Philip Morris Intl Q2 2026 Earnings Call: Complete Transcript

Philip Morris Intl (NYSE: PM ) held its second-quarter earnings conference call on Wednesday.

Below is the complete transcript from the call.

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Access the full call at Watch the full earnings call below: Summary Philip Morris Intl reported H1 net revenues of $8.9 billion, with an adjusted diluted EPS growth of 9.4% excluding currency effects and 15.6% in dollar terms, driven by strong international performance.

The company's smoke-free portfolio, particularly IQOS, showed robust growth with a 13.7% increase in net revenue and a 16.9% rise in gross profit, despite some market challenges in Japan.

Cigarette volumes are expected to decline by 2-3% for the year, yet smoke-free product growth is anticipated to offset this decline, leading to stable to slightly positive total shipment volume.

Philip Morris Intl plans increased investment in the U.S. market, particularly for the ZYN brand, with new product launches and a comprehensive marketing campaign aimed at enhancing market share.

The company maintains its full-year guidance with an expected currency tailwind, projecting adjusted diluted EPS growth of 9.5-11.5% and continuing strong cash flow generation.

Full Transcript Emmanuel Babeau, CFO Terms to reach $8.9 billion.

Adjusted diluted EPS grew by plus 9.4% excluding currency and by plus 15.6% in dollar term reaching a first half record of $4.16.

The strength of our international business which made up 93% of H1 group net revenues was naturally at the core of this remarkable performance.

International smoke free was again outstanding with H1 organic growth of 13.7% in net revenue and plus 16.9% in gross profit driving gross margin expansion of 190 basis points to reach 70%.

This primarily reflect continued IQOS growth with further enhancement from our ozosmo free category.

Especially Viv combustible also performed very well exceeding our midterm trajectory of low single digit organic top line growth and low to mid single digit gross profit growth.

An excellent Q2 with organic growth of 6.4% in net revenue and plus 8% in gross profit driven by resilient volume and strong pricing enable US to realize H1 organic net revenue growth of 3.8% despite negative geographic mix.

H1 gross profit increased by 6.1% with margin expansion of 150 basis points to 67.7% including the benefit of effective cost management.

As a result, total H1 international net revenue grew by plus 7.4% and gross profit by plus 10.1% with gross margin expansion of 160 basis points to 68.6%.

In turn, adjusted OCI increased plus 11.7% all on an organic basis.

Turning now to volumes where total shipment growth returned to a positive trajectory in the second quarter with an increase of 2.5% resulting in 0.4% growth for the first half.

Smoke free shipments grew by 7.5% in Q2 and plus 8.3% in H1 mainly fueled by IQOS HTUs with notable contribution from Taiwan, Global Travel Retail and Italy.

E‑vapor shipments increased by a remarkable 55% in Q2 and plus 72% in H1 with Romania, Greece and Germany among the main drivers.

Overall smoke free volumes declined by 1.2% in the quarter, primarily reflecting industry decline and inventory impact for snus in the Nordics.

Despite a stable category share performance.

This was partly offset by continued rapid nicotine pod growth in international markets excluding the Nordics and the return to shipment volume growth for ZYN in the US Q2 cigarette shipments increased by 1.1% ahead of expectation.

This reflects a combination of good category share performance, certain timing or comparison factors and more favorable industry dynamic in certain large markets, predominantly where smoke free products are banned or very small.

Notable callouts include Indonesia, Turkey, Egypt and relative resilience in India and Mexico.

However, with industry volumes declining low to mid single digit in more developed smoke free market where the average unit economic of cigarette are more favorable, this generated an unfavorable mix impact on net revenue for H1.

Overall cigarette volumes declined by 1.9%.

Given our Q2 performance and the latest industry dynamics, we now expect a more moderate full year decline in our cigarette volumes of around 2 to 3% versus 3% previously which remained consistent with the structural evolution of the category.

Taken together, we now expect total shipment volume to be around stable to slightly positive for the full year with high single digit growth in smoke free product broadly offsetting the decline in cigarettes.

Turning to our H1 top line growth drivers, pricing was the largest contributor adding 5.9 points of growth reflecting strong combustible pricing of 9.2%.

With low single digit smoke free pricing including around 3% from IQOS.

The positive mix impact from international smoke free growth Contributed A further/2 points as the increasing weight of SFPs continues to enhance our revenue profile.

These drivers were partly offset by the US which had a negative impact of 1 point mainly due to Q1 comparison as well as international combustible geographic mix and other factors which reduce growth by 2 points.

As a result, H1 organic net revenue growth reached 5.3% while currency provided a tailwind of 4.5 points bringing reported net revenue growth to plus 9.8%.