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Item 2. Management’s Discussion and Analysis

2025-07-25 compared with 2025-04-24 · 486 added, 210 removed, 1221 unchanged (36% of the section changed)

17 unchanged sentences

Our four geographical segments are as follows:

• Europe Region;

• Europe Region, including our Wellness & Healthcare business;

• South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA");

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IQOS , ZYN and VEEV are the leading brands in our SFPs portfolio.

As of December 31, 2024, our smoke-free products were available for sale in 95 markets.

As of June 30, 2025, our smoke-free products were available for sale in 97 markets.

Our Wellness and Healthcare business strategy focuses on developing and commercializing oral and inhaled consumer health and wellness offerings and inhaled prescription products for therapy areas that include pain management and cardiovascular emergencies.

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

Consolidated Operating Results for the Three Months Ended March 31, 2025

• Net Revenues - Net revenues of $9.3 billion for the three months ended March 31, 2025, increased by $0.5 billion, or 5.8%, from the comparable 2024 amount.

The change in our net revenues from the comparable 2024 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 5.8%.

Consolidated Operating Results for the Six Months Ended June 30, 2025

• Net Revenues - Net revenues of $19.4 billion for the six months ended June 30, 2025, increased by $1.2 billion, or 6.5%, from the comparable 2024 amount.

The change in our net revenues from the comparable 2024 amount was driven by the following (variances not to scale with year-to-date results):

For the six months ended June 30, 2025, net revenues increased by 6.5%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 8.4%, mainly reflecting:

a favorable pricing variance, primarily due to higher combustible tobacco pricing;

and favorable volume/mix, mainly driven by higher smoke-free products volume, notwithstanding unfavorable cigarette mix.

Net revenues by product category for the three months ended March 31, 2025 and 2024, are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the three months ended March 31, 2025, from the comparable 2024 amounts, were as follows:

a favorable pricing variance, predominantly due to higher combustible tobacco pricing;

and favorable volume/mix, driven by higher smoke-free volume, notwithstanding unfavorable mix and lower volumes for cigarettes.

Net revenues by product category for the six months ended June 30, 2025 and 2024 are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted earnings per share (“diluted EPS”) for the six months ended June 30, 2025, from the comparable 2024 amounts, were as follows:

Diluted EPS % Change

For the three months ended March 31, 2024 $ 1.38

For the six months ended June 30, 2024 $ 2.92

2024 Restructuring charges 0.09

2024 Amortization of intangibles 0.06

2024 Impairment of other intangibles 0.01

2024 Amortization of intangibles 0.17

2024 Fair value adjustment for equity security investments (0.15)

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Subtotal of 2024 items 0.18

2025 Restructuring charges (0.13)

2025 Impairment of goodwill (0.03)

2025 Amortization of intangibles (0.24)

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2025 Income tax impact associated with Swedish Match AB financing 0.24

2025 Tax items (0.03)

Subtotal of 2025 items 0.07

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Operations 0.56

For the three months ended March 31, 2025 $ 1.72 24.6 %

Restructuring charges – During the first quarter of 2024, we recorded pre-tax restructuring charges of $168 million (representing $141 million net of income tax and a diluted EPS charge of $0.09 per share), related to the restructuring of the sourcing of IQOS products to be commercialized in the U.S., and the cessation of our operations in Venezuela.

For the six months ended June 30, 2025 $ 3.67 25.7 %

Restructuring charges – During the six months ended June 30, 2024, we recorded pre-tax restructuring charges of $168 million (representing $141 million net of income tax and a diluted EPS charge of $0.09 per share), related to the restructuring of the sourcing of IQOS products to be commercialized in the U.S., and the cessation of our operations in Venezuela.

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.

For further details, see Note 16.

Restructuring Activities .

Amortization of intangibles – During the first quarter of 2024 and 2025, we recorded amortization of intangible expense of $120 million (representing $95 million net of income tax or $0.06 per share decrease in diluted EPS) and $246 million (representing $191 million net of income tax or $0.12 per share decrease in diluted EPS), respectively.

