Philip Morris International Inc. (PM) Q3 2025 Earnings Summary

Executive Summary

Q3 2025 delivered strong top-line and margin expansion: net revenues $10.85B (+9.4% reported, +5.9% organic), adjusted OI margin 43.1% (+120 bps yoy), and adjusted diluted EPS $2.24 (+17.3%), with currency tailwind of $0.08 .
The smoke-free business reached a record $3.1B gross profit and comprised 41% of net revenues; IQOS adjusted IMS grew ~9% and ZYN accelerated U.S. offtake to +39% on Nielsen, supported by a one-time September “free can” relaunch promotion .
Guidance raised: FY25 adjusted diluted EPS to $7.46–$7.56 (from $7.43–$7.56), organic OI growth now 10–11.5% (from 11–12.5%), effective tax rate ~22%, operating cash flow >$11.5B; dividend lifted 8.9% to $1.47 per quarter .
Stock-relevant catalysts: EPS and revenue beats vs S&P Global consensus, upgraded EPS guidance, record smoke-free gross profit, and U.S. ZYN momentum alongside increased commercial investments (short-term drag on Americas net revenue/OI from promotions) .
Estimates noted below are from S&P Global.*

What Went Well and What Went Wrong

What Went Well

Record quarterly smoke-free gross profit (> $3B) and adjusted EPS; CEO: “record quarterly smoke-free gross profit and adjusted diluted EPS” .
IQOS momentum across regions: Europe adjusted IMS +7.3%, Japan +6%, global HTU shipments +15.5% to 40.8B; PMI holds ~76% category share .
ZYN U.S. acceleration: offtake +39% in Q3 (Nielsen); PM reiterated best-in-class margins longer term despite Q3 relaunch promotions .

What Went Wrong

Americas organic net revenues −5.0% and adjusted OI −43.5% y/y, driven by U.S. ZYN relaunch promotions booked in net revenue and higher SG&A .
Competitive intensity in Japan’s heat‑not‑burn increased; management flagged heavier promotional activity by competitors (still confident in share stability) .
Cigarette volumes −3.2% y/y; negative mix in combustibles offset by pricing, but combustibles offtake share declined in certain markets (e.g., Turkey) .

Financial Results

Headline results vs prior quarters

Metric	Q1 2025	Q2 2025	Q3 2025
Net Revenues ($USD Billions)	$9.301	$10.140	$10.845
Reported Diluted EPS ($)	$1.72	$1.95	$2.23
Adjusted Diluted EPS ($)	$1.69	$1.91	$2.24
Adjusted Operating Income Margin (%)	40.7%	41.9%	43.1%

Q3 2025 actuals vs S&P Global consensus

Metric	Consensus	Actual	Surprise
Revenue ($USD Billions)	$10.66*	$10.85	+$0.19B (Beat)
Primary EPS ($)	$2.10*	$2.24	+$0.14 (Beat)
EBITDA ($USD Billions)	$5.08*	$4.92*	−$0.16B (Miss)
Values retrieved from S&P Global.*

Segment breakdown (Q3 2025)

Region	Net Revenues ($USD Millions)	Reported YoY	Organic YoY
Europe	$4,719	+12.4%	+6.4%
SSEA, CIS & MEA	$3,273	+10.4%	+7.8%
EA, AU & PMI GTR	$1,768	+10.4%	+8.9%
Americas	$1,085	−5.5%	−5.0%
Total PMI	$10,845	+9.4%	+5.9%

Product category breakdown (Q3 2025)

Category	Net Revenues ($USD Billions)	Reported YoY	Organic YoY
Smoke-Free Business	$4.445	+17.7%	+13.9%
Combustibles	$6.400	+4.3%	+1.0%

KPIs (Q3 2025)

KPI	Q3 2025	YoY
Total Shipment Volume (bn units)	204.9	+0.7%
HTU Shipments (bn units)	40.8	+15.5%
Oral SFP (bn pouch-equiv.)	5.2	+16.9%
E‑vapor (bn units)	0.9	+91.0%
Cigarettes (bn units)	157.9	−3.2%
Smoke-Free % of Net Revenues	41%	+2.9pp
Adjusted OI Margin (%)	43.1%	+1.2pp

