Philip Morris' second quarter results for 2025 met non-GAAP earnings expectations but fell short of Wall Street’s revenue consensus, with the market reacting negatively. Management attributed quarterly performance to continued robust growth in smoke-free products, especially IQOS heated tobacco and ZYN nicotine pouches, which together offset challenges in the traditional cigarette business. CFO Emmanuel Babeau highlighted that, “multi-category momentum of our Smoke-Free business accelerated with a Q2 step up in offtake growth for IQOS, ZYN, and VEEV.” The company acknowledged modest declines in cigarette volumes, particularly in Indonesia and Turkey, but emphasized that strong pricing and operational efficiencies supported margins.
Is now the time to buy PM? Find out in our full research report (it’s free).
Philip Morris (PM) Q2 CY2025 Highlights:
- Revenue: $10.14 billion vs analyst estimates of $10.27 billion (7.1% year-on-year growth, 1.3% miss)
- Adjusted EPS: $1.91 vs analyst estimates of $1.86 (2.8% beat)
- Adjusted EBITDA: $4.59 billion vs analyst estimates of $4.39 billion (45.2% margin, 4.4% beat)
- Operating Margin: 36.6%, in line with the same quarter last year
- Market Capitalization: $245.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Philip Morris’s Q2 Earnings Call
- Gaurav Jain (Barclays) asked whether ZYN restocking below expectations signals a lower growth trajectory or altered shipment guidance. CFO Emmanuel Babeau clarified the impact was small, emphasizing resumed growth momentum and strong consumer uptake now that supply constraints are resolved.
- Eric Serrano (Morgan Stanley) inquired about IQOS Iluma’s U.S. FDA approval timeline and sustainability of international growth. Babeau said approval could occur in the second half but acknowledged timing uncertainty, and cited Europe’s regulatory normalization and new market entries as drivers of sustained growth.
- Matt Smith (Stifel) questioned the rationale for higher full-year guidance and the impact of second-half phasing and cost dynamics. Babeau explained that smoke-free momentum remains strong, but H2 faces tougher comparisons, less favorable phasing, and one-off benefits realized earlier in the year.
- Bonnie Herzog (Goldman Sachs) asked if the lower end of ZYN shipment guidance is now more realistic and about future promotional strategy. Babeau maintained confidence in the full guidance range and said all commercial levers, including increased promotions, are being deployed to accelerate growth now that supply constraints are lifted.
- Callum Elliott (Bernstein) probed the strategic shift to a three-category approach, especially improvements in VEEV margins and loyalty. Babeau said IQOS remains the priority, but VEEV’s profitability has improved by over 10 percentage points, supporting a multi-category strategy when consumer loyalty is demonstrated.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will watch (1) the pace of smoke-free product adoption, particularly IQOS and ZYN, in both established and new markets; (2) the impact of resumed commercial activity and increased capacity for ZYN in the U.S.; and (3) ongoing regulatory developments, especially EU excise proposals and U.S. FDA authorizations for new products. Margin progression and the company’s ability to manage combustible declines while scaling smoke-free categories will also be key focus areas.
Philip Morris currently trades at $157.85, down from $180.76 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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