Philip Morris International Inc. (PM) Q2 2025 Earnings Summary

Executive Summary

Q2 2025 delivered record net revenues ($10.14B), double‑digit adjusted operating income growth (+16.1% reported; +14.9% organic), and adjusted diluted EPS of $1.91; EPS beat consensus ($1.86*) while revenue slightly missed ($10.33B*) .
Smoke‑free momentum reaccelerated: IQOS HTU adjusted IMS +11.4%; ZYN U.S. offtake +26% in Q2 and +36% in June; smoke‑free reached 41% of net revenues and >42% of gross profit .
Full‑year guidance raised: FY25 adjusted diluted EPS to $7.43–$7.56 (ex‑FX $7.33–$7.46); organic OI growth to 11%–12.5%; OCF to ~$11.5B; CapEx to ~$1.6B; Q3 adjusted EPS guided to $2.08–$2.13 .
Catalysts: guidance raise, ZYN reacceleration with normalized supply, continued IQOS share gains in Europe/Japan, and expected IQOS ILUMA U.S. PMTA (timing subject to FDA workload) .

What Went Well and What Went Wrong

What Went Well

“Very strong results…record net revenues and exceptional growth in operating income and adjusted diluted EPS,” per CEO Jacek Olczak .
Steep smoke‑free acceleration: IQOS adjusted IMS +11.4%; ZYN U.S. offtake +26% for Q2 and +36% in June; VEEV shipments more than doubled, with #1 closed‑pod position in 6 European markets .
Margin expansion: adjusted OI margin rose 330 bps YoY to 41.9%; Europe margin +430 bps to 47.2% and EA/AU & GTR +490 bps to 49.9% .

What Went Wrong

Revenue miss vs consensus and softer combustibles volumes: cigarettes down 1.5% driven by Turkey and Indonesia; unfavorable mix weighed on topline .
Turkey supply chain/regulatory changes and Indonesia illicit trade pressured combustibles; management expects cigarette shipments down ~2% for 2025 (H2 ‑3% to ‑4%) .
Operating cash flow down YoY in Q2 ($3.41B vs $4.63B in Q2’24) due to German duties and final U.S. Tax Cuts & Jobs Act payment (cumulatively >$1B) .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Net Revenues ($USD Billions)	$9.71	$9.30	$10.14
Reported Diluted EPS ($)	$(0.38)	$1.72	$1.95
Adjusted Diluted EPS ($)	$1.55	$1.69	$1.91
Gross Profit ($USD Billions)	$6.30	$6.26	$6.86
Adjusted OI Margin (%)	36.3%	40.7%	41.9%
Total Shipment Volume (bn units)	193.1	187.8	200.1

Estimates vs Actual (Consensus from S&P Global)	Q4 2024	Q1 2025	Q2 2025
Revenue Consensus ($USD Billions)	$9.44*	$9.14*	$10.33*
Revenue Actual ($USD Billions)	$9.71	$9.30	$10.14
EPS Consensus (Adjusted) ($)	$1.50*	$1.61*	$1.86*
Adjusted EPS Actual ($)	$1.55	$1.69	$1.91
EBITDA Consensus ($USD Billions)	$3.37*	$3.92*	$4.39*
EBITDA Actual ($USD Billions)	$3.17*	$4.30*	$5.57*
Values retrieved from S&P Global.*

Segment performance (Q2 2025 vs Q2 2024):

Region	Net Revenues Q2 2024 ($mm)	Net Revenues Q2 2025 ($mm)	Reported Growth	Organic Growth	Adj. OI Margin Q2 2024	Adj. OI Margin Q2 2025
Europe	3,895	4,234	+8.7%	+7.3%	42.9%	47.2%
SSEA, CIS & MEA	2,771	2,926	+5.6%	+4.9%	32.3%	34.3%
EA, AU & PMI GTR	1,673	1,708	+2.1%	+1.6%	45.0%	49.9%
Americas	1,129	1,272	+12.7%	+17.0%	29.7%	30.6%

KPIs and category metrics:

KPI	Q4 2024	Q1 2025	Q2 2025
Smoke‑Free as % of Net Revenues	40%	42%	41%
Smoke‑Free as % of Gross Profit	~42%	44%	>42%
IQOS HTU Adjusted IMS Growth (YoY)	~13%	~9.4%	11.4%
ZYN U.S. Offtake Growth (YoY)	~42% (Q4)	53% shipments	+26% in Q2; +36% in June
HTU Shipments (bn units)	35.7	37.1	38.8
Nicotine Pouch Shipments (mm cans)	183.8	223.4	214.7
Total International Market Share	28.9%	28.6%	29.2%
Dividend per Share (Quarterly)	$1.35	$1.35	$1.35

