Philip Morris International Inc.

Previous wording

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 ZYNnicotine 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").

Current wording

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 legal-age adults who would otherwise 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 ZYNnicotine 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").

Previous wording

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.

Current wording

IQOS, ZYN and VEEV are the leading brands in our SFPs portfolio. As of September 30, 2026, our smoke-free products were available for sale in 110 markets.

Previous wording

•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):

Current wording

•Net Revenues - Net revenues of $32.8 billion for the nine months ended September 30, 2026, increased by $2.5 billion, or 8.2%, 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):

Previous wording

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.

Current wording

For the nine months ended September 30, 2026, net revenues increased by 8.2%. Net revenues, excluding currency and acquisitions/divestitures, increased by 5.9%, mainly reflecting: a favorable pricing variance mainly driven by international combustibles, and higher international smoke-free volumes; partly offset by unfavorable volume/mix, mainly driven by lower international combustibles and U.S. volumes in the first quarter.

Previous wording

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

Current wording

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

Previous wording

•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:

Current wording

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

Previous wording

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 millionnet 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.

Current wording

Restructuring charges – During the nine months ended September 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 nine months ended September 30, 2026, we recorded pre-tax restructuring charges of $34 million(representing $27 millionnet of income tax and a diluted EPS charge of$0.02 per share), related to a series of footprint optimization initiatives in the U.S. For further details, see Note 15. Restructuring Activities.

Previous wording

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.

Current wording

Amortization of intangibles –During the nine months ended September 30, 2025 and 2026, we recorded amortization of intangibles expense of $746 million (representing $580 million net of income tax or $0.37 per share decrease in diluted EPS) and $750 million (representing$584 million net of income tax or $0.37 per share decrease in diluted EPS), respectively.

Previous wording

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.

Current wording

Fair value adjustment for equity security investments –During the nine months ended September 30, 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $513 million gain after tax (or $0.33 per share increase in diluted EPS) and $339 million loss after tax (or $0.22 per share decrease in diluted EPS), respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.

Previous wording

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.

Current wording

Impairment related to RBH equity investment –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 (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.

Previous wording

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.

Current wording

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 $0.07 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.

Previous wording

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.

Current wording

The 2025 tax items that increased our 2025 diluted EPS by $0.11 per share in the table above were due to benefits related to an interest expense election primarily driven by a reduction in prior year tax costs associated with global intangible low-taxed income and refunds expected on amended tax returns filed in Germany; partially offset by valuation allowances recorded on deferred tax assets related to U.S. foreign tax credits and the recognition of current tax expense related to the potential disallowance of deductions for certain intercompany transactions in Indonesia.

Previous wording

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.

Current wording

The change in the tax rate that increased our diluted EPS by $0.03 per share in the table above was primarily driven by discrete tax benefits recognized during the period. For further details, see Note 10. Income Taxes.

Previous wording

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.

Current wording

Currency– The favorable impact of $0.20 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. This favorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Previous wording

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

Current wording

Interest – The favorable impact of $0.03 per share from interest in the table above was primarily due to higher interest income on investments.

Previous wording

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

Current wording

Operations – The increase in diluted EPS of $0.43 from our operations in the table above was due primarily to the following:

Previous wording

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

Current wording

•International Smoke-Free segment: Favorable volume/mix, favorable pricing and lower manufacturing costs; and

Previous wording

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

Current wording

•International Combustibles segment: Favorable pricing and the restructuring of distribution terms in certain markets, partly offset by unfavorable volume/mix and increases in energy-related input prices.

Previous wording

•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):

Current wording

•Net Revenues - Net revenues of $11.4 billion for the three months ended September 30, 2026, increased by $0.6 billion, or 5.5%, 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):

Previous wording

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.

Current wording

Amortization of intangibles –During the third quarter of 2025 and 2026, we recorded amortization of intangibles expense of $250 million (representing $195 million net of income tax or $0.13 per share decrease in diluted EPS) and $247 million (representing $192 million net of income tax or $0.13 per share decrease in diluted EPS), respectively.

Previous wording

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.

Current wording

Fair value adjustment for equity security investments –During the third quarter of 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $103 million gain after tax (or $0.07 per share increase in diluted EPS) and $99 million loss after tax (or $0.06 per share decrease in diluted EPS), respectively. For further details, see Note 13. Related Parties - Equity Investments and Other.

Previous wording

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.

Current wording

Income taxes – The income tax impact associated with the Swedish Match acquisition financing that 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.

Previous wording

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.

Current wording

The change in the tax rate that decreased our diluted EPS by $0.08 per share in the table above was primarily driven by benefits related to an interest expense election primarily driven by a reduction in 2025 tax costs associated with global intangible low-taxed income.

Previous wording

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.

Current wording

Currency– The unfavorable impact of $0.01 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S. dollar, especially against the Euro and Japanese yen, partly offset by the Russian ruble and Swiss franc. This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Previous wording

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:

Current wording

See pages 80 -91 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:

Previous wording

•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.

Current wording

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

Previous wording

•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.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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%.

Current wording

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 0.5% with smoke-free volumes, up by 6.4%, driven by HTU and E-vapor categories, partly offset by cigarette volumes, down by 1.2%.

