IFF sold a little more, kept a little more of it, and ended with dramatically less net income.
In the three months ended June 30, revenue rose 1.8% to $2.0 billion, while operating income climbed 11.3% to $158 million. Operating margin widened from 7.4% to 8.1%. Then net income fell 91.7%, from $599 million to $50 million. The business measured at the operating line improved; the earnings line did not follow.
The gross-profit explanation is doing more work than the headline numbers suggest. IFF says volume and productivity helped, but tariff refunds and the changing portfolio also mattered.
"The increase in gross profit was primarily driven by volume increases and productivity gains and the benefit of tariff refunds received and recognized during the quarter offset in part by the change in business portfolio mix due to divestitures."
IFF, 10-Q filed Aug. 4, 2026
That puts the 3.5% rise in gross profit, and the 0.7-percentage-point gross-margin improvement to 43.7%, in a less tidy category than simple volume growth. Some of the lift came from volume and productivity gains. Some came from refunds and from what IFF no longer owns.
The cost-of-sales bridge makes the portfolio effect concrete. IFF said divestitures reduced cost of sales by about $250 million, with tariff refunds helping again, while higher sales volume pushed in the other direction.
"The decrease in cost of sales was primarily driven by the impact of divestitures of approximately $250 million and the benefit of tariff refunds recognized during the period, partially offset in part by volume increases in sales."
IFF, 10-Q filed Aug. 4, 2026
The plain-English version: the reported operating measures improved, but the period also includes benefits that may not repeat in the same form. IFF does not provide a single clean explanation in the supplied discussion for the plunge from operating income to net income, so the two profit measures are currently telling different parts of the business story without a full bridge between them.
The balance sheet adds another odd detail. Inventory fell 36.5% to $1.5 billion, yet cash fell 30.3% to $569 million. The three-month comparison shows both movements, but does not disclose the cause of the cash change. A smaller inventory balance did not translate into a larger cash balance in this snapshot.
That matters against IFF's recent annual backdrop. Revenue fell 5.2% in 2025 to $10.9 billion, and operating margin was negative 3.5%. The current period's operating margin is therefore a sharp change from that annual base, even as the bottom-line comparison is distorted by the large gap in net income.
IFF's next quarterly report will add another three-month balance-sheet snapshot and another bridge from operating income to net income, the two disclosures needed to separate recurring operating progress from portfolio and refund effects.
For now, operating income is rising, net income is falling, and the filing leaves the gap open.
Source: IFF’s 10-Q filed Aug. 4, 2026, for the three months ended June 30, 2026.