Philip Morris International Inc. (NYSE: PM)
Q1 2025 Financial Analysis | April 23, 2025
Executive Summary
Philip Morris International Inc. (NYSE: PM) reported exceptionally strong performance for the first quarter of 2025, with continued volume growth supporting excellent top-line performance and very strong margin expansion. The company raised its 2025 full-year adjusted diluted EPS forecast for currency only, now projecting dollar-term double-digit growth. PMI's smoke-free business continues to strengthen, accounting for 42% of total net revenues and 44% of total gross profit, with impressive growth of 14.4% in shipment volumes, 15.0% (20.4% organically) in net revenues, and 27.7% (33.1% organically) in gross profit.
Q1 2025 Highlights
Financial Performance
Philip Morris International delivered an exceptionally strong first quarter, with organic net revenue growth of 10.2% driven by favorable pricing and volume/mix. The company's adjusted operating income increased by 16.0% on an organic basis, reflecting the same factors as net revenues, partially offset by higher marketing, administration, and research costs. Adjusted operating income margin expanded by 2.5 percentage points to 40.7%, demonstrating PMI's ability to translate revenue growth into even stronger profit performance. Reported diluted EPS of $1.72 grew by 24.6%, while adjusted diluted EPS of $1.69 increased by 12.7%, or 17.3% excluding unfavorable currency impacts of $0.07. This strong financial performance, particularly in the smoke-free segment, positions PMI well for continued success throughout 2025.
Business Segment Performance
Business Segment | Q1'25 Net Revenue ($B) | % of Total | YoY Growth (Reported) | YoY Growth (Organic) |
---|---|---|---|---|
Smoke-Free Business | $3.9 | 42% | 15.0% | 20.4% |
Combustibles | $5.4 | 58% | 0.0% | 3.8% |
Total | $9.3 | 100% | 5.8% | 10.2% |
PMI's smoke-free business continues to be the primary growth driver, accounting for 42% of total net revenues and 44% of total gross profit. The segment delivered impressive growth with net revenues up 15.0% (20.4% organically) and gross profit up 27.7% (33.1% organically). This performance reflects the continued strength and consumer adoption of PMI's smoke-free products across all categories, including heat-not-burn, oral products, and e-vapor. Meanwhile, the combustibles business demonstrated resilience with organic net revenue growth of 3.8% and gross profit growth of 5.3%, driven by strong pricing and moderate volume growth of 1.1%, partially offset by unfavorable geographic mix. This balanced performance across both segments underscores PMI's successful strategy of growing its smoke-free business while maintaining strong performance in its traditional products.
Product Category Performance
Product Category | Q1'25 Shipment Volume | YoY Growth | Market Share/Notes |
---|---|---|---|
Heated Tobacco Units (HTU) | 37.1 billion units | 11.9% | IQOS HTU share up 0.6pp to 5.7% internationally |
Oral Smoke-Free Products | 318 million cans | 31.0% | ZYN in U.S. exceeded 200 million cans (53% growth) |
E-Vapor Products | 0.6 billion units | >100% | Driven by growth in Europe |
Cigarettes | 144.8 billion units | 1.1% | Market share up 0.4pp to 24.8% globally |
Total PMI | 187.8 billion units | 3.9% | Total international share up 0.7pp to 28.6% |
HTU Performance Highlights
Oral Products Performance Highlights
PMI's product portfolio showed strong performance across all categories in Q1 2025. Heated Tobacco Units (HTUs) shipment volume grew 11.9% to 37.1 billion units, with IQOS continuing to strengthen its position as the second-largest nicotine brand in markets where present. In Japan, IQOS HTU market share increased to a record 32.2%, with the HTU category exceeding 50% share in 13 major cities. Oral smoke-free products saw impressive growth of 31.0% to 318 million cans, driven primarily by ZYN nicotine pouches in the U.S., which exceeded 200 million cans (53% growth). E-vapor products more than doubled in shipment volume, fueled by growth in Europe and further gross margin expansion. Even the traditional cigarette business showed resilience with 1.1% volume growth and market share increasing by 0.4 percentage points to 24.8%. This balanced growth across all product categories underscores PMI's successful strategy of offering a diverse portfolio of smoke-free alternatives while maintaining its traditional business.
