Philip Morris International Inc. (PM) Earnings & Analysis

Latest quarter

Philip Morris reported Q3 FY2026 revenue of $11.4 billion, up from $10.8 billion a year earlier. Revenue exceeded the consensus by 0.26%, although both the reported and consensus figures rounded to $11.4 billion. Adjusted EPS of $2.36 beat the $2.30 consensus, while reported diluted EPS fell to $2.12 from $2.23.

CFO Massimo Andolina said pricing and a favorable product mix helped drive organic revenue growth of 7.1% in the quarter. He said smoke-free shipments rose 2.7%, while cigarette shipments were flat.

Philip Morris reported gross margin of 68.7%, compared with 67.9% a year earlier, and operating margin of 42.5%, compared with 39.3%. The company reported free cash flow of $5.0 billion, up from $4.1 billion.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Massimo Andolina said IQOS adjusted in-market sales volume growth accelerated to 7.1% in the third quarter. He said Japan faced excise-driven price increases and Poland faced a characterizing-flavor ban; excluding those markets, growth was 10%. In Japan, he said consumers stocked up ahead of an October price increase, with that effect likely to reverse in Q4.

Andolina said U.S. ZYN shipments rose 4.2% to 3.2 billion pouches, or 13% excluding the prior-year promotional comparison. He said new variants helped ZYN gain an estimated 1.4 points of category share from June to September, and described initial consumer feedback on the expanded range as positive.

On pricing, Andolina said the combustible business benefited from stable volumes, high single-digit pricing and restructured distribution terms in some markets. He said gross margin expansion reflected pricing, smoke-free mix, scale and manufacturing productivity. Philip Morris had also generated more than $2 billion in cumulative gross cost savings since 2024, he said.

Andolina said the company is moving its main U.S. ZYN variants from 15 to 20 pouches per can and supporting the transition with retail activity and consumer communication. He said the change means approximately 25% less revenue per pouch, all else equal. U.S. segment SG&A was around $370 million in Q3, and he forecast an increase of around 10% in Q4; he also projected U.S. adjusted operating company income around zero or slightly negative.

Asked about future U.S. spending, Andolina called the Q3 level “a good proxy for the run rate” for the following year. Asked about conflict-related inflation, he said rising energy costs were reaching inputs and services, but declined to quantify their precise split across quarters.

Guidance

Philip Morris now expects FY2026 adjusted diluted EPS of $8.29 to $8.44, compared with its previous forecast of $8.26 to $8.41. Andolina said delivery was more likely to be at the midpoint or lower half of the current range, citing U.S. investment and geopolitical costs.

The company now expects total shipment volumes to grow in 2026, rather than be broadly stable to slightly growing. Andolina also said full-year cigarette volumes would decline by a similar level to the year-to-date decline of 1.2%, subject to year-end inventory movements; the previous forecast was a decline of around 2% to 3%.