Philip Morris International (NYSE:PM) executives highlighted strong 2025 results and outlined expectations for continued growth in 2026, driven primarily by smoke-free products and supported by resilient combustible performance. Management pointed to expanding profitability, increasing cash generation, and renewed medium-term growth targets as the company enters what it called the “second decade” of its smoke-free transformation.
2025 performance: smoke-free growth and margin expansion
CEO Jacek Olczak said 2025 was “another outstanding year,” with PMI delivering a fifth consecutive year of positive total shipment volumes and “rapid top-line progress and significant margin expansion.” Smoke-free product volumes increased 12.8% in 2025, and the company reported organic smoke-free gross profit growth of 18.7%.
CFO Emmanuel Babeau said organic net revenue increased 6.5% in 2025, or 7.9% excluding what he described as a “technical Indonesia impact.” Organic operating income rose 10.6% with 140 basis points of organic margin expansion. In dollar terms, adjusted operating income grew 11.8% to $16.4 billion, and adjusted diluted EPS rose 14.2% at constant currency and 15% in dollar terms to $7.54. Babeau noted EPS landed at the high end of the company’s prior guidance range despite a lower-than-expected currency tailwind, citing non-recurring transactional losses in the fourth quarter largely related to the Russian ruble and Swiss franc.
PMI also reported operating cash flow of $12.2 billion, matching a record level reached in 2024.
Smoke-free scale milestones and category details
Management emphasized that the business mix continues shifting toward smoke-free products. Olczak said PMI’s total net revenues exceeded $40 billion in 2025, with 41.5%—close to $17 billion—generated by the smoke-free business. He added that smoke-free gross profit contribution has “essentially doubled in five years” to 43% of total PMI, and that adjusted operating margin returned to above 40% for the year.
PMI said smoke-free products are now available in 106 markets, with 52 deploying a multi-category strategy. Babeau added that 26 markets now have all three smoke-free categories, up from nine two years earlier. The company estimated its smoke-free volume share at around 60% across the markets and categories where it competes, and said its share of category growth was over 70% in 2025. PMI also estimated 43.5 million legal-age consumers used its smoke-free products as of December 31, 2025.
On product lines in 2025, Babeau reported:
- Smoke-free shipments: Up 12.8% to 179 billion units.
- IQOS HTU shipments: Up 11% to 155 billion units; Q4 adjusted IMS growth accelerated to 12% while Q4 shipments grew 7.5% due to destocking impacts.
- VEEV: Shipments up 102% to 3.3 billion equivalent units.
- Nicotine pouches: Overall smoke-free product volume up 18.5% to 20.7 billion units; U.S. ZYN volumes rose 37% to 11.9 billion pouches, representing close to 7% of total smoke-free volumes.
For nicotine pouches, Babeau described ZYN as PMI’s global number one brand, with a 2025 PMI category share of around 40% in pouch terms. PMI expanded ZYN presence by 19 markets to 56 and reported 36% shipment growth to 13.6 billion pouches (880 million cans), achieving its 2026 target a year early. The company highlighted the rollout of ZYN X-Low (1.5 mg) to around two-thirds of markets, saying it improved first-experience acceptance among adult nicotine consumers.
In e-vapor, PMI said VEEV is the fastest-growing international closed-pod vape brand among major players, now present in 47 markets, with shipments doubling in 2025 and profitability improving.
Combustibles: pricing-led performance and share commentary
Management said combustibles delivered “robust” top- and bottom-line results in 2025 despite more normalized industry volume declines and supply chain issues in Turkey. Babeau reported cigarette shipments declined 1.5% for the year, slightly better than the company’s expectation of around a 2% decline. Pricing contributed meaningfully to results, with Babeau citing 7.6% pricing for combustibles in 2025 and 6.8% in the fourth quarter.
PMI’s full-year cigarette share declined 0.2 points to 25.3%, which Babeau said was mainly due to Turkey. He added that Marlboro reached a record high share both for the full year and the fourth quarter, with Q4 Marlboro share reaching 11% of the international cigarette category excluding China.
