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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-33708

Philip Morris International Inc.

(Exact name of registrant as specified in its charter)


Virginia			13-3435103
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


677 Washington Blvd, Suite 1100	Stamford	Connecticut	06901
(Address of principal executive offices)			(Zip Code)


Registrant’s telephone number, including area code			(203)			905-2410

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

New York Stock Exchange

0.125% Notes due 2026

PM26B

New York Stock Exchange

3.125% Notes due 2027

PM27

New York Stock Exchange

3.125% Notes due 2028

PM28

New York Stock Exchange

2.875% Notes due 2029

PM29

New York Stock Exchange

3.375% Notes due 2029

PM29A

New York Stock Exchange

2.750% Notes due 2029

PM29D

New York Stock Exchange

3.750% Notes due 2031

PM31B

New York Stock Exchange

0.800% Notes due 2031

PM31

New York Stock Exchange

3.250% Notes due 2032

PM32

New York Stock Exchange

3.125% Notes due 2033

PM33

New York Stock Exchange

2.000% Notes due 2036

PM36

New York Stock Exchange

1.875% Notes due 2037

PM37A

New York Stock Exchange

6.375% Notes due 2038

PM38

New York Stock Exchange

1.450% Notes due 2039

PM39

New York Stock Exchange

4.375% Notes due 2041

PM41

New York Stock Exchange

4.500% Notes due 2042

PM42

New York Stock Exchange

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

3.875% Notes due 2042

PM42A

New York Stock Exchange

4.125% Notes due 2043

PM43

New York Stock Exchange

4.875% Notes due 2043

PM43A

New York Stock Exchange

4.250% Notes due 2044

PM44

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

At July 17, 2026, there were 1,558,613,439 shares outstanding of the registrant’s common stock, no par value per share.

Table of Contents

PHILIP MORRIS INTERNATIONAL INC.

TABLE OF CONTENTS


		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Earnings for the
	Six Months Ended June 30, 2026 and 2025	3
	Three Months Ended June 30, 2026 and 2025	3

	Condensed Consolidated Statements of Comprehensive Earnings for the
	Six Months Ended June 30, 2026 and 2025	4
	Three Months Ended June 30, 2026 and 2025	5

	Condensed Consolidated Balance Sheets at
	June 30, 2026 and December 31, 2025	6 – 7

	Condensed Consolidated Statements of Cash Flows for the
	Six Months Ended June 30, 2026 and 2025	8 – 9

	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the
	Six Months Ended June 30, 2026 and 2025	10
	Three Months Ended June 30, 2026 and 2025	11

	Notes to Condensed Consolidated Financial Statements	12 – 40

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41 – 88

Item 4.	Controls and Procedures	88

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	88

Item 1A.	Risk Factors	88

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89

Item 5.	Other Information	89

Item 6.	Exhibits	90

Signature		91

In this report, “PMI,” “we,” “us” and “our” refer to Philip Morris International Inc. and its subsidiaries.

Trademarks and service marks in this report are the registered property of, or licensed by, the subsidiaries of Philip Morris International Inc. and are italicized.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

(Unaudited)


	For the Six Months Ended June 30,
	2026		2025
Net revenues 1 & 2 (Note 13)	$	21,338	$	19,441
Cost of sales (Note 1)	6,774		6,305
Gross profit	14,564		13,136
Marketing, administration and research costs (Notes 1 & 15)	5,838		5,416
Impairment of goodwill (Note 5)	—		41
Corporate expenses and other (Note 1)	303		423
Operating income	8,423		7,256
Interest expense, net	480		518
Pension and other employee benefit (income) costs (Note 4)	(10)		23
Earnings before income taxes	7,953		6,715
Provision for income taxes	1,631		1,311
Impairment related to the RBH equity investment (Note 13)	511		—
Equity investments and securities (income)/loss, net (Note 13)	244		(581)
Net earnings	$	5,567	$	5,985
Net earnings attributable to noncontrolling interests	312		256
Net earnings attributable to PMI	$	5,255	$	5,729
Per share data (Note 7):
Basic earnings per share	$	3.36	$	3.67
Diluted earnings per share	$	3.36	$	3.67

(1) Includes net revenues from related parties of $2,440 million and $2,080 million for the six months ended June 30, 2026 and 2025, respectively.

(2) Net revenues are shown net of excise tax on products. For the six months ended June 30, 2026 and 2025, excise tax on products was $27,826 million and $25,274 million, respectively.

See notes to condensed consolidated financial statements.

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

(Unaudited)


	For the Three Months Ended June 30,
	2026		2025
Net revenues 1 & 2 (Note 13)	$	11,192	$	10,140
Cost of sales (Note 1)	3,533		3,274
Gross profit	7,659		6,866
Marketing, administration and research costs (Notes 1 & 15)	2,981		2,988
Impairment of goodwill (Note 5)	—		41
Corporate expenses and other (Note 1)	148		125
Operating income	4,530		3,712
Interest expense, net	243		277
Pension and other employee benefit (income) costs (Note 4)	(5)		11
Earnings before income taxes	4,292		3,424
Provision for income taxes	955		652
Impairment related to the RBH equity investment (Note 13)	511		—
Equity investments and securities (income)/loss, net (Note 13)	(159)		(376)
Net earnings	2,985		3,148
Net earnings attributable to noncontrolling interests	168		109
Net earnings attributable to PMI	$	2,817	$	3,039
Per share data (Note 7):
Basic earnings per share	$	1.80	$	1.95
Diluted earnings per share	$	1.80	$	1.95

(1) Includes net revenues from related parties of $1,255 million and $1,143 million for the three months ended June 30, 2026 and 2025, respectively.

(2) Net revenues are shown net of excise tax on products. For the three months ended June 30, 2026 and 2025, excise tax on products was $14,973 million and $13,272 million, respectively.

See notes to condensed consolidated financial statements.

Table of Contents

Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)


	For the Six Months Ended June 30,
	2026		2025
Net earnings	$	5,567	$	5,985
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $(139) in 2026 and $433 in 2025	491		(1,626)
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2026 and $0 in 2025	(19)		—

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2026 and $(7) in 2025	—		12
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(14) in 2026 and $(25) in 2025	50		93

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(26) in 2026 and $43 in 2025	135		(235)
(Gains) losses transferred to earnings, net of income taxes of $16 in 2026 and $9 in 2025	(73)		(50)

Total other comprehensive earnings (losses)	584		(1,806)
Total comprehensive earnings	6,151		4,179
Less comprehensive earnings (losses) attributable to:
Noncontrolling interests	256		289

Comprehensive earnings attributable to PMI	$	5,895	$	3,890

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)


	For the Three Months Ended June 30,
	2026		2025
Net earnings	$	2,985	$	3,148
Other comprehensive earnings (losses), net of income taxes:
Change in currency translation adjustments:
Unrealized gains (losses), net of income taxes of $(17) in 2026 and $339 in 2025	81		(1,922)
(Gains)/losses transferred to earnings, net of income taxes of $0 in 2026 and $0 in 2025	3		—

Change in net loss and prior service cost:
Net gains (losses) and prior service costs, net of income taxes of $0 in 2026 and $(7) in 2025	—		12
Amortization of net losses, prior service costs and net transition costs, net of income taxes of $(7) in 2026 and $(11) in 2025	25		47

Change in fair value of derivatives accounted for as hedges:
Gains (losses) recognized, net of income taxes of $(8) in 2026 and $19 in 2025	41		(113)
(Gains) losses transferred to earnings, net of income taxes of $9 in 2026 and $7 in 2025	(41)		(29)

Total other comprehensive earnings (losses)	109		(2,005)
Total comprehensive earnings	3,094		1,143
Less comprehensive earnings (losses) attributable to:
Noncontrolling interests	145		140

Comprehensive earnings attributable to PMI	$	2,949	$	1,003

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)


	June 30, 2026		December 31, 2025
ASSETS
Cash and cash equivalents	$	5,999	$	4,872
Trade receivables (less allowances of $64 in 2026 and $23 in 2025) (1)	5,179		4,572
Other receivables (less allowances of $24 in 2026 and $24 in 2025)	1,295		1,238
Inventories:
Leaf tobacco	2,639		2,425
Other raw materials	2,629		2,223
Finished product	6,168		6,830
	11,436		11,478

Other current assets	2,097		2,203
Total current assets	26,006		24,363
Property, plant and equipment, at cost	19,556		19,616
Less: accumulated depreciation	11,243		11,219
	8,313		8,397
Goodwill (Note 5)	16,917		17,264
Other intangible assets, net (Note 5)	10,178		10,884
Equity investments (Note 13)	2,130		2,891
Deferred income taxes	1,137		1,247
Other assets (less allowances of $11 in 2026 and $12 in 2025)	3,590		4,139
TOTAL ASSETS	$	68,271	$	69,185

(1) Includes trade receivables from related parties of $1,043 million and $839 million as of June 30, 2026, and December 31, 2025, respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.

See notes to condensed consolidated financial statements.

Continued

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

(in millions of dollars, except share data)

(Unaudited)


	June 30, 2026		December 31, 2025
LIABILITIES
Short-term borrowings (Note 11)	$	3,341	$	168
Current portion of long-term debt (Note 11)	3,406		3,533
Accounts payable	3,919		4,407
Accrued liabilities:
Marketing and selling	1,348		1,354
Taxes, except income taxes	6,572		7,555
Employment costs	1,293		1,545
Dividends payable	2,314		2,312
Other	3,273		3,298
Income taxes	1,076		1,255

Total current liabilities	26,542		25,427
Long-term debt (Note 11)	42,366		45,134
Deferred income taxes	2,057		2,065
Employment costs	2,249		2,406
Other liabilities	1,714		2,181
Total liabilities	74,928		77,213
Contingencies (Note 9)
STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, no par value (2,109,316,331 shares issued in 2026 and 2025)	—		—
Additional paid-in capital	2,477		2,453
Earnings reinvested in the business	36,055		35,400
Accumulated other comprehensive losses (Note 12)	(11,656)		(12,296)
	26,876		25,557
Less: cost of repurchased stock (550,713,450 and 552,659,642 shares in 2026 and 2025, respectively)	35,459		35,551
Total PMI stockholders’ deficit	(8,583)		(9,994)
Noncontrolling interests	1,926		1,966
Total stockholders’ deficit	(6,657)		(8,028)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	68,271	$	69,185

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of dollars)

(Unaudited)


	For the Six Months Ended June 30,
	2026		2025
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

Net earnings	$	5,567	$	5,985

Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization expense	1,023		970
Impairment of goodwill (Note 5)	—		41

Impairment related to the RBH equity investment (Note 13)	511		—
Deferred income tax (benefit) provision	(10)		(274)
Restructuring charges, net of cash paid (Note 15)	(15)		239

Cash effects of changes, net of the effects from acquired and divested companies:
Receivables, net	(690)		(780)
Inventories	(80)		(419)
Accounts payable	(284)		(161)
Accrued liabilities and other current assets	(1,081)		(1,972)
Income taxes	(200)		(611)
Pension plan contributions (Note 4)	(67)		(62)
Other	419		106
Net cash provided by (used in) operating activities	5,093		3,062

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Capital expenditures	(733)		(760)
Proceeds from sale of businesses, net of cash disposed (Note 2)	87		32


Purchases of debt securities	(5)		(105)
Sales and maturities of debt securities	193		25
Equity investments	(45)		(35)

Collateral posted/settlements for derivatives, (paid)/returned (Note 6)	543		(1,953)
Other	(17)		46
Net cash provided by (used in) investing activities	23		(2,750)

See notes to condensed consolidated financial statements.

Continued

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in millions of dollars)

(Unaudited)


	For the Six Months Ended June 30,
	2026		2025
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

Short-term borrowing activity by original maturity:
Net issuances (repayments) - maturities of 90 days or less	$	2,525	$	2,294
Issuances - maturities longer than 90 days	1,659		170
Repayments - maturities longer than 90 days	(994)		(70)

Long-term debt proceeds	1,478		3,596
Long-term debt repaid	(4,021)		(1,566)


Dividends paid	(4,604)		(4,222)
Collateral received/settlements for derivatives, received/(returned)	404		(824)

Noncontrolling interests activity and Other	(326)		(268)
Net cash provided by (used in) financing activities	(3,879)		(890)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(105)		500

Cash, cash equivalents and restricted cash (1):
Increase (Decrease)	1,132		(78)
Balance at beginning of period	4,892		4,254
Balance at end of period	$	6,024	$	4,176

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $25 million and $38 million as of June 30, 2026 and 2025, respectively, and $20 million and $38 million as of December 31, 2025 and 2024, respectively, which were included in other current assets in the condensed consolidated balance sheets.

