Philip Morris CEO Says Smoke-Free Segment Powering Profits Despite Global Headwinds

• Philip Morris’ international smoke-free unit recorded an 11.9% increase in shipment volumes.
• The IQOS heated tobacco system remained a key growth driver, delivering over 11% rise in adjusted sales. 
• First-quarter revenue climbed 9.1% year-on-year to $10.1 billion, with an adjusted earnings per share of $1.96.

Philip Morris International Inc. (PM) reported a strong opening to its fiscal year, driven largely by increased demand for its smoke-free product portfolio and favorable pricing strategies across global markets, even as the U.S.-Iran conflict sent energy costs higher. 

Chief Financial Officer Emmanuel Babeau highlighted expansion in the company’s smoke-free segment, noting double-digit gains in shipment volumes and gains in revenue and profit.

“International smoke-free delivered a striking performance with double-digit volume growth, mid-teens organic top-line progression and high-teens organic gross profit growth, or almost plus 30% in dollar terms.”

- Emmanuel Babeau, CFO, Philip Morris International

Smoke-Free Portfolio Leads Growth

Speaking in the first-quarter fiscal 2026 earnings call, Babeau said pointed to sustained consumer shifts away from traditional cigarettes as a key factor supporting smoke-free products' performance.

The heated tobacco platform IQOS continued to anchor growth, posting nearly 11% growth in adjusted sales. Babeau credited the brand’s global traction and consistent demand as major contributors to overall performance. 

The company also saw additional support from its expanding product lineup, including the nicotine pouch brand ZYN and the e-vapor product VEEV, with the latter achieving a leading position in Europe’s closed-pod segment, according to Nielsen data. 

The company said geopolitical tensions in the Middle East caused by the U.S.-Iran war had a minor effect on shipments, particularly in travel retail and certain regional markets. While energy costs have risen and supply disruptions have occurred, Philip Morris noted that consumer demand has yet to show changes tied to these factors.

Philip Morris International stock inched 0.1% lower after hours on Wednesday, after closing at over a twelve-month high.  

PM's Profitability And Margins Improve

The international smoke-free division posted 11.9% growth in shipment volumes, alongside gains of nearly 15.8% in net revenue and roughly 19.4% in gross profit. 

These improvements pushed overall margins higher, with the segment's gross margin climbing by 210 basis points to approximately 70%. 

Overall, Q1 revenue climbed 9.1% year-on-year (YoY) to $10.1 billion, with an adjusted earnings per share (EPS) of $1.96. Both metrics surpassed the analysts’ consensus estimates of $9.9 billion and $1.83, respectively, according to Fiscal AI data. The smoke-free segment accounted for roughly 43% of total revenue. 

Looking ahead, Philip Morris expects adjusted EPS to range between $8.36 and $8.51 for the full year, representing double-digit growth from 2025 levels. 

PM stock has gained over 2% year-to-date. 

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