Overview
Philip Morris International
PM · NYSEQ3 2026Tobacco · Smoke-Free Products
Since the Report + 3.0%
Revenue grew 5.5% year over year, EPS beat the estimate by 2.6%; the stock fell 1.2% in its first reaction.
- RevenueQ3
- $11.44B
- Estimate $11.32B · 1.0% Beat
- EPSAdjusted
- $2.36
- Estimate $2.30 · 2.6% Beat
Verdict
HOLDPhilip Morris posted revenue and earnings slightly above expectations, but trimmed its full-year profit guidance by 6 cents on currency. The stock fell nearly 8% at the open and recovered most of the loss by midday; the selling reflected the lower-half signal and rising costs. The next thing to watch is the pace of organic growth in smoke-free products.
Close on Report DayOct 21
$197.46▼ 1.2%Report-Day Move
- Market Cap(Today)
- ≈ $317 B
- 1Y Return(At Report)
- + 34%
- P/E(At Today's Price · $8.22 · Trailing 12M)
- 24.7
- PEG(Company Guidance 2026)
- 2.27
- Net Margin(Trailing 12M)
- 24.8%
Earnings Summary
In 30 Seconds- Revenue of $11.44 billion beat estimates by 1.0%, and adjusted EPS of $2.36 beat by 2.6%.
- Full-year EPS guidance was cut to $8.29-8.44 on currency; the range excluding currency was unchanged.
- The stock fell nearly 8% at the open and closed the day down 1.2%.
The Numbers
Adjusted Operating Margin
44.7%
▲ 1.6 Points YoY
Smoke-Free Revenue
$4.63B
▲ 4.0% YoY · 40.4% Share
Operating Cash Flow
$5.35B
Nine Months ▲ 38.8%
Stock Reaction
▼ 1.2%
Close to Close · Oct 21
Quarterly Revenue ($ Billion)
10.85
Q3 25 · $10.8 B
10.36
Q4 25 · $10.4 B · QoQ − 4.5%
10.15
Q1 26 · $10.1 B · QoQ − 2.1%
11.19
Q2 26 · $11.2 B · QoQ + 10.3%
11.44
Q3 26 · $11.4 B · QoQ + 2.2% · YoY + 5.5%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
Q4 2026 Company Guidance
- Full-Year Adjusted EPS8.29 – 8.44 $8.29 $8.44 $8.29 – 8.44 $
Midpoint 8.37 · Prior 8.35–8.50 · Estimate 8.38Revised Down 0.7% ▼
- Adjusted EPS ex-Currency8.11 – 8.26 $8.11 $8.26 $8.11 – 8.26 $
Unchanged From Prior · Growth 7.5–9.5%
- Organic Revenue Growth5% – 7%5%7%
Middle or Upper Half Expected
- Organic Operating Income Growth7% – 9%7%9%
Middle or Lower Half Expected
- Operating Cash Flow13.5 billion
Approximately · Full Year
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±19% around the midpoint.
Segment and KPI Data
Revenue by Segment
- International Combustibles$6.73 BShare 58.8%▲ 6.5% YoY
- International Smoke-Free$3.87 BShare 33.8%▲ 0.7% YoY
- United States$845 MShare 7.4%▲ 22.6% YoY
Includes ZYN and IQOS
Key Metrics
IQOS Heated Tobacco Shipments
41.5 B units
▲ 1.5% YoYPress Release
Total Shipments
206 B units
▲ 0.6% YoYPress Release
U.S. ZYN Shipments
3.20 B pouches
▲ 4.2% YoYPress Release
Operating Cash Flow
$5.35 B
8-K
Shares are computed over the segment total: $11.4 B. Source: 8-K.
Metrics come only from the company's own filings; each one names the document it was taken from.
“We delivered another excellent quarter, with growing total volumes, double-digit organic operating income growth and robust margin expansion.”
- Total Volume Growth
- Margin Expansion
- ZYN Shift to 20-pouch Cans
Summary and Review
Summary
Philip Morris International (PMI) reported third-quarter revenue of $11.44 billion. That is up 5.5% year over year, with organic growth of 7.1%. Revenue beat the $11.32 billion market expectation by 1.0%, so that gate is in line. Adjusted EPS came in at $2.36, 2.6% above the estimate. The earnings gate is open. Full-year adjusted EPS guidance, however, was cut to $8.29-8.44 on currency. That cut closes the guidance gate.
The stock fell sharply at the open and touched $184 during the session. That was a loss of roughly 8% from the prior close. The stock closed at $197.46, down 1.2% close to close. The market read this report not as a profit story but as a cost story. The company expects to finish the year in the middle or lower half of its ranges. Energy costs and ZYN marketing spend fed that view.