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Six Months Ended June 30, 2026 and 2025

(in millions of dollars, except per share amounts)

(Unaudited)


	PMI Stockholders’ (Deficit) Equity
	Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Noncontrolling Interests		Total
Balances, January 1, 2025	$	—	$	2,335	$	32,869	$	(11,314)	$	(35,640)	$	1,880	$	(9,870)
Net earnings					5,729						256		5,985
Other comprehensive earnings (losses), net of income taxes							(1,839)				33		(1,806)
Issuance of stock awards			29						87				116
Dividends declared ($2.70 per share)					(4,222)								(4,222)
Dividends paid to noncontrolling interests											(215)		(215)




Balances, June 30, 2025	$	—	$	2,364	$	34,376	$	(13,153)	$	(35,553)	$	1,954	$	(10,012)
Balances, January 1, 2026	$	—	$	2,453	$	35,400	$	(12,296)	$	(35,551)	$	1,966	$	(8,028)
Net earnings					5,255						312		5,567
Other comprehensive earnings (losses), net of income taxes							640				(56)		584
Issuance of stock awards			24						92				116
Dividends declared ($2.94 per share)					(4,600)								(4,600)
Dividends paid to noncontrolling interests											(296)		(296)





Balances, June 30, 2026	$	—	$	2,477	$	36,055	$	(11,656)	$	(35,459)	$	1,926	$	(6,657)

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended June 30, 2026 and 2025

(in millions of dollars, except per share amounts)

(Unaudited)


	PMI Stockholders’ (Deficit) Equity
	Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Noncontrolling Interests		Total
Balances, April 1, 2025	$	—	$	2,326	$	33,447	$	(11,117)	$	(35,557)	$	1,975	$	(8,926)
Net earnings					3,039						109		3,148
Other comprehensive earnings (losses), net of income taxes							(2,036)				31		(2,005)
Issuance of stock awards			38						4				42
Dividends declared ($1.35 per share)					(2,110)								(2,110)
Dividends paid to noncontrolling interests											(161)		(161)







Balances, June 30, 2025	$	—	$	2,364	$	34,376	$	(13,153)	$	(35,553)	$	1,954	$	(10,012)
Balances, April 1, 2026	$	—	$	2,433	$	35,538	$	(11,788)	$	(35,462)	$	1,979	$	(7,300)
Net earnings					2,817						168		2,985
Other comprehensive earnings (losses), net of income taxes							132				(23)		109
Issuance of stock awards			44						3				47
Dividends declared ($1.47 per share)					(2,300)								(2,300)
Dividends paid to noncontrolling interests											(198)		(198)





Balances, June 30, 2026	$	—	$	2,477	$	36,055	$	(11,656)	$	(35,459)	$	1,926	$	(6,657)

See notes to condensed consolidated financial statements.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Background and Basis of Presentation:

Background

Philip Morris International Inc. is a holding company incorporated in Virginia, U.S.A. (also referred to herein as the U.S., the United States or the United States of America), whose subsidiaries and affiliates and their licensees are primarily engaged in the manufacture and sale of cigarettes and smoke-free products. Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc. and its subsidiaries and affiliates.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products. SFB also includes wellness products, as well as consumer accessories.

Smoke-free products (also referred to herein as "SFPs") is the term PMI uses to refer to all of its products that provide nicotine without combusting tobacco, such as heat-not-burn, e-vapor, and oral smokeless, and that therefore generate far lower levels of harmful chemicals. As such, these products have the potential to present less risk of harm versus continued smoking.

Basis of Presentation

The interim condensed consolidated financial statements of PMI are unaudited. These interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and such principles are applied on a consistent basis. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.GAAP have been omitted. It is the opinion of PMI’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings attributable to PMI for any interim period are not necessarily indicative of results that may be expected for the entire year.

With PMI's smoke-free business now operating at scale across its regions, including growth from its U.S. business, PMI has implemented an evolved organizational model with two primary business units: International and U.S. This change was implemented effective January 1, 2026, and as a result, PMI realigned its reportable segments accordingly. The four geographic segments have been replaced with the following three new reportable segments:

•International Smoke-Free;

•International Combustibles; and

•U.S. (including the wellness business unit, Aspeya).

Certain prior year amounts have been reclassified to conform with the current year's presentation as a result of the new segment structure discussed above. The consolidated statement of earnings includes a new caption for "Corporate expenses and other." "Other" includes foreign currency gains/losses and compensation expense related to restricted share units and performance share units awards, which were reclassified from "Cost of sales" and "Marketing, Administration and Research" costs. These reclassifications did not impact PMI’s consolidated financial position, results of operations or cash flows in any of the periods presented. See Note 5. Goodwill and Other Intangible Assets, net and Note 8. Segment Reporting for further details.

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2025.

Note 2. Acquisitions and Divestitures:

Sale of certain other businesses

During the fourth quarter of 2025, PMI completed the sale of one business and classified as held-for-sale net assets of certain other businesses (disposal group), primarily related to its consumer accessories products acquired as part of the Swedish Match AB acquisition in 2022. $142 million of the disposal group assets and $59 million of the disposal group liabilities were classified as held-for-sale and were included within other current assets and other accrued liabilities, respectively, in PMI’s consolidated balance sheet as of December 31, 2025. As a result, PMI recorded a pre-tax loss of $94 million, primarily related to the impairment charge to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

and the loss on the completed sale, of which $6 million related to the reclassification of currency translation losses from other comprehensive losses ($3 million reflected in the fourth quarter of 2025 and $3 million in the second quarter of 2026 upon completion of sales of the respective businesses). The loss on sale has been recorded in marketing, administration and research costs in PMI’s consolidated statement of earnings for the year ended December 31, 2025. The estimated fair value of the disposal group less costs to sell was determined using a market approach, based upon the expected net sales proceeds of the disposal group.

In the second quarter of 2026, PMI completed the sale of the remaining other businesses previously classified as held-for-sale for a total consideration of $121 million, of which $87 million of cash proceeds were received at closing and $34 million of deferred consideration recorded in other receivables and other assets.

Note 3. Stock Plans:

In May 2022, PMI’s shareholders approved the Philip Morris International Inc. 2022 Performance Incentive Plan (the “2022 Plan”). Under the 2022 Plan, PMI may grant to eligible employees restricted shares and restricted share units, performance-based cash incentive awards and performance-based equity awards. Up to 25 million shares of PMI’s common stock may be issued under the 2022 Plan. At June 30, 2026, shares available for grant under the 2022 Plan were 15,097,356.

In May 2017, PMI’s shareholders approved the Philip Morris International Inc. 2017 Stock Compensation Plan for Non-Employee Directors (the “2017 Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the 2017 Non-Employee Directors Plan. At June 30, 2026, shares available for grant under the plan were 836,062.

Restricted share unit (RSU) awards

PMI may grant RSU awards to eligible employees; recipients may not sell, assign, pledge or otherwise encumber such awards. Such awards are subject to forfeiture if certain employment conditions are not met. RSU awards do not carry voting rights, although they do earn dividend equivalents. RSU awards generally vest on the third anniversary of the grant date.

The fair value of the RSU awards at the date of grant is determined by using the closing market price of PMI’s stock on the date of the grant and is amortized to expense over the restriction period, typically three years after the date of the award, or upon death, disability or reaching the age of 58.

During the six months and three months ended June 30, 2026 and 2025, the recorded compensation expense related to RSU awards and the respective tax benefit (charge) were as follows:


(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	Compensation Expense Related to RSU Awards		Tax Benefit/(Charge) Related to RSU Awards		Compensation Expense Related to RSU Awards		Tax Benefit/(Charge) Related to RSU Awards
2026	$	113	$	43	$	41	$	11
2025	$	97	$	26	$	34	$	6

The compensation expense was recorded in corporate expenses and other costs.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

During the six months ended June 30, 2026 and 2025, shares granted to eligible employees and the weighted-average grant date fair value per share were as follows:


	Number of Shares Granted	Weighted-Average Grant Date Fair Value Per RSU Award Granted
2026	1,285,510	$ 182.60
2025	1,506,180	$ 145.19

During the six months ended June 30, 2026, 1,405,563 RSU awards vested. The grant date fair value of all the vested awards was approximately $145 million. The total fair value of RSU awards that vested during the six months ended June 30, 2026, was approximately $255 million.

As of June 30, 2026, PMI had $290 million of total unrecognized compensation cost related to non-vested RSU awards, which is expected to be recognized over the performance cycle of the awards of approximately three years.

Performance share unit (PSU) awards

PMI may grant PSU awards to certain executives; recipients may not sell, assign, pledge or otherwise encumber such awards. Such awards are subject to forfeiture if certain employment conditions are not met. The PSU awards require the achievement of certain performance metrics, which are predetermined at the time of grant, typically over a three-year performance cycle.

The performance metrics for such PSUs granted during the six months ended June 30, 2026, consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis (40% weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate (30% weight), and a VALUE Index, which consists of two drivers:

•Product impact (20% weight): aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's products, focused on two strategic priorities: consumers and circularity; and

•Operational impact (10% weight): aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's business activities, focused on four strategic priorities: PMI’s workforce, workers in the value chain, climate, and nature.

The performance metrics, targets and relative weights for the PSUs granted during the six months ended June 30, 2026, were the same as the PSUs granted during the six months ended June 30, 2025, with the exception of changes made to certain components of the Sustainability Index, which was replaced with the VALUE Index. The VALUE Index, built on the foundation of the Sustainability Index, continues to follow the same guiding principles, structure and governance while reflecting a more focused approach to incentivizing progress on key transformation matters. The division and relative weight of product and operational KPIs remain the same.

The PSU performance metrics may be adjusted if appropriate to reflect the impact of unusual or infrequently occurring events, including, to the extent significant, corporate transactions, accounting or tax law changes, asset write-downs, litigation or claim adjustments, foreign exchange gains and losses, unbudgeted capital expenditures and other such events.

The aggregate of the weighted performance factors for the three metrics in each such PSU award determines the percentage of PSUs that will vest at the end of the three-year performance cycle. The minimum percentage of such PSUs that can vest is zero, with a target percentage of 100 and a maximum percentage of 200. Each such vested PSU entitles the participant to one share of common stock. An aggregate weighted PSU performance factor of 100 will result in the targeted number of PSUs being vested. At the end of the performance cycle, participants are entitled to an amount equivalent to the accumulated dividends paid on common stock during the performance cycle for the number of shares earned.

The fair value of the PSU awards at the date of grant, adjusted by performance metrics, is amortized to expense over the restriction period, typically three years after the date of the award, or upon death, disability or reaching the age of 58.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

During the six months ended June 30, 2026 and 2025, the recorded compensation expense related to PSU awards, and the respective tax benefit (charge) were as follows:



(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	Compensation Expense related to PSU Awards		Tax Benefit/(Charge) Related to PSU Awards		Compensation Expense related to PSU Awards		Tax Benefit/(Charge) Related to PSU Awards
2026	$	53	$	27	$	7	$	5
2025	$	60	$	17	$	9	$	1

The compensation expense was recorded in corporate expenses and other costs.

During the six months ended June 30, 2026 and 2025, shares granted to eligible employees and the weighted-average grant date fair value per share related to PSU awards were as follows:


	Number of Shares Granted	Weighted- Average PSU Grant Date Fair Value Subject to Other Performance Factors (Per Share)	Weighted- Average PSU Grant Date Fair Value Subject to TSR Performance Factors (Per Share)
2026	327,880	$ 182.81	$ 236.97
2025	396,400	$ 145.35	$ 213.72

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the closing market price of PMI’s stock on the date of the grant. The grant date fair value of the PSU market-based awards subject to the TSR performance factor was determined by using the Monte Carlo simulation model. The following assumptions were used to determine the grant date fair value of the PSU awards subject to the TSR performance factor:


	2026		2025
Average risk-free interest rate (a)	3.5	%	4.1	%
Average expected volatility (b)	21.7	%	21.0	%

(a) Based on the U.S. Treasury yield curve.

(b) Determined using the observed historical volatility.

During the six months ended June 30, 2026, 816,829 PSU awards vested. The grant date fair value of all the vested awards was approximately $94 million. The total fair value of PSU awards that vested during the six months ended June 30, 2026, was approximately $149 million.

As of June 30, 2026, PMI had $62 million of total unrecognized compensation cost related to non-vested PSU awards, which is expected to be recognized over the performance cycle of the awards of approximately three years.

Note 4. Benefit Plans:

Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements. In addition, PMI provides health care and other benefits to certain U.S. retired employees and certain non-U.S. retired employees. In general, health care benefits for non-U.S. retired employees are covered through local government plans.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Pension and other employee benefit (income) costs per the condensed consolidated statements of earnings consisted of the following:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2026		2025		2026		2025
Net pension costs (income)	$	(81)	$	(42)	$	(40)	$	(22)
Net postemployment costs	63		58		31		29
Net postretirement costs	8		7		4		4
Total pension and other employee benefit (income) costs	$	(10)	$	23	$	(5)	$	11

Pension Plans

Components of Net Periodic Benefit Cost

Net periodic pension cost consisted of the following:


	Pension (1)
	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2026		2025		2026		2025
Service cost	$	111	$	116	$	55	$	59
Interest cost	118		102		59		52
Expected return on plan assets	(244)		(210)		(122)		(108)
Amortization:
Net loss	46		67		23		34
Prior service cost (credit)	(1)		(1)		—		—


Net periodic pension cost	$	30	$	74	$	15	$	37

(1) Primarily non-U.S. based defined benefit retirement plans.

