Strong Top-Line and Revenue Growth
Net revenues exceeded $10 billion, up +9.1% reported and +2.7% organic for Q1 2026, outperforming expectations despite tough prior-year comparisons.
Philip Morris
· PM
April 22nd, 2026
Summary
- Earnings Call Date:
- 2026-04-22
- Change Since:
- +9.05%
- Next Earnings Date:
- 2026-07-22
Earnings Call Sentiment
PositiveThe call communicated a predominantly positive operational and financial performance driven by strong pricing power, significant international smoke-free momentum (IQOS, ZYN, VEEV), margin expansion and robust EPS growth. Notable challenges were concentrated in the U.S. (ZYN shipment normalization and promotional/comparative dynamics), temporary timing effects (Japan pantry loading, Nordic timing), regional regulatory and excise headwinds, and a near-term slowdown in total shipments. Overall the positives — clear smoke-free growth, pricing, margin gains, strong cash generation and reconfirmed guidance with an upgraded reported EPS outlook — materially outweigh the near-term and localized headwinds.
Company Guidance
The company reconfirmed its 2026 guidance: broadly stable shipment volumes, organic net revenue growth of +5% to +7%, organic operating income growth of +7% to +9% and currency‑neutral adjusted diluted EPS growth of +7.5% to +9.5%; at prevailing rates they now expect a $0.25 currency tailwind, lifting adjusted diluted EPS to $8.36–$8.51 (≈ +10.9%–12.9% in dollar terms), and they remain on track for full‑year organic margin expansion. Additional specifics include a full‑year cigarette volume decline of ~3%, continued strong global smoke‑free growth supported by high single‑digit volume progression, Q2 HTU shipments of 40–42 billion and mid‑single‑digit organic net revenue growth for Q2, a Q2 adjusted diluted EPS guide of $2.02–$2.07 (including a $0.02 favorable currency variance), an expectation of low‑single‑digit cigarette shipment decline in Q2, SG&A organic progression at or below net revenue growth for the year, and a continued plan to realize productivity and reinvestment while targeting more than a 6% combustible pricing variance for the year after Q1’s +8.5% combustible pricing.
Robust Profitability and EPS Expansion
Adjusted gross profit rose +10% to $6.9 billion (organic +3.8%) with +70 bps organic gross margin expansion. Adjusted operating income increased +10% to $4.2 billion (close to +1% organic). Adjusted diluted EPS grew +16% to $1.96 (including a $0.18 currency tailwind).
Exceptional International Smoke-Free Performance
International smoke-free delivered standout results: volume +11.9%, net revenue +15.8%, gross profit +19.4%, and gross margin expansion of 210 basis points to 70%. IQOS drove ~+10.9% adjusted in-market sales growth.
Smoke-Free Category Momentum and Scale
Global smoke-free: organic net revenue +5.3% and organic gross profit +3.9%. Smoke-free shipments increased +9.1%; HTUs rose +11% to 41.3 billion units; e-vapor shipments grew +95%. In-market smoke-free product sales volume increased +11%.
Strong Pricing and Mix Contribution
Pricing was the largest top-line driver, contributing +5 percentage points (combustible pricing +8.5%, international smoke repricing +2.9%). Smoke-free mix added +2.7 points; currency added +6.4 points to reported net revenue growth.
Operating Leverage, Margin Expansion and Cost Efficiencies
Adjusted operating income margin expanded by +40 basis points to over 41%. Company realized approximately $150 million of gross cost efficiency in Q1 and remains on track for full-year organic margin expansion.
Market Share and Launch Successes
IQOS reached record adjusted market share in Japan of 34.9%; Taiwan launch showed rapid adoption (national exit share ~6%, Taipei ~8% in March). VEEV became joint #1 in Europe (Q4 '25) and shipments exceeded 1 billion units for the quarter.
Reconfirmed and Upgraded FY26 Guidance (Reported EPS Tailwind)
Reconfirmed currency-neutral guidance: organic net revenue growth +5% to +7%, organic operating income growth +7% to +9%, currency-neutral adjusted diluted EPS +7.5% to +9.5%. At prevailing rates forecast updated adjusted diluted EPS of $8.36–$8.51 (reported +10.9% to +12.9%) with an expected $0.25 currency tailwind.
Sustainability and Governance Progress
Published value report 2025 and Value Plan 2030; highlighted progress on smoke-free expansion, underage access prevention, carbon neutrality in direct operations, eliminating systemic child labor in tobacco supply chain and anti-littering initiatives.
Operator
[Audio Gap] a strong start to the year with outstanding growth from our international smoke-free business and very robust pricing driving impressive progress despite a particularly strong prior year comparison for both the U.S. and combustibles. Income growth exceeded our expectations driving plus 10% adjusted OI growth and plus 16% adjusted diluted earnings per share growth to reach $1.96 International smoke-free delivered a striking performance with double-digit volume growth, mid-teens organic top line progression and high teens organic gross profit growth or almost plus 30% in in dollar terms. This was led by IQOS with close to plus 11% adjusted in-market sales growth alongside further multi-category accretion from ZYN [indiscernible] which reached the estimated joint #1 [indiscernible] position in Europe based on Nielsen of [indiscernible]. The financial performance of our combustible business was robust, delivering results in line with our midterm model with low single-digit organic top line growth and low to mid-single-digit organic gross profit growth. This was especially remarkable considering cigarette volume declines were at the more negative end of our expectations following a prior year period of volume growth due to a number of temporary factors. This reflects the enduring pricing power of our portfolio led by Marlboro alongside efficient cost management. In the U.S., ZYN offtake volumes grew by plus 10% despite an even competitive landscape.
As anticipated, segment financial performance was challenging due to the specific combination of impact this quarter, ...
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