Key Highlights

  • Philip Morris International shares rose sharply after record Q2 net revenue above $11 billion.
  • Adjusted diluted EPS of $2.20 topped the $2.04 consensus estimate.
  • Smoke-free products (IQOS, VEEV, ZYN) now comprise about 42% of revenue after 7.5% shipment growth.
  • PMI cut its full-year EPS guidance for the third time this year, to $8.26-$8.41 from $8.31-$8.46, on currency headwinds.

Philip Morris International (NYSE: PM) shares rose sharply after the company reported record Q2 net revenue above $11 billion, with adjusted diluted EPS of $2.20 topping the $2.04 consensus estimate, driven by 7.5% growth in smoke-free product shipments.

What Happened

Q2 2026 results were strong: organic net revenue growth of 8%, organic operating income growth of 11%, and adjusted diluted EPS of $2.20, up 15% in dollar terms and 14% currency-neutral; first-half adjusted diluted EPS reached a record $4.16.

The international smoke-free business drove growth with high single-digit volume growth and double-digit top-line growth; iQOS adjusted IMS volume grew 8% in the first half (5.1% in Q2, moderated by transitory headwinds in Japan and Poland's flavor ban); e-vapor (Veev) shipments grew 72% in the first half; Zyn international shipments grew 6% in the first half, or 32% excluding Nordics.

The U.S. business showed sequential improvement, with net revenue up 38% and gross profit up 46% versus Q1; Zyn shipments grew 2% to 2.9 billion pouches despite a prior-year inventory tailwind. The combustible business outperformed expectations, with Q2 net revenue up 6.4% and gross profit up 8% organically, and pricing up 9.2% in the first half. Smoke-free products, spanning IQOS, VEEV, and ZYN, now comprise about 42% of total revenue.

Market Reaction

Despite the beat, PMI cut its full-year adjusted EPS guidance for the third time this year, to $8.26-$8.41 from $8.31-$8.46, on currency headwinds, and issued soft Q3 guidance below consensus.

The company also announced plans to accelerate U.S. investment in its Zyn nicotine pouch business to fend off rising competition from British American Tobacco's Velo. BTIG initiated coverage with a Buy rating and $216 price target, citing the company's execution of its reduced-risk product transition.

Outlook

Full-year 2026 guidance was maintained at organic net revenue growth of 5-7%, organic operating income growth of 7-9%, and currency-neutral adjusted diluted EPS growth of 7.5-9.5%; with a $0.15 currency tailwind, reported EPS guidance is $8.26-$8.41, up 9.5-11.5%. Q3 EPS guidance is $2.20-$2.25, including a $0.08 unfavorable currency impact, and operating cash flow generation is expected around $13.5 billion for the year.

The company now expects full-year cigarette volume decline of 2-3%, versus a prior estimate of 3%, and full-year pricing variance of more than 7%, though offset by adverse geographic mix. Emmanuel Babeau will be succeeded by Massimo Andolina as Group CFO in August.

Why did Philip Morris shares rise despite cutting guidance?

Shares rose on record Q2 revenue and an EPS beat driven by strong smoke-free product growth, even as the company cut full-year EPS guidance for the third time this year on currency headwinds.

What share of PMI's revenue now comes from smoke-free products?

Smoke-free products, including IQOS, VEEV, and ZYN, comprise about 42% of total revenue.

Who is succeeding Emmanuel Babeau as CFO?

Massimo Andolina will succeed Babeau as Group CFO in August.