Regional Performance
Region | Q1'25 Net Revenue ($B) | YoY Growth (Reported) | YoY Growth (Organic) | Adjusted Operating Income Growth (Organic) |
---|---|---|---|---|
Europe | $3.56 | 3.0% | 8.6% | 4.8% |
SSEA, CIS & MEA | $2.74 | 3.2% | 6.5% | 13.9% |
EA, AU & PMI GTR | $1.73 | 2.8% | 6.5% | 22.8% |
Americas | $1.27 | 27.2% | 32.0% | 56.4% |
Total PMI | $9.30 | 5.8% | 10.2% | 16.0% |
PMI delivered strong performance across all geographic regions in Q1 2025. The Americas region led growth with organic net revenue increase of 32.0% and adjusted operating income growth of 56.4%, primarily driven by the exceptional performance of ZYN nicotine pouches in the U.S. Europe, which represents the largest portion of PMI's business, saw organic revenue growth of 8.6% and adjusted operating income growth of 4.8%, reflecting favorable pricing and higher smoke-free product volumes, partially offset by higher marketing and administrative costs. The EA, AU & PMI GTR region (East Asia, Australia & PMI Global Travel Retail) achieved impressive organic adjusted operating income growth of 22.8%, driven by higher smoke-free products volume. The SSEA, CIS & MEA region (South & Southeast Asia, Commonwealth of Independent States & Middle East and Africa) delivered 13.9% organic growth in adjusted operating income, primarily reflecting favorable pricing and higher cigarette and HTU volumes. This balanced regional performance demonstrates PMI's global strength and effective execution of its smoke-free strategy across diverse markets.
Outlook & Guidance
2025 Full-Year Guidance
Volume & Operational Outlook
Philip Morris International has raised its 2025 full-year adjusted diluted EPS forecast for currency only, now projecting growth of 12.0% to 14.0% to reach $7.36 to $7.49, compared to $6.57 in 2024. Excluding a favorable currency impact of $0.10, adjusted diluted EPS is expected to grow by 10.5% to 12.5%. The company projects organic net revenue growth of around 6% to 8% and organic operating income growth of 10.5% to 12.5%. PMI expects total shipment volume growth of up to 2%, driven by smoke-free products volume growth of 12% to 14%. The company anticipates that U.S. nicotine pouch shipment volume will accelerate to reach 800 to 840 million cans, representing growth of 38% to 45%. For Q2 2025, PMI forecasts adjusted diluted EPS of $1.80 to $1.85, including an estimated favorable currency impact of 6 cents. The company also expects further improvement in its net debt to adjusted EBITDA ratio as it continues to target a ratio of around 2x by the end of 2026. This strong guidance reflects PMI's confidence in its ability to deliver superior results despite an uncertain and volatile global economic environment.
Risks & Opportunities
Risks
Opportunities
Conclusion
Performance Highlights
- Exceptional Q1 results with 10.2% organic revenue growth
- Smoke-free business now accounts for 42% of revenues, 44% of gross profit
- Strong volume growth across all product categories
- Significant margin expansion with adjusted operating income margin up 2.5pp
Strategic Position
- Accelerating transformation to smoke-free future
- Multi-category portfolio of smoke-free products deployed in 46 markets
- IQOS leadership in heat-not-burn with 77% global volume share
- ZYN dominance in U.S. nicotine pouch category with accelerating growth
Summary
Philip Morris International delivered an exceptionally strong first quarter in 2025, with continued volume growth supporting excellent top-line performance and very strong margin expansion. The company's smoke-free business continues to drive growth, with significant increases in both volumes and profitability across its portfolio of IQOS heated tobacco products, ZYN nicotine pouches, and VEEV e-vapor products. With smoke-free products now accounting for 42% of total revenues and 44% of gross profit, PMI's transformation to a predominantly smoke-free company is progressing rapidly. The raised full-year guidance, projecting double-digit adjusted EPS growth in dollar terms, reflects the company's confidence in its ability to deliver superior results despite an uncertain global economic environment. PMI's multi-category approach, geographic diversification, and continued innovation position the company well for sustainable long-term growth as it advances its vision of a smoke-free future.
