Marlboro maker Philip Morris says smoke-free growth will more than offset cigarette declines

Philip Morris International Inc. PM shares rose Wednesday after the tobacco company reported second-quarter 2026 results that beat Wall Street estimates on both earnings and revenue, driven by continued growth in its smoke-free products business.

Adjusted diluted earnings per share increased to $2.20, topping the analyst estimate of $2.04. Net revenue rose 10.4% year over year to $11.19 billion, exceeding expectations of $10.64 billion. Organic revenue grew 7.6%.

Philip Morris Earnings And Margins

Reported diluted EPS declined 7.7% to $1.80, primarily due to a $511 million noncash impairment charge related to PMI’s investment in RBH, equal to 33 cents per share.

Operating income increased 22% to $4.53 billion, while adjusted operating income rose 12.4% to $4.77 billion. Adjusted operating margin expanded to 42.6% from 41.9%.

Adjusted gross profit climbed 11.5% to $7.67 billion, with adjusted gross margin improving 70 basis points to 68.5%.

Smoke-Free Business Drives Growth

Total shipment volume increased 2.5% to 205.2 billion equivalent units.

Smoke-free shipments rose 7.5%, led by 7.6% growth in heated tobacco units and a 55.1% increase in e-vapor products. Cigarette shipments increased 1.1%.

Smoke-free products accounted for about 42% of total revenue, up 0.5 percentage points from a year earlier, and were available in 109 markets.

International smoke-free revenue increased 14.2% to $3.88 billion, with adjusted gross margin reaching 70.1%. IQOS adjusted in-market sales rose 5.1%, or 10% excluding Japan and Poland.

VEEV shipments surged 55.1%, while international modern oral product volumes increased 14.7%, or 26.3% excluding the Nordic markets.

International combustibles revenue rose 9.8% to $6.46 billion, supported by 10% pricing growth. Marlboro maintained a record 11% share of the international cigarette category.

U.S. Business

U.S. revenue slipped 0.7% to $856 million, while ZYN shipments increased 1.8% to 2.9 billion pouches. The company launched ZYN ULTRA and plans additional product variants and higher marketing investment in the second half of the year.

On the earnings call, management said it left full-year guidance largely unchanged despite a strong first half to support increased second-half investment behind ZYN. Executives said early consumer response to ZYN ULTRA has been encouraging, although launch data remains limited.

The company also said it continues to prioritize IQOS volume growth over near-term pricing. Management expects volatility in Japan ahead of an October excise tax increase but believes the worst of the earlier tax-related disruption has passed.

Executives added that the conflict in the Middle East has had only a minor impact so far, mainly through higher transportation, energy and other input costs.

Outlook

Philip Morris said smoke-free products should continue driving growth and largely offset declines in cigarette volumes.

Management now expects total shipment volume to be stable to slightly positive for the full year, supported by high-single-digit smoke-free growth, while cigarette shipments are forecast to decline about 2% to 3%.

Executives said the performance and long-term potential of IQOS, ZYN and VEEV reinforce confidence in the company’s smoke-free strategy.

PMI raised its reported EPS forecast for 2026 to $7.19-$7.34 from $7.18-$7.33, but that remains below the analyst consensus of $7.78.

The company lowered its adjusted EPS outlook to $8.26-$8.41 from $8.31-$8.46, compared with the analyst estimate of $8.41. It expects third-quarter adjusted EPS of $2.20-$2.25, below the consensus estimate of $2.43.

PMI maintained its guidance for 5%-7% organic revenue growth and 7%-9% organic operating income growth.

The company continues to expect operating cash flow of about $13.5 billion and capital expenditures of $1.4 billion-$1.6 billion, primarily to support smoke-free products. It also expects net debt-to-adjusted EBITDA to be about 2.0 times by year-end and does not plan to repurchase shares in 2026.

Philip Morris Price Action

PM Price Action: Philip Morris Intl shares were up 3.28% at $194.21 at the time of publication on Wednesday. The stock is trading near its 52-week high of $194.90, according to Benzinga Pro data.

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This article Marlboro Maker Philip Morris Says Smoke-Free Growth Will More Than Offset Cigarette Declines originally appeared on Benzinga.com.