bn free cash flow in FY26.
- Use cost savings and selective asset sales to bring leverage back inside 2.5–3.0x by FY28. [34]
Diageo also has a history of capital returns via share buybacks, including a $1bn programme in FY24, but with leverage elevated and growth under pressure, aggressive buybacks are less likely to be the focus in the near term. [35]
How cheap is Diageo? Valuation and analyst sentiment
Valuation multiples
Across various data providers, Diageo screens roughly as follows (late November / early December 2025): [36]
- Trailing P/E (TTM): about 21x.
- Forward P/E: typically in the 11–14x range, depending on the earnings estimates used.
- Price‑to‑sales: ~2.5x.
Some fundamental screens suggest the stock is now roughly in line with, or slightly cheaper than, many global consumer staples on a forward basis, even though Diageo still looks more expensive on trailing P/E due to depressed FY25 earnings.
Not all valuation work points to upside, though. One discounted cash flow model (ValueInvesting.io) estimates intrinsic value for DGE at roughly £13.3–14.1 per share, implying negative upside from current levels – though such models are highly sensitive to long‑term growth and margin assumptions. [37]
Analyst ratings and price targets
For the NYSE‑listed ADR (DEO):
- MarketBeat tracks around 10 analysts with an average rating of “Hold” (a mix of buy, hold and sell calls).
- The consensus 12‑month price target is about $119, versus a current price around $92–93, implying roughly 28–30% potential upside. [38]
- Some brokers, such as Bank of America, have trimmed targets (e.g. to around $109) but kept buy ratings, while Zacks has gone as far as a “strong sell”, underlining how polarising the stock has become. [39]
For the London listing (DGE):
- Around 8 analysts collectively rate the shares a “Moderate Buy”, split roughly between buys and holds.
- Consensus price targets cluster around 2,200–2,290p, pointing to ~25% upside from the current mid‑1,700s. [40]
Growth forecasts
Analyst models aggregated by several platforms paint a picture of muted but positive growth from a depressed base: [41]
- Revenue: consensus sees low single‑digit annual growth (around 2–4% per year) over the next few years, from roughly $20.25bn in FY25 to the low‑$21bn range by FY27.
- Earnings per share: forecasts imply a sharp rebound in FY26 as exceptional charges roll off, with EPS rising by ~60% from the depressed FY25 level, followed by mid‑single‑digit growth thereafter.
- Some services summarise this as high single‑digit to low double‑digit annual EPS growth through 2028, assuming Lewis’s turnaround stabilises margins and cost savings land as planned.
In short, the Street’s base case remains one of modest top‑line recovery and gradual margin rebuild, not a return to the high‑growth years.
Key upside drivers: the bull case
Supporters of Diageo at today’s price generally point to several factors:
- World‑class brands and global scale
Diageo still owns some of the most powerful names in spirits and beer – Johnnie Walker, Guinness, Smirnoff, Baileys, Don Julio, Tanqueray and more – with deep distribution in nearly 180 countries. That brand equity and route‑to‑market depth are hard to replicate. [42] - Resilient pockets of growth
While the US and China are struggling, Europe, LAC, Africa and India are still posting mid‑ to high‑single‑digit organic growth, especially in Guinness, Scotch and ready‑to‑drink formats. [43] - Attractive income profile
A 4.5–5% dividend yield from a company that, historically, has grown its dividend over time and aims to generate around $3bn of free cash flow per year is attractive to many income‑focused investors, provided payout ratios remain manageable. [44] - New turnaround CEO with a strong track record
Sir Dave Lewis has already earned investor goodwill thanks to his Tesco turnaround. If he can simplify Diageo’s portfolio, sharpen execution and reduce debt, there is scope for both earnings growth and a re‑rating from today’s compressed forward multiples. [45] - ESG and premiumisation tailwinds in emerging markets
Diageo India’s progress on emissions, renewable energy and premium spirits growth shows how the group can align with both rising incomes and sustainability themes in high‑growth markets. [46]
Key risks: the bear case
Sceptics highlight an equally long list of concerns:
- Structural demand risks in developed markets
Per‑capita alcohol consumption in many rich countries is flat or declining, while younger consumers experiment with lower‑ or no‑alcohol options. That makes Diageo more reliant on premiumisation and innovation to grow – both vulnerable in downturns. - Regulatory and tax headwinds
Tariffs on spirits, excise hikes (as in Maharashtra) and tighter advertising rules can quickly erode profitability and growth. Diageo already faces hundreds of millions of dollars in tariff‑related costs and ongoing legal and regulatory battles. [47] - High leverage and limited margin for error
With $21.9bn of net debt and a leverage ratio of 3.4x, Diageo has less flexibility if earnings disappoint again or interest rates remain elevated. The company is paying out a large portion of free cash flow as dividends, which, while attractive for shareholders today, reduces the buffer for shocks. [48] - Execution risk under a new CEO
Turnarounds often involve job cuts, asset disposals and big strategic calls. Integrating portfolio changes, managing labour relations (for example, industrial action threats at key breweries) and keeping flagship brands on track will all test the new leadership. Financial Times+3TS2 Tech+3www.diageo.com+3 - Valuation still not “dirt cheap”
While forward P/E has fallen into the low‑teens, Diageo still trades at a premium to some slower‑growth consumer names and, by some DCF models, above intrinsic value. If earnings recovery falls short of forecasts, the stock could have further to fall. [49]
Diageo stock outlook for 2026 and beyond
Looking ahead to 2026–2028, the Diageo story hinges on three big questions:
- Can Lewis stabilise US and China performance?
If the new CEO can stop the bleeding in North America and China – even without spectacular growth – the drag on group sales and margins would ease, making it easier to hit the Street’s modest growth assumptions. [50] - Will cost savings drop through to the bottom line?
Delivering the planned $625m of cost savings, while still investing behind priority brands, is key to achieving the mid‑single‑digit operating profit growth guided for FY26 and beyond. Execution here will determine whether the forward P/E of ~11–14x proves cheap or fair. [51] - How safe – and how growing – is the dividend?
With a yield near 5% and a history of steady increases, Diageo’s dividend is central to the investment case. Sustaining and growing that payout requires consistent free cash flow and credible deleveraging – areas investors will watch closely in upcoming results. [52]
Bottom line:
- The market is currently pricing Diageo as a quality franchise in a rough patch, not as a broken business.
- Consensus expects low‑single‑digit revenue growth, mid‑single‑digit EPS growth (after a one‑off rebound), and a healthy dividend stream, all now offered at more reasonable – though not bargain‑basement – multiples. [53]
- The key swing factor is whether “Drastic Dave” can translate his Tesco turnaround playbook into the spirits world against a backdrop of changing alcohol habits, regulatory pressures and elevated debt. [54]
For investors, Diageo in December 2025 looks less like a simple “buy the dip” story and more like a high‑yield, medium‑risk turnaround, where returns over the next few years will depend on operational execution as much as on macro trends.
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