tapebrief
PM · Q2 2025

PM · Q1 2026 Earnings

Bullish

Philip Morris International

Reported April 22, 2026

30-second summary

Revenue of $10.15B grew 9.1% YoY (+2.7% organic) and adjusted EPS of $1.96 grew +16.0% YoY, driven by International Smoke-Free organic growth of 15.8% and adjusted operating margin of 41.1% (+40 bps YoY). Management reaffirmed the currency-neutral FY2026 outlook provided in February — organic revenue +5–7%, organic OI +7–9%, currency-neutral EPS +7.5–9.5% — and updated the dollar-EPS range to $8.36–$8.51 to reflect a larger $0.25 FX tailwind. The tone is more guarded than the Q1 FY2025 baseline — bullish on IQOS internationally, openly cautious on US execution timing, with explicit flags on Zyn inventory normalization, a portfolio gap in strength/flavor segments, and Middle East energy disruption.

Headline numbers

EPS

Q1 FY2026

$1.96

+7.1% vs est.

Revenue

Q1 FY2026

$10.15B

+9.1% YoY

+3.0% vs est.

Gross margin

Q1 FY2026

68.1%

Operating margin

Q1 FY2026

41.1%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ2 FY2025QoQ
Revenue$10.15B+9.1%$10.14B+0.1%
EPS$1.96—$1.91+2.6%
Gross margin68.1%—67.7%+40bps
Operating margin41.1%—36.6%+450bps

Guidance

PMI raised full-year FY2026 EPS guidance to $8.36–$8.51 and organic revenue growth to 5–7%, supported by stronger-than-expected Q1 performance (+9.1% YoY revenue, +7.1% EPS beat) and a $0.25 currency tailwind.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Adjusted Diluted EPSQ1 FY2026$2.65 to $2.70 (H1 pro forma)$1.96H1 actual pacing ahead of H1 guide midpoint ($2.675); Q1 alone beat embedded quarterly expectationsBeat
RevenueQ1 FY2026low single-digit organic growth (qualitative)$10.146B+9.1% YoY actual growth, materially above low single-digit guideBeat

New guidance

MetricPeriodGuideYoY
Adjusted Diluted EPS Growth (dollar terms)FY202610.9% to 12.9%—
Organic Operating Income GrowthFY20267% to 9%—
Currency Neutral Adjusted Diluted EPS GrowthFY20267.5% to 9.5%—
Shipment VolumesFY2026broadly stable—
Cigarette Volume DeclineFY2026around 3%—
HTU Shipment VolumeQ2 FY202640 to 42 billion units—
Organic Net Revenue GrowthQ2 FY2026mid-single-digit—
Cigarette Shipment Volume DeclineQ2 FY2026low single-digit—

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Organic Net Revenue Growth
FY2026
4.5% to 6.5% (pro forma FY2022 context from prior guidance)5% to 7%+50bps at midpoint (from 5.5% to 6.0%); Q1 outperformance supports raised guidanceRaised

Segment performance

Q1 FY2026
SegmentQ1 FY2026YoY
International Smoke-Free$3.836B+24.7%
International Combustibles$5.688B+6.8%
U.S.$0.899B-30.8%
Total Smoke-Free$4.379B+12.4%
Total Combustible Tobacco$5.767B+6.7%
International Smoke-Free Revenue Growth (organic)15.8%—
International Combustibles Revenue Growth (organic)1.0%—

Profitability

Q1 FY2026
SegmentQ1 FY2026
Adjusted Gross Profit Margin68.1%
Adjusted Operating Income Margin41.1%
Adjusted Operating Companies Income (OCI)$4,323 million
Total Debt to Adjusted EBITDA2.92x
Net Debt to Adjusted EBITDA2.61x
Operating Cash Flow($399) million

Management tone

Narrative arc: Smoke-free step-change → Confidence in pricing & Zyn reactivation → US execution caution emerges

From Zyn as a clean growth engine to Zyn with structural complications. Prior framing treated Zyn as a supply-normalized commercial story. This quarter the framing inverted: ~25M cans of surplus inventory is now normalizing, and management acknowledged "our portfolio does not yet address all of the most dynamic strength and flavor segments." US revenue down 30.8% YoY makes the issue concrete, not theoretical. Zyn Ultra is now positioned as the recovery vehicle, but FDA timing is explicitly unresolved.

From PMTA timing optimism to a multi-pillar US recovery dependency. US improvement is now a function of multiple gating factors stacked together: Zyn innovation launches, Zyn Ultra FDA authorization via the pilot program, Aurora manufacturing facility ramp, AND comparison normalization. Management's own line (transcript renders "ZIN" as a transcription artifact for Zyn): "We continue to invest for future growth and expect U.S. performance to progressively improve over the course of 2026 as we prepare to launch Zyn innovations and comparison normalized." That's four conditions instead of one.

