Philip Morris International Inc. PM

Philip Morris International reported a strong Q2 FY26, with organic net revenue growing +7.6% and adjusted operating income increasing +11% organically. This performance drove a +14% currency-neutral progression in adjusted diluted EPS to $2.20. The results were primarily fueled by excellent performance in the international smoke-free business and better-than-expected combustible performance, contributing to robust H1 growth despite Q1 comparison headwinds.

The company is accelerating its investment in the U.S. ZYN business, leveraging a broader portfolio of variants including new flavors, ZYN Ultra (9mg and 11mg), and planned 1.5mg and 8mg dry formats. A new marketing campaign, 'When It Clicks,' is rolling out to enhance brand engagement. The recent Modified Risk Tobacco Product (MRTP) authorization for 20 ZYN SKUs further strengthens its regulatory position and long-term growth potential, allowing claims of lower risk compared to cigarettes.

IQOS adjusted in-market sales volume grew +8% in H1, despite transitory^📎 headwinds in Japan and the EU flavor ban. Q2 growth moderated to +5.1% due to Japan's excise-driven price increase and pantry loading reversal. Excluding Japan and Poland, Q2 growth was strong at +10.2%. The company maintains a global heat-not-burn category share of approximately 76% and saw strong share gains in key cities and emerging markets like Mexico, Indonesia, and Taiwan. Underlying demand in Japan remains robust, with the HTU share stable at 31.8% in Q2, excluding pantry loading.

VEEV e-vapor products delivered exceptional H1 shipment growth of +72%, reinforcing its leadership as the #1 brand in Europe for closed pod and combined categories. International ZYN shipment volume grew +6% in H1 (+32% excluding Nordics), gaining share in a fast-growing category. Encouraging progress is noted across geographies like the U.K., Pakistan, Poland, Greece, and the Philippines, with further expansion planned.

The combustible business delivered a strong Q2 performance, with shipments increasing +1.1% ahead of expectations. This was driven by good category share performance, timing factors, and favorable industry dynamics in markets where smoke-free products are banned or limited (e.g., Indonesia, Turkey, Egypt, India, Mexico). Pricing variance was +9.2% in H1, with the portfolio maintaining its international category share at 25.3% and Marlboro reaching a record high of 11% share.

H1 adjusted operating income margin expanded by +40 bps organically to nearly 42%, primarily driven by gross margin expansion (+70 bps) from strong pricing, favorable smoke-free mix, and productivity. The company delivered over $300 million in gross cost savings across COGS and SG&A in H1, remaining on track for its $2 billion target for the 2024-2026 period. Increased SG&A costs are expected in H2 due to strategic U.S. growth investments.