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Diluted EPS	FY 2025	$7.36–$7.49	$7.43–$7.56	Raised
Adjusted Diluted EPS (ex‑FX)	FY 2025	$7.26–$7.39	$7.33–$7.46	Raised
Organic Net Revenue Growth	FY 2025	~6%–8%	~6%–8%	Maintained
Organic Operating Income Growth	FY 2025	10.5%–12.5%	11%–12.5%	Raised low end
Effective Tax Rate (ex discrete)	FY 2025	~22.5%–23.5%	~22%–23%	Lowered
Operating Cash Flow	FY 2025	>$11B	~$11.5B	Raised
Capital Expenditures	FY 2025	~$1.5B	~$1.6B	Raised
U.S. ZYN Shipments	FY 2025	800–840m cans	800–840m cans	Maintained
Q3 Adjusted Diluted EPS	Q3 2025	N/A	$2.08–$2.13	New
Share Repurchases	FY 2025	None	None	Maintained
Net Debt / Adj. EBITDA Target	End‑2026	~2x	~2x	Maintained
Dividend	Ongoing	$1.35/qtr	$1.35/qtr	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Smoke‑Free momentum (IQOS/ZYN/VEEV)	IQOS IMS acceleration; ZYN shipments ~165m cans in U.S.; VEEV top‑3 in 13 EU mkts	SFP net rev +15.0% (+20.4% org); ZYN shipments >200m cans	IQOS IMS +11.4%; ZYN U.S. offtake +26% Q2/+36% June; VEEV shipments >2x	Strengthening
Europe flavor ban impact	IQOS adjusted IMS still near +10%; city share milestones	IQOS adjusted IMS +7.4%; share up +1.2 pp	Europe IMS reaccelerated +9.1%; ban impact subsiding	Improving
Japan IQOS users	IQOS share gains; ILUMA i launch	Adjusted IMS +9.3%; adjusted share +3.0 pp	>10m IQOS users; adjusted share 31.7% (+2.3 pp)	Strong
U.S. ZYN supply/marketing	FDA authorizations; strong growth	Capacity increase ahead of schedule; restocking began	Supply normalized; full 360° marketing restarting	Acceleration
Combustibles volumes/pricing	Robust pricing; volume mixed geographically	Combustibles organic net rev +3.8%	Volumes return to declines; pricing remains robust	Mixed; pricing offsets
EU Tobacco Excise Directive (TED)	N/A	N/A	Differentiation for smoke‑free recognized; illicit trade risk underaddressed; process length emphasized	Monitoring
U.S. IQOS ILUMA PMTA	N/A	N/A	Hopeful for H2 approval; could slip to 2026 given FDA workload	Timing uncertain
FX headwinds (CHF)	N/A	N/A	Swiss franc volatility offset euro benefit; transactional losses explained	Headwind
OCF/working capital	Strong FY OCF outlook	Q1 OCF negative due to timing	Q2 OCF lower YoY; German duties and U.S. tax payments >$1B	Normalizing H2

Management Commentary

CEO: “Our business delivered very strong results in the second quarter, with record net revenues and exceptional growth in operating income and adjusted diluted EPS…we are raising our full‑year guidance.”
CFO: “Adjusted diluted EPS of $1.91 reflects growth of +20%…strong top‑line momentum, positive margin evolution in our smoke‑free product business, and robust combustible pricing.”
CFO on ZYN: “Restocking…behind us…June was growing 36% in consumer off‑take…we are absolutely back to renewed dynamism.”
CFO on IQOS ILUMA PMTA: “We are still hoping for an approval in H2, but…we do not have a certainty…could move to 2026.”

Q&A Highlights

ZYN restocking impact modest (~10–20m cans below expectations); shipment cadence implies Q3 flat vs Q2 and Q4 step‑up to meet 800–840m full‑year guide .
EU TED: differentiation for smoke‑free is positive; concern about illicit trade not addressed; legislative process likely lengthy and unanimous .
IQOS ILUMA U.S. PMTA timing: hopeful for H2 2025, but may slip to 2026 due to FDA workload .
Combustibles trajectory: return to low single‑digit declines long‑term; H2 decline concentrated in Turkey; pricing supports gross profit .
HTU pricing strategy: aim to avoid volume impairment; prioritize volume growth with selective price increases .
FX: Swiss franc volatility created transactional losses, offsetting euro tailwinds; explains smaller FX benefit vs expectations .
Working capital/OCF: lower Q2 cash flow due to German duties and U.S. tax payments (> $1B cumulative); no unusual H2 working capital expected .

Estimates Context

Q2 2025: Adjusted EPS $1.91 beat ($1.86*), revenue $10.14B missed ($10.33B*), EBITDA $5.57B beat ($4.39B*) .
Q1 2025: Adjusted EPS $1.69 beat ($1.61*), revenue $9.30B beat ($9.14B*), EBITDA $4.30B beat ($3.92B*) .
Q4 2024: Adjusted EPS $1.55 beat ($1.50*), revenue $9.71B beat ($9.44*), EBITDA $3.17B missed ($3.37*).
Values retrieved from S&P Global.*

Implications: Revenue miss amid mix and combustibles volumes offset by significant margin expansion and tax rate tailwinds drove the EPS beat. Consensus likely to revise FY25 EPS upward within raised guidance range; revenue estimates may modestly recalibrate for H2 given Turkey/Indonesia dynamics.

Key Takeaways for Investors

EPS beat with revenue resilience; strong margin expansion in smoke‑free (+330 bps OI margin YoY) supports quality of earnings .
Guidance raised across EPS, OI growth, OCF and CapEx; Q3 EPS guide ($2.08–$2.13) sets a supportive near‑term trajectory .
ZYN U.S. reacceleration and normalized supply underpin H2 growth; marketing restarts should further boost share/velocity .
IQOS momentum broad‑based: Europe reaccelerating post flavor ban; Japan >10m users with share +2.3 pp; global travel retail strong .
Combustibles will decline in H2 (‑3% to ‑4%), but robust pricing and efficiencies should sustain gross profit growth .
FX risk (CHF) and Turkey regulatory changes are watch‑items; management expects operational mitigation and sustained deleveraging towards ~2x by end‑2026 .
Non‑GAAP reconciliations: Q2 included $243m restructuring, $250m intangible amortization, and $41m goodwill impairment; adjusted view remains key for trend analysis .

Notes on non‑GAAP and adjustments

Adjusted measures exclude currency and special items (restructuring, amortization of acquired intangibles, impairments, tax items); reconciliations provided in Exhibits 99.1/99.2 to the 8‑K –.