All of the amounts in the table above, other than service cost, are recognized in pension and other employee benefit costs in the condensed consolidated statement of earnings.

Employer Contributions

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and meet specific funding requirements of its funded pension plans. Employer contributions of $67 million were made to the pension plans during the six months ended June 30, 2026. Currently, PMI anticipates making additional contributions during the remainder of 2026 of approximately $79 million to its pension plans, based on current tax and benefit laws. However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest and currency rates.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 5. Goodwill and Other Intangible Assets, net:

Goodwill

The movements in goodwill were as follows:


(in millions)	International Smoke-Free		International Combustibles		U.S. (a)		Total
Balances, December 31, 2025	$	3,913	$	4,862	$	8,489	$	17,264
Changes due to:




Currency	(186)		(152)		(9)		(347)
Balances, June 30, 2026	$	3,727	$	4,710	$	8,480	$	16,917

(a) U.S. goodwill balance is net of accumulated impairment losses of $556 million at June 30, 2026, and December 31, 2025. These accumulated losses, which relate to PMI's wellness unit Aspeya, exclude amounts related to businesses which were subsequently sold or reclassified as held-for-sale.

At June 30, 2026, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB, as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia.

As discussed in Note 1. Background and Basis of Presentation, PMI has implemented an evolved organizational model effective January 1, 2026, and realigned its reportable segments accordingly. This reorganization resulted in changes to the composition of certain reporting units. Consequently, PMI reassigned assets and liabilities to the applicable reporting units and reallocated goodwill using the relative fair value approach. PMI performed a review of goodwill for potential impairment of the impacted reporting units immediately before and after the reorganization. As a result of this review, no impairment charges were required. The table above reflects the reclassification as a result of the realignment.

During the second quarter of 2026, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment. As a result of this review, no impairment charges were required.

Each of PMI's reporting units had fair values substantially in excess of their carrying values. PMI continues to monitor the Wellness reporting unit as any changes in assumptions and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals and authorizations, and other market factors could result in future goodwill and other intangible asset impairments.

Impairment of Goodwill in 2025

During the second quarter of 2025, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment. As a result of updated financial projections, it was determined that the estimated fair value of a business, which was a separate reporting unit in 2025, related to the consumer accessories products acquired as part of the Swedish Match AB acquisition in 2022 was lower than its carrying value. Consequently, PMI recorded in the second quarter of 2025 a goodwill impairment charge of $41 million, which represented the entirety of the goodwill recorded in the reporting unit. For further details, see Note 2. Acquisitions and Divestitures.

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Other Intangible Assets

Details of other intangible assets were as follows:


		June 30, 2026						December 31, 2025
(in millions)	Weighted-Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Non-amortizable intangible assets		$	4,661			$	4,661	$	4,776			$	4,776
Amortizable intangible assets:
Trademarks	14 years	2,175		$	1,027	1,148		2,227		$	984	1,243

Reacquired commercialization rights for IQOS in the U.S.	3 years	2,777		1,203		1,574		2,777		926		1,851
Developed technology, including patents	6 years	349		172		177		358		160		198
Customer relationships and other	9 years	3,809		1,191		2,618		3,873		1,057		2,816
Total other intangible assets		$	13,771	$	3,593	$	10,178	$	14,011	$	3,127	$	10,884

Changes in the net carrying amount of intangible assets were as follows:


			Changes Due To:
	December 31, 2025		Amortization & Impairment		Acquisitions & Divestitures		Currency & Other		June 30, 2026
Non-amortizable intangible assets	$	4,776	$	—	$	—	$	(115)	$	4,661

Amortizable intangible assets:	6,108		(503)		—		(88)		5,517
Gross book value	9,235				—		(125)		9,110
Accumulated amortization	(3,127)		(503)		—		37		(3,593)
Total Intangibles, net	$	10,884	$	(503)	$	—	$	(203)	$	10,178

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico, as well as the tobacco manufacturing license associated with PMI's acquisition in Egypt.

Amortization expense for each of the next five years is estimated to be approximately $1,000 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

Note 6. Financial Instruments:

Overview

PMI operates globally with manufacturing and sales facilities in various locations around the world and is exposed to risks such as changes in foreign currency exchange rates and interest rates. As a result, PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, (collectively referred to as "foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in foreign currency exchange and interest rates related to net investments in foreign operations, as well as third-party and intercompany actual and forecasted transactions. The primary currencies to which PMI is exposed include the Euro, Indian rupee, Indonesian rupiah, Japanese yen, Russian ruble and Swiss franc.

Additionally, certain materials that PMI uses in the manufacturing of its products are exposed to market price risks. PMI uses commodity derivative contracts (“commodity contracts") to manage its exposure to the market price volatility of certain commodity components of these materials.

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These foreign exchange contracts, interest rate contracts and commodity contracts are collectively referred to as "derivative contracts". PMI is not a party to leveraged derivatives and, by policy, does not use derivative financial instruments for speculative purposes. Substantially all of PMI's derivative financial instruments are subject to master netting arrangements, whereby the right to offset occurs in the event of default by a participating party. While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the condensed consolidated balance sheets. Collateral associated with these arrangements is in the form of cash and is unrestricted. Changes in collateral posted are included in cash flows from investing activities and changes in collateral received are included in cash flows from financing activities. Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. PMI formally documents the nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Additionally, for hedges of forecasted transactions, the significant characteristics and expected terms of the forecasted transaction must be specifically identified, and it must be probable that each forecasted transaction will occur. If it were deemed probable that the forecasted transaction would not occur, the gain or loss would be recognized in earnings.

The gross notional amounts for outstanding derivatives at the end of each period were as follows:


(in millions)	At June 30, 2026		At December 31, 2025
Derivative contracts designated as hedging instruments:
Foreign exchange contracts	$	29,207	$	29,062
Interest rate contracts	4,800		4,700
Commodity contracts	3		3
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts	18,144		16,278
Total	$	52,154	$	50,043

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The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025, were as follows:


	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
		At		At			At		At
(in millions)	Balance Sheet Classification	June 30, 2026		December 31, 2025		Balance Sheet Classification	June 30, 2026		December 31, 2025
Derivative contracts designated as hedging instruments:
Foreign exchange contracts	Other current assets	$	587	$	378	Other accrued liabilities	$	161	$	499
	Other assets	130		107		Other liabilities	492		853
Interest rate contracts	Other current assets	4		—		Other accrued liabilities	4		27
	Other assets	12		77		Other liabilities	22		—
Commodity contracts	Other current assets	—		—		Other accrued liabilities	—		1

Derivative contracts not designated as hedging instruments:
Foreign exchange contracts	Other current assets	442		91		Other accrued liabilities	151		319
	Other assets	—		—		Other liabilities	184		276
Total gross amount derivatives contracts presented in the condensed consolidated balance sheets		$	1,175	$	653		$	1,014	$	1,975
Gross amounts not offset in the condensed consolidated balance sheets
Financial instruments		(575)		(444)			(575)		(444)
Cash collateral received/pledged		(553)		(183)			(410)		(1,374)
Net amount		$	47	$	26		$	29	$	157

PMI assesses the fair value of its derivative contracts using standard valuation models that use, as their basis, readily observable market inputs. The fair value of PMI’s foreign exchange forward contracts, foreign currency swaps and interest rate derivatives is determined using prevailing spot and forward foreign exchange rates, spot and forward interest rates, and the instruments' respective maturity dates. The fair value of currency options is estimated using a Black-Scholes valuation model that incorporates foreign exchange spot rates, interest rate differentials, currency volatilities, strike rates and maturity dates. The fair value of PMI’s commodity contracts is determined using prevailing market spot and futures prices and the corresponding maturity dates. PMI’s derivative contracts have been classified within Level 2 at June 30, 2026 and December 31, 2025.

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For the six months ended June 30, 2026 and 2025, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:


(pre-tax, in millions)	For the Six Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives				Statement of Earnings Classification of Gain/(Loss) on Derivatives	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings			Amount of Gain/(Loss) Recognized in Earnings
	2026		2025				2026		2025		2026		2025
Derivative contracts designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts	$	148	$	(279)		Net revenues	$	53	$	63

						Marketing, administration and research costs	12		(27)
						Interest expense, net	—		(1)
Interest rate contracts	12		1			Interest expense, net	24		28
Commodity contracts	1		—			Cost of sales	—		(4)
Fair value hedges:
Interest rate contracts						Interest expense, net (a)					$	(68)	$	66
Net investment hedges (b):
Foreign exchange contracts	638		(1,992)			Interest expense, net (c)					174		141
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts						Interest expense, net					135		183
						Marketing, administration and research costs (d)					317		(1,350)
Total	$	799	$	(2,270)			$	89	$	59	$	558	$	(960)

(a) The gains (losses) from these contracts are offset by the changes in the fair value of the hedged item

(b) Amount of gains (losses) on hedges of net investments principally related to changes in foreign currency exchange and interest rates between the Euro and U.S. dollar

(d) The gains (losses) from these contracts attributable to changes in foreign currency exchange rates are largely offset by the (losses) and gains generated by the underlying intercompany and third-party loans being hedged

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For the three months ended June 30, 2026 and 2025, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:


(pre-tax, in millions)	For the Three Months Ended June 30,
	Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives				Statement of Earnings Classification of Gain/(Loss) on Derivatives	Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings				Amount of Gain/(Loss) Recognized in Earnings
	2026		2025			2026		2025		2026		2025
Derivative contracts designated as hedging instruments:
Cash flow hedges:
Foreign exchange contracts	$	50	$	(133)	Net revenues	$	31	$	11

					Marketing, administration and research costs	7		14
					Interest expense, net	—		(1)
Interest rate contracts	(1)		2		Interest expense, net	12		14
Commodity contracts	—		(1)		Cost of sales	—		(2)
Fair value hedges:
Interest rate contracts					Interest expense, net (a)					$	(31)	$	19
Net investment hedges (b):
Foreign exchange contracts	83		(1,555)		Interest expense, net (c)					86		71
Derivative contracts not designated as hedging instruments:
Foreign exchange contracts					Interest expense, net					69		90
					Marketing, administration and research costs (d)					57		(1,108)
Total	$	132	$	(1,687)		$	50	$	36	$	181	$	(928)

(a) The gains (losses) from these contracts are offset by the changes in the fair value of the hedged item

(b) Amount of gains (losses) on hedges of net investments principally related to changes in foreign currency exchange and interest rates between the Euro and U.S. dollar

Cash Flow Hedges

PMI has entered into derivative contracts to hedge the foreign currency exchange, interest rate and commodity price risks related to certain forecasted transactions. Gains and losses associated with qualifying cash flow hedge contracts are deferred as components of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s condensed consolidated statements of earnings. As of June 30, 2026, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through December 2028. Premiums paid for, and settlements of, the derivative contracts designated as cash flow hedges are included primarily in cash flows from operating activities on PMI’s condensed consolidated statements of cash flows.

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Fair Value Hedges

PMI has entered into fixed-to-floating interest rate contracts, designated as fair value hedges to minimize exposure to changes in the fair value of fixed rate U.S. dollar-denominated debt that results from fluctuations in benchmark interest rates. For derivative contracts that are designated and qualify as fair value hedges, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged items attributable to the hedged risk, is recognized in current earnings. The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of June 30, 2026 was $6,148 million, including $1,396 million related to discontinued hedges, and was recorded in long-term debt in the condensed consolidated balance sheets. The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $12 million as of June 30, 2026.

Hedges of Net Investments in Foreign Operations

PMI designates derivative contracts and certain foreign currency denominated debt and other financial instruments as net investment hedges, primarily of its Euro net assets. For the six months ended June 30, 2026 and 2025, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive gains within currency translation adjustments, was $7 million and nil, respectively. For the three months ended June 30, 2026 and 2025, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $(6) million and nil, respectively. Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities on PMI’s condensed consolidated statements of cash flows.

Other Derivatives

PMI has entered into derivative contracts to hedge the foreign currency exchange and interest rate risks related to intercompany loans between certain subsidiaries and third-party loans. While effective as economic hedges, no hedge accounting is applied for these contracts; therefore, the gains (losses) relating to these contracts are reported in PMI’s condensed consolidated statements of earnings. Settlements of other derivative contracts are included primarily in cash flows from investing activities on PMI's condensed consolidated statements of cash flows.

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

Derivative gains or losses reported in accumulated other comprehensive losses are a result of qualifying hedging activity. Transfers of these gains or losses to earnings are offset by the corresponding gains or losses on the underlying hedged item. Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:


(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2026		2025		2026		2025
Gain/(loss) as of beginning of period,	$	284	$	467	$	346	$	324
Derivative (gains)/losses transferred to earnings	(73)		(50)		(41)		(29)
Change in fair value	135		(235)		41		(113)
Gain/(loss) as of June 30,	$	346	$	182	$	346	$	182

At June 30, 2026, PMI expects $171 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months. These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.