Score 55, verdict hold. The quarter itself was solid: total volume grew and adjusted operating margin expanded by 1.6 points. But cigarette price increases are carrying the growth. Smoke-free revenue rose only 4.0%. Guidance excluding currency was unchanged, so the core business shows no deterioration. Still, the currency-driven cut and the lower-half signal do not point to a strong year-end. One gate is open, one is in line and one is closed.
Full Review
Pricing power sits in cigarettes.
Combustible revenue was $6.81 billion. That is up 6.4% year over year and 7.7% organically. Cigarette shipments were flat at 158 billion units. So all of the growth in this line came from price. International Combustibles is the company's largest segment at $6.73 billion of revenue. The segment grew 6.5% year over year. This mix protects profit and supports margins in the short term. But cigarette volume is a shrinking base over the long run. The company now expects full-year cigarette volume to follow the year-to-date trend. The previous expectation was a decline of about 2-3%. How much longer price increases can hold is the key question for the coming quarters. Rising energy costs make that question more pressing. For now, consumers are absorbing price increases without volume losses.
Smoke-free growth slowed.
Smoke-free revenue was $4.63 billion. That is up 4.0% year over year and 6.3% organically. These products made up 40.4% of total revenue. Year to date, the share is about 42%. IQOS heated tobacco shipments rose only 1.5% to 41.5 billion units. U.S. ZYN shipments were 3.2 billion pouches, up 4.2%. A promotion in September last year made the comparison harder. U.S. segment revenue rose 22.7% to $845 million. But the same segment's operating income fell 3.3% on higher marketing spend. In the fourth quarter, the company moves flagship ZYN products to 20-pouch cans. That change is expected to lower revenue per pouch. E-vapor shipments grew 61.6% from a small base. Wellness revenue rose to $74 million.
Margins widened, cash is strong.
Adjusted gross margin was 68.7%, up 0.8 points year over year. Adjusted operating margin rose from 43.1% to 44.7%. The main driver of that expansion was cigarette pricing. Operating cash flow was $5.35 billion in the quarter. The nine-month total reached $10.45 billion, up 38.8% year over year. The company expects full-year operating cash flow of about $13.5 billion. That cash goes first to paying down debt. Net debt to EBITDA should approach 2.0x by year-end. As a result, no share buybacks are planned for 2026. Shareholder returns continue through the dividend. The quarterly dividend was raised 8.8% to $1.60 in September. Strong cash flow means the dividend is insulated from swings in earnings. Buybacks could return to the agenda once deleveraging is done.
Why guidance fell and GAAP EPS dropped.
Full-year adjusted EPS guidance moved from $8.35-8.50 to $8.29-8.44. The midpoint fell 0.7%. The entire cut comes from currency. The currency benefit shrank from 24 cents to 18 cents. The range excluding currency was unchanged at $8.11-8.26. That implies 7.5-9.5% growth over 2025's $7.54. The new midpoint of $8.37 is almost identical to the $8.38 market expectation. Reported EPS fell 4.9%, from $2.23 to $2.12. The drop came from non-cash items. A fair-value adjustment on equity securities cost 6 cents and amortization 13 cents. A Dutch pension plan buy-out added another 4 cents. These items do not change the direction of the business. That is why the market keeps its focus on adjusted earnings.
Next quarter, watch one line.
Organic revenue growth in smoke-free products was 6.3% this quarter. The company's story rests on this line offsetting volume erosion in cigarettes. If the rate stays above 6% in the fourth quarter, the ZYN can change and the promotion effect have been absorbed. If it drops below 5%, the growth burden falls entirely on cigarette pricing. Then the low end of guidance becomes a realistic scenario. The second gauge is U.S. segment operating income. It fell 3.3% year over year this quarter. A recovery would show that ZYN spending is paying off. A deeper decline would suggest the marketing burden is lasting. The third gauge is IQOS shipments; the 1.5% growth needs to accelerate. For a general method, see our guide on how to read earnings day.
Looking Ahead
Strengths and Risks
4 Strengths · 5 RisksStrengths
4- Adjusted operating margin expanded 1.6 points year over year to 44.7%.
- Nine-month operating cash flow rose 38.8% to $10.45 billion.
- Full-year EPS guidance excluding currency was held at $8.11-8.26.
- U.S. segment revenue rose 22.7% year over year to $845 million.
Risks
5- Smoke-free revenue rose only 4.0%, leaving growth dependent on cigarette pricing.
- The company expects to land in the middle or lower half of its operating income and EPS ranges.
- The move to 20-pouch ZYN cans could lower revenue per pouch.
- Energy costs tied to the Middle East and pressures from Ukraine are weighing on earnings growth.
- U.S. segment operating income fell 3.3% year over year on higher ZYN spending.
What to Watch
3- The quarterly dividend of $1.60 will be paid on October 26.
- Flagship ZYN products switch to 20-pouch cans in the fourth quarter.
- Fourth-quarter and full-year results are expected in early February 2027, along with 2027 guidance.
Upcoming Earnings
To Understand This