Philip Morris International Inc.

In Q2, PMI reported organic net revenue growth of 7.6% (more than 10% in dollar terms) to over $11 billion, adjusted gross profit growth of 8.7% organically and 11.5% in dollar terms, adjusted operating income growth of close to 11% organically and 12% in dollar terms to $4.8 billion, and adjusted diluted EPS of $2.20, up 15% in dollar terms and 14% in currency-neutral terms. For H1, organic net revenue grew 5.3%, adjusted operating income grew 6.1% organically to $8.9 billion, and adjusted diluted EPS reached a record $4.16, up 15.6% in dollar terms. PMI now expects full-year cigarette volumes to decline around 2% to 3% versus 3% previously, total shipment volume to be around stable to slightly positive, organic net revenue growth of 5% to 7%, organic operating income growth of 7% to 9%, and currency-neutral adjusted diluted EPS growth of 7.5% to 9.5% (or $8.26 to $8.41 in dollar terms, including about $0.15 of currency tailwind). For Q3, PMI expects adjusted diluted EPS of $2.20 to $2.25, mid-single-digit organic top-line growth, modest organic margin expansion, and HTU shipment volume of around 41 billion units. Operating cash flow is still expected to be around $13.5 billion.

Emmanuel Babeau framed the quarter as evidence that PMI’s smoke-free transition is scaling well while combustibles are also outperforming. He said the company is at an “exciting moment” in the U.S., where a broader ZYN portfolio, the launch of ZYN Ultra, the upcoming 1.5 mg and 8 mg formats, and a new marketing campaign will support a step-up in investment. His tone was confident but disciplined: PMI is choosing to reinvest the upside rather than chase a guidance raise, while still aiming for best-in-class growth and a sixth consecutive year of total volume growth.

Babeau highlighted strong financial leverage from pricing, mix, and smoke-free economics, including H1 gross margin expansion of 150 bps to 67.7% in international markets and 190 bps to 70% in international smoke-free. He noted over $300 million of gross cost savings in H1 and said PMI remains on track for its $2 billion cost-savings target for 2024-2026, with more than $1.8 billion accumulated so far. He also explained that H2 SG&A will be higher than previously expected because PMI decided to step up U.S. growth investment, and he reaffirmed operating cash flow guidance of around $13.5 billion along with a commitment to the progressive dividend.

Analysts focused on why PMI held full-year guidance despite an H1 beat, and management said the main reason is a deliberate step-up in second-half U.S. investment rather than a deterioration in the business. On ZYN, Babeau said the company wants to optimize price to maximize volume and bottom-line growth, while new variants and the marketing campaign should help expand the franchise; he said it is too early to judge ZYN Ultra but the initial feedback is encouraging. Questions on Japan centered on excise-driven pricing, share, and competitive behavior; management said the quarter played out broadly as expected, IQOS share remained resilient, and the market should see more volatility in H2 around the October excise change.