Airport sales and international expansion
Global travel retail was one of several markets recording strong double-digit growth in IQOS shipments in Q3, PMI said on its earnings call. Germany, Greece, Spain, Indonesia, the U.K. and the Netherlands also recorded growth at that pace. The brand's airport presence includes exclusive activations such as the IQOS ILUMA i Skylens experience at Japan's Narita Airport.
PMI also identified travel retail, Poland and the Philippines as promising growth markets for ZYN nicotine pouches. ZYN's international footprint now spans 62 markets. International shipments totaled 1.5 billion pouches in the first nine months, an increase of 6.3% on a like-for-like basis, with Q3 shipments rising 7% sequentially.
For VEEV, PMI reported promising results in travel retail, Indonesia, Egypt, Malaysia and South Korea, where the brand launched in August. The company said the e-vapor brand also strengthened its leadership position in Europe. VEEV shipments increased 61.6% year over year in Q3; over the first nine months, they rose 68% to 4.0 billion equivalent units.
Smoke-free products exceed 40% of quarterly revenue
PMI's results, announced October 21, put Q3 net revenue at $11.4 billion, up 5.5%, or 7.1% on an organic basis. Smoke-free products generated more than 40% of quarterly net revenue and approximately 42% for the first nine months of 2026.
The company's smoke-free portfolio is available in 110 markets. In more than 30 markets, those products account for a majority of net revenue.
Worldwide IQOS heated tobacco unit shipments reached 41.5 billion in Q3, up 1.5% from a year earlier and at the high end of PMI's previously disclosed expectations. Adjusted in-market sales grew faster, at 7.1%, or 10% excluding Japan and Poland. PMI said it accounts for around three-quarters of global heated tobacco unit volume.
Operating income increased 14.1% to $4.9 billion, with organic growth of 10.5%. Adjusted diluted earnings per share rose 5.4% to a quarterly record of $2.36. Reported diluted EPS, however, fell 4.9% to $2.12, mainly because of a non-cash fair value adjustment on equity security investments.
CEO Jacek Olczak described the results as "another excellent quarter" and said PMI remained on course for its sixth consecutive year of volume growth. The company increased its regular quarterly dividend by 8.8% to $1.60 per share, equivalent to an annualized $6.40. It was PMI's 19th consecutive annual dividend increase.
U.S. ZYN packaging shift and authorizations
PMI is moving most of its U.S. ZYN flagship portfolio from 15-pouch cans to 20-pouch cans starting in October 2026. The company said the change translates to approximately 25% less revenue per pouch.
For Q4, PMI expects unusually low U.S. profitability, with adjusted operating companies income around zero or slightly negative. U.S. segment selling, general and administrative expenses were about $370 million in Q3 and are expected to rise roughly 10% sequentially in Q4.
PMI also reported that the U.S. Food and Drug Administration granted premarket tobacco product application (PMTA) authorization to 11 ZYN ULTRA variants on August 21. That brought ZYN's total to 31 authorized variants, which PMI said was more than any other nicotine brand on the market. The decision followed modified risk tobacco product (MRTP) authorization for 20 ZYN flagship variants on June 30.
Full-year outlook and cost pressures
PMI forecast full-year 2026 adjusted diluted EPS of $8.29 to $8.44, representing approximately 10% to 12% growth in dollar terms, and organic net revenue growth of 5% to 7%. It said results were more likely to fall in the middle or lower half of both ranges. For Q4, it guided to heated tobacco unit shipments of 39.5 billion to 40.5 billion.
Energy-related inflation tied to the ongoing Middle East conflict increased costs in Q3, with a slightly greater impact expected in Q4. Strikes in Ukraine also disrupted PMI's supply chain and logistics. The company estimated that each factor would reduce full-year adjusted diluted EPS growth by about half a percentage point, for a combined impact of approximately one percentage point.