Previous wording

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%).

Current wording

For the full year 2026, we currently expect a growing (previously broadly stable to slightly growing) total PMI cigarette and SFP shipment volume, with high single-digit SFP shipment growth, led by high single-digit SFP adjusted IMS growth, and a cigarette shipment volume decline at a similar level to the year-to-date trend (previously around 2% to 3%).

Previous wording

(1) Cost variance includes charges in 2026 and 2025 of $30 million and $243 million, respectively, related to restructuring charges. For more details, see Note 15. Restructuring Activities.

Current wording

(1) Cost variance includes charges in 2026 and 2025 of $34 million and $243 million, respectively, related to restructuring charges and $176 million related to the Germany excise tax classification litigation charge in 2025. For more details, see Note 15. Restructuring Activities and the "Executive Summary" section of this MD&A.

Previous wording

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.

Current wording

For the nine months ended September 30, 2026, net revenues increased by 8.2%. Net revenues, excluding currency and acquisitions/divestitures, increased by 5.9%, mainly reflecting: a favorable pricing variance mainly driven by international combustibles; and higher international smoke-free volumes; partly offset by unfavorable volume/mix, mainly driven by lower international combustibles and U.S. volumes in the first quarter.

Previous wording

Operating income increased by 16.1%. Operating income, excluding currency and acquisitions/divestitures, increased by 10.4%, mainly reflecting: the same factors as for net revenues and lower restructuring charges in 2026, partially offset by higher marketing, administration and research costs.

Current wording

Operating income increased by 15.4%. Operating income, excluding currency and acquisitions/divestitures, increased by 12.1%, mainly reflecting: the same factors as for gross profit, lower restructuring charges in 2026 and the 2025 Germany excise tax classification litigation charge of $176 million, partially offset by higher marketing, administration and research costs.

Previous wording

Interest expense, net, of $480 million decreased by $38 million or 7.3%, primarily due to higher interest income on investments.

Current wording

Interest expense, net, of $679 million decreased by $69 million or 9.2%, primarily due to higher interest income on investments.

Previous wording

Our effective tax rate increased by 1.0 percentage point to 20.5%. We estimate that our 2026 effective tax rate will be around 21.5%, excluding discrete tax events. For further details, see Note 10. Income Taxes.

Current wording

Our effective tax rate increased by 1.7 percentage points to 20.9%. We estimate that our 2026 effective tax rate will be around 21.5%, excluding discrete tax events. For further details, see Note 10. Income Taxes.

Previous wording

We recorded a non-cash impairment charge of $511 million related to our RBH equity investment in the condensed consolidated statement of earnings for the six months ended June 30, 2026. For further details, see Note 13. Related Parties - Equity Investments and Other.

Current wording

We recorded a non-cash impairment charge of $511 million related to our RBH equity investment in the condensed consolidated statement of earnings for the nine months ended September 30, 2026. For further details, see Note 13. Related Parties - Equity Investments and Other.

Previous wording

Equity investments and securities (income)/loss net was a loss of $244 million in 2026 compared to income of $(581) million in 2025. The variance was primarily due to the unfavorable fair value adjustments for our equity security investments in India and Sri Lanka. For further details, see Note 13. Related Parties - Equity Investments and Other.

Current wording

Equity investments and securities (income)/loss net was a loss of $330 million in 2026 compared to income of $(926) million in 2025. The variance was primarily due to the unfavorable fair value adjustments for our equity security investments in India and Sri Lanka. For further details, see Note 13. Related Parties - Equity Investments and Other.

Previous wording

Net earnings attributable to PMI of $5.3 billion decreased by $0.5 billion or 8.3%. This decrease was primarily due to the unfavorable fair value adjustments for our equity security investments, the non-cash impairment charge related to our RBH equity investment and a higher effective tax rate, partly offset by higher operating income and lower interest expense, net. Basic and diluted EPS of $3.36 both decreased by 8.4%. Excluding a favorable currency impact of $0.22, diluted EPS decreased by 14.4%.

Current wording

Net earnings attributable to PMI of $8.6 billion decreased by $0.6 billion or 6.9%. This decrease was primarily due to the unfavorable fair value adjustments for our equity security investments, the non-cash impairment charge related to our RBH equity investment and a higher effective tax rate, partly offset by higher operating income and lower interest expense, net. Basic and diluted EPS of $5.49 and $5.48 decreased by 6.9% and 7.0%, respectively. Excluding a favorable currency impact of $0.20, diluted EPS decreased by 10.4%.

Previous wording

During the quarter, estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs increased by 0.8%.

Current wording

During the quarter, estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs was broadly stable, decreasing by 0.1%.

Previous wording

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 2.5% driven by a 7.5% increase in smoke-free mainly due to IQOS and complemented by a resilient combustible segment, notably in markets where SFPs are banned or have a limited market presence.

Current wording

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 0.6% driven by a 2.7% increase in smoke-free products, with shipment growth across all categories supported by high single-digit growth in adjusted SFP in-market sales, which is the closest proxy to consumer offtake. This was complemented by the continuing resilience of the combustible segment, notably in markets where SFPs are banned or have a limited market presence.