Contingent Features

PMI’s derivative instruments do not contain contingent features.

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Credit Exposure and Credit Risk

PMI is exposed to credit loss in the event of non-performance by counterparties. While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments less any cash collateral received or pledged. PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Other Investments

Certain PMI investments, which are comprised of Indonesian rupiah denominated bonds in Indonesia, have been classified within Level 2 and had a fair value of $24 million at June 30, 2026. For the six months and three months ended June 30, 2026,

the gross unrealized pre-tax gains (losses) on these investments were immaterial.

Note 7. Earnings Per Share:

Basic and diluted earnings per share (“EPS”) were calculated using the following:


(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2026		2025		2026		2025
Net earnings attributable to PMI	$	5,255	$	5,729	$	2,817	$	3,039
Less distributed and undistributed earnings attributable to share-based payment awards (1)	14		16		7		8
Net earnings for basic and diluted EPS	$	5,241	$	5,713	$	2,810	$	3,031
Weighted-average shares for basic EPS	1,558		1,556		1,559		1,557

Plus contingently issuable performance stock units (PSUs)(1)	2		2		1		1
Weighted-average shares for diluted EPS	1,560		1,558		1,560		1,558

(1) Including rounding adjustment

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore are included in PMI’s earnings per share calculation pursuant to the two-class method.

For the 2026 and 2025 computations, there were no antidilutive stock awards.

Note 8. Segment Reporting:

PMI’s subsidiaries and affiliates are primarily engaged in the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, e-vapor and oral nicotine products.

Effective January 1, 2026, PMI reorganized its segments to reflect the manner in which the Chief Executive Officer, who is the chief operating decision maker (“CODM”), manages the business and reviews the results of its operations. Based on changes to PMI’s organizational structure, including restructuring of roles and responsibilities of the executive management layer reporting directly to the CODM as of January 2026, PMI’s reportable segments are organized by product groupings and geographical region as follows: International Smoke-Free, International Combustibles and the U.S. The results of PMI’s Wellness unit, Aspeya, are included within the U.S. reportable segment.

In conjunction with the organizational changes discussed above, the primary profitability measure based on which the CODM evaluates performance of and allocates resources to the reportable segments has changed from regional operating income to segment gross profit. Segment net revenues and segment gross profit are the primary financial measures used by the CODM to review short-term and long-term trends, forecasts, and budget-to-actual variances in order to assess the performance of PMI’s reportable segments and to allocate resources in response to changing market conditions and organizational priorities.

Marketing, administration and research costs, including restructuring charges, are not allocated to segments to determine the primary measure of segment profitability. Additionally, interest expense, net, corporate expenses and other, and provision for

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income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measures of segment profitability reviewed by management. Information about total assets and capital expenditures by segment is not disclosed because such information is not reported to or used by PMI’s CODM. Segment goodwill and other intangible assets, net, are disclosed in Note 5. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Item 8, Note 2. Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2025.

Net revenues, cost of sales and gross profit by segment were as follows:


(in millions)	International Smoke-Free		International Combustibles		U.S.		Total
For the Six Months Ended June 30, 2026
Net revenues	$	7,713	$	12,147	$	1,478	$	21,338
Cost of sales	(2,313)		(3,917)		(544)		(6,774)
Gross profit	$	5,400	$	8,229	$	935	$	14,564
For the Six Months Ended June 30, 2025
Net revenues	$	6,471	$	11,209	$	1,762	$	19,441
Cost of sales	(2,066)		(3,774)		(466)		(6,305)
Gross profit	$	4,405	$	7,435	$	1,296	$	13,136


(in millions)	International Smoke-Free		International Combustibles		U.S.		Total
For the Three Months Ended June 30, 2026
Net revenues	$	3,877	$	6,459	$	856	$	11,192
Cost of sales	(1,161)		(2,071)		(301)		(3,533)
Gross profit	$	2,716	$	4,388	$	555	$	7,659
For the Three Months Ended June 30, 2025
Net revenues	$	3,395	$	5,883	$	862	$	10,140
Cost of sales	(1,076)		(1,947)		(252)		(3,274)
Gross profit	$	2,319	$	3,936	$	611	$	6,866

Note: Amounts may not foot due to rounding

PMI disaggregates its net revenues from contracts with customers by product category for each reportable segment. PMI believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

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PMI's net revenues by product category were as follows:


(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2026		2025		2026		2025
Smoke-free:
International Smoke-Free	$	7,713	$	6,471	$	3,877	$	3,395
U.S.	1,311		1,584		768		766
of which, Wellness	118		109		56		57
Total Smoke-free	9,024		8,055		4,645		4,161
Combustible tobacco:
International Combustibles	12,147		11,209		6,459		5,883
U.S.	167		178		88		96
Total Combustible tobacco	12,314		11,386		6,547		5,979
Total PMI net revenues	$	21,338	$	19,441	$	11,192	$	10,140

Note: Amounts may not foot due to rounding

Net revenues related to smoke-free, excluding wellness, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable. These net revenue amounts consist of the sale of PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories. Net revenues related to wellness refer to the operating revenues generated from the sale of products, primarily associated with oral and intra-oral delivery systems.

Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products that are combusted. Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos, and do not include smoke-free products.

Other segment data were as follows:


(in millions)	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2026		2025		2026		2025
Depreciation and amortization expense:
International Smoke-Free	$	180	$	160	$	90	$	82
International Combustibles	136		143		69		72
U.S.	54		45		27		22
Total depreciation and amortization expense by segment	370		348		186		176
Other(1)	653		622		327		314
Total depreciation and amortization expense	$	1,023	$	970	$	513	$	490
(1) Included in marketing, administration and research costs, and corporate expenses and other in PMI's condensed consolidated statements of earnings

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Note 9. Contingencies:

Tobacco and/or Nicotine-Related Litigation

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions. Our indemnitees include distributors, licensees, and others that have been named as parties in certain cases and that we have agreed to defend, as well as to pay costs and some or all of judgments, if any, that may be entered against them. Pursuant to the terms of the Distribution Agreement between Altria Group, Inc. ("Altria") and PMI, PMI will indemnify Altria and Philip Morris USA Inc. ("PM USA"), a U.S. tobacco subsidiary of Altria, for tobacco product claims based in substantial part on products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for tobacco product claims based in substantial part on products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

It is possible that there could be adverse developments in pending cases against us and our subsidiaries. An unfavorable outcome or settlement of pending tobacco or nicotine-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in the case of the "Health Care Cost Recovery Litigation" described below, could range into the billions of U.S. dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. While, as discussed below, we have to date been largely successful in defending tobacco-related litigation, litigation is subject to uncertainty. Additionally, as reported further below, beginning in March 2024, litigation related to oral nicotine products was filed against us and our subsidiaries before certain courts in the United States.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, except as stated otherwise in this Note 9. Contingencies, it is reasonably possible that an unfavorable outcome in a case may occur. Legal defense costs are expensed as incurred.

It is possible that our consolidated financial statements, including our results of operations, cash flows or financial position, could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts. All such cases are, and will continue to be, vigorously defended. However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

After assessing the information available to it, except as stated otherwise in this Note 9. Contingencies, (i) management has not concluded that it is probable that a loss has been incurred in any of the pending cases mentioned in this Note 9. Contingencies; (ii) management is unable to estimate the possible loss or range of loss for any of these cases; and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.

Combustible tobacco products litigation

Since 1995, more than 600 combustible tobacco product-related cases, including smoking and health, label-related, health care cost recovery, and public civil actions, have been filed by governmental entities or individual plaintiffs, or on behalf of a class or purported class of individual plaintiffs, against a PMI entity. All cases resolved by final and non-appealable liability judgment have been terminated in our favor and only a small number of cases remain pending. The pending cases include seven health care cost recovery cases, one public civil action, and individual cases. These do not include nine proposed class actions and ten health care cost recovery cases that have been released pursuant to the plan of compromise and arrangement under the Companies' Creditors Arrangement Act (“CCAA”) of PMI's wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc. (the “CCAA Plan”), that have been or will be formally dismissed in due course, and are no longer reported here. The amounts at issue in the pending individual cases would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position. Of the pending combustible tobacco product-related cases, two individual cases were initially decided in favor of plaintiffs, and remain on appeal. Final resolution in the

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amount of the verdict in such cases would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.

Pending claims related to combustible tobacco products generally fall within the following categories:

Health Care Cost Recovery Litigation: These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices. Plaintiffs in these cases seek various forms of relief, including compensatory and other damages, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of June 30, 2026, excluding the cases that have been or will be dismissed pursuant to the CCAA Plan described above, there were 7 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil (1), Korea (1) and Nigeria (5), compared with 17 such cases as of June 30, 2025.

In the health care cost recovery case in Brazil, The Attorney General of Brazil v. Souza Cruz Ltda., et al., Federal Trial Court, Porto Alegre, Rio Grande do Sul, Brazil, filed May 21, 2019, we, our subsidiaries, and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases in certain prior years, payment of anticipated costs of treating future alleged smoking-related diseases, and moral damages. Defendants filed answers to the complaint in May 2020. Between May and July 2026, at the direction of the court, plaintiff, defendants and the public prosecutor filed their closing arguments.

In the first health care cost recovery case in Nigeria, The Attorney General of Lagos State v. British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. We are in the process of making challenges to service and the court's jurisdiction. Currently, the case is stayed in the trial court pending a co-defendant's appeal relating to service objections.

In the second health care cost recovery case in Nigeria, The Attorney General of Kano State v. British American Tobacco (Nigeria) Limited, et al., High Court of Kano State, Kano, Nigeria, filed May 9, 2007, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. We are in the process of challenging service and the court's jurisdiction. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v. British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us. As a result of this ruling, plaintiff must re-serve its claim. We have not yet been re-served.

In the fourth health care cost recovery case in Nigeria, The Attorney General of Oyo State, et al., v. British American Tobacco (Nigeria) Limited, et al., High Court of Oyo State, Ibadan, Nigeria, filed May 25, 2007, we and other members of the industry are defendants. Plaintiffs seek reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. We challenged service as improper. In June 2010, the court ruled that plaintiffs did not have leave to serve the writ of summons on the defendants and that they must re-serve the writ. We have not yet been re-served.

In the fifth health care cost recovery case in Nigeria, The Attorney General of Ogun State v. British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria, filed February 26, 2008, we and other members of the industry are defendants. Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past

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several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages. In May 2010, the trial court rejected our objections to the court's jurisdiction. We have appealed. Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

In the health care cost recovery case in Korea, the National Health Insurance Service v. KT&G, et. al., filed April 14, 2014, our subsidiary and other Korean manufacturers are defendants. Plaintiff alleges, among other things, that defendants concealed the health hazards of smoking, marketed to underage individuals, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes. The National Health Insurance Service seeks to recover damages allegedly incurred in treating 3,484 patients with small cell lung cancer, squamous cell lung cancer, and squamous cell laryngeal cancer from 2003 to 2012. The trial court dismissed the case in its entirety on November 20, 2020. The appellate court granted plaintiff a de novo appeal in 2021 and, on January 15, 2026, dismissed plaintiff's claims and appeal. On February 4, 2026, plaintiff filed an appeal to the Supreme Court of Korea.

Public Civil Actions: Claims have been filed either by an individual, or a public or private entity, seeking to protect collective or individual rights, such as the right to health, the right to information or the right to safety. Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including product defect, concealment, and misrepresentation. Plaintiffs in these cases seek various forms of relief, including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

As of June 30, 2026, there was one public civil action pending against our subsidiary in Venezuela (1), compared with one such case as of June 30, 2025.

In a public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al. v. National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court, filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case. In January 2009, our subsidiary appeared in the case in response to this notice. The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health. The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products. In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases. In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements. In December 2012, the court admitted our subsidiary and a subsidiary of British American Tobacco plc as interested third parties. In February 2013, our subsidiary answered the complaint. On February 27, 2024, the Attorney General of Venezuela filed, on behalf of defendants, a motion to dismiss the case for lack of prosecution.

Smoke-Free Products-Related Litigation

Claims have been filed against PMI and one or more subsidiaries related to ZYN nicotine pouches. These cases were filed either on behalf of an individual plaintiff, on behalf of a purported class of individuals, or on behalf of a municipal entity. Plaintiffs assert a variety of common law and statutory claims, and seek various forms of relief, including monetary and equitable relief.

