By Evie Liu

Celsius posted triple-digit revenue growth, widened gross margins, and took a bigger slice of the energy-drink aisle in the third quarter. But shares tumbled as much as 27% on Thursday, as surprising negative earnings spooked investors. The concerns might be overblown.

For the quarter ended in September, Celsius posted revenue of $725 million, up 173% from a year ago, as the company's widened portfolio kicked into gear. Wall Street analysts polled by FactSet had expected sales to come at $720 million.

Two years ago, Celsius held a 10% share in the energy-drink market. Today, through organic growth and strategic expansion, it has doubled that position.

The company now has three brands under its belt: It acquired Alani Nu in April and took over Rockstar in August in its strategic partnership with PepsiCo, which increased its stake in Celsius and gave the energy-drink company more distribution support.

In the third quarter, sales across Celsius' entire portfolio rose 31% at tracked U.S. retailers, which doesn't include direct-to-consumer or online sales, lifting the company's dollar share in the energy-drink market to 21%.

Alani Nu, especially, delivered an eye-popping 114% growth to reach $332 million in quarterly sales. The Celsius brand also grew retail sales by 13% year over year as it added distribution points and rolled out innovative, limited-time flavors.

"The third quarter marked another important step in Celsius' transformation in a year full of growth catalysts," said CEO John Fieldly in a statement. "With a broader portfolio, a deeper leadership bench, and the reach of PepsiCo's system, we're operating from a position of strength and staying focused on building sustainable growth for the long term."

Prior to Thursday's earnings report, Celsius stock had more than doubled year to date as investors stayed upbeat about its growth trajectory.

Despite strong revenue growth, Celsius posted a net loss of 27 cents per share in the third quarter, largely due to the one-time distributor-termination cost of $247 million as Celsius moves Alani Nu into PepsiCo's distribution system. PepsiCo is funding those fees, but the payments will show up on Celsius' balance sheet over the lifetime of the agreement. Meanwhile, accounting rules require Celsius to record all estimated expenses in its income statement for the past quarter.

Celsius said its cash position will not be affected by these one-time costs. Still, the mismatched accounting timing and negative numbers on the book might have clouded the company's otherwise strong fundamentals.

Excluding the termination costs, adjusted earnings were actually 42 cents per share, beating Wall Street expectation of 29 cents. That's a significant improvement from the same quarter a year ago, when the company didn't post any profit.

Investors might also undercut the Celsius brand's 44% revenue growth, since part of it was due to last year's wobble. In 2024, Celsius stock tumbled on suppressed revenue as PepsiCo, its largest distributor, cut its purchase to keep inventory low -- even as retail sales remained healthy.

PepsiCo is now catching up with higher inventory levels. That's why Celsius reported that revenue increased 44% from a year ago, even though retail sales grew only 13%. The latter is arguably a better metric of real demand growth.

The uncertainty of Rockstar's future might also have some investors worried. The brand saw its sales decrease 9% in the third quarter from a year ago, with 2.4% market share. But now that it's under the Celsius umbrella, a rebranding campaign, more flavor launches, and better shelf-space planning might be down the line.

If Celsius can successfully orchestrate its portfolio across demographics -- from Alani Nu's female-skewing fan base to Celsius' fitness crowd to Rockstar's legacy buyers -- it could compound its share in the energy market and grow into a giant that rivals legacy names such as Red Bull and Monster Beverage.

But for now, investors are waiting.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 06, 2025 14:09 ET (19:09 GMT)

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