PMI’s Smoke-Free Transition Accelerates: Smoke-Free Products Account for 41.5% of 2025 Revenues as ZYN and IQOS Drive Market Gains

Smoke-Free Products Propel Growth—Now 41.5% of Net Revenue

Philip Morris International (PMI) reported that smoke-free products (SFP) made up 41.5% of total net revenues in 2025, up 2.8 percentage points from the previous year. Smoke-free shipment volumes climbed 12.8%, net revenues rose 15%, and gross profit surged 20.3%. Flagship brands like IQOS and ZYN led the charge, with IQOS now available in 106 markets worldwide and ZYN’s nicotine pouch volumes climbing 36.6% globally.

In the fourth quarter alone, SFP revenues reached over 50% in three of PMI’s four regions, with strong performances in both mature and emerging markets. This shift means nearly 43 million adult consumers have adopted PMI’s smoke-free alternatives, a gain of nearly 4.5 million since last year.

ZYN and IQOS Set New Benchmarks in Their Categories

IQOS continued to solidify its leadership in the heat-not-burn segment, holding a global volume share of around 76% and a 1 percentage point gain in total nicotine industry share to 9.6% in Q4. In the oral nicotine category, ZYN dominated growth with global shipment volumes reaching 794 million cans for 2025 (up 36.6%), and a 66% value share in the U.S.—the fastest-growing nicotine segment.

In Europe, IQOS achieved a double-digit market share in eight countries, and ZYN expanded to 55 countries globally. Both products remain critical to PMI’s aim of moving away from traditional cigarettes, with continued investment and innovation fueling gains even amid tougher competition.

Operating Margins and Profitability Reach New Highs

PMI’s operating results demonstrate robust margin expansion and disciplined management. For 2025, net revenues exceeded $40 billion, gross profit was $27.3 billion, and operating income reached $14.9 billion. Notably, adjusted diluted EPS rose 14.8% to $7.54, with growth outperforming previous targets and key organic metrics (EPS up 14.2% on a currency-neutral basis).

This outperformance also enabled PMI to deliver its three-year compound annual growth rate (CAGR) targets for operating income and EPS within just two years, aided by sustained growth in smoke-free products and productivity improvements across operations.

2026 Guidance Reaffirms Momentum with Expansion in Smoke-Free and Margins

Looking ahead, PMI forecasts reported diluted EPS of $7.87 to $8.02 (including a $0.51 adjustment), implying 11.1% to 13.1% growth versus 2025. Excluding currency impacts, adjusted diluted EPS is expected to rise between 7.5% and 9.5%. Notably, smoke-free product volumes are set for further high-single-digit growth in 2026, with organic net revenue growth of 5% to 7% and operating income growth of 7% to 9%.

PMI also targeted a net debt to adjusted EBITDA ratio of close to 2.0x by year-end 2026, and expects capital expenditures in the $1.4–1.6 billion range, supporting expansion of its smoke-free portfolio.

2026–2028 Targets: Strong Double-Digit Compounded Growth in Earnings

PMI’s medium-term (2026–2028) goals call for organic net revenue growth of 6% to 8% per year, operating income climbing 8% to 10%, and adjusted diluted EPS expanding 9% to 11% annually, excluding currency impacts. These ambitious targets align with PMI’s strategy to continue pivoting away from combustibles, grow global market share in heated tobacco and nicotine pouches, and drive sustainable shareholder value.

Segment Reorganization to Reflect Smoke-Free Scale and U.S. Expansion

With smoke-free reaching significant scale globally, PMI announced a new segment model for 2026: International Smoke-Free, International Combustibles, and U.S. This structure is intended to enhance focus and agility as the company pushes toward a smoke-free future and integrates recent U.S. acquisitions. Historical segment data (2023–2025) under the new structure will be provided for investor benchmarking.

Regional Insights—Smoke-Free Momentum Offsets Cigarette Declines

Geographically, Europe and SSEA, CIS & MEA regions led SFP volume growth, with Europe’s SFP shipments up 10.9% and SSEA, CIS & MEA up 14.1%. Americas also saw a notable 27.7% surge in SFP, primarily due to ZYN nicotine pouches’ explosive growth in the U.S. While traditional cigarette volumes declined in most mature markets, higher SFP penetration and pricing power mitigated these headwinds.

Dividend, Cash Flow, and Shareholder Value Remain Priorities

PMI reinforced its commitment to shareholder returns, declaring a regular quarterly dividend of $1.47/share (annualized $5.88) and projecting operating cash flow at approximately $13.5 billion for 2026. Further deleveraging is foreseen as operational efficiency improves and investments in smoke-free technology continue.

Key Takeaway: PMI’s Smoke-Free Pivot Delivers Scale, Margin, and Global Growth Tailwinds

Philip Morris International’s 2025 results highlight a successful transformation towards smoke-free products, with surging revenues from IQOS and ZYN driving profitability and a superior margin profile. With bold guidance and long-term targets rooted in double-digit earnings growth, PMI is poised to expand its global leadership as regulatory, consumer, and industry trends continue to shift away from combustibles.

For investors and industry watchers, PMI’s execution on its smoke-free vision sets a new standard in the global nicotine and wellness sector. The next chapters—marked by portfolio innovation, U.S. expansion, and ESG investment—will be closely watched as PMI pursues its goal of a smoke-free future.

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