In the first case, a putative class action, Kelly v. Philip Morris International Inc., et al., filed on March 19, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches (the "Kelly class action"). The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN products in the United States, (ii) all residents of Florida who purchased ZYN products, and (iii) all residents of Florida who, at the time of their use of ZYN products, were under the age of 21, and who procured and used ZYN products. Plaintiff alleges, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring. On May 6, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice. On August 20, 2024, the court granted Swedish Match North America LLC’s motion to dismiss the fraud claim and plaintiff’s request for medical monitoring, but denied the motion to dismiss other claims, denied PMI’s motion to dismiss without prejudice, and granted plaintiff’s request to conduct jurisdictional discovery. On December 4, 2024, plaintiff

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filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants: Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc. filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim. On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiff’s fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc. The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction. The defendants filed their answers to plaintiff's amended complaint on April 2, 2025, and the case moved to the discovery phase, which closed on June 26, 2026. The Court scheduled the start of trial on December 7, 2026. On September 15, 2025, Plaintiff filed a motion to amend his complaint to add two additional named plaintiffs, Darryl Maultsby and Griffin Dykes, as well as a new claim under the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"). On October 14, 2025, the Court granted plaintiff's motion to amend the complaint. On October 22, 2025, defendants filed a motion to dismiss the FDUTPA claim. On December 12, 2025, the Court denied defendants' motion to dismiss the FDUTPA claim. On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint. Plaintiffs Griffin Dykes and Zachary Kelly decided not to proceed with their claims and the Court approved stipulations dismissing their claims with prejudice on February 24 and March 24, 2026, respectively. The case remains open as to plaintiff Darryl Maultsby. On April 6, 2026, plaintiff Darryl Maultsby filed a motion seeking to certify one class and one subclass.  The class is defined as “[a]ll persons who purchased, in Florida, ZYN products.”  For this class, plaintiff seeks certification as to the FDUTPA claim and “liability only” issues as to the strict liability design defect and failure to warn claims, excluding causation and damages.  The subclass is defined as “[a]ll persons who procured and used, in Florida, ZYN products while under the age of 21.”  The subclass is sought for the FDUTPA claim only.  On June 15, 2026, defendants filed their opposition to Plaintiff's motion for class certification. Defendants also filed motions for summary judgment on June 15, which ask the Court to enter judgment as a matter of law in favor of defendants on all of plaintiff's claims.

In the second case, a putative class action, Bates-Ferreira v. Philip Morris International Inc., et al., filed March 29, 2024, before United States District Court for the Eastern District of California, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who used ZYN products in the United States, (ii) all persons who used ZYN products in the United States while under the age of 18, (iii) all residents of California who used ZYN products, and (iv) all residents of California who used ZYN products while under the age of 18. Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products. Plaintiff asserts fraud, unjust enrichment, breach of implied warranty, and breach of consumer protection, unfair competition and advertising statutes claims and is seeking compensatory and punitive damages, disgorgement of profits, attorney’s fees and expenses, interest and other applicable injunctive relief. On June 7, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and Swedish Match North America LLC also filed a motion to stay the proceedings pending resolution of the Kelly class action. On August 5, 2024, plaintiff voluntarily dismissed his claim against PMI without prejudice. On March 28, 2025, the Court granted Swedish Match North America LLC’s motion to stay the case, ordering that the case be stayed until the court in the Kelly case, described above, issues a ruling on the motion recently filed by plaintiff Maultsby to certify a class. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the third case, a putative class action, Norris v. Philip Morris International Inc., et al., filed July 30, 2024, before United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who used ZYN products in the United States, (ii) all persons who used ZYN products in the United States while under the age of 18, (iii) all residents of Florida who used ZYN products, and (iv) all residents of Florida who used ZYN products while under the age of 18. Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products. Plaintiff asserts unjust enrichment, and breach of consumer protection, unfair trade and advertising statutes claims and is seeking compensatory and punitive damages, disgorgement of profits, attorney’s fees and expenses, interest and other applicable injunctive relief. On September 24, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and a motion to stay discovery. On October 2, 2024, Plaintiff filed a notice of voluntary dismissal without prejudice as to Swedish Match North America LLC, which the Court ordered on October 3, 2024. On April 11, 2025, PMI filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on the motion recently filed by plaintiff Maultsby to certify a class. On June 13, 2025, the Court granted PMI's motion

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to stay until the court in the Kelly case issues a ruling on class certification. In light of the ruling on the motion to stay, the Court denied PMI's motion to dismiss without prejudice. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the fourth case, Mayor and City Council of Baltimore v. Philip Morris International Inc. et al, filed May 7, 2025, before the Circuit Court for Baltimore City, Maryland, the City of Baltimore alleges that the defendants have violated the City of Baltimore’s Consumer Protection Ordinance by, among other things, marketing ZYN products in a deceptive manner. The complaint names PMI, Swedish Match North America LLC, and Swedish Match USA Inc. as defendants. Plaintiff alleges, among other things, that defendants marketed ZYN products to minors and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products. Plaintiff asserts that defendants’ actions violate the prohibition on “unfair, abusive, or deceptive trade practices” in the Consumer Protection Ordinance and seeks monetary and injunctive relief. The complaint was served on defendants on June 9, 2025. On July 7, 2025, defendants removed the case to the United States District Court for the District of Maryland. On August 6, 2025, plaintiff filed a motion to remand the case back to state court. That motion is now fully briefed but resolution of the motion has been stayed pending an appellate court's disposition of a similar remand issue in an unrelated case. Defendants have not yet answered or otherwise responded to the complaint. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding, and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

In the fifth case, Austin Siegert v. Philip Morris International Inc. et al, filed September 26, 2025, before the United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches. The complaint named PMI and Swedish Match North America LLC as defendants. Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN in the United States and (ii) a subclass of persons who purchased ZYN in New York. Plaintiff alleges, among other things, that defendants misrepresented that ZYN is tobacco-free; misled consumers regarding ZYN’s nicotine strength and addictive potential; and deployed misleading advertisements geared towards those under the legal age. Plaintiff asserts claims for violations of New York General Business Law § 349 (deceptive and unfair trade practices); violations of New York General Business Law § 350 (misleading advertising); violations of state consumer protection statutes; and breaches of the implied warranty of merchantability. Plaintiff seeks compensatory, statutory and punitive damages, attorney’s fees and expenses, prejudgment interest, and declaratory and injunctive relief. On October 30, 2025, defendants filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on the motion recently filed by plaintiff Maultsby to certify a class. On November 3, 2025, the Court granted the motion to stay until the court in the Kelly case issues a ruling on class certification. At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding, and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

Other Litigation

In July 2020, the Public Prosecutor’s office of Rome, Italy, notified our Italian subsidiary, Philip Morris Italia S.r.l. (“PM Italia”), as well as three former or current employees and a former external consultant of PM Italia in July and March 2020, respectively, that it concluded a preliminary investigation against them for alleged contravention of anti-corruption laws and related disruption of trade freedom. The Public Prosecutor alleged that the individuals involved promised certain personal favors to government officials from January to July of 2018 in exchange for favorable treatment for PM Italia, and that PM Italia lacked appropriate organizational controls to prevent the alleged actions by the individuals. On September 21, 2020, the Public Prosecutor issued his indictment and referred the matter to the court. At the preliminary hearing held on May 11, 2021, the judge decided to refer all charges/defendants (including our affiliate) to trial. The first trial hearing took place on September 22, 2021. British American Tobacco Italia S.p.a. (“BAT Italia”) filed a civil claim against PM Italia claiming vicarious liability for the alleged wrongdoings of its former or current employees and seeking EUR50 million (approximately $57 million) in damages. After various postponements, the trial before the court of first instance started on September 25, 2023 and continued through April 29, 2026.

On July 3, 2026, the trial court announced its decision orally. All charges against PM Italia have been dismissed, and the company was acquitted in full. The civil claim filed by BAT Italia against PM Italia has been dismissed. The court acquitted one former employee of PM Italia, and convicted two other employees. Finally, the court convicted the three government officials charged in the case.

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The court’s detailed written reasoning is expected to be issued by the end of September 2026. Parties will then have an opportunity to appeal within 45 days of the issuance of the court’s detailed written reasoning.

Following an October 2020 final decision by the highest court in Brazil in tax litigation pertaining to overpayments of certain indirect taxes, our affiliate modified the methodology for calculation of the deduction applicable to the indirect taxes at issue. The Brazilian Tax Authority objected to such methodology and, on December 3, 2024, served our affiliate with notice of an assessment alleging underpayments of these indirect taxes during the 2020 fiscal year, for approximately BRL 137 million (approximately $27 million). On March 31, 2025, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2021 fiscal year, for approximately BRL 211 million (approximately $42 million). On March 4, 2026, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2022 and 2023 fiscal years, for approximately BRL 369 million (approximately $74 million). Our affiliate believes it is probable that the Brazilian Tax Authority will issue assessments alleging underpayment of indirect taxes for subsequent fiscal years. We disagree with the position of the Brazilian Tax Authority and will defend vigorously.

On December 21, 2023, we were informed that Future Technology K.K. (“FTKK”) filed an application with Tokyo Customs against Sojitz Corporation (“Sojitz”), Philip Morris Japan Limited’s (“PMJL”) importer and distributor, due to alleged infringement of a patent. FTKK sought an order to stop the importation of TEREA consumables. FTKK withdrew its Customs application following the issuance of an opinion from expert advisors to Customs that the patent at issue was not infringed. The proceeding is now concluded.

In July and August 2024, respectively, FTKK filed two patent infringement actions against Sojitz, for alleged infringement of two patents by TEREA consumables. After receiving an indicative view from the Tokyo District Court that FTKK's patents were not infringed, FTKK withdrew its claims and the matters were terminated in September 2025.

Between November 2024 and December 2025, FTKK filed twelve additional patent infringement actions against Sojitz for alleged infringement of twelve new FTKK patents by TEREA and SENTIA consumables. FTKK asserts a claim for damages in these actions. Between February 2025 and July 2025, FTKK also filed eight patent infringement actions against Sojitz seeking a preliminary injunction. The patents FTKK asserted in each of these preliminary injunction actions were previously asserted by FTKK in the earlier filed actions seeking monetary damages. PMJL is obligated to indemnify Sojitz for damages and has intervened in all of these matters. To date, we have received three written rulings from the Tokyo District Court rejecting FTKK’s claims on the basis that FTKK’s patents were not infringed or were invalid. FTKK has appealed one of these rulings to the IP High Court. FTKK has further withdrawn eight of these actions following indicative rulings indicating that FTKK’s patents were not infringed or were invalid. FTKK’s remaining patent infringement actions remain at various stages.

On November 27, 2024, we were informed that FTKK filed another application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK sought an order to stop the importation of TEREA and SENTIA consumables. In April 2025, Tokyo Customs issued a formal notification rejecting FTKK's request for an import injunction on the basis that the accused products do not infringe FTKK's patent. To our knowledge, FTKK has not appealed and the time for any appeal has expired, so the matter is now concluded. On June 5, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK sought an order to stop the importation of TEREA and SENTIA consumables. On November 4, 2025, Tokyo Customs issued a formal notification rejecting FTKK's request for an import injunction on the basis that the accused products do not infringe FTKK's patent. We were informed on January 22, 2026, that FTKK has filed a request for re-investigation of the matter with Tokyo Customs. PMJL submitted a response on February 19, 2026, and filed an additional brief on May 7, 2026. On December 16, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent. FTKK sought an order to stop the importation of TEREA and SENTIA consumables. FTKK withdrew its Customs application following the issuance of an opinion from expert advisors to Customs that the patent at issue was not infringed. The proceeding is now concluded.

PMJL intends to vigorously defend the matters commenced by FTKK and take steps to mitigate disruption, if any, that could result from FTKK’s claims.

Other patent challenges are pending in various jurisdictions.

We are also involved in additional litigation arising in the ordinary course of our business. While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably

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possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

Note 10. Income Taxes:

Income tax provisions for jurisdictions outside the United States of America, as well as state and local income tax provisions, were determined on a separate company basis, and the related assets and liabilities were recorded in PMI’s condensed consolidated balance sheets.

On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was signed into law in the U.S. The Act contains several provisions related to corporate income taxes, including the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The provisions and modifications included in the Act did not have a material impact on PMI’s 2025 consolidated financial statements.

PMI’s effective tax rates for the six months and three months ended June 30, 2026 were 20.5% and 22.3%, respectively. PMI’s effective tax rates for the six months and three months ended June 30, 2025 were 19.5% and 19.0%, respectively.

The effective tax rate for the six months ended June 30, 2026 was unfavorably impacted by deferred tax expense for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($97 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity, partly offset by a decrease in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($68 million).

The effective tax rate for the six months ended June 30, 2025 was favorably impacted by a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($373 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity, partially offset by an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($115 million), as well as the recognition of current tax expense related to the potential disallowance of intercompany transactions in Indonesia ($46 million).

Changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which recommended changes to numerous long-standing tax principles. Many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023. PMI has determined that Pillar Two did not have a material impact on its 2025 consolidated financial statements and should not be expected to have a material impact on its 2026 consolidated financial statements.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions. The U.S. federal statute of limitations remains open for the years 2020 and 2022 onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years after the filing of a return.

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk, have recorded income tax receivables in the amount of 3.6 trillion Indonesian rupiah (approximately $200 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2017 to 2023. Objection letters have been filed with the Tax Office and these assessments are being challenged at various levels in court. These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at June 30, 2026 and December 31, 2025.

It is reasonably possible that within the next 12 months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties. An estimate of any possible change cannot be made at this time.

