Celsius Holdings

Celsius' second-quarter sales rose 11% to $818 million, of which $364 million came from Alani and $67 million from Rockstar; the Celsius brand (55% of sales) declined 12%. Adjusted EBITDA margin contracted nearly 6 percentage points to 22.5% from input cost inflation and lower Celsius sales.

Why it matters: While much of the recent focus has been on the ongoing integration of Alani and Rockstar, the Celsius brand remains the core profit driver. While Celsius' sales decline stands in stark contrast to last quarter's 6% organic growth, we think much of the headwinds should be temporary. Management attributed the Celsius decline to overly aggressive stock-keeping unit rationalization, slower-than-expected shelf space gains, club channel softness, delayed innovation, trade spend inefficiencies, and distributor inventory rebalancing. Underlying retail sales for Celsius weren't as bad as the headline number, dropping just 2%. Half of the difference to the reported sales decline was driven by distributor inventory and does not reflect demand weakness. Separately, we expect shelf space headwinds to ease and innovation to resume.

The bottom line: We don't expect a major change to our $41 fair value estimate for no-moat Celsius. Shares look attractive, as we think the market may now be overlooking the temporary nature of many of the revenue headwinds. Shares fell 18% during Aug. 6 midday trading, which we think is due to the drop in Celsius sales. However, the company remains on track to hit our full-year estimates for sales and adjusted EBITDA of $3.3 billion and $756 million, respectively. Our forecast before the earnings call of 9% average annual revenue growth and long-term adjusted EBITDA margins of 24% shouldn't change by much. While we expect intensifying competition to weigh on growth and margin expansion, we think the market is now overestimating the effect.

We have maintained our fair value estimate of $41 per share. Our valuation implies a 16 times enterprise value/EBITDA multiple and 16 times price/earnings multiple on our 2027 estimates.

Celsius' second-quarter sales rose 11% to $818 million, of which $364 million came from Alani and $67 million from Rockstar; the Celsius brand (55% of sales) declined 12%. Adjusted EBITDA margin contracted nearly 6 percentage points to 22.5% from input cost inflation and lower Celsius sales.

For 2026, we expect sales to rise 30% to $3.3 billion, on organic growth of 3%, 18%, and 3% respectively for the Celsius, Alani Nu, and Rockstar brands. For reference, 2025 revenue included only nine months and four months of contribution, respectively, from Alani Nu and Rockstar. For the remainder of the forecast period between 2027 and 2035, we expect normalized sales growth of 6.5%, with the bulk of increases in the Celsius and Alani brands, given the appeal of better-for-you offerings and the solid positioning of the brands in the low/no-sugar subsegment. We model the Celsius brand to grow sales at 6% annually on flavor and packaging innovation and moderate distribution gains in retail and foodservice, while the smaller Alani can expand at a faster 8% clip given the distribution lift from its transition to the PepsiCo platform and a strong innovation pipeline featuring seasonal, limited-edition beverage offerings. We model more modest 3% annual sales growth for Rockstar (5% of total sales). Given its sluggish performance in recent years in the traditional energy drink category dominated by incumbents Monster and Red Bull, we are skeptical that Celsius can lift the brand to a materially higher growth trajectory.

We forecast gross margin to improve to 51% by the end of our forecast from 50.4% in 2025. We contend gross margin will expand due to manufacturing and logistics efficiencies as the firm scales over the longer term. We believe gross margin can also benefit from a favorable price mix as Alani gains momentum in convenience and away-from-home channels, though we anticipate ongoing innovation from competitors in the reduced-sugar energy drink category, which will limit Celsius' margin trajectory. On operating expenses, we don’t foresee much advertising leverage, as the firm will need to maintain marketing investments across its multibrand portfolio to stay connected with consumers. As such, we have modeled this spending to remain at a low-20s percentage of sales over the 10-year forecast period. We do anticipate efficiency gains in selling and labor expenses as the revenue base expands at a solid pace. We forecast such spending to average 9% of sales in the next 10 years, down from a 12% average in the past five years. Overall, we forecast adjusted operating margin to widen to 20.7% by 2035 from 18.6% in 2025.

We don’t believe Celsius has a moat. Despite share gains in the energy drink category in North America, the firm’s combined 20% retail sales share across the Celsius, Alani Nu, and Rockstar brands trails Red Bull (36%) and Monster (32%), according to Circana. While a long-term alliance with wide-moat PepsiCo is helpful, we think the narrowly focused energy drink brand faces an uphill battle in taking share from competitively advantaged incumbents, such as narrow-moat Monster and privately held Red Bull, that boast strong brand equity and distribution prowess. In addition, smaller entrants continue to encroach on Celsius by offering new flavor profiles and functional benefits, further limiting the firm’s ability to expand its scale or command pricing power. Even though we anticipate returns on invested capital to average around 18% over the next 10 years, well ahead of our roughly 8% estimate of the cost of capital, we attribute the excess returns to an asset-light business model rather than to a durable competitive edge.