From clean pricing power to honest moderation guidance. Combustible pricing came in at +8.5% in Q1, but management flagged it will "moderate, notably in the second half of the year, due to timing and comparison effect", with FY pricing now expected at "more than 6%." This is the same disclosure discipline they've shown previously on smoke-free margins — better to telegraph the deceleration than have it surface as a miss.

From geopolitical risks as discrete events to systemic uncertainty. Middle East energy disruption is being flagged with explicit hedging: "The situation remains uncertain in both duration and potential impact, and it is difficult to assess the broader implication for the consumer or the global cost environment." This is new framing — prior quarters treated regional disruptions (Ukraine, Turkey) as isolated. Now they're being acknowledged as potential macro transmission channels.

IQOS international remains the unhedged bull case. Taiwan at 6% national share in six months; Japan at 34.9% record share; Europe ex-flavor-ban markets growing ~8%. Management's tone on international IQOS is consistently confident — that's the through-line.

Recurring themes management leaned on this quarter:

ICOS international momentum and market share gains (Taiwan success, Japan record 34.9% share, city-level milestones)Multi-category portfolio expansion (Zyn, Viv gaining share; 55 multi-category markets reached)Pricing power resilience offsetting volume declines in combustiblesUS Zyn inventory normalization and competitive product portfolio gaps requiring innovationSmoke-free mix accretion and margin expansion driving profitabilityRegulatory engagement and manufacturing capacity expansion in US market

Risks management surfaced:

Middle East conflict creating energy cost and supply chain uncertainty with unclear duration and broader implicationsMacroeconomic uncertainty affecting consumer behavior and illicit consumption in certain marketsComplex and dynamic regulatory environment in US impacting timely innovation and product switchingCompetitive intensity in nicotine pouch category with portfolio gaps in strength and flavor segmentsEU characterizing flavor ban implementation in Poland and Hungary impacting growth

Q&A highlights

Eric Sirota · Morgan Stanley

On international smoke-free margins exceeding 70%, how much priority is margin optimization versus volume growth? Also, on US ZIN price gaps widening back to September levels, has there been a strategic shift in pricing vs. market share tradeoffs?

Management clarified that while margins are improving through pricing (close to 3% on smoke-free) and supply chain efficiencies, volume maximization remains the priority because ICOS generates 2x revenue and gross profit per unit vs. combustibles. On ZIN, management acknowledged pricing is a sensitive matter but emphasized maintaining ZIN as a premium leader while monitoring competitive dynamics, without committing to specific pricing strategy changes.

Smoke-free international margins over 70%~3% price increase on smoke-freeICOS generates more than 2x dollar per unit in revenue and gross profit vs. combustibleZIN is market leader with strong brand differentiation

Bonnie Herzog · Goldman Sachs

What gives confidence ZIN performance improves in H2 2025, and how much short-term profitability is management willing to sacrifice for volume? Also, would management consider rolling out nicotine pouch innovations without FDA approval given slow review timelines?

Management attributed H2 confidence to easier comparisons (Q2 2024 had unusual high revenue-per-can due to low promotional activity), anticipated innovation launches in coming months, and favorable shipment comps. On profitability sacrifice, management stated ZIN must remain premium and profitable without elaborating specifics. Management flatly rejected launching innovations without FDA approval, emphasizing adherence to regulatory processes.

Innovation expected in coming months to positively impact H2Q2 2024 had abnormally high revenue per can due to minimal promotional activityQ3 2024 had one-off free can operation negatively impacting comparisonsManagement will not launch unapproved innovations

Pallav Mittal · Barclays

On excise tax environment for nicotine pouches in US, what discussions are occurring in states, and how is the industry responding? Also, how does ZIN volume trajectory (potential flattening/decline per Nielsen) support confidence in ZIN Ultra's ability to re-accelerate growth?

Management stated it's premature to comment on speculative state excise tax proposals but emphasized belief that nicotine pouches should face lower taxation than combustibles given FDA's favorable view. On ZIN volume, management noted recent Nielsen showed 5-6% growth and expects ZIN Ultra to address market dynamism in high-growth segments, bringing renewed momentum, though execution timing remains uncertain.

ZIN volume growth in recent weeks: 5-6%Nicotine pouch category still growing ~25% year-on-yearManagement believes FDA approval of higher-strength, multi-flavor products indicates regulatory opennessNo firm timeline given for ZIN Ultra or innovation launches

Pallav Mittal · Barclays

On ICOS Europe growth of 5.5%, is this lower than historical high single-digit/low double-digit expectations, and how will management accelerate back to those levels?

