Detailed Narrative
International Smoke-Free Momentum
The international smoke-free business delivered an outstanding quarter, with organic net revenue growth of +15.8% and organic gross profit growth of +19.4%. This was primarily driven by IQOS, which saw +10.9% adjusted in-market sales growth across various markets, including strong performance in Europe and Japan. New market launches for smoke-free products, including ZYN in Portugal and Kenya and VEEV in Egypt, expanded the footprint to 108 markets, with 55 now multi-category. VEEV reinforced its position as the fastest-growing international closed pod brand, becoming joint #1 in Europe in Q4 '25 and almost doubling IMS volumes.
U.S. ZYN Dynamics and Innovation
U.S. ZYN continued to lead the nicotine pouch category with +10% offtake growth in Q1, as estimated by Nielsen. However, Q1 shipments declined to 155 million cans due to the normalization of approximately 25 million cans of surplus inventory from the end of 2025. The company expects ZYN shipments to broadly track offtake growth in future quarters, with underlying volumes estimated at 180 million cans for Q2. Management is focused on launching new ZYN innovations in the coming months⏳ to address dynamic strength and flavor segments and drive renewed momentum, while navigating the complex regulatory environment.
Combustibles Resilience and Pricing Power
Despite a -1.9% decline in total shipments and -5.1% in international combustible volumes, the combustible business demonstrated resilience. Strong pricing, adding +5 points to overall net revenue growth and +8.5% for combustibles, was a key driver, with notable contributions from Turkey, Indonesia, and Mexico. This, combined with efficient cost management, allowed international combustible gross profit to grow +3.9% organically and gross margins to expand +190 basis points, offsetting volume and mix headwinds.
Margin Expansion and Cost Efficiency
Adjusted operating income margins expanded by +40 basis points to over 41%, supported by a positive currency impact🌐. Organic gross margin expansion of +70 basis points was driven by strong pricing, operating leverage, and the continued benefit of smoke-free mix. The company realized approximately $150 million in gross cost efficiencies in Q1 and remains on track for full-year organic margin expansion, despite increased reinvestment in the smoke-free portfolio and commercial programs.
Regulatory Landscape and Product Pipeline
Philip Morris International continues to engage with the FDA on regulatory matters. The previous version of IQOS has been reauthorized as a modified risk tobacco product, and the company is pursuing authorization for IQOS ILUMA. The PMTA application for ZYN Ultra remains under active scientific review, with management optimistic about its launch in the coming months⏳. The company advocates for differentiated, low excise duties on reduced-risk products, aligning with the FDA's public health goals to encourage switching from combustibles.
Strategic Outlook and Sustainability Initiatives
The company reconfirmed its full-year 2026 currency-neutral guidance, including organic net revenue growth of +5% to +7% and organic operating income growth of +7% to +9%. An updated currency tailwind of $0.25 leads to an adjusted diluted EPS forecast of $8.36 to $8.51. PMI also published its Value Report 2025, highlighting progress on sustainability priorities and introducing the Value Plan 2030, a framework focused on consumers, circularity, workforce, climate, and nature, integrated with its business strategy.