Impairment of goodwill and other intangibles – During the first quarter of 2024, we recorded an impairment charge of $27 million (representing $20 million net of income tax or $0.01 per share decrease in diluted EPS), primarily reflecting the impairment of non-amortizable intangible assets related to an in-process research and development project in our Wellness and Healthcare business.

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 reporting unit included within the Europe segment 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 on the goodwill impairment charge, see Note 5.

Goodwill and Other Intangible Assets, net .

Amortization of intangibles – During the six months ended June 30, 2024 and 2025, we recorded amortization of intangible expense of $332 million (representing $260 million net of income tax or $0.17 per share decrease in diluted EPS) and $496 million (representing $385 million net of income tax or $0.24 per share decrease in diluted EPS), respectively.

The higher 2025 amount includes the reacquired rights recorded as other intangible assets, net following the reacquisition of IQOS commercialization rights in the U.S.

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Goodwill and Other Intangible Assets, net .

Impairment of other intangibles – During the first quarter of 2024, we recorded an impairment charge of $27 million (representing $20 million net of income tax or $0.01 per share decrease in diluted EPS), primarily reflecting the impairment of non-amortizable intangible assets related to an in-process research and development project in our Wellness and Healthcare business.

Fair value adjustment for equity security investments – During the first quarter of 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $126 million after tax gain (or $0.08 per share increase in diluted EPS) and $143 million after tax gain (or $0.09 per share increase in diluted EPS), respectively.

Fair value adjustment for equity security investments – During the six months ended June 30, 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $242 million after tax gain (or $0.15 per share increase in diluted EPS) and $410 million after tax gain (or $0.26 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 Swedish Match financing that decreased our 2024 diluted EPS by $0.07 per share and increased our 2025 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.

Income taxes – The Income tax impact associated with Swedish Match AB financing that decreased our 2024 diluted EPS by $0.09 per share and increased our 2025 diluted EPS by $0.24 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 2024 tax items that increased our 2024 diluted EPS by $0.03 per share in the table above were due to a U.S.

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Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela.

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 decreased our diluted EPS by $0.06 per share in the table above was primarily due to increases in foreign statutory tax rates and repatriation cost differences, partially offset by a decrease in U.S.

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Currency – The unfavorable impact of $0.05 per share during the reporting period primarily results from the fluctuations of the U.S.

dollar, especially against the Egyptian pound, Japanese yen, Mexican peso and Russian ruble.

dollar, especially against the Russian ruble and Swiss franc, partly offset by the Euro and Japanese yen.

This unfavorable currency movement has impacted our profitability across our primary revenue markets and local currency cost bases.

Interest – The favorable impact of $0.03 per share from interest in the table above was primarily due to a favorable mark-to-market adjustment related to derivative financial instruments and a lower average debt level.

Interest – The favorable impact of $0.05 per share from interest in the table above was primarily due to a lower weighted average cost of debt, including the favorable impact of derivative financial instruments.

Operations – The increase in diluted EPS of $0.56 from our operations in the table above was due primarily to the following segments:

Favorable volume/mix and a favorable pricing variance, partly offset by higher marketing, administration and research costs;

• SSEA, CIS & MEA:

Favorable pricing and higher cigarette volume and HTU volume, partly offset by higher manufacturing costs and higher marketing, administration and research costs;

Favorable pricing and favorable volume/mix, partly offset by higher marketing, administration and research costs;

Favorable volume/mix and a favorable pricing variance, partly offset by higher marketing, administration and research costs and higher manufacturing costs;

• EA, AU & PMI GTR:

Favorable volume/mix.

Consolidated Operating Results for the Three Months Ended June 30, 2025

• Net Revenues - Net revenues of $10.1 billion for the three months ended June 30, 2025, increased by $0.7 billion, or 7.1%, from the comparable 2024 amount.

The change in our net revenues from the comparable 2024 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 7.1%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.8%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

and favorable volume/mix driven by higher smoke-free products volume, notwithstanding lower volumes and unfavorable mix for cigarettes.

