Shares in P&G were flat in early trading.
A slowing global birthrate has hit P&G and competitors like Huggies diapers maker Kimberly-Clark, particularly in China and the United States. To boost sales, both companies have invested in higher-priced premium products.
Premium baby-care sales in China are up 20-30% so there are still opportunities despite the slow birthrate, Chief Operating Officer Jon Moeller said on a post-earnings call.
U.S. sales growth for diapers and baby care was about flat from a year ago and innovation in the market remains competitive, Moeller said.
The company said net sales rose 4.6% to $18.24 billion, which missed the average analyst estimate of $18.37 billion, according to IBES data from Refinitiv.
Jefferies analyst Kevin Grundy said Wall Street expectations were built on the company's momentum in the past five quarters, but the modest second-quarter results are likely to be met with disappointment.
"Good quarter, but high bar," he wrote in a note to clients.
In 2018, P&G launched Pampers Pure, plant-based diapers made with zero chlorine bleaching, fragrance or parabens. It has recently teamed up with Google to make a smartphone app that alerts parents when a diaper needs changing. Similarly, Kimberly Clark in July launched a premium Huggies brand, Special Delivery, made from plant-based materials like sugarcane.
Sales of P&G's baby and feminine products rose just 1% to $4.58 billion, while sales of fabric and home care products rose 4% to $5.79 billion, both missing estimates.
The company said inventory levels in Japan fell following a buildup before the nation's sales tax hike in October.
Sales at the grooming business, which makes Gillette razors, rose 2% to $1.65 billion, also below estimates. The company took an $8 billion charge last year related to the unit, which faces competition from smaller rivals Harry's and Dollar Shave Club.
P&G has been investing heavily to develop new products across all categories, improve packaging and marketing as it tries to appeal to younger consumers and fights competition from Unilever, Reckitt-Benckiser and local upstarts.
The company raised its fiscal 2020 forecast for core earnings per share growth to between 8% and 11% from a prior range of a rise of 5%-10%.
Net earnings attributable to P&G rose 16.4% to $3.72 billion in the quarter ended Dec. 31. Excluding one-time items, profit of $1.42 per share beat the average estimate of $1.37.
(This story corrects typographical errors, paragraph 4)
By Richa Naidu and Nivedita Balu