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Diluted EPS	FY 2025	$7.43–$7.56	$7.46–$7.56	Raised (mid-point)
Currency tailwind (EPS)	FY 2025	~$0.10	~$0.10	Maintained
Organic Net Revenue Growth	FY 2025	~6–8%	~6–8%	Maintained
Organic OI Growth	FY 2025	~11–12.5%	~10–11.5%	Lowered
Effective Tax Rate (ex-discrete)	FY 2025	~22–23%	~22%	Lowered
Operating Cash Flow	FY 2025	~$11.5B	>$11.5B	Raised
Capital Expenditures	FY 2025	~$1.6B	~$1.6B	Maintained
Dividend	Ongoing	$1.35/qtr ($5.40 annual)	$1.47/qtr ($5.88 annual)	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2, Q1)	Current Period (Q3)	Trend
U.S. ZYN offtake & pricing	Q2: offtake reaccelerated to ~36% in June; restocking completed; plan to intensify commercial activity . Q1: shipments >200M cans; +53% growth; early replenishment .	Offtake +39%; September “free can” relaunch; ~$100M Q3-specific investment; maintain premium positioning with higher promotions vs H1	Accelerating offtake; higher near-term promo; premium maintained
IQOS competition in Japan	Q2: IQOS adjusted IMS +7.8%; share 31.7% despite rising competition . Q1: adjusted IMS +9.3%; adjusted share +3.0pp to 32.2% .	Competitive intensity increased; adjusted IMS +6%; share stable; PMI retains ~75%+ category share	Competition intensifying; share resilient
Combustibles pricing/mix	Q2: pricing strong; organic net revenue +2.0% . Q1: organic net revenue +3.8%; gross profit +2.0% .	Cigarette volumes −3.2% y/y; pricing supports revenue +4.3% reported; Marlboro category share 10.9% (highest since 2008)	Pricing resilient; volumes declining
SG&A/investments	Q2: stepped-up U.S. investments noted . Q1: higher marketing/admin/research costs across regions .	Gross margin +170bps; OI margin +60bps organic despite elevated SG&A for ZYN/IQOS/VEEV; $2B cost-savings program on track 2024–2026	Ongoing reinvestment; efficiency offsets
Regulatory (FDA)	Q2: continued U.S. IQOS pilot; awaiting Illuma authorization . Q1: not highlighted [Q1 release].	FDA streamlining for pouches; TPSAC MRTP for ZYN expected Q1 2026; considering options on ZYN Ultra but won’t speculate	Pathway clarity improving; timing pending

Management Commentary

CEO Jacek Olczak: “Our global smoke-free portfolio is outgrowing the industry by a clear margin, driving positive total volumes, strong top-line growth and impressive margin expansion.”
CFO Emmanuel Babeau: “Smoke-free gross profit...over $3 billion...adjusted group operating income margin of over 43%...record $2.24...delivered in a quarter with elevated commercial spending as we invest in the future growth of our brands.”
On U.S. ZYN relaunch: “This was an exceptional quarter of investment, with around $100 million of Q3 specific investment and reduced revenues linked to restarting our commercial engine.”

Q&A Highlights

ZYN promotions impact and sustainability: ~$100M Q3-specific one-off tied to relaunch and special “free can” promotion; normalized higher promo level vs H1 but maintaining premium brand; ZYN expected to remain best-in-class margin within PMI .
Inventory adjustments ahead: IQOS Q4 shipment vs IMS alignment including ~2B unit timing reversal; ZYN 20–30M can inventory reduction expected “in the coming months,” potentially Q4 .
U.S. regulatory path: PMI hopes FDA streamlining creates a level playing field; TPSAC MRTP hearing for ZYN in Q1 2026; considering options for ZYN Ultra without speculation .
Competitive landscape in Japan: Acknowledged heavier competitor promotions; PMI retains ~75%+ share and expects strong growth to continue .

Estimates Context

Q3 2025 beats: Revenue $10.85B vs $10.66B consensus; EPS $2.24 vs $2.10 consensus; EBITDA miss vs $5.08B consensus as PMI prioritizes relaunch investments and higher SG&A in the U.S. .
Consensus values retrieved from S&P Global.*
Guidance implies continued double-digit EPS growth in dollar terms and >40% adjusted OI margin for FY25, albeit with slightly lower organic OI range vs Q2 (10–11.5% now) .

Key Takeaways for Investors

Narrative improving: PMI delivered revenue/EPS beats, record smoke-free gross profit, and raised FY EPS guidance—supportive for sentiment and potential upward estimate revisions .
U.S. ZYN is a major growth engine; expect continued strong offtake with normalized higher promotions; near-term revenue/OI drag should fade as promo laps and inventory normalizes .
IQOS resilience underpins global smoke-free leadership despite intensifying competition in Japan; PMI’s ~75%+ share and innovation cadence support sustained growth .
Combustibles remain cash-generative with robust pricing; Marlboro category share reached highest quarterly level since 2008, supporting mix and margins .
Cash generation and capital return remain attractive: FY25 operating cash flow >$11.5B and dividend increased to $5.88 annualized .
Watch Q4 technicals: IQOS shipment vs IMS timing, ZYN inventory adjustment (20–30M cans), higher tax rate will weigh on Q4 EPS growth (up to ~6% currency-neutral) .
2026 outlook: management sees similar size currency tailwind and remains on track to ~2x net debt/EBITDA by end-2026—deleveraging supports valuation flexibility .

Notes on non-GAAP adjustments: Q3 adjusted EPS excludes items including Germany excise tax litigation ($176M), amortization of intangibles ($250M), and RBH plan impacts; currency effect on adjusted EPS was +$0.08 .

Additional references and prior quarter context:

Q2 2025: net revenues $10.14B; adjusted EPS $1.91; SFB net revenues +15.2% .
Q1 2025: net revenues $9.30B; adjusted EPS $1.69; SFB net revenues +15.0% .
Early Q3 reaffirmation (Sept. 2): PM reiterated adjusted EPS growth 13–15% in dollar terms; highlighted ZYN offtake ~32% growth in first 8 weeks of Q3 .