Net revenues by product category for the three months ended June 30, 2025 and 2024, are shown below:

• Diluted Earnings Per Share - The changes in our reported diluted EPS for the three months ended June 30, 2025, from the comparable 2024 amounts, were as follows:

Diluted EPS % Change

For the three months ended June 30, 2024 $ 1.54

2024 Amortization of intangibles 0.11

2024 Fair value adjustment for equity security investments (0.08)

2024 Income tax impact associated with Swedish Match AB financing 0.02

2024 Tax items —

Subtotal of 2024 items 0.05

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

Currency 0.02

Interest 0.02

Change in tax rate (0.03)

Operations 0.31

For the three months ended June 30, 2025 $ 1.95 26.6 %

Amortization of intangibles – During the second quarter of 2024 and 2025, we recorded amortization of intangible expense of $212 million (representing $165 million net of income tax or $0.11 per share decrease in diluted EPS) and $250 million (representing $194 million net of income tax or $0.12 per share decrease in diluted EPS), respectively.

Fair value adjustment for equity security investments – During the second quarter of 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $116 million after tax gain (or $0.08 per share increase in diluted EPS) and $267 million after tax gain (or $0.17 per share increase in diluted EPS), respectively.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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 16.

Restructuring Activities .

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 reporting unit included within the Europe segment 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 .

Income taxes – The Income tax impact associated with Swedish Match AB financing that decreased our 2024 diluted EPS by $0.02 per share and increased our 2025 diluted EPS by $0.18 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 change in the tax rate that decreased our diluted EPS by $0.03 per share in the table above was primarily due to increases in foreign statutory tax rates and repatriation cost differences, partially offset by a decrease in U.S.

state income tax expense.

Currency – The favorable impact of $0.02 per share during the reporting period primarily results from the fluctuations of the U.S.

dollar, especially against the Euro, Russian ruble and Japanese yen, partly offset by the 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 a lower weighted average cost of debt, including the favorable impact of derivative financial instruments.

Operations – The increase in diluted EPS of $0.31 from our operations in the table above was due primarily to the following segments:

Favorable pricing and favorable volume/mix;

• SSEA, CIS & MEA:

Favorable pricing and higher cigarette volume and HTU volume, partly offset by higher manufacturing costs and higher marketing, administration and research costs;

Favorable pricing and favorable volume/mix, partly offset by higher marketing, administration and research costs.

Favorable volume/mix, partly offset by higher marketing, administration and research costs;

• EA, AU & PMI GTR:

Favorable volume/mix.

Discussion and Analysis

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(in millions) Europe SSEA, CIS & MEA EA, AU & PMI GTR Americas Total

For the Three Months Ended March 31, 2025

For the Six Months Ended June 30, 2025

Net revenues $ 7,794 $ 5,669 $ 3,439 $ 2,539 $ 19,441

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Marketing, administration and research costs 2,537 1,308 696 1,284 5,825

Impairment of goodwill 41 — — — 41

Operating income $ 3,105 $ 1,920 $ 1,766 $ 465 $ 7,256

For the Three Months Ended March 31, 2024

For the Six Months Ended June 30, 2024

Net revenues $ 7,350 $ 5,429 $ 3,357 $ 2,125 $ 18,261

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Operating income $ 3,028 $ 1,663 $ 1,516 $ 282 $ 6,489

(in millions) Europe SSEA, CIS & MEA EA, AU & PMI GTR Americas Total

For the Three Months Ended June 30, 2025

Net revenues $ 4,234 $ 2,926 $ 1,708 $ 1,272 $ 10,140

Cost of sales 1,129 1,241 489 420 3,279

Marketing, administration and research costs 1,396 685 366 661 3,108

Impairment of goodwill 41 — — — 41

Operating income $ 1,668 $ 1,000 $ 853 $ 191 $ 3,712

For the Three Months Ended June 30, 2024

Net revenues $ 3,895 $ 2,771 $ 1,673 $ 1,129 $ 9,468

Cost of sales 1,126 1,311 528 380 3,345

Marketing, administration and research costs 1,152 569 392 566 2,679

Operating income $ 1,617 $ 891 $ 753 $ 183 $ 3,444

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

PMI Net Revenues by Product Category

(in millions) For the Three Months Ended March 31,

2025 2024 Change

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2025 2024 Change 2025 2024 Change

Combustible tobacco:

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• Restructuring charges – See Note 16.

