IQOS profitability continues to expand as we invest consistently behind the brand, driven by a growing contribution from pricing, continued scale benefits and productivity improvements across both consumables and device costs.
— Jacek Olczak
03Detailed Report
4I1.DE
Company 4I1.DE
Period
Q1 2026
CurrencyUSD
Report TypeQuarterly Earnings
GeneratedJun 7, 2026
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Executive Summary
Summary of QQ1 2026 performance highlights PMI delivered a solid start to 2026. Reported net revenues of $10.15 billion rose 9.1% year over year, aided by strong pricing and a favorable mix shift toward smoke-free products, particularly IQOS, ZYN and VEEV. Adjusted gross profit increased ~10% to $6.91 billion and adjusted operating income grew ~10% to $4.21 billion, supported by a currency tailwind and ongoing cost discipline. International smoke-free operations posted standout results with roughly 12% volume growth and high‑teens dollar revenue growth, helping to push gross margin expansion of about 210 basis points in the segment and contributing to an overall robust margin profile despite headwinds in the US and combustibles. Management reiterated confidence in full-year 2026 organic margin expansion and currency-neutral growth metrics, while guiding for continued smoke-free investments, innovation rollouts, and new product initiatives (e.g., ZYN Ultra, IQOS by IQOS Bonds). Net income declined modestly versus the prior year on a reported basis (net income of $2.44B, down ~9% YoY) reflecting base effects and higher profitability in prior-year periods, with quarterly uplift visible in a positive QoQ comparison of earnings per share. The company maintains a long-duration strategic pivot to smoke-free products as the core growth engine, supported by a strong balance sheet, resilient pricing power, and a disciplined approach to operating and manufacturing efficiency. Investors should monitor: (1) the trajectory of US nicotine pouch adoption and regulatory developments, (2) cigarette volumes and illicit trade dynamics, (3) operating cash flow conversion and working capital movements, and (4) the pace of international smoke-free expansion and margin capture across IQOS, ZYN and VEEV.
Key Performance Indicators
Revenue
Increasing
10.15B
QoQ: -2.08% | YoY: 9.09%
Gross Profit
Increasing
6.91B
68.06% margin
QoQ: 1.51% | YoY: 10.29%
Operating Income
Increasing
3.89B
QoQ: 15.42% | YoY: 9.85%
Net Income
Decreasing
2.44B
QoQ: 13.87% | YoY: -9.37%
EPS
Decreasing
1.56
QoQ: 13.87% | YoY: -9.30%
Revenue Trend
Margin Analysis
Financial Highlights
PMI QQ1 2026 key metrics and interpretation:
- Revenue: $10.146B; YoY +9.1%; QoQ -2.1%. Reported revenue benefited from price/mix and favorable forex, with organic growth around +2.7%.
- Gross Profit: $6.905B; YoY +10.3%; QoQ +1.5%; Gross margin ~68.06% (from 68.06% in the dataset), with international smoke-free gross margin expansion contributing meaningfully (210 bps in the segment).
- Operating Income: $3.893B; YoY +9.9%; QoQ +15.4%; Operating margin ~38.37% (0.3837).
- Net Income: $2.439B; YoY -9.4%; QoQ +13.9%; Net income margin ~24.03%.
- EPS: $1.56; YoY -9.3%; QoQ +13.9%; Diluted EPS driven by a ~+$0.18 currency tailwind in Q1.
- Cash Flow: Operating cash flow of -$0.399B and free cash flow of -$0.752B; cash cycle and working capital changes were a material drag in Q1, with inventories and accounts payable/tax timing impacting cash generation.
- Balance Sheet signals: Total assets $68.9B; total liabilities $76.2B; stockholders’ equity negative at -$9.28B, alongside net debt of $46.5B. Liquidity remains adequate (cash $5.45B) but leverage is elevated; note that PMI discusses a disciplined approach to funding growth via back-office scale and cost efficiency initiatives.
- Segment and product mix: International smoke-free volumes +11% (IMS) with in-market sales growth +10.9% for IQOS; ZYN and VEEV contributed to multi-category momentum; Cigarette volumes declined at the high end of expectations but pricing power offset volume headwinds.
- Guidance and expectations: 2026 currency-neutral growth trajectory reaffirmed with net revenue +5% to +7%, organic operating income +7% to +9%, and currency-neutral adjusted EPS +7.5% to +9.5%; currency tailwind of about $0.25 per share expected; Q2 guidance includes HTU shipments of 40–42 billion and mid-single-digit organic net revenue growth.
- Market dynamics and management tone: PMI emphasises the durable growth profile of its smoke-free portfolio and the long-run potential of IQOS, ZYN and VEEV as it expands into additional markets and categories.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
10.15B
9.09%
-2.08%
Gross Profit
6.91B
10.29%
1.51%
Operating Income
3.89B
9.85%
15.42%
Net Income
2.44B
-9.37%
13.87%
EPS
1.56
-9.30%
13.87%
Key Financial Ratios
Management Insights Available for Members
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