Philip Morris International (PM) reported first-quarter 2026 results that exceeded expectations, with adjusted diluted EPS growing 16% and the company’s flagship IQOS product surpassing Marlboro in nicotine brand volume in the markets where both products compete. The headline reported EPS figure showed a decline, but that was driven entirely by a non-cash accounting adjustment, not by operations.
The IQOS Milestone: Surpassing Marlboro in the Markets That Matter
PMI’s most significant Q1 2026 development was competitive, not financial: IQOS passed Marlboro to become the number one nicotine brand by volume in markets where both products are present. In those markets, IQOS reached a 10.9% share of combined cigarette and heat-not-burn (HTU) industry volumes in Q1 2026, gaining 1.7 percentage points year-over-year. PMI holds approximately 77% volume share of the global heat-not-burn category.
HTU adjusted in-market sales (IMS) — which excludes estimated distributor inventory movements — grew 10.9% year-over-year, consistent with shipment volume growth of 11.3%. The geographic breadth of the gains was notable. In Japan, where heated tobacco accounts for approximately 53% of total national nicotine offtake, PMI’s HTU adjusted IMS grew an estimated 10.4%. IQOS holds close to 70% of the heat-not-burn segment there, with its adjusted IMS share of total nicotine reaching a record 34.9%. In Europe, IQOS HTU adjusted IMS grew approximately 5.4% and adjusted market share increased 1.1 percentage points to 12.6%. Outside Europe and Japan, adjusted IMS grew 19.4%, with strong momentum in Taiwan — PMI describes it as the most successful major launch market to date, reaching approximately 6% national offtake share in March 2026.
VEEV, PMI’s e-vapor brand, exceeded one billion equivalent units in shipments for the first time in a single quarter, growing 94.8% year-over-year. VEEV now shares the number one closed pod position in Europe.
PMI’s smoke-free products are now available in 108 markets. Smoke-free revenue accounted for 43% of total PMI net revenues in Q1 2026, up 1.3 percentage points year-over-year.
Financials: Adjusted EPS Up 16%, Reported EPS Down — What Explains the Gap
Total net revenues were $10.1 billion in Q1 2026, up 9.1% year-over-year (organic growth: +2.7%). The spread between reported and organic growth reflects currency tailwinds. Gross profit grew 10.1% year-over-year (organic: +3.8%), with gross margin expanding through pricing, operating leverage, and smoke-free product mix. Operating income grew 9.8% year-over-year to $3.9 billion (organic: +0.9%).
The gap between reported and adjusted EPS requires explanation:
EPS Summary — Q1 2026 (GAAP and Non-GAAP)
Q1 2026
Q1 2025
Change
Reported Diluted EPS (GAAP)
$1.56
$1.72
-9.3%
Fair value adjustment — equity security (non-cash)
+$0.22
-$0.09
—
Intangible amortization
+$0.12
+$0.12
—
Restructuring charges
+$0.01
—
—
Swedish Match AB financing tax impact
+$0.05
-$0.06
—
Adjusted Diluted EPS (non-GAAP)
$1.96
$1.69
+16.0%
Adjusted Diluted EPS excl. currency (non-GAAP)
$1.78
$1.69
+5.3%
All non-GAAP figures per PMI earnings release, April 22, 2026.
The reported EPS decline from $1.72 to $1.56 is explained by a $0.22 per share non-cash, mark-to-market adjustment on PMI’s minority stake in an Indian company — a purely accounting item with no cash flow impact. Excluding that adjustment and other standard non-GAAP items, adjusted EPS grew 16% to $1.96, beating consensus of approximately $1.89.
Q1 2026 Segment Revenue and Gross Profit
Net Revenue
Revenue vs. Q1 2025
Organic Revenue
Gross Profit
GP vs. Q1 2025
International Smoke-Free
$3.8B
+24.7%
+15.8%
$2.7B
+28.6%
International Combustibles
$5.7B
+6.8%
+1.0%
$3.8B
+9.8%
U.S. Segment
$0.6B
-30.8%
-31.6%
$0.4B
-44.5%
Total PMI
$10.1B
+9.1%
+2.7%
$6.9B
+10.1%
All figures are GAAP unless otherwise noted. Source: PMI Q1 2026 press release.
