- Smoke-Free Revenue Dominance: Smoke-free products accounted for 41.5% ($17B) of total $40B net revenues in 2025, up from prior years.
- Adjusted EPS Growth: Adjusted diluted EPS surged 14.2% to $7.54, outpacing organic top-line growth of 6.5%.
- IQOS & ZYN Volume Surge: Smoke-free volumes grew 12.8%, driven by IQOS shipments +11% (155B units) and ZYN pouches +36% (13.6B units).
- 2026 Guidance: PMI targets 5–7% organic revenue growth and 7.5–9.5% EPS growth, with smoke-free product momentum offsetting combustible declines.
Smoke-Free Products Drive Growth
The company's smoke-free products volumes grew by 12.8%, driven by IQOS, which saw shipments grow by 11% to 155 billion units, and nicotine pouches, led by ZYN, which grew by 36% to 13.6 billion pouches. This growth underscores PMI's successful strategy of transitioning towards smoke-free products, a trend that is expected to continue into 2026.
Guidance and Targets for 2026 and Beyond
For 2026, PMI expects another strong performance despite transitory headwinds, including excise tax increases on heat-not-burn products in Japan. The company forecasts organic net revenue growth of 5-7%, driven by continued momentum in smoke-free products and pricing, and EPS growth of 7.5-9.5%. PMI has renewed its medium-term growth targets, aiming for 6-8% organic net revenue growth, 8-10% organic operating income growth, and 9-11% adjusted diluted EPS growth through 2028.
Valuation Metrics
With a P/E Ratio of 23.91 and an EV/EBITDA of 19.03, PMI's valuation reflects its strong growth prospects. The company's Dividend Yield of 3.09% and Free Cash Flow Yield of 3.56% indicate a commitment to returning value to shareholders. The ROIC of 27.97% highlights PMI's ability to generate returns on its invested capital.
Operational Highlights and Challenges
PMI's IQOS product has seen high single-digit growth, with a strong performance in various markets. However, Japan has experienced a slowdown due to increased competition and excise tax hikes. The company is also navigating regulatory challenges, such as the proposed excise tax increase on nicotine pouches in New York, which could impact the competitive landscape.
Cost Efficiency and Innovation
PMI is on track to deliver $2 billion in cost savings by 2026, with a focus on products like IQOS ILUMA and ZYN Ultra. The company is also exploring the potential of AI to drive efficiency and cost savings, which is expected to be a key factor in its future performance.