While we see nascent differentiation for Celsius, we don’t see evidence of a durable intangible asset. Monster and Red Bull dominate the global energy drink market, holding shares of 17% and 13%, respectively, versus an estimated 3% for Celsius, according to Euromonitor. In its core market of North America, the gap remains, with Celsius’ 14% volume share trailing the 66% combined shares of category leaders Monster and Red Bull. The gap narrows in the North American reduced-sugar energy drink category (51% of total volume), with Celsius’ portfolio holding a 26% volume share, still behind Monster (30%) but ahead of Red Bull (15%).

Celsius’ health-centric focus likely serve as differentiation versus entrenched competitors, which mainly focus on the perceived functional benefits related to improved mental alertness and energy levels. Instead, Celsius’ “Live Fit” motto and brand tout a better-for-you offering, with an emphasis on natural ingredients and a proprietary MetaPlus formula, which uses green tea extract, guarana seed extract, ginger root, and other ingredients. We think Celsius’ positioning aligns with health and wellness trends, as Celsius claims 44% of its consumers are new to the category and boasts greater appeal to female consumers, with a 60/40 male/female ratio versus the traditional 70/30 breakdown in the convenience channel. The acquisition of Alani Nu in 2025 enhanced its presence in the health and fitness category, particularly among women. However, we see Celsius’ and Alani's approach as replicable and thus it fails to suggest evidence of a brand intangible asset.

We have yet to see evidence of pricing power. Over the past five years, Celsius’ gross margin averaged 46%, below Monster’s 54%, despite operating entirely in the niche low-sugar subsegment that should command higher prices. We think Celsius’ lower margins are attributable to the fast pace of innovation in the category, where Monster’s reach affords a more comprehensive pulse on evolving consumer trends. Although Celsius has rolled out new product extensions, it’s too early to tell if this can boost pricing power, expand consumption occasions, or help Celsius grow shelf space. Monster has also launched numerous new products and extensions that have resonated strongly with consumers. This supports our view that incumbent beverage companies will vigorously defend their market position. As such, we expect Celsius’ gross margins will remain below those of its larger rival, reaching 51% at the end of our 10-year forecast (versus Monster's 58%).

We believe the alliance with Pepsi should augment Celsius’ reach. In 2022, Celsius secured a 20-year distribution agreement with PepsiCo, which opened the door for increased access to shelf space across retail, convenience, and foodservice in North America, though the benefit is negligible in international markets where PepsiCo outsources distribution. Celsius increased its all-commodity value percentage (a measure of distribution reach) in the convenience channel to 98.7% at 2024 year-end from 63% in the second quarter of 2022 (just before the distribution deal), according to Circana. The alliance was strengthened in 2025 as PepsiCo raised its stake in Celsius to 11%, sold the Rockstar business in North America to the latter, and gave Celsius a bigger role in product and distribution planning in the energy drink category.

However, the agreement falls short of those of Coca-Cola and Monster. We believe Celsius is unlikely to derive the same benefits due to PepsiCo’s comparatively less robust distribution breadth (both in domestic and international markets) in beverages. Coca-Cola has a commanding lead over PepsiCo in the US carbonated soft drink category of 36.4% versus 23% share (Euromonitor) in 2025. Internationally, the discrepancy is even wider. In Western Europe, a market Celsius has highlighted for future expansion, Coca-Cola’s CSD share was 44% (Euromonitor), ahead of PepsiCo’s 14%.

We don’t believe that Celsius benefits from a cost advantage. Still in the process of building its revenue base to better spread fixed costs over higher volume, Celsius delivered an average adjusted operating margin of 11% over the last five years, compared with Monster's 28%. We expect that even when Celsius achieves greater scale in the coming years, the benefits will lag wide-moat names, including Coke and PepsiCo, in the overall beverage industry. Moreover, Celsius’ reliance on third-party co-packers restricts cost-cutting potential. As for selling and advertising, Celsius remains far behind the pack, spending $319 million (13% of sales), relative to Monster’s $600 million (7%), Coca-Cola’s $5.4 billion (11%), and PepsiCo’s $5.4 billion (6%) in 2025. This limits its ability to compete for advantageous advertising, sponsorships, or influencer collaborations, while requiring the firm to allocate a disproportionate share of sales to tout its offerings.

Celsius' and Alani Nu's better-for-you, fitness-oriented product portfolio complements consumers' preference for wellness-oriented offerings, propelling outsize growth prospects relative to the overall beverage and energy drink category.

Celsius should continue to expand its distribution points through the PepsiCo network, facilitating growth through entry into new markets and channel penetration.

Investments in branded cooler placements should enhance Celsius’ in-store visibility, while continued product investments could bolster brand loyalty.

Celsius must spend significantly more on marketing and research and development to remain competitive, signaling the significant brand investment required to stay relevant, while integrating Alani Nu could prove costly, which could cap the firm’s profit prospects.

Success in international markets may be difficult due to differences in taste preferences, Monster’s market dominance, and PepsiCo’s less robust beverage distribution prowess relative to Coca-Cola.

Regulatory scrutiny in the US and Europe might diminish the firm’s brand, especially with its narrow category focus.