International combustibles volumes declined 5.1% year-over-year, following exceptional prior-year growth, but revenue and gross profit grew due to strong pricing (+8.5% in Q1). Marlboro continued to gain share, reaching a record 10.7% first-quarter category share globally.
ZYN in the U.S.: Inventory Normalization vs. Underlying Demand
The U.S. segment was the one clear soft spot. U.S. net revenues fell 30.8% year-over-year to $0.6 billion. ZYN shipments dropped 23.5% to 2.3 billion pouches (approximately 155 million cans). Total U.S. smoke-free volumes fell 21.2%.
PMI was explicit in attributing the decline to channel inventory normalization, not a demand problem. The company had flagged this dynamic in its February 2026 earnings call. Underlying ZYN consumer offtake — estimated by Nielsen — grew approximately 10% year-over-year. The shipment decline reflects distributors and retailers reducing inventories that had been elevated, combined with a challenging promotional comparison from the prior year. PMI uses a Q1 2025 base of approximately 160 million cans as an estimate of underlying offtake-linked shipments to contextualize the comparison.
The regulatory environment for ZYN remains active. ZYN ULTRA is under FDA review as part of the nicotine pouch pilot program. PMI also noted that its U.S. competitive position is constrained by limited access to certain flavor and strength segments where the category is growing fastest. ZYN is available in 58 markets globally, with notable offtake share gains in Pakistan, Poland, and the UK.
U.S. Segment — ZYN Key Metrics
Q1 2026
Change vs. Q1 2025
ZYN shipments
2.3B pouches (155M cans)
-23.5%
Total U.S. smoke-free volumes
2.8B eq. units
-21.2%
U.S. segment net revenue
$0.6B
-30.8%
Underlying ZYN offtake (Nielsen est.)
+10%
—
All figures per PMI Q1 2026 press release. Offtake is Nielsen estimate.
2026 Outlook: What $8.36–$8.51 Guidance Requires to Land
PMI updated its 2026 full-year guidance on April 22, 2026, adjusting solely for currency movements. The underlying operational guidance was unchanged. The key targets:
Adjusted diluted EPS: $8.36 to $8.51, representing growth of 10.9% to 12.9% from $7.54 in 2025
Currency-neutral adjusted EPS growth: 7.5% to 9.5%
Organic net revenue growth: 5% to 7%
Adjusted operating income growth: 7% to 9%
The guidance implies that international smoke-free momentum must continue at broadly current rates while ZYN’s U.S. volume normalizes toward underlying demand. The Middle East conflict was cited as a small headwind in Q1 for Global Travel Retail shipments, though PMI said it has not yet observed a discernible shift in consumer behavior.
PMI’s market capitalization stood at $256.17 billion as of April 24, 2026, based on a share price of approximately $164.28.
Key Signals for Investors
IQOS overtaking Marlboro in combined nicotine volume across key markets is a milestone that matters: it validates PMI’s thesis that product substitution at scale is achievable, not just directionally promising.
The 16% adjusted EPS growth in Q1 2026 is the operational number investors should focus on; the 9.3% reported EPS decline is entirely a non-cash, mark-to-market accounting item and has no cash flow or dividend impact.
ZYN U.S. offtake is growing at 10% even as shipment volumes are down 23.5% — the gap is temporary inventory normalization; resolution will depend on channel restocking pace and FDA progress on ZYN ULTRA authorization.
The 2026 EPS guidance ($8.36–$8.51) was updated only for currency, leaving the operational framework intact — management appears confident in sustaining double-digit EPS growth despite ongoing Middle East and regulatory uncertainty.
The biggest forward risk is regulatory: the characterizing flavor ban in Poland and potential broader EU restrictions on smoke-free products, combined with FDA’s pace on U.S. product authorizations, represent the variables that could most materially shift the growth trajectory.
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