Restructuring Activities for a breakdown of these costs by segment for the three months ended March 31, 2024.

Restructuring Activities for a breakdown of these costs by segment for the six months and three months ended June 30, 2025 and 2024.

• Impairment of goodwill – See Note 5.

Goodwill and Other Intangible Assets, net for details of the $41 million of goodwill impairment charge recorded in the Europe segment for the six months and three months ended June 30, 2025.

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.

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Shipment Volume

For the Three Months Ended March 31,

Cigarettes and Heated Tobacco Units (million units) 2025 2024 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

Cigarettes and Heated Tobacco Units (million units) 2025 2024 Change 2025 2024 Change

Cigarettes 300,001 300,809 (0.3) % 155,248 157,618 (1.5) %

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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.

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 products based on data from a number of internal and external sources and may, in defined instances, exclude China.

paid 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.

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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.

Key market data regarding total market size, our shipments and market share of cigarettes and heated tobacco units are shown in the table below:

For the Three Months Ended March 31,

Key market data regarding total market size, our shipments and market share of cigarettes and heated tobacco units are shown in the tables below:

For the Six Months Ended June 30,

PMI Shipments (billion units) PMI Market Share (2) %

Market Total Market (billion units) Total Cigarette Heated Tobacco Unit Total Heated Tobacco Unit

Market Cigarettes & HTU Market (billion units) Cigarettes & HTU Cigarette HTU Cigarettes & HTU HTU

2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

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Australia 1.8 2.7 0.6 1.0 0.6 1.0 — — 37.1 35.2 — —

Japan (2) (3)

73.4 73.6 36.9 35.4 8.1 8.4 28.8 27.0 42.9 41.0 31.9 29.3

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(1) Market share estimates are calculated using IMS data, unless otherwise stated

(2) Total market and market share estimates include cigarillos in Japan

(3) PMI market share reflects estimated adjusted IMS volume share;

Total Market is based on reported IMS

(4) 2025 includes 4.1 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfilment services agent

For the Three Months Ended June 30,

PMI Shipments (billion units) PMI Market Share (2) %

Market Cigarettes & HTU Market (billion units) Cigarettes & HTU Cigarette HTU Cigarettes & HTU HTU

2025 2024 2025 2024 2025 2024 2025 2024 2025 2024 2025 2024

Total (1) (2)

654.5 654.0 194.1 193.2 155.2 157.6 38.8 35.5 29.2 28.8 5.7 5.1

France 6.4 6.7 2.7 3.3 2.7 3.3 — — 40.5 41.5 0.5 0.6

18.4 17.3 6.9 6.8 5.6 5.8 1.2 1.1 37.9 39.0 6.8 6.0

18.9 18.1 10.1 10.6 7.0 8.0 3.1 2.5 53.4 53.6 17.7 16.7

13.8 15.0 6.2 6.5 4.8 5.1 1.3 1.4 45.2 43.5 9.9 9.2

Spain 11.2 11.2 3.5 3.5 3.1 3.2 0.4 0.3 29.7 29.1 3.4 2.6

SSEA, CIS & MEA

Egypt 22.6 19.1 6.7 6.7 6.4 6.3 0.3 0.3 29.6 34.3 1.8 1.9

Indonesia (4)

60.4 65.0 18.9 19.6 18.5 19.4 0.4 0.3 31.3 30.2 0.7 0.4

Philippines 12.0 11.1 5.5 5.1 5.4 5.0 0.1 0.1 46.0 46.2 0.9 0.6

Russia 56.3 55.2 18.3 17.4 13.3 12.9 5.1 4.4 32.1 31.5 9.0 8.2

Turkey 41.0 39.3 18.7 20.3 18.7 20.3 — — 45.8 51.7 — —

EA, AU & PMI GTR

Australia 0.7 1.4 0.1 0.4 0.1 0.4 — — 24.8 32.8 — —

Japan (2) (3)

37.9 37.9 18.0 17.5 4.2 4.1 13.9 13.4 42.8 41.0 31.7 29.4

South Korea 17.8 18.2 3.5 3.6 1.9 2.2 1.6 1.4 19.9 19.6 8.9 7.7

Argentina 6.4 5.9 4.1 3.6 4.1 3.6 — — 63.8 61.6 — —

Mexico 8.2 7.9 4.7 4.6 4.6 4.6 0.1 0.1 57.8 58.6 1.0 0.8

(1) Market share estimates are calculated using IMS data, unless otherwise stated.