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Note 11. Indebtedness:

Short-term Borrowings:

At June 30, 2026 and December 31, 2025, PMI’s short-term borrowings and related average interest rates consisted of the following:


	June 30, 2026				December 31, 2025
(in millions)	Amount Outstanding		Average Rate		Amount Outstanding		Average Rate
Commercial paper	$	2,652	3.7	%	$	—	—	%
Bank loans	689		5.4		168		10.3

	$	3,341			$	168

PMI continues to have access to liquidity in the commercial paper market through programs in place in the U.S. and in Europe having an aggregate issuance capacity of $8.0 billion.

Given the mix of PMI's legal entities and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.

The fair values of PMI’s short-term borrowings at June 30, 2026 and December 31, 2025, based on current market interest rates, approximate carrying value.

Long-term Debt:

At June 30, 2026 and December 31, 2025, PMI’s long-term debt consisted of the following:


(in millions)	June 30, 2026		December 31, 2025
U.S. dollar notes, 1.750% to 6.375% (average interest rate 4.719%), due through 2044	$	37,371	$	37,430
Foreign currency obligations:
Euro notes, 0.125% to 3.750% (average interest rate 2.039%), due through 2039	6,563		7,942

Euro credit facility borrowing related to Swedish Match AB acquisition, (interest rate 2.859%), due 2027	1,711		2,944
Swedish krona note, (interest rate 2.190%), due 2029	28		267
Finance leases (average interest rate 4.552%), due through 2037	99		84
Carrying value of long-term debt	45,772		48,667
Less current portion of long-term debt	3,406		3,533
	$	42,366	$	45,134

The fair value of PMI’s outstanding long-term debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities. At June 30, 2026, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:


(in millions)	June 30, 2026
Level 1	$	43,216
Level 2	1,741

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Item 8, Note 2. Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2025.

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Debt Issuances

PMI's debt issuances in the first six months of 2026 were as follows:

(in millions)

Type

Face Value

Interest Rate

Issuance

Maturity

U.S. dollar notes

(a)

$750

4.125%

April 2026

April 2029

U.S. dollar notes

(a)

$750

4.875%

April 2026

April 2036

(a) Interest is payable semi-annually, commencing in October 2026

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper or to refinance certain of our outstanding notes due in 2026.

Euro Term Loan Facility related to the Financing of the Swedish Match Acquisition

On June 29, 2026, PMI prepaid €1.0 billion (approximately $1.1 billion), including a portion of the outstanding principal and accrued interest, under the 5-year tranche of the term loan facility. Borrowings in the amount of €1.5 billion (approximately $1.7 billion) under the 5-year tranche of the term loan facility remain outstanding, expiring on June 23, 2027.

Revolving Credit Facilities:

At June 30, 2026, PMI's total committed revolving credit facilities were as follows:


(in billions)
Type	Committed Revolving Credit Facilities
Multi-year $2.0 billion revolving credit, expiring January 29, 2031	$	2.0
Multi-year $2.5 billion revolving credit, expiring September 29, 2026 (1) (2)	2.5
Multi-year €1.5 billion revolving credit, expiring January 29, 2029	1.7
Total facilities	$	6.2

(1) Includes pricing adjustments that may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets.

(2) On September 20, 2022, PMI entered into an agreement, effective September 29, 2022, to amend and extend the term of its $2.5 billion multi-year revolving credit facility, for an additional year covering the period September 30, 2026 to September 29, 2027, in the amount of $2.3 billion. On September 20, 2023, PMI entered into an agreement, effective September 29, 2023, to amend and further extend the term to September 29, 2028.

At June 30, 2026, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

In addition to the committed revolving credit facilities discussed above, PMI maintains certain short-term credit arrangements, including uncommitted credit lines, to primarily meet working capital needs. These credit arrangements amounted to approximately $4.2 billion at June 30, 2026, and approximately $3.9 billion at December 31, 2025. Borrowings under these arrangements and other bank loans amounted to $689 million at June 30, 2026, and $168 million at December 31, 2025.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 12. Accumulated Other Comprehensive Losses:

PMI’s accumulated other comprehensive losses, net of taxes, consisted of the following:


(Losses) Earnings	At		At		At
(in millions)	June 30, 2026		December 31, 2025		June 30, 2025
Currency translation adjustments	$	(10,647)	$	(11,175)	$	(10,979)
Pension and other benefits	(1,355)		(1,405)		(2,356)
Derivatives accounted for as hedges	346		284		182

Total accumulated other comprehensive losses	$	(11,656)	$	(12,296)	$	(13,153)

Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, are shown on the condensed consolidated statements of comprehensive earnings for the six months and three months ended June 30, 2026 and 2025. For additional information, see Note 4. Benefit Plans for disclosures related to PMI's pension and other benefits and Note 6. Financial Instruments for disclosures related to derivative financial instruments.

Note 13. Related Parties - Equity Investments and Other:

Equity Method Investments:

At June 30, 2026 and December 31, 2025, PMI had total equity method investments of $1,008 million and $1,019 million, respectively. Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses, dividends, capital contributions, changes in ownership interests and movements in currency translation adjustments. The carrying value of our equity method investments at June 30, 2026 and December 31, 2025, exceeded our share of the investees' book value by $1,023 million and $1,033 million, respectively. The difference between the investment carrying value and the amount of underlying equity in net assets is mainly attributable to equity method goodwill, convertible debt instruments, and definite-lived intangible assets and other assets. The difference related to the definite-lived intangibles and other assets at June 30, 2026 and December 31, 2025 of $161 million in both periods, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings. At June 30, 2026 and December 31, 2025, PMI received year-to-date dividends from equity method investees of $17 million and $203 million, respectively.

PMI holds a 23% equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia, which as of June 30, 2026 had a book value of $0.8 billion, including related cumulative foreign currency translation losses of $0.5 billion reflected in accumulated other comprehensive losses in stockholders’ equity. There are risks related to this investment as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.

PMI holds an indirect economic interest of approximately 25% in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture with the Algerian state-owned enterprise Management et Développement des Actifs et des Ressources Holding ("MADAR Holding"). STAEM manufactures and distributes under license some of PMI’s brands. As of June 30, 2026, the book value of PMI’s investment in STAEM was $0.7 billion, including related cumulative foreign currency translation losses of $0.3 billion reflected in accumulated other comprehensive losses in stockholders’ equity. PMI monitors general economic, political, regulatory, and other market factors for potential unfavorable developments which could impact the value of the investment.

PMI holds an indirect economic interest of 14.7% in Eastern Company (“Eastern"), Egypt’s largest cigarette manufacturer which also includes cigars and pipe tobacco, among others, in its portfolio. PMI accounts for its investment in Eastern under the equity method of accounting as it has the indirect ability to participate in Eastern's policy making processes. In relation to its investment in Eastern, PMI also guarantees certain credit facilities and repayment of certain bank loan liabilities. The maximum amount of these guarantee obligations is $385 million and they will be in effect until 2034.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Additionally, as part of its Wellness business strategy, PMI holds non-controlling equity interests in certain companies.

The initial investments in TKM, STAEM, Eastern and Wellness business related investments have been recorded at cost and are included in equity investments on the condensed consolidated balance sheets. Transactions between these equity method investees and PMI subsidiaries are considered to be related-party transactions and are included in the tables below.

Equity securities:

On March 22, 2019, PMI deconsolidated its wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc. (“RBH”) following an initial order from the Ontario Superior Court of Justice granting it protection under the Companies’ Creditors Arrangement Act ("CCAA"), which is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course with minimal disruption to its customers, suppliers and employees.

On March 6, 2025, the CCAA court issued a decision approving the plan of compromise and arrangement (the "Plan") setting forth certain terms of a proposed comprehensive resolution of Canadian tobacco claims and related litigation, including the global settlement amount. The Plan became effective on August 29, 2025. PMI evaluated the terms of the Plan and concluded that powers provided under the Plan to RBH’s CCAA Plan Administrator and to the Claimants (as these terms are defined in the Plan) continue to remove certain elements of control of the business from PMI and RBH. As a result, PMI has determined that RBH will remain deconsolidated as it does not have a controlling financial interest over RBH as defined in ASC 810 (Consolidation). PMI will continue to account for its investment in RBH in accordance with ASC 321 (Investments-Equity Securities) as an equity security, without readily determinable fair value, until the global settlement amount has been paid and the operating covenants that govern RBH’s business are lifted.

In May 2026, pursuant to its obligation under the Plan, RBH provided an annual business plan to its Plan Administrator containing updated five-year financial projections reflecting current industry dynamics. As a result, PMI determined that the estimated fair value of its investment in RBH was lower than its carrying value and recorded a non-cash impairment charge of $511 million in the second quarter of 2026. As of June 30, 2026 and December 31, 2025, the carrying value of PMI's investment in RBH was $51 million and $569 million, respectively. This included the cumulative amount of impairments and downward adjustments of $3,060 million as of June 30, 2026 and $2,549 million as of December 31, 2025. Transactions between PMI and RBH are considered to be related-party transactions from the date of deconsolidation and are included in the tables below.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $983 million and $1,291 million at June 30, 2026 and December 31, 2025, respectively. Unrealized pre-tax gain (loss) of $(308) million ($(240) million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the six months ended June 30, 2026.

Other related parties:

United Arab Emirates-based Trans-Emirates Trading and Investments (FZC) ("TTI") holds a 33% non-controlling interest in Philip Morris Misr LLC ("PMM"), an entity incorporated in Egypt which is consolidated in PMI’s financial statements. PMM sells, under license, PMI brands in Egypt through an exclusive distribution agreement with a local entity that is also controlled by TTI.

Godfrey Phillips India Ltd ("GPI") is one of the non-controlling interest holders in Philip Morris India Trading Private Ltd ("PM India") (formerly IPM India), which is a 56.3% owned PMI consolidated subsidiary. GPI also acts as contract manufacturer and distributor for PM India.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Financial activity with the above related parties:

PMI’s net revenues and expenses with the above related parties were as follows:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2026		2025		2026		2025
Net revenues:
Megapolis Group	$	1,487	$	1,264	$	783	$	715
Other	953		816		472		428
Net revenues (a)	$	2,440	$	2,080	$	1,255	$	1,143

Expenses:

Other	$	141	$	103	$	45	$	66
Expenses	$	141	$	103	$	45	$	66

(a) Net revenues exclude excise taxes and VAT billed to customers.

PMI’s balance sheet activity with the above related parties was as follows:


(in millions)	At June 30, 2026		At December 31, 2025

Receivables:
Megapolis Group	$	699	$	568
Other	344		271
Receivables	$	1,043	$	839

Other assets:
Other	$	81	$	—
Other assets	$	81	$	—

Payables:

Other	$	46	$	37
Payables	$	46	$	37

The activities with the above related parties are in the ordinary course of business, and are primarily for distribution, service fees, contract manufacturing and license agreements. PMI eliminated its respective share of all significant intercompany transactions with the equity method investees.

Note 14. Sale of Accounts Receivable:

To mitigate risk and enhance cash and liquidity management, PMI sells trade receivables to unaffiliated financial institutions. These arrangements allow PMI to sell, on an ongoing basis, certain trade receivables without recourse. The trade receivables sold are generally short-term in nature and are removed from the condensed consolidated balance sheets. PMI sells trade receivables under two types of arrangements, servicing and non-servicing. For servicing arrangements, PMI continues to service the sold trade receivables on an administrative basis and does not act on behalf of the unaffiliated financial institutions. When applicable, a servicing liability is recorded for the estimated fair value of the servicing. The amounts associated with the servicing liability were not material as of June 30, 2026 and 2025. Under the non-servicing arrangements, PMI does not provide any administrative support or servicing after the trade receivables have been sold to the unaffiliated financial institutions.

Cumulative trade receivables sold, including excise taxes, for the six months ended June 30, 2026 and 2025, were $5.3 billion and $5.6 billion, respectively. PMI’s operating cash flows were positively impacted by the amount of the trade receivables sold and derecognized from the condensed consolidated balance sheets, which remained outstanding with the unaffiliated financial institutions. The trade receivables sold that remained outstanding under these arrangements as of June 30, 2026 and 2025, were

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

$0.6 billion and $0.7 billion, respectively. The net proceeds received are included in cash provided by operating activities in the condensed consolidated statements of cash flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of trade receivables within marketing, administration and research costs in the condensed consolidated statements of earnings.

The loss on sale of trade receivables was as follows:



(in millions)	For the Six Months Ended June 30,		For the Three Months Ended June 30,
2026	$	14	$	7
2025	$	17	$	9

Note 15. Restructuring Activities:

For the six months and three months ended June 30, 2026, PMI recorded total pre-tax restructuring charges of $30 million and $6 million, respectively. For the six months and three months ended June 30, 2025, PMI recorded total pre-tax restructuring charges of $243 million. The pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings. As discussed in Note 8. Segment Reporting, marketing, administration and research costs, including restructuring charges, are not allocated to segments to determine the primary measure of segment profitability.

