Philip Morris (PM) Q3 2025 Earnings: Smoke-Free Products Power Growth

Philip Morris International (PMI), the global tobacco giant behind brands like Marlboro, is in the midst of a massive transformation, shifting its focus from traditional cigarettes to what it calls "smoke-free products" (SFPs) like the heated-tobacco system IQOS and the nicotine pouch ZYN. To understand how this strategic pivot is playing out, we're diving into the company's latest quarterly report filed with the SEC for the period ending September 30, 2025. The numbers reveal a company gaining significant momentum, largely powered by its new generation of products.

For the third quarter of 2025, PMI reported strong growth across the board. Net revenues climbed 9.4% year-over-year to $10.8 billion, while operating income saw an impressive 16.7% jump to $4.3 billion. This translated to a diluted earnings per share (EPS) of $2.23, up 13.2% from the same period last year. The nine-month figures tell a similar story, with revenues up 7.5% to $30.3 billion.

The Smoke-Free Growth Engine

The driving force behind these results is clear: the accelerating adoption of smoke-free products. For the first nine months of 2025, revenues from SFPs surged by 16% to $12.5 billion, while revenue from traditional combustible tobacco products grew by a modest 2.2%.

This shift is even more pronounced when looking at shipment volumes. While cigarette shipments fell by 1.3% over the nine-month period, shipments of Heated Tobacco Units (HTUs) for devices like IQOS jumped by 12.2%. This trend highlights a fundamental change in the company's business mix. In fact, smoke-free products now account for over 41% of PMI's total net revenues, a significant milestone in its transition away from cigarettes.

The following flow diagram visualizes how the company's revenues from its various product categories and geographic segments translate into its bottom-line earnings for the third quarter of 2025.

Regional Performance Breakdown

A closer look at PMI's geographic segments reveals where this growth is coming from. The Europe region was a standout performer, with nine-month operating income rising 9.5% to $5.3 billion, driven by favorable pricing and strong SFP performance. The East Asia, Australia, and PMI Global Travel Retail (EA, AU & PMI GTR) segment also delivered robust results, with operating income climbing 13.4% to $2.6 billion, largely thanks to strong HTU volume in Japan.

However, the Americas region presented a more mixed picture. While nine-month operating income grew 18.6%, this was primarily due to favorable volume/mix from the fast-growing ZYN nicotine pouches in the U.S. In the third quarter, the segment's operating income actually fell sharply by 76.6% to just $32 million, which the company attributed to unfavorable pricing and higher costs. This highlights that while the SFP transition is a powerful tailwind, regional market dynamics can still create significant volatility.

Looking Ahead

Philip Morris International's latest financial report paints a clear picture of a company successfully navigating a profound industry shift. The strategic pivot to smoke-free products is not just a plan—it's now the primary driver of the company's financial performance. While traditional cigarettes still contribute the majority of revenue, the momentum has decisively shifted to next-generation products.

The key challenge for PMI will be to sustain this growth while managing a complex and ever-changing global regulatory landscape for tobacco and nicotine products. As the results from the Americas show, the path forward may not be uniform across all markets. Nonetheless, with over 40% of its business now coming from smoke-free alternatives, PMI's transformation is well underway.