Depending on the market and distribution model, IMS may represent an estimate.

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Total Market is based on reported IMS

(4) 2025 includes 1.9 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfillment services agent

Consolidated Operating Results for the Three Months Ended March 31, 2025

The following discussion compares our consolidated operating results for the three months ended March 31, 2025, with the three months ended March 31, 2024.

During the quarter, estimated international industry volume (excluding China and the U.S.) for cigarettes and HTUs decreased by 0.6%.

(4) 2025 includes 2.1 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfilment services agent

Consolidated Operating Results for the Six Months Ended June 30, 2025

The following discussion compares our consolidated operating results for the six months ended June 30, 2025, with the six months ended June 30, 2024.

Estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs was broadly stable.

For the full year 2025, we currently expect an estimated total international industry volume decline of around 1% for cigarettes and HTUs, excluding China and the U.S.

Total Shipment Volume

Six Months Ended June 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

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387.9 87.9 75.9 10.5 1.5 300.0

Q1 2024 3.9% 14.4% 11.9% 27.2% +100% 1.1%

June YTD 2024 2.5% 13.1% 10.5% 25.5% +100% (0.3)%

Oral smoke-free products conversion:

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one milliliter of e-vapor liquid equivalent to 10 units.

Our total shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 3.9% with smoke-free volumes up by 14.4%, with all SFP categories growing strongly, and cigarette volumes up by 1.1% driven by SSEA, CIS & MEA region.

For the full year 2025, we currently expect total cigarette and smoke-free product shipment volume growth for PMI of up to 2% driven by smoke-free products volume growth of 12% to 14%.

For the full year 2025, we also expect nicotine pouch shipment volume in the U.S.

of 800 to 840 million cans.

Shipment Volume

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 2.5% with smoke-free volumes up by 13.1%, with all SFP categories growing strongly, and cigarette volumes down by 0.3%.

For the full year 2025, we currently expect total cigarette and smoke-free product shipment volume growth for PMI of around 1%.

We continue to expect smoke-free product volume growth of 12% to 14%, partly offset by cigarette volume declines which we now forecast to be around 2%.

Given the cigarette dynamics, it is possible that in the second-half of 2025, we may see modest declines for total PMI volumes.

We continue to expect 10 to 12% HTU adjusted IMS growth for the year, with growth skewed to the fourth quarter given a strong comparison in the third quarter.

For the third quarter specifically, we forecast HTU shipments of 38.5 to 39.5 billion units.

In the U.S., ZYN reaccelerated its consumer offtake growth, as measured by Nielsen, in the second quarter as in-store availability improved and legal-age consumers regain access to the full portfolio of ZYN offerings.

Restocking was effectively completed in the first-half, with the estimated impact slightly lower than initially expected.

In the third quarter, we expect a broadly similar level of ZYN shipments as in the second quarter.

We continue to expect for the full year 2025 nicotine pouch shipment volume in the U.S.

of 800 to 840 million cans, including a sequential step-up in the fourth quarter.

International Share of Market - Cigarette and HTUs (Excluding China and the United States)

First-Quarter

Six Months Year-to-Date

2025 2024 Change (pp)

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Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2025 2024 Total Excl.