U.S. Reorganization

In the first quarter of 2026, the PMI U.S. organization announced a series of footprint optimization initiatives under the Further Integration Program (“FIP”). These initiatives include the planned closure of the Richmond office and the transition of certain roles and capabilities to strategic U.S. locations, primarily the newly established Business Solutions Center (“BSC”) in Tampa, Florida, and the PMI U.S. headquarters in Stamford, Connecticut. The program also includes the closure of the cigar manufacturing facility in Dothan, Alabama and the consolidation of its cigar production operations into PMI’s manufacturing footprint in the Dominican Republic.

As a result of these actions, PMI recorded pre‑tax restructuring charges of $30 million for the six months ended June 30, 2026. These charges primarily included employee separation and other employee related costs of $25 million, and asset impairment charges of $5 million.

For the full year 2026, PMI expects total pre‑tax restructuring charges associated with the FIP program to be approximately $50 million.

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other combustible tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co. KG, initiated consultations with employee representatives on October 29, 2024, on a proposal to end production in the factories located in Berlin and in Dresden by the end of the second quarter of 2025, and to seek to agree on fair solutions for any impacted employees.

The consultation processes for both of these factories were concluded in April 2025, and as a result of the closure PMI recorded pre-tax restructuring charges of $243 million in the second quarter of 2025. This amount included pension and employee separation costs of $127 million and contract termination and other costs of $24 million, which were paid in cash, as well as asset impairment costs of $92 million, primarily related to property lease, and machinery and equipment, which were non-cash charges.

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Philip Morris International Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Movement in Restructuring Related Liabilities

The movement in restructuring related liabilities for the six months ended June 30, 2026 was as follows:


(in millions)
Liability balance, January 1, 2026	$	115
Charges, net	25
Cash spent	(45)

Currency/other	(6)
Liability balance, June 30, 2026	$	89

Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2027.

Note 16. Leases:

The components of PMI’s lease cost were as follows for the six months and three months ended June 30, 2026 and 2025:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2026		2025		2026		2025
Operating lease cost	$	171	$	150	$	86	$	78
Finance lease cost:
Amortization of right-of-use assets	30		26		16		11
Interest on lease liabilities	2		1		1		1
Short-term lease cost	35		29		18		15
Variable lease cost	20		16		11		9
Total lease cost	$	258	$	222	$	132	$	114

Note 17. Supply Chain Financing:

PMI has engaged with unaffiliated global financial institutions that offer a voluntary supply chain financing ("SCF") program to some of our suppliers. Under the SCF program, the suppliers may elect, at their sole discretion, to sell PMI's payment obligations to these financial institutions. The suppliers independently negotiate the sale arrangements directly with these financial institutions. PMI does not participate in these negotiations, nor does it have any economic interest in these agreements, or in the designated suppliers’ voluntary decision to sell PMI's payment obligations to these financial institutions. No guarantees or securities are provided by PMI or any of its subsidiaries under the SCF programs. PMI's obligations to its suppliers, including amounts due and scheduled payment terms are not impacted by the suppliers’ decision to sell amounts under the SCF program. The payment terms of PMI’s suppliers generally do not exceed 120 days. All outstanding payable amounts related to suppliers that are participating in the SCF program are recorded in accounts payable in PMI's condensed consolidated balance sheets. The associated payments are included in cash flows from operating activities within PMI's condensed consolidated statement of cash flows. As of June 30, 2026 and December 31, 2025, the total amount due to suppliers participating in the SCF program was $1.0 billion and $1.1 billion, respectively.

Note 18. New Accounting Standards:

On November 4, 2024, the FASB issued Accounting Standards Update ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires disclosure of more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. PMI is currently evaluating the impact of ASU 2024-03 on its disclosures.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Description of Our Company

We are a leading international consumer goods company, actively delivering a smoke-free future. We are evolving our portfolio for the long term to include products outside of the tobacco and nicotine sector. Our current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, nicotine pouch and e-vapor products. Since 2008, we have invested over $16 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke or use other nicotine-containing consumer products, with the goal of completely ending the sale of cigarettes. This investment includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies. In November 2022, we acquired Swedish Match AB ("Swedish Match") – a leader in oral nicotine delivery – creating a global smoke-free combination led by the companies’ IQOS and ZYN brands. As of April 30, 2024, we hold the full rights to commercialize IQOS in the U.S. after reaching an agreement to end our U.S. commercial relationship covering IQOS with Altria Group, Inc. in 2022. Following a robust science-based review, the U.S. Food and Drug Administration (the "FDA") has authorized the marketing of Swedish Match’s General snus and ZYN nicotine pouches and versions of PMI’s IQOS devices and consumables - the first-ever such authorizations in their respective categories. Versions of IQOS devices and consumables, General snus and 20 ZYN nicotine pouch variants also obtained the first-ever Modified Risk Tobacco Product ("MRTP") authorizations from the FDA. We describe the MRTP orders in more detail in the "Business Environment" section of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").

With our smoke-free business now operating at scale across our regions, including growth from our U.S. business, PMI has implemented an evolved organizational model with two primary business units: International and U.S. This change was implemented effective January 1, 2026, and as a result PMI, realigned its reportable segments accordingly. The four geographic segments have been replaced with the following three new reportable segments:

•International Smoke-Free;

•International Combustibles; and

•U.S. (including our wellness business unit, Aspeya).

Our cigarettes are sold in approximately 170 markets, and in many of these markets they hold the number one or number two market share position. We have a wide range of premium, mid-price and low-price brands. Our portfolio is comprised of both international and local brands.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products. SFB also includes wellness products, as well as consumer accessories.

IQOS, ZYN and VEEV are the leading brands in our SFPs portfolio. As of June 30, 2026, our smoke-free products were available for sale in 109 markets.

With a strong foundation and significant expertise in life sciences, PMI has a long-term ambition to expand into wellness areas. The business strategy of our wellness unit, Aspeya, currently focuses on developing and commercializing primarily oral consumer wellness offerings. This includes medical and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

We use the term net revenues to refer to our operating revenues from the sale of our products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. Our net revenues and operating income are affected by various factors, including the volume and mix of products we sell, the price of our products and changes in currency exchange rates. Mix is a term used to refer to the proportionate value of premium-price brands to mid-price or low-

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price brands in any given market (product mix). "Mix" can also refer to the proportion of shipment volume in more profitable markets versus shipment volume in less profitable markets (geographic mix). "Other” also includes the currency-neutral net revenue variance attributable to the restructuring of distribution terms in certain markets.

Our cost of sales consists primarily of: tobacco leaf, non-tobacco raw materials, labor and manufacturing costs; shipping and handling costs; and the cost of devices produced by third-party electronics manufacturing service providers. Estimated costs associated with device warranty programs are generally provided for in cost of sales in the period the related revenues are recognized.

Our marketing, administration and research costs include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (excluding corporate expenses and other), and costs incurred to develop new products. The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses.

Corporate expenses and other include certain other expenses related to foreign currency gains/losses and compensation expense related to restricted share units and performance share units awards, which were reclassified from cost of sales and marketing, administration and research costs.

Executive Summary

The following executive summary provides the business update and significant highlights from the "Discussion and Analysis" that follows.

Consolidated Operating Results for the Six Months Ended June 30, 2026

•Net Revenues - Net revenues of $21.3 billion for the six months ended June 30, 2026, increased by $1.9 billion, or 9.8%, from the comparable 2025 amount. The change in our net revenues from the comparable 2025 amount was driven by the following (variances not to scale with year-to-date results):

For the six months ended June 30, 2026, net revenues increased by 9.8%. Net revenues, excluding currency and acquisitions/divestitures, increased by 5.3%, mainly reflecting: a favorable pricing variance mainly driven by international combustibles; partly offset by unfavorable volume/mix, mainly driven by lower international combustibles and U.S. volumes, notwithstanding higher international smoke-free volumes.

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Net revenues by product category for the six months ended June 30, 2026 and 2025 are shown below:

Note: Sum of product categories might not foot to total PMI due to rounding

•Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the six months ended June 30, 2026, from the comparable 2025 amounts, were as follows:


	Diluted EPS		% Change
For the six months ended June 30, 2025	$	3.67
2025 Restructuring charges	0.13
2025 Impairment of goodwill	0.03
2025 Amortization of intangibles	0.24
2025 Fair value adjustment for equity security investments	(0.26)
2025 Income tax impact associated with Swedish Match AB financing	(0.24)



2025 Tax items	0.03
Subtotal of 2025 items	(0.07)
2026 Restructuring charges	(0.01)
2026 Impairment related to RBH equity investment	(0.33)
2026 Egypt sales tax settlement adjustment	0.01
2026 Amortization of intangibles	(0.25)
2026 Fair value adjustment for equity security investments	(0.16)


2026 Income tax impact associated with Swedish Match AB financing	(0.06)

Subtotal of 2026 items	(0.80)
Currency	0.22
Interest	0.02
Change in tax rate	0.11
Operations	0.21
For the six months ended June 30, 2026	$	3.36	(8.4)	%

Restructuring charges – During the six months ended June 30, 2025, we recorded pre-tax restructuring charges of $243 million (representing $200 million net of income tax and a diluted EPS charge of $0.13 per share), related to the end of combustible tobacco production in two of our factories in Germany. During the six months ended June 30, 2026, we recorded pre-tax restructuring charges of $30 million (representing $24 million net of income tax and a diluted EPS charge of $0.01 per share), related to a series of footprint optimization initiatives in the U.S. For further details, see Note 15. Restructuring Activities.

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Impairment of goodwill – During the second quarter of 2025, after the completion of our annual review of goodwill, it was determined that the estimated fair value of a business, which was a separate reporting unit in 2025, related to the consumer accessories products acquired as part of the Swedish Match acquisition in 2022 was lower than its carrying value. Consequently, PMI recorded a goodwill impairment charge of $41 million (representing a $0.03 per share decrease in diluted EPS). For further details, see Note 5. Goodwill and Other Intangible Assets, net.

Amortization of intangibles – During the six months ended June 30, 2025 and 2026, we recorded amortization of intangibles expense of $496 million (representing $385 million net of income tax or $0.24 per share decrease in diluted EPS) and $503 million (representing $392 million net of income tax or $0.25 per share decrease in diluted EPS), respectively.

Impairment related to RBH equity investment – In May 2026, pursuant to its obligation under its court-approved plan of compromise and arrangement (the "Plan"), RBH provided an annual business plan to its Plan Administrator containing updated five-year financial projections reflecting current industry dynamics. As a result, PMI determined that the estimated fair value of its investment in RBH was lower than its carrying value and recorded a non-cash impairment charge of $511 million (representing $0.33 per share decrease in diluted EPS) in the second quarter of 2026. For further details, see Note 13. Related Parties - Equity Investments and Other.

Egypt sales tax settlement adjustment – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies at that time, we concluded that an adverse outcome was probable and recorded a pre-tax charge in 2024 of $45 million (representing a diluted EPS charge of $0.03 per share) in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016. Pursuant to tax amnesty legislation enacted in Egypt in December 2024, PMI submitted review requests with the Dispute Resolution Committee, which issued settlement recommendations subject to court approval. In May 2026, court approval was obtained for the settlement covering the 2016 year, which then became effective. As a result, PMI recorded a favorable sales tax settlement adjustment during the second quarter of 2026 of $18 million net of income tax (representing an increase of $0.01 to diluted EPS).

Fair value adjustment for equity security investments – During the six months ended June 30, 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $410 million gain after tax (or $0.26 per share increase in diluted EPS) and $240 million loss after tax (or $0.16 per share decrease in diluted EPS), respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.

Income taxes – The income tax impact associated with the Swedish Match acquisition financing that increased our 2025 diluted EPS by $0.24 per share and decreased our 2026 diluted EPS by $0.06 per share in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

The 2025 tax items that decreased our 2025 diluted EPS by $0.03 per share in the table above were due to the recognition of current tax expense related to the potential disallowance of deductions for certain intercompany transactions in Indonesia.

The change in the tax rate that increased our diluted EPS by $0.11 per share in the table above was primarily driven by a reduction in tax costs associated with global intangible low-taxed income and discrete tax benefits recognized during the period. For further details, see Note 10. Income Taxes.

Currency – The favorable impact of $0.22 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S. dollar, especially against the Euro and Russian ruble, partly offset by the Japanese yen and Swiss franc. This favorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Interest – The favorable impact of $0.02 per share from interest in the table above was primarily due to higher interest income on investments

Operations – The increase in diluted EPS of $0.21 from our operations in the table above was due primarily to the following:

•International Smoke-Free segment: Favorable volume/mix and favorable pricing; and

•International Combustibles segment: Favorable pricing, partly offset by unfavorable volume/mix;

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partly offset by

•U.S. segment: Unfavorable volume/mix, unfavorable pricing and higher manufacturing costs; and

•Higher marketing, administration and research costs.

