Third Quarter 2026 and First Nine-Months 2026
Filed Oct 21, 2026Third-quarter reported diluted EPS declined by 4.9% to $2.12; adjusted diluted EPS grew by 5.4% to $2.36; and by 5.8% excluding currency.
Third-quarter net revenues, gross profit and operating income reached record quarterly highs, with 7.1% organic net revenue growth, 10.5% organic operating income growth and adjusted diluted EPS growth of 5.4%.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 total shipment volumeother | 206.2 billion equivalent units | – | 0.6% |
| Q3 2026 cigarette shipment volumeother | 158.0 billion equivalent units | – | —% |
| Q3 2026 SFP shipment volumeother | 48.2 billion equivalent units | – | 2.7% |
| Q3 2026 HTU shipment volumeother | 41.5 billion units | – | 1.5% |
| Q3 2026 oral SFP shipment volumeother | 5.3 billion equivalent units | – | 1.8% |
| Q3 2026 e-vapor shipment volumeother | 1.4 billion equivalent units | – | 61.6% |
| Q3 2026 net revenuesGAAP | $11.44B | – | 5.5% |
| Q3 2026 net revenues organic growthnon-GAAP | 7.1% | – | 7.1% |
| Q3 2026 gross profitGAAP | $7.85B | – | 6.7% |
| Q3 2026 adjusted gross profitnon-GAAP | $7.86B | – | 6.7% |
| Q3 2026 adjusted gross profit marginnon-GAAP | 68.7% | – | 0.8pp |
| Q3 2026 operating incomeGAAP | $4.87B | – | 14.1% |
| Q3 2026 adjusted operating incomenon-GAAP | $5.12B | – | 9.6% |
| Q3 2026 adjusted operating income marginnon-GAAP | 44.7 % | – | 1.6pp |
| Q3 2026 reported diluted EPSGAAP | $2.12 | – | (4.9)% |
| Q3 2026 adjusted diluted EPSnon-GAAP | $2.36 | – | 5.4% |
| Q3 2026 adjusted diluted EPS, excluding Currencynon-GAAP | $2.37 | – | 5.8% |
| First Nine-Months 2026 total shipment volumeother | 595.6 billion equivalent units | – | 0.5% |
| First Nine-Months 2026 cigarette shipment volumeother | 452.2 billion equivalent units | – | (1.2)% |
| First Nine-Months 2026 SFP shipment volumeother | 143.4 billion equivalent units | – | 6.4% |
| First Nine-Months 2026 HTU shipment volumeother | 124.5 billion equivalent units | – | 6.7% |
| First Nine-Months 2026 oral SFP shipment volumeother | 14.9 billion equivalent units | – | (5.3)% |
| First Nine-Months 2026 e-vapor shipment volumeother | 4.0 billion equivalent units | – | 68.1% |
| First Nine-Months 2026 net revenuesGAAP | $32.78B | – | 8.2% |
| First Nine-Months 2026 net revenues organic growthnon-GAAP | 5.9% | – | 5.9% |
| First Nine-Months 2026 gross profitGAAP | $22.42B | – | 9.4% |
| First Nine-Months 2026 adjusted gross profitnon-GAAP | $22.44B | – | 9.4% |
| First Nine-Months 2026 adjusted gross profit marginnon-GAAP | 68.5% | – | 0.8pp |
| First Nine-Months 2026 operating incomeGAAP | $13.29B | – | 15.4% |
| First Nine-Months 2026 adjusted operating incomenon-GAAP | $14.06B | – | 10.6% |
| First Nine-Months 2026 adjusted operating income marginnon-GAAP | 42.9 % | – | 0.9pp |
| First Nine-Months 2026 reported diluted EPSGAAP | $5.48 | – | (7.0)% |
| First Nine-Months 2026 adjusted diluted EPSnon-GAAP | $6.52 | – | 11.8% |
| First Nine-Months 2026 adjusted diluted EPS, excluding Currencynon-GAAP | $6.32 | – | 8.4% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| International Smoke-Free Segment2.7% shipment volume growth and a favorable volume/mix driven by higher HTU and e-vapor volumes, partly offset by currency and a challenging HTU comparison due to shipment phasing, notably in Japan. | $3.87B | – | 0.7% |
| International Combustibles SegmentAnother quarter of 8.9% pricing, favorable restructuring of distribution terms in certain markets and broadly flat shipment volume, partly offset by unfavorable geographic mix. | $6.72B | – | 6.5% |
| U.S. SegmentGrowing ZYN shipments of 4.2%, favorable price comparisons against prior-year promotions, and growth in the Wellness business and cigars. | $845M | – | 22.7% |
2026 Full-Year Forecast outlook
- RevenueNet revenue growth of 5% to 7% on an organic basis
- Tax rateAn effective tax rate, excluding discrete tax events, of around 21.5%
- NoteReported diluted EPS of $7.11 - $7.26
- NoteAdjusted Diluted EPS of $8.29 - $8.44
- NoteAdjusted Diluted EPS, excluding currency of $8.11 - $8.26
- NoteOrganic operating income growth of 7% to 9%
- NoteGrowing total PMI cigarette and SFP shipment volume, with high single-digit SFP shipment growth
- NoteOperating cash flow around $13.5 billion at prevailing exchange rates, subject to year-end working capital requirements
- NoteCapital expenditures of $1.4 to $1.6 billion
- NoteFurther net debt to adjusted EBITDA ratio improvement as we target a ratio of close to 2.0x by the end of 2026, at prevailing exchange rates
- NoteNo share repurchases
Capital returns
- Increased regular quarterly dividend by 8.8% to $1.60 per share, or an annualized $6.40 per share.
