Philip Morris Smoke-Free Revenue at 41%

Company Overview and Strategic Direction - Philip Morris International is a leading global producer of tobacco and nicotine products, operating in approximately 170 markets with well-known brands such as Marlboro, Parliament, IQOS, ZYN, and VEEV [2] - The company is transitioning from traditional combustible cigarettes to smoke-free alternatives, including heated tobacco devices, oral nicotine pouches, and electronic vapor products [3] Quarterly Performance Highlights - In Q2 2025, adjusted earnings per share were $1.91, exceeding the estimate of $1.86 by 2.7%, while GAAP revenue was $10.1 billion, falling short by 2.1% [1] - Smoke-free products accounted for 41% of net revenue, an increase of 2.9 percentage points year-over-year, with gross profit from these products exceeding 42% of total gross profit [4] - Shipments of smoke-free products rose by 11.8%, with net revenue in this segment increasing by 15.2% and gross profit up by 23.3% [4] Product Performance - IQOS generated over $3 billion in net revenue, holding a 76% share of the global heat-not-burn category, with sales volumes in Europe growing by 9.1% and in Japan by 7.8% [5] - ZYN pouches saw a global shipment volume increase of 26.5%, with U.S. shipments rising over 40% to 190 million cans [6] - VEEV e-vapor product volumes more than doubled, achieving top market positions in six European countries [6] Traditional Cigarette Segment - Traditional cigarette volumes declined by 1.5%, but revenue for this segment grew by 2.1% due to strong pricing [7] - Marketing, Administration, and Research Costs increased by 16.0% compared to the previous year [7] Regional Performance - Europe's organic revenue rose by 7.3%, driven by smoke-free growth, while the Americas experienced a 17% increase in organic net revenues, primarily from oral nicotine [8] - The European market faced a 1.7% decline in shipment volume, mainly due to cigarette declines in specific countries [8] Future Outlook - The company raised its full-year adjusted diluted EPS guidance to $7.43, reflecting an 11.5% to 13.5% growth from last year's adjusted EPS of $6.57 [10] - Organic net revenue growth is forecasted at 6-8%, with smoke-free product volumes expected to grow by 12-14% and cigarette volumes projected to decline by about 2% [10] - Capital expenditure guidance is set at $1.6 billion, primarily for smoke-free product scale-up, with operating cash flow expected around $11.5 billion [10]