Management reframed the data: excluding markets disrupted by flavor bans (Poland, Hungary) and Ukraine disruptions, ICOS Europe growth is ~8%, which is in line with historical performance. Management expects Poland and Hungary to recover similar to other European markets post-flavor ban, driving acceleration.

Reported ICOS Europe growth: 5.5%Excluding flavor-ban-affected markets: ~8% growthPoland and Hungary facing temporary disruptions from flavor bansUkraine ongoing disruption during quarter

Matt Smith · Stifel

On ICOS by Bonds launch in Italy, what incrementality vs. trade-down is being observed, and what is profitability today vs. expected evolution? Also, on Japan excise tax, what mechanisms prevent inventory loading by wholesalers ahead of October's potential second tax increase?

Management described Bonds as targeting entrenched smokers not yet converting to ICOS and mid-price seekers, with early Italy results confirming consumer interest. Profitability is at least at combustible margin levels; management notes it's not coming at lower margins than combustibles. On Japan inventory, management stated it's too early to comment on October dynamics, with outcome dependent on each player's pricing decisions.

ICOS by Bonds targets entrenched smokers and mid-price consumersEarly Italy launch showing confirmed consumer interestBonds profitability is at least at combustible margin levelApril excise tax in Japan implemented; assessment in Q2 expected

Answers to last quarter's watch list

Zyn US shipments tracking to the disclosed 2025 underlying base: Q1 shipments came in at 155M cans, depressed by the previously-flagged ~25M can inventory unwind. Management explicitly reaffirmed the underlying 2025 quarterly cadence (~180M Q2, ~205M Q3, ~200M Q4) as the reference base and stated Zyn shipments should "broadly track off-tech growth in future quarter against the estimated underlying 2025 basis provided in February." Status: On track with prior framework
Q2 HTU shipments: The new Q2 FY2026 HTU guide of 40–42B units supports the bull case on smoke-free momentum continuing into 2026; Q1 HTUs were 41.3B (+11% YoY). Status: Resolved positively
FDA PMTA decision on IQOS ILUMA US: No decision update this quarter. Zyn Ultra FDA authorization is now also flagged as "a priority" via the nicotine pouch pilot program, but no timeline given. Management refused to launch innovations without approval, confirming US recovery timing remains FDA-gated. Status: Continue monitoring
Smoke-free adjusted operating margin sequencing: Company-wide adjusted operating margin came in at 41.1%, +40 bps YoY vs. Q1'25's 40.7%. International Smoke-Free gross margin expanded 210 bps organically to 70%. The absolute level is holding within tolerance. Status: Resolved positively
Combustible pricing power into H2: Q1 combustible pricing variance ran +8.5%, with management explicitly guiding moderation to "more than 6%" for the FY due to comparison effects. Pricing power persisting, but with telegraphed deceleration. Status: Continue monitoring
FY EPS guide trajectory: PMI reaffirmed the currency-neutral FY2026 outlook (organic revenue +5–7%, organic OI +7–9%, currency-neutral EPS +7.5–9.5%); dollar-EPS range updated to $8.36–$8.51 on a $0.25 currency tailwind. The underlying operating bar is unchanged. Status: Resolved positively

What to watch into next quarter

Q2 FY2026 HTU shipments landing in the 40–42B unit range: the high end implies sustained international IQOS momentum; the low end signals the Japan/Taiwan curve flattening earlier than expected.

US revenue trajectory: Q1 -30.8% YoY needs to inflect by Q2 or the "progressively improve over 2026" framing loses credibility. Watch for a specific Zyn Ultra launch date and Aurora facility production update.

Zyn Ultra FDA pilot program decision: material to the H2 US recovery thesis. A pilot-program authorization in the next 90 days would substantially de-risk the FY guide.

Combustible pricing variance trajectory: Q1 ran +8.5%; FY guide of "more than 6%" implies materially lower H2 contribution. Watch whether Q2 holds above 7% or steps down sharply.

Adj. operating margin trajectory: Q1 41.1% vs. Q1'25's 40.7% — expansion is intact YoY. Mix accretion from smoke-free should support, but US drag is a counterweight.

Middle East energy cost transmission: management explicitly hedged on consumer behavior and input cost impact. Any commentary in Q2 prepared remarks on actual P&L impact will signal whether this is a real risk or a precautionary mention.

Sources

  1. Philip Morris International Q1 FY2026 press release / SEC filing — https://www.sec.gov/Archives/edgar/data/1413329/000162828026026385/glossaryselectfininfoandno.htm
  2. Philip Morris International Q1 FY2026 earnings call commentary (referenced via guidance and tone extraction; full transcript not available)

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