- No share repurchases.
What drove it
- Third-quarter net revenues increased by 7.1% organically, mainly reflecting a favorable pricing variance driven by international combustibles and the U.S. segment.
- Third-quarter organic operating income increased by 10.5%, largely reflecting the same factors as net revenues.
- SFP adjusted in-market sales grew by high single digits, while HTU adjusted IMS grew by 7.1%.
- International combustibles organic revenue growth reflected favorable pricing variance and distribution-term restructuring in certain markets.
- VEEV quarterly shipments increased by 61.6%.
- ZYN ULTRA, new flagship dry flavors, 1.5mg and 8mg flagship variants supported U.S. ZYN shipment growth.
Concerns
- The favorable restructuring of distribution terms in certain markets is not expected to recur at the same level in future quarters.
- Energy-related inflation drove incremental cost pressures in the third quarter, and PMI expects a slightly higher impact in the fourth quarter.
- Ukraine-related strikes disrupted supply chain and logistics infrastructure in certain locations and are expected to affect operating income this year.
- PMI plans to further increase U.S. investments in the fourth quarter to support ZYN, including consumer communications and transitional support programs for the move to 20-pouch cans.
- The first nine months U.S. segment recorded organic net revenue growth of (5.5)%, organic gross profit growth of (14.6)% and adjusted OCI organic growth of (41.1)%.
What to watch
- Fourth-quarter reacceleration in international smoke-free net revenue growth.
- The impact of energy-related input-price increases on fourth-quarter operating income.
- The scale and return profile of increased U.S. commercial investments behind the ZYN portfolio expansion.
- Whether total PMI cigarette and SFP shipment volume grows for the full year.
- Progress toward a net debt to adjusted EBITDA ratio of close to 2.0x by the end of 2026.
Balance sheet and cash flow
- Operating cash flow around $13.5 billion at prevailing exchange rates, subject to year-end working capital requirements.
- Capital expenditures of $1.4 to $1.6 billion, predominantly supporting the smoke-free business.
- Further net debt to adjusted EBITDA ratio improvement as we target a ratio of close to 2.0x by the end of 2026, at prevailing exchange rates.
Analysis
PMI reported a strong third quarter, with net revenues of $11,438 million, up 5.5%, and 7.1% organic growth. Gross profit rose 6.7% to $7,854 million and operating income increased 14.1% to $4,866 million. The quarter set new records for net revenue, gross profit and operating income. Adjusted operating income was $5,117 million, while adjusted operating income margin expanded to 44.7 % from 43.1 %.
Volume performance was positive despite a broadly flat cigarette base. Total shipment volume increased 0.6% to 206.2 billion equivalent units, supported by 2.7% growth in SFP volume. HTU shipment volume grew 1.5% to 41.5 billion units and HTU adjusted IMS rose 7.1%. Oral SFP volume rose 1.8%, while e-vapor volume increased 61.6%. Smoke-free products accounted for more than 40% of third-quarter total net revenues.
International combustibles was the principal earnings contributor, producing 6.5% revenue growth and 8.6% gross-profit growth. The segment benefited from 8.9% pricing and favorable distribution-term restructuring in certain markets, although PMI said that benefit is not expected to recur at the same level in future quarters. International smoke-free revenue growth was more modest at 0.7% reported and 3.4% organic, reflecting shipment phasing in Japan, even as adjusted IMS accelerated to 8.0%. The U.S. business delivered 22.7% revenue growth and 24.2% gross-profit growth, but operating companies income declined 3.3% as PMI increased commercial investments behind ZYN.
Reported diluted EPS declined 4.9% to $2.12 because of, among other items, the non-cash fair value adjustment for equity security investments. Adjusted diluted EPS increased 5.4% to $2.36, and adjusted diluted EPS excluding currency grew 5.8% to $2.37. For the first nine months, net revenues reached $32,776 million, adjusted diluted EPS was $6.52 and adjusted diluted EPS excluding Currency was $6.32.
The full-year adjusted diluted EPS outlook was updated for currency only to $8.29 - $8.44, with adjusted diluted EPS excluding currency of $8.11 - $8.26. PMI forecast 5% to 7% organic revenue growth and 7% to 9% organic operating income growth, while noting greater fourth-quarter energy-related cost pressure, Ukraine-related disruption and increased U.S. growth investment. The company also raised its regular quarterly dividend by 8.8% to $1.60 per share and maintained guidance for no share repurchases.
Management, verbatim
We delivered another excellent quarter, with growing total volumes, double-digit organic operating income growth and robust margin expansion.
Jacek Olczak, Group CEO PMI
With continued strong offtake momentum for our smoke-free brands and the exceptional results of our combustible business, we are in a strong position to continue delivering best-in-class performance, and firmly on track for a sixth consecutive year of volume growth.
Jacek Olczak, Group CEO PMI
Not in the filing
stated, not guessed- Q3 2026 GAAP net income
- First Nine-Months 2026 GAAP net income
- Q3 2026 operating cash flow
- First Nine-Months 2026 operating cash flow
- Q3 2026 free cash flow
- First Nine-Months 2026 free cash flow
- Period-end cash balance
- Period-end debt balance
- Prior-quarter figures for reported financial metrics
- Prior guidance comparison, because a previous outlook section was not provided
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.