Philip Morris International (NYSE:PM) reported third-quarter results marked by higher revenue, operating income and adjusted earnings per share, as growth in smoke-free products and resilient cigarette performance helped offset increased costs tied to geopolitical disruptions and U.S. investments.
Group Chief Financial Officer Massimo Andolina said the company delivered 7.1% organic net revenue growth in the quarter, with reported net revenue rising 5.5% to $11.4 billion. Adjusted operating income increased 10.5% organically and 9.6% in dollar terms, surpassing $5 billion for the first time in a quarter. Adjusted operating margin approached 45%, while adjusted diluted earnings per share rose 5.4% to a quarterly record of $2.36.
“We delivered excellent performance in the third quarter,” Andolina said, citing volume momentum, pricing, favorable category mix and cost management. The company reported total shipment growth of 0.6%, outperforming what it described as a broadly stable industry, despite difficult comparisons for heated tobacco unit shipments.
Smoke-Free Portfolio Drives Growth
Smoke-free shipments grew 2.7% in the third quarter and 6.4% year to date, led by IQOS heated tobacco products. IQOS heated tobacco unit shipments reached 41.5 billion units during the quarter, while adjusted in-market sales volume rose 7.1%. Excluding Japan and Poland, where the company faced pricing and flavor-ban-related headwinds, IQOS adjusted in-market sales grew about 10%.
Andolina said IQOS growth was broad-based, with double-digit shipment progression in markets including Germany, Greece, Spain, Indonesia, the United Kingdom, the Netherlands and global travel retail. Italy, Greece and Spain each posted double-digit adjusted in-market sales growth year to date, while the company also highlighted performance in Mexico, the Philippines, Saudi Arabia and Taiwan.
In Japan, heated tobacco in-market sales returned to growth in the third quarter, increasing 3.4%, after a second-quarter decline related to consumer pantry de-loading. Excluding pantry-loading effects ahead of an October price increase, underlying growth was 1.3%, according to the company. PMI said it expects a softer fourth quarter in Japan as consumer inventory effects reverse, though it continues to anticipate full-year growth.
The company’s VEEV e-vapor business recorded a 62% increase in third-quarter shipments. Year-to-date VEEV shipments climbed 68% to 4 billion equivalent units. PMI said VEEV strengthened its position as the leading closed-pod brand in Europe and continued to gain ground in markets including Egypt, Malaysia, South Korea and travel retail.
International ZYN nicotine-pouch shipments grew 7% in the third quarter and 6.3% year to date on a like-for-like basis. The company cited new flavor variants and growth in markets including Poland, Mexico and travel retail, partly offset by inventory movements in the United Kingdom and Pakistan.
U.S. ZYN Investments Pressure Near-Term Profitability
In the U.S., ZYN shipment volumes rose 4.2% to 3.2 billion pouches in the third quarter. Excluding a September 2025 promotional comparison, shipments rose 13%, PMI said. U.S. net revenue increased nearly 23%, while gross profit rose 24% and gross margin expanded 60 basis points to 64.4%.
However, adjusted operating company income in the U.S. increased just 1.5%, reflecting higher commercial investment behind ZYN portfolio expansion. The company said total U.S. segment selling, general and administrative expense rose to about $370 million in the third quarter and is expected to increase another approximately 10% sequentially in the fourth quarter.
PMI is expanding the ZYN lineup through new flavors, nicotine strengths and its higher-nicotine ZYN Ultra range. It also began shifting key flagship variants from 15-pouch cans to 20-pouch cans while maintaining the prior can price. Andolina said the transition represents approximately 25% less revenue per pouch, before considering other factors, and will affect fourth-quarter revenue.
The company expects fourth-quarter U.S. adjusted operating company income to be around zero or slightly negative due to portfolio-transition costs, commercial spending and manufacturing-capacity expansion. PMI said the third-quarter expense level should be a “good proxy” for the U.S. commercial investment run rate next year, though it did not provide formal 2027 guidance.
Andolina said the new ZYN variants have received encouraging initial consumer feedback. PMI estimated that ZYN’s category offtake share increased 1.4 percentage points between June and September, supported by the expanded product range.
Combustibles Remain Resilient
PMI’s cigarette shipment volumes were flat in the third quarter despite strong pricing, outperforming an industry decline of 1.1%, according to the company. Year-to-date cigarette shipments declined 1.2%.
International combustible pricing increased 8.9% in the third quarter and 9.1% year to date. PMI now expects full-year combustible pricing above 8%, although it said geographic mix will partially offset the revenue benefit. International category share rose 0.4 percentage points to 25.9%, led by Marlboro, which reached an all-time high share of 11.4%.
The company said volumes were particularly resilient in markets where smoke-free alternatives are unavailable or have limited presence, including Turkey, Indonesia and Egypt.
Outlook Retained Despite Cost Headwinds
PMI maintained its full-year outlook for 5% to 7% organic net revenue growth, 7% to 9% organic operating income growth and 7.5% to 9.5% currency-neutral adjusted diluted EPS growth. At prevailing exchange rates, the company expects adjusted EPS of $8.29 to $8.44, representing approximately 10% to 12% growth in dollar terms.
Management said results are now more likely to land around the midpoint or lower half of its guidance ranges because of increased costs from energy, shipping and other inputs associated with Middle East tensions, along with supply-chain disruptions in Ukraine. PMI estimated these factors would collectively reduce full-year adjusted EPS growth by about one percentage point.
The company expects fourth-quarter heated tobacco shipments of 39.5 billion to 40.5 billion units and said it anticipates strong international smoke-free revenue and operating-income performance. PMI also forecast record operating cash flow of approximately $13.5 billion for the year.
In September, PMI raised its annual dividend for the 19th consecutive year to $6.40 per share, an increase of nearly 9%.
About Philip Morris International (NYSE:PM)
Philip Morris International Inc (NYSE:PM) is a global tobacco and nicotine company headquartered in Stamford, Connecticut. It was established as an independent company in 2008 following the separation of Philip Morris International from Altria Group. The company develops, manufactures and markets tobacco, nicotine and other related consumer products primarily outside the United States.
Its portfolio includes internationally recognized cigarette brands such as Marlboro, Parliament, L&M, Chesterfield and Bond Street.
