Philip Morris International Inc.

What they do

PMI sells cigarettes and smoke-free products (heat-not-burn, nicotine pouches, e-vapor) in approximately 170 markets for cigarettes and 106 markets for smoke-free, as of year-end 2025. The company also operates a wellness unit, Aspeya, focusing on oral consumer wellness offerings including non-recreational cannabinoid products. Cigarette brands span premium, mid-price and low-price segments, while smoke-free brands are led by IQOS, ZYN and VEEV.

Revenue drivers

• Smoke-Free Products (IQOS, ZYN, VEEV) — Generated approximately 42% of total net revenues in Q2 2026, with volume up 7.5% year-over-year. IQOS leads the global heated tobacco category with roughly three-quarters volume share. ZYN drives modern oral pouch growth.
• Combustible Cigarettes — Still a substantial revenue contributor, with net revenues up 9.5% in Q2 2026 (6.1% organically). Sold in ~170 markets; many hold #1 or #2 market share positions. Price and mix improvements partially offset volume declines.
• International Smoke-Free Segment — Net revenues grew 14.2% (11.8% organically) in Q2 2026, fueled by 8.0% volume growth. IQOS remains the primary growth engine, with HTU adjusted in-market sales growing 5.1% despite headwinds in Japan and Poland.
• U.S. Market (IQOS and ZYN) — PMI holds full rights to commercialize IQOS in the U.S. since April 2024, with a limited roll-out of IQOS 3.0 (blade version) beginning in Austin, Texas in March 2025. ZYN nicotine pouches also authorized by FDA and contribute to U.S. growth.

Recent performance

In Q2 2026, PMI reported net revenues of $11.19 billion, up 10.4% (7.6% organically), marking the first quarter over $11 billion. Adjusted diluted EPS grew 15.2% to $2.20 (13.6% excluding currency). Reported diluted EPS was $1.80, unfavorably impacted by a non-cash impairment of an equity investment. Smoke-free shipment volume increased 7.5%, while total shipments rose 2.5%. Gross profit increased 11.5% (8.7% organically) and operating income rose 22.0% (10.7% organically).

Strategy

PMI's stated goal is to completely end the sale of cigarettes by replacing them with smoke-free alternatives, backed by over $16 billion invested since 2008 in development, scientific substantiation and commercialization. The company acquired Swedish Match in 2022 to gain leadership in oral nicotine (ZYN). It holds full U.S. commercialization rights for IQOS and is pursuing a limited roll-out while awaiting FDA authorization for the IQOS ILUMA induction version. PMI is also expanding into wellness through Aspeya, targeting oral consumer wellness and cannabinoid products, though near-term revenue is expected negligible.

Risks

• Russia-Ukraine conflict exposure — Russia accounted for ~9% of cigarette and HTU shipment volume and ~6% of net revenues in 2025; Ukraine for ~2% and ~1%. Further sanctions, asset deprivation, or nationalization could cause material impairment.
• Regulatory and excise tax increases — Excessive excise and sales tax hikes, flavor bans (e.g., Poland's characterizing flavor ban), and discriminatory tax structures could reduce consumption and profitability, especially in key markets like Japan and Europe.
• Dependence on third-party manufacturers and suppliers — Reliance on third-party contract manufacturers and suppliers for electronic components (e.g., semiconductors) could disrupt product distribution and quality, particularly for IQOS devices.
• U.S. IQOS commercialization risks — PMI's U.S. roll-out is limited to IQOS 3.0 pending FDA authorization for the induction-heated ILUMA version; delays or denial could hinder growth in the world's largest smoke-free market.

Outlook

Management characterized Q2 2026 results as outstanding and stated that with a robust first half, the company is well positioned to deliver on full-year targets while investing for future growth. They updated the 2026 full-year adjusted diluted EPS forecast for currency only, reflecting confidence in underlying performance. Key focus areas include continued IQOS expansion, U.S. market development, and navigating regulatory headwinds in Japan and Poland.