2026 outlook: growth with transitory headwinds
For 2026, PMI forecast organic net revenue growth of 5% to 7% and organic operating income growth of 7% to 9%, supported by operating leverage and cost efficiencies alongside continued investment in smoke-free products. The company projected currency-neutral adjusted diluted EPS growth of 7.5% to 9.5%, assuming net finance costs broadly stable and an effective corporate tax rate around 21.5%. Including a currency benefit estimate of $0.28 at prevailing exchange rates, PMI guided to 2026 adjusted diluted EPS of $8.39 to $8.54, implying 11.3% to 13.3% growth in dollar terms.
PMI also projected operating cash flow of about $13.5 billion in 2026 (at prevailing exchange rates, subject to working capital needs) and reiterated a deleveraging goal. The company ended 2025 with an adjusted leverage ratio of 2.5x and said it is targeting close to 2x by year-end 2026 at prevailing exchange rates.
Management flagged several “transitory headwinds,” including:
- Japan heat-not-burn excise taxes: PMI said excise increases in April and October 2026 could pressure category growth and volumes, and could create shipment volatility around the timing of those changes. Olczak said PMI had submitted an application to increase prices in April.
- U.S. ZYN inventory dynamics: PMI said 2025 shipments benefited from channel inventory rebuilds and that 2026 shipments are expected to more closely reflect consumer offtake growth from an underlying base, before additional inventory movement.
- Combustible volume declines: PMI forecast cigarette volume declines of around 3% in 2026, citing weaker industry volumes in India and Mexico following excise increases, and comparisons impacted by an ongoing recovery in Turkey.
For the first quarter of 2026, PMI said it expects broadly flat year-over-year organic net revenue and operating income due to demanding comparisons and investment phasing, while forecasting adjusted diluted EPS of $1.80 to $1.85 (including a $0.14 currency tailwind at prevailing rates).
Renewed medium-term targets and regulatory themes
PMI renewed its 2026-2028 medium-term targets, continuing to target compound annual growth rates of 6% to 8% in organic net revenue, 8% to 10% in organic operating income, and 9% to 11% in adjusted diluted EPS at constant currency. Olczak said an acceleration beyond 2026 is expected as Japan’s excise structure becomes more symmetric between heated tobacco and cigarettes starting in 2027, and as PMI addresses what he called portfolio “asymmetries” in the U.S. nicotine pouch market, subject to FDA authorization.
Executives discussed pending FDA submissions for ZYN innovations, including ZYN Ultra (higher strengths and “adult-oriented flavors”), and said they are preparing for launch pending FDA action. Management also reiterated that it believes IQOS ILUMA merits “expeditious FDA action,” while noting the U.S. timing assumptions are incorporated into the company’s multi-year framework without being described as a material dependency.
On costs, Babeau said PMI has delivered around $1.5 billion in gross cost savings since 2024 and remains on track toward a $2 billion objective for 2024-2026. He said the company expects artificial intelligence to be an “engine for more efficiency” over time, though he did not quantify additional savings targets through 2028.
During Q&A, Olczak also commented on a reported proposal in New York to increase excise taxes on nicotine pouches, calling the approach “counterproductive” to public health objectives because the products are “vastly better than cigarettes,” while noting that state-level actions may not necessarily translate across other states.
About Philip Morris International (NYSE:PM)
Philip Morris International Inc (NYSE: PM) is a global tobacco company that manufactures and sells cigarettes, other nicotine-containing products and a growing portfolio of smoke-free alternatives for adult smokers. The firm traces its corporate roots to the 19th century Philip Morris enterprise and was established as an independent, publicly traded company following a 2008 separation from what is now Altria. Since the spin-off, the company has focused on serving international markets outside the United States.
PMI’s product mix includes traditional combustible cigarettes as well as smoke-free offerings such as heated tobacco systems and other reduced-risk products.
Further Reading
- Five stocks we like better than Philip Morris International
- NEW LAW: Congress Approves Setup For Digital Dollar?
- Trade this between 9:30 and 10:45 am EST
- ~$1.5T SpaceX IPO: Pre-IPO Opportunity
- “Fed Proof” Your Bank Account with THESE 4 Simple Steps
- What a Former CIA Agent Knows About the Coming Collapse
