Philip Morris Q3 2026 Adjusted EPS Up 5.4%

Third‑Quarter 2026 Results

Philip Morris International Inc. (NYSE: PM) announced that third‑quarter 2026 reported diluted earnings per share fell 4.9% year‑over‑year to $2.12, primarily because of a non‑cash fair‑value adjustment for equity‑security investments. Adjusted diluted EPS, however, increased 5.4% to $2.36, and when the one‑cent adverse currency effect is removed, adjusted EPS rose 5.8% to $2.37, marking an all‑time quarterly high.

Net revenues for the quarter reached $11.4 billion, up 5.5% on a reported basis and 7.1% on an organic basis. Growth was broad‑based: smoke‑free products (SFP) contributed $4.1 billion (up 4.1% reported, 6.3% organically) and combustibles $6.4 billion (up 6.4% reported, 7.7% organically). Smoke‑free sales accounted for just over 40% of total net revenues in Q3 and about 42% on a year‑to‑date basis, with availability in 110 markets and more than 30 markets delivering over 50% of those revenues.

Gross profit climbed 6.7% (8.3% organically) to $7.9 billion, driven by strong combustible pricing, scale benefits and an improved SFP mix, which together expanded gross margins. Operating income set a new quarterly record at $4.9 billion, up 14.1% (10.5% organically). The regular quarterly dividend was raised 8.8% to $1.60 per share, equating to an annualized $6.40 per share.

Segment Highlights

• International Smoke‑Free Segment: Net revenue grew 0.7% (3.4% organically) on the back of 2.7% volume growth. Adjusted in‑market sales (IMS) accelerated to 8.0% year‑over‑year. IQOS heat‑not‑burn units shipped 41.5 billion units, a 1.5% increase, raising HTU (heat‑not‑burn) market share to 9.9% of combined cigarette and HTU volumes in markets where present. HTU adjusted IMS grew 7.1% overall, with double‑digit growth outside Japan and Poland. In Japan, HTU adjusted IMS rose 3.4% (1.3% ex‑pantry‑loading), while IQOS retained a 68% category share. In Europe, HTU adjusted IMS grew 6.0% and HTU market share rose 0.9 percentage points to 11.6%, led by Germany, Greece, Spain and Romania. Outside Europe and Japan, adjusted IMS expanded 12.7% with notable gains in Riyadh, Kuala Lumpur, Mexico City, Jakarta and Taipei.
• Oral SFP: Total oral SFP volumes turned positive, up 0.5% year‑over‑year, driven by a 20.6% rise in modern oral pouches to 0.5 billion units, offsetting a decline in legacy Nordic snus. ZYN is now sold in 62 markets, with strong growth in Global Travel Retail, Poland, the Philippines and Sweden.
• E‑Vapor SFP: VEEV shipments surged 61.6% quarter‑over‑quarter, reinforcing leadership in Europe (especially Romania, Greece, France and Spain) and expanding in Indonesia, Global Travel Retail, Egypt, Malaysia and South Korea following its August launch.
• International Combustibles Segment: Cigarette shipments were broadly flat, with volume strength in Turkey, Indonesia and Egypt offsetting declines elsewhere. Net revenue rose 6.5% (7.8% organically) on an 8.9% pricing uplift, partially offset by an adverse geographic mix. Gross profit increased 8.6% (9.8% organically). Marlboro’s category share reached a record 11.4%, up 0.5 percentage points, while overall cigarette share rose to 25.9%.
• U.S. Segment: ZYN shipments grew 4.2% to 3.2 billion pouches, despite a tough prior‑year promotional baseline. Segment net revenue jumped 22.7% and gross profit 24.2% (23.8% organically), reflecting volume growth and favorable pricing versus last year’s promotions. Operating income fell 3.3% (1.5% organically) due to higher commercial investment supporting ZYN’s expansion, including a shift to 20‑pouch cans and an expanded ‘When It Clicks’ campaign. The FDA granted PMTA authorization for 11 new ZYN ULTRA variants on August 21, bringing total PMTA‑authorized variants to 31, and MRTP authorization for 20 flagship variants on June 30.

Dividend and Shareholder Return

The regular quarterly dividend was increased 8.8% to $1.60 per share, translating to an annualized $6.40 per share.

Full‑Year 2026 Forecast

PMI projects reported diluted EPS to range between $7.11 and $7.26 at prevailing exchange rates. After adjusting for $1.18 per share of items (including amortization of intangibles, fair‑value adjustments, restructuring charges, tax impacts, and various impairment and litigation items), adjusted diluted EPS is expected to be $8.11‑$8.26, representing a 7.5%‑9.5% increase versus 2025 adjusted EPS of $7.54, with a $0.18 favorable currency effect.

Key assumptions underpinning the outlook include:

• Total cigarette and SFP shipment volume to grow modestly, with high single‑digit SFP volume growth and a comparable decline in cigarette volume.
• Net revenue growth of 5%‑7% organically, with a higher likelihood of landing in the mid‑to‑upper half of the range, supported by a fourth‑quarter re‑acceleration in international smoke‑free sales.
• Organic operating income growth of 7%‑9%, with the lower end more probable given ongoing geopolitical cost pressures and increased U.S. growth investments.
• Full‑year amortization of acquired intangibles of $0.50 per share, stable net financing costs, and an effective tax rate (excluding discrete events) of roughly 21.5%.
• Operating cash flow around $13.5 billion, capital expenditures of $1.4‑$1.6 billion (mainly for smoke‑free business), and a target net‑debt‑to‑adjusted‑EBITDA ratio near 2.0× by year‑end.
• No share repurchases are planned.

Geopolitical and Energy Cost Impact

PMI noted that the ongoing Middle‑East conflict has introduced incremental energy‑related inflation, raising input costs in Q3 and expected to have a slightly larger effect in Q4. Disruptions linked to the Ukraine situation, including strikes affecting supply‑chain and logistics infrastructure, are also anticipated to pressure operating income for the year.

Conference Call

A conference call hosted by Group CFO Massimo Andolina was webcast at 9:00 a.m. Eastern Time on October 21, 2026, with further market data to be provided in an appendix to the webcast presentation.

Company Overview

PMI described itself as a leading international consumer‑goods company focused on delivering a smoke‑free future. Its portfolio comprises cigarettes and smoke‑free products (heat‑not‑burn, nicotine‑pouch and e‑vapor) sold in 110 markets, serving over 43 million adult consumers as of December 31, 2025. Since 2008, PMI has invested more than $16 billion in developing and commercialising smoke‑free products. Recent FDA authorisations include the first‑ever Modified Risk Tobacco Product approvals for IQOS devices, General snus and 20 ZYN nicotine‑pouch variants.

Forward‑Looking Statements

The release contains forward‑looking statements regarding financial performance, capital allocation, regulatory outcomes and market expectations, subject to risks including regulatory restrictions, excise‑tax changes, health‑related litigation, geopolitical instability, currency fluctuations, inflation, supply‑chain disruptions and other factors detailed in PMI’s filings.