Six Months Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

$ 9,301 $ 8,793 5.8 % 10.2 % $ 508 $ (340) $ (49) $ 526 $ 377 $ (6)

Net Revenues $ 19,441 $ 18,261 6.5 % 8.4 % $ 1,180 $ (269) $ (88) $ 946 $ 602 $ (11)

Cost of Sales (6,319) (6,540) 3.4 % 0.7 % 221 80 92 — 149 (100)

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(5,825) (5,232) (11.3) % (14.6) % (593) 107 62 — — (762)

Impairment of Goodwill (41) — — % — % (41) — — — — (41)

Operating Income $ 7,256 $ 6,489 11.8 % 12.1 % $ 767 $ (82) $ 66 $ 946 $ 751 $ (914)

(1) Cost/Other variance includes higher amortization of intangibles in 2025 , partly offset by charges in 2024 of $168 million related to restructuring charges and the 2024 impairment of other intangibles of $27 million.

(1) Cost/Other variance includes charges in 2025 of $243 million related to restructuring charges and higher amortization of intangibles in 2025, partly offset by charges in 2024 of $168 million related to restructuring charges and the 2024 impairment of other intangibles of $27 million.

For more details, see Note 5.

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Restructuring Activities .

During the quarter, net revenues increased by 5.8%.

For the six months ended June 30, 2025, net revenues increased by 6.5%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 8.4%, mainly reflecting:

a favorable pricing variance, primarily due to higher combustible tobacco pricing;

and favorable volume/mix, mainly driven by higher smoke-free products volume, notwithstanding unfavorable cigarette mix.

The unfavorable currency impact in net revenues was due primarily to the Euro, Indonesian rupiah, Japanese yen, Mexican peso and Russian ruble.

a favorable pricing variance, predominantly due to higher combustible tobacco pricing;

and favorable volume/mix, driven by higher smoke-free volume, notwithstanding unfavorable mix and lower volumes for cigarettes.

The unfavorable currency impact in net revenues was due primarily to the Euro, Indonesian rupiah, Japanese yen and Mexican peso, partly offset by the Russian ruble.

Net revenues include $8.1 billion in 2025 and $7.0 billion in 2024 related to smoke-free.

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Operating income, excluding currency and acquisitions/divestitures, increased by 12.1%, mainly reflecting:

the same factors as for net revenues and a favorable comparison to 2024 reflecting restructuring charge in 2024;

partly offset by higher marketing, administration and research costs and higher amortization of intangibles in 2025.

Interest expense, net, of $241 million decreased by $58 million or 19.4%, primarily due to a favorable mark-to-market adjustment related to derivative financial instruments and a lower average debt level.

the same factors as for net revenues, partly offset by higher marketing, administration and research costs, higher manufacturing costs, higher restructuring charges in 2025, the impairment of goodwill charge in 2025 and higher amortization of intangibles in 2025.

Interest expense, net, of $518 million decreased by $110 million or 17.5%, primarily due to a lower weighted average cost of debt, including the favorable impact of derivative financial instruments.

Our effective tax rate decreased by 4.7 percentage points to 19.5%.

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Income Taxes .

Income from equity investments and securities, net, increased by $229 million or 65.1%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

For further details, Note 13.

Related Parties - Equity Investments and Other .

Net earnings attributable to PMI of $5.7 billion increased by $1.2 billion or 25.8%.

This increase was due primarily to higher operating income, a lower effective tax rate and lower interest expense, net, as discussed above.

This increase was due primarily to higher operating income, a lower effective tax rate and higher income from equity investments and securities, net.

Basic and diluted EPS of $3.67 increased by 25.7%.

Excluding an unfavorable currency impact of $0.05, diluted EPS increased by 27.4%.

Consolidated Operating Results for the Three Months Ended June 30, 2025

The following discussion compares our consolidated operating results for the three months ended June 30, 2025, with the three months ended June 30, 2024.

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

Total Shipment Volume

Quarters Ended June 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

Total Shipment Volume

(equivalent units in billions)

200.1 44.8 38.8 5.2 0.9 155.2

1.2% 11.8% 9.2% 23.8% +100% (1.5)%

Oral smoke-free products conversion:

(i) nicotine pouches:

15 pouches per can in the U.S.

and approximately 20 pouches per can outside the U.S.;

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

E-vapor products conversion:

one milliliter of e-vapor liquid equivalent to 10 units.

