Philip Morris International Inc.

Philip Morris International reported a strong third quarter in 2025, driven by exceptional performance in its smoke-free business (SFB). Total net revenues reached $10.8 billion, a 9.4% increase year-over-year, with organic growth of 5.9%. The SFB was a significant contributor, accounting for 41% of total net revenues (up 2.9 percentage points) and over 42% of total gross profit (up 2.5 percentage points). SFB shipment volumes surged by 16.6%, leading to a 17.7% increase in net revenues (13.9% organically) and a 19.5% rise in gross profit (14.8% organically). This growth was broad-based across categories, with IQOS strengthening its position, VEEV e-vapor shipment volumes growing by 91.0%, and ZYN nicotine pouches accelerating growth in the U.S. by 37% in cans. Despite expected lower volumes, the combustibles segment also saw net revenues grow by 4.3% (1.0% organically) and gross profit by 7.7% (4.8% organically), primarily due to high single-digit pricing and Marlboro achieving its highest quarterly market share (10.9%) since its 2008 spin-off.

Profitability metrics demonstrated significant improvement, with total gross profit increasing by 12.4% to $7.4 billion (8.7% organically) and adjusted operating income rising 12.4% to $4.7 billion (7.5% organically). The adjusted operating income margin expanded by 1.2 percentage points to 43.1% year-over-year, reflecting the favorable mix shift towards higher-margin smoke-free products and effective pricing strategies in combustibles. The company's continued investment in its smoke-free portfolio, which now includes IQOS, ZYN, and VEEV across 100 markets, is clearly yielding impressive margin expansion and driving overall financial performance.

Management commentary highlighted the success of the global smoke-free portfolio, which is outgrowing the industry and driving positive total volumes. CEO Jacek Olczak emphasized the company's trajectory to exceed its 2024-26 growth targets. Strategic initiatives include the ongoing rollout of IQOS ILUMA i devices and innovation in consumables like DELIA and LEVIA, alongside the broader expansion of BONDS by IQOS in markets like Indonesia. In the oral smoke-free category, ZYN's accelerated growth in the U.S., supported by commercial activities and promotions, reinforced its best-in-class profitability outlook. The company also increased its regular quarterly dividend by 8.9% to $1.47 per share, signaling confidence in its financial health and future prospects.

Looking ahead, PMI has raised its full-year 2025 adjusted diluted EPS forecast to a range of $7.46 to $7.56, representing a 13.5% to 15.1% increase over 2024, or 12.0% to 13.5% excluding currency. This forecast assumes organic net revenue growth of 6% to 8% and organic operating income growth of 10% to 11.5%. The company anticipates total shipment volume growth of around 1%, with smoke-free products growing 12% to 14% and cigarette volumes declining by approximately 2%. A significant organizational change is planned for January 1, 2026, with new segments: International Smoke-Free, International Combustibles, and U.S., designed to enhance agility and further support its smoke-free transformation. Operating cash flow is projected to exceed $11.5 billion, with capital expenditures of around $1.6 billion almost entirely dedicated to the smoke-free business, underscoring the company's commitment to its strategic shift.