Consolidated Operating Results for the Three Months Ended June 30, 2026

•Net Revenues - Net revenues of $11.2 billion for the three months ended June 30, 2026, increased by $1.1 billion, or 10.4%, from the comparable 2025 amount. The change in our net revenues from the comparable 2025 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 10.4%. Net revenues, excluding currency and acquisitions/divestitures, increased by 7.6%, mainly reflecting: a favorable pricing variance mainly driven by international combustibles; supported by favorable volume/mix, driven by international smoke-free volumes, notwithstanding adverse international combustibles mix.

Net revenues by product category for the three months ended June 30, 2026 and 2025, are shown below:

Note: Sum of product categories might not foot to total PMI due to rounding

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•Diluted Earnings Per Share - The changes in our diluted EPS for the three months ended June 30, 2026, from the comparable 2025 amounts, were as follows:


	Diluted EPS		% Change
For the three months ended June 30, 2025	$	1.95
2025 Restructuring charges	0.13
2025 Impairment of goodwill	0.03
2025 Amortization of intangibles	0.12
2025 Fair value adjustment for equity security investments	(0.17)
2025 Income tax impact associated with Swedish Match AB financing	(0.18)
2025 Tax items	0.03
Subtotal of 2025 items	(0.04)
2026 Restructuring charges	—
2026 Impairment related to RBH equity investment	(0.33)
2026 Egypt sales tax settlement adjustment	0.01
2026 Amortization of intangibles	(0.13)
2026 Fair value adjustment for equity security investments	0.06
2026 Income tax impact associated with Swedish Match AB financing	(0.01)

Subtotal of 2026 items	(0.40)
Currency	0.03
Interest	0.02
Change in tax rate	0.05

Operations	0.19
For the three months ended June 30, 2026	$	1.80	(7.7)	%

Restructuring charges – During the second quarter of 2025, we recorded pre-tax restructuring charges of $243 million (representing $200 million net of income tax and a diluted EPS charge of $0.13 per share), related to the end of combustible tobacco production in two of our factories in Germany. For further details, see Note 15. Restructuring Activities.

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Amortization of intangibles – During the second quarter of 2025 and 2026, we recorded amortization of intangibles expense of $250 million (representing $194 million net of income tax or $0.12 per share decrease in diluted EPS) and $252 million (representing $196 million net of income tax or $0.13 per share decrease in diluted EPS), respectively.

Fair value adjustment for equity security investments – During the second quarter of 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $267 million gain after tax (or $0.17 per share increase in diluted EPS) and $98 million gain after tax (or $0.06 per share increase in diluted EPS), respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.

Income taxes – The income tax impact associated with the Swedish Match acquisition financing that increased our 2025 diluted EPS by $0.18 and decreased our 2026 diluted EPS by $0.01 in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

The change in the tax rate that increased our diluted EPS by $0.05 per share in the table above was primarily driven by a reduction in tax costs associated with global intangible low-taxed income and discrete tax benefits recognized during the period.

Currency – The favorable impact of $0.03 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S. dollar, especially against the Euro and the Russian ruble. This favorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Interest – The favorable impact of $0.02 per share from interest in the table above was primarily due to higher interest income on investments

Operations – The increase in diluted EPS of $0.19 from our operations in the table above was due primarily to the following:

•International Smoke-Free segment: Favorable volume/mix and favorable pricing; and

•International Combustibles segment: Favorable pricing, partly offset by unfavorable mix;

partly offset by

•U.S. segment: Unfavorable volume/mix, mostly driven by cigars, and higher manufacturing costs; and

•Higher marketing, administration and research costs.

Discussion and Analysis

Critical Accounting Estimates

For information on our critical accounting estimates, see "Critical Accounting Estimates" in the MD&A included in Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Consolidated Operating Results

See pages 77 - 88 for a discussion of our "Cautionary Factors That May Affect Future Results." Net revenues, cost of sales and gross profit by segment, as well as total significant expenses and operating income were as follows:

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(in millions)	International Smoke-Free		International Combustibles		U.S.		Total
For the Six Months Ended June 30, 2026
Net revenues	$	7,713	$	12,147	$	1,478	$	21,338
Cost of sales	(2,313)		(3,917)		(544)		(6,774)
Gross profit	$	5,400	$	8,229	$	935	14,564
Marketing, administration and research costs							(5,838)

Corporate expenses and other							(303)
Operating income							$	8,423
For the Six Months Ended June 30, 2025
Net revenues	$	6,471	$	11,209	$	1,762	$	19,441
Cost of sales	(2,066)		(3,774)		(466)		(6,305)
Gross profit	$	4,405	$	7,435	$	1,296	13,136
Marketing, administration and research costs							(5,416)
Impairment of goodwill							(41)
Corporate expenses and other							(423)
Operating income							$	7,256


(in millions)	International Smoke-Free		International Combustibles		U.S.		Total
For the Three Months Ended June 30, 2026
Net revenues	$	3,877	$	6,459	$	856	$	11,192
Cost of sales	(1,161)		(2,071)		(301)		(3,533)
Gross profit	2,716		4,388		555		7,659
Marketing, administration and research costs							(2,981)

Corporate expenses and other							(148)
Operating income							$	4,530
For the Three Months Ended June 30, 2025
Net revenues	$	3,395	$	5,883	$	862	$	10,140
Cost of sales	(1,076)		(1,947)		(252)		(3,274)
Gross profit	2,319		3,936		611		6,866
Marketing, administration and research costs							(2,988)
Impairment of goodwill							(41)
Corporate expenses and other							(125)
Operating income							$	3,712

Note: Amounts may not foot due to rounding

Items affecting the comparability of results from operations were as follows:

•Restructuring charges – See Note 15. Restructuring Activities for details of the pre-tax charges included in marketing, administration and research costs for the six months and three months ended June 30, 2026 and 2025.

•Impairment of goodwill – See Note 5. Goodwill and Other Intangible Assets, net for details of the goodwill impairment charge recorded for the six months and three months ended June 30, 2025.

Marketing, administration and research costs, including restructuring charges, as well as corporate expenses and other are not allocated to segments to determine the primary measure of segment profitability.

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Our net revenues by product category are shown in the table below:


(in millions)	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2026		2025		Change		2026		2025		Change
Smoke-free:
International Smoke-Free	$	7,713	$	6,471	19.2	%	$	3,877	$	3,395	14.2	%
U.S.	1,311		1,584		(17.2)	%	768		766		0.3	%
of which, Wellness	118		109		9.0	%	56		57		(1.3)	%
Total Smoke-free	9,024		8,055		12.0	%	4,645		4,161		11.7	%
Combustible tobacco:
International Combustibles	12,147		11,209		8.4	%	6,459		5,883		9.8	%
U.S.	167		178		(5.8)	%	88		96		(8.5)	%
Total Combustible tobacco	12,314		11,386		8.2	%	6,547		5,979		9.5	%
Total PMI net revenues	$	21,338	$	19,441	9.8	%	$	11,192	$	10,140	10.4	%

Note: Amounts may not foot due to rounding

Net revenues related to smoke-free, excluding wellness, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable. These net revenue amounts consist of the sale of our products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories. Net revenues related to wellness refer to the operating revenues generated from the sale of products, primarily associated with oral and intra-oral delivery systems.

PMI's heat-not-burn products include licensed KT&G heat-not-burn products.

Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes. These net revenue amounts consist of the sale of our cigarettes and other tobacco products that are combusted. Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include smoke-free products.

References to "Cost" in the Consolidated Financial Summary table of total PMI and the three reportable segments throughout this "Discussion and Analysis" reflects the currency-neutral variances of: cost of sales (excluding the volume/mix cost component); and where applicable, marketing, administration and research costs (including restructuring charges); corporate expenses and other, and amortization and impairment of intangibles.

Following the deconsolidation of our Canadian subsidiary, we continue to report the volume and corresponding royalty revenues of brands sold by RBH for which other PMI subsidiaries are the trademark owners. These include Next, Parliament, TEREA and VEEV. The volume and corresponding royalty revenues of these brands sold by RBH were not material to PMI for all periods presented.

Total shipment volume is defined as the combined total of cigarette, heated tobacco, oral smoke-free products (excluding snuff, snuff leaf and U.S. chew) and e-vapor shipment volume in equivalent units, unless otherwise stated.

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS, DELIA, HEETS and HEETS Creations (defined collectively as HEETS), SENTIA, TEREA, TEREA CRAFTED and TEREA Dimensions, as well as the KT&G-licensed brands, Fiit and Miix (outside of South Korea). HTUs also include zero tobacco heat-not-burn consumables (BEYOND and LEVIA).

Oral smoke-free product volume excludes snuff, snuff leaf and U.S. chew.

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In-market sales ("IMS") is defined as sales to the trade channels, which serve the end legal age nicotine users. Depending on the market and distribution model, IMS may represent an estimate. Consequently, past reported periods may be updated to ensure comparability and to incorporate the most current information.

Adjusted market share for HTUs is defined as the total in-market sales volume for PMI HTUs as a percentage of the total estimated sales volume for cigarettes and HTUs, excluding the impact of estimated distributor and wholesaler inventory movements.

Unless otherwise stated, market share for HTUs is defined as the IMS volume for HTUs as a percentage of the total estimated industry sales volume for cigarettes and HTUs.

References to total industry and our market share performance reflect cigarettes and heated tobacco units, unless otherwise stated.

Consumer offtake or offtake is the term PMI uses to refer to an approximation of purchases by consumers based on various market specific sources.

Total industry volume, PMI in-market sales volume and PMI market share for the total international market, and Japanese domestic market include the cigarillo category in Japan.

References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the United States, total industry (or total market) and market shares throughout this "Discussion and Analysis" are our estimates for tax-paid and Global Travel Retail products based on data from a number of internal and external sources and may, in defined instances, exclude China. Past reported periods may be updated to ensure comparability and to incorporate the most current information for industry and market share reporting.

From time to time, PMI’s shipment volumes and IMS are subject to the impact of distributor inventory movements (or wholesaler inventory movements in certain markets where PMI does not sell to distributors), and estimated total industry/market volumes are subject to the impact of inventory movements in various trade channels that include estimated trade inventory movements of PMI’s competitors arising from market-specific factors that significantly distort reported volume disclosures. Such factors may include changes to the manufacturing supply chain, shipment methods, consumer demand, timing of excise tax increases or other influences that may affect the timing of sales to customers. In such instances, in addition to reviewing PMI shipment volumes, IMS, certain estimated total industry/market volumes and estimated market shares on a reported basis, management reviews these measures on an adjusted basis that excludes the impact of distributor and/or estimated trade inventory movements. Management also believes that disclosing PMI's shipment volumes, IMS, and estimated total industry/market volumes and estimated market shares in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements improves the comparability of performance and trends for these measures over different reporting periods.

Consolidated Operating Results for the Six Months Ended June 30, 2026

The following discussion compares our consolidated operating results for the six months ended June 30, 2026, with the six months ended June 30, 2025.

Total Market

Estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs declined by 0.4%.

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Total Shipment Volume

Our shipment volume for cigarettes and smoke-free products is shown in the table below:


Shipment Volume (equivalent units in billions)
	For the Six Months Ended June 30,
	2026	2025	Change
Total	389.4	387.9	0.4	%
Cigarettes	294.2	300.0	(1.9)	%
Smoke-Free Products	95.2	87.9	8.3	%
HTU	83.1	75.9	9.4	%
Oral SFP	9.6	10.5	(8.8)	%
E-vapor	2.6	1.5	72.0	%

Note: Amounts may not foot due to rounding. Oral smoke-free products conversion: 1 pouch equals 1 unit. E-vapor products conversion: one milliliter of e-vapor liquid is equivalent to 10 units.

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 0.4% with smoke-free volumes, up by 8.3%, driven by HTU and E-vapor categories, partly offset by cigarette volumes, down by 1.9%.

For the full year 2026, we currently expect a broadly stable to slightly growing (previously broadly stable) total PMI cigarette and SFP shipment volume, with high-single digit SFP shipment volume growth, and a cigarette shipment volume decline of 2% to 3%, (previously around 3%).



Financial Summary
					Change Fav./(Unfav.)				Variance Fav./(Unfav.)
Six Months Ended June 30,	2026		2025		Total		Excl. Curr. & Acquis/Divest		Total		Cur- rency		Acq. / Div.		Price		Vol/ Mix/Other		Cost
(in millions)
Net Revenues	$	21,338	$	19,441	9.8	%	5.3	%	$	1,897	$	889	$	(17)	$	1,150	$	(125)	$	—
Cost of Sales	(6,774)		(6,305)		(7.4)	%	(3.0)	%	(469)		(294)		13		—		(113)		(75)
Gross Profit	14,564		13,136		10.9	%	6.4	%	1,428		595		(4)		1,150		(238)		(75)
Marketing, Administration and Research Costs (1)	(5,838)		(5,416)		(7.8)	%	(2.1)	%	(422)		(308)		2		—		—		(116)
Impairment of Goodwill	—		(41)		+100%		+100%		41		—		—		—		—		41
Corporate Expenses and Other	(303)		(423)		28.4	%	(2.6)	%	120		131		—		—		—		(11)
Operating Income	$	8,423	$	7,256	16.1	%	10.4	%

Philip Morris International Inc. 10-Q