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 1.2% with smoke-free volumes up by 11.8%, with all SFP categories growing strongly, and cigarette volumes down by 1.5% largely driven by Turkey and Indonesia.

International Share of Market - Cigarette and HTUs (Excluding China and the United States)

Second-Quarter

2025 2024 Change (pp)

Total International Market Share (1)

29.2 % 28.8 % 0.4

Cigarettes 23.4 % 23.7 % (0.3)

HTU 5.7 % 5.1 % 0.6

Cigarette over Cigarette Market Share (2)

25.4 % 25.5 % (0.1)

(1) Defined as PMI's cigarette and heated tobacco unit in-market sales volume as a percentage of total industry cigarette and heated tobacco unit sales volume, excluding China and the U.S., including cigarillos in Japan

(2) Defined as PMI's cigarette in-market sales volume as a percentage of total industry cigarette sales volume, excluding China and the U.S., including cigarillos in Japan

Sum of share of market by product categories might not foot to total due to rounding

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Quarters Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

$ 10,140 $ 9,468 7.1 % 6.8 % $ 672 $ 71 $ (39) $ 420 $ 225 $ (5)

Cost of Sales (3,279) (3,345) 2.0 % 1.5 % 66 (26) 43 — 76 (27)

Marketing, Administration and Research Costs (1)

(3,108) (2,679) (16.0) % (16.2) % (429) (14) 19 — — (434)

Impairment of Goodwill (41) — — % — % (41) — — — — (41)

Operating Income $ 3,712 $ 3,444 7.8 % 6.2 % $ 268 $ 31 $ 23 $ 420 $ 301 $ (507)

(1) Cost/Other variance includes charges in 2025 of $243 million related to restructuring charges and higher amortization of intangibles in 2025.

For more details, see Note 5.

Goodwill and Other Intangible Assets, net and Note 16.

Restructuring Activities .

During the quarter, net revenues increased by 7.1%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.8%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

and favorable volume/mix driven by higher smoke-free products volume, notwithstanding lower volumes and unfavorable mix for cigarettes.

The favorable currency impact in net revenues was due primarily to the Euro, Japanese yen and Russian ruble, partly offset by Indonesian rupiah and Mexican peso.

Net revenues include $4.2 billion in 2025 and $3.6 billion in 2024 related to smoke-free.

Operating income increased by 7.8%.

Operating income, excluding currency and acquisitions/divestitures, increased by 6.2%, mainly reflecting:

the same factors as for net revenues;

partly offset by higher marketing, administration and research costs, restructuring charge in 2025 of $243 million, impairment of goodwill in 2025 of $41 million and higher amortization of intangibles in 2025.

Interest expense, net, of $277 million decreased by $52 million or 15.8%, primarily due to a lower weighted average cost of debt, including the favorable impact of derivative financial instruments.

Our effective tax rate decreased by 4.7 percentage points to 19.0%.

Income from equity investments and securities, net, increased by $215 million or over 100%, primarily driven by a favorable fair value adjustment for our equity security investments in India and Sri Lanka.

For further details, Note 13.

Related Parties - Equity Investments and Other .

Net earnings attributable to PMI of $3.0 billion increased by $0.6 billion or 26.3%.

This increase was due primarily to higher operating income, a lower effective tax rate and higher income from equity investments and securities, net.

Basic and diluted EPS of $1.95 increased by 26.6%.

Excluding a favorable currency impact of $0.02, diluted EPS increased by 25.3%.

Operating Results by Business Segment

Segment Operating Results – Three Months Ended March 31, 2025

The following discussion compares operating results within each of our segments for the three months ended March 31, 2025, with the three months ended March 31, 2024.

Segment Operating Results – Three Months and Six Months Ended June 30, 2025

The following discussion compares operating results within each of our segments for the three months and six months ended June 30, 2025, with the three months and six months ended June 30, 2024.

Financial Summary

Quarters Ended March 31, Change

Quarters Ended June 30, Change

Fav./(Unfav.) Variance

6 unchanged sentences

During the quarter, net revenues increased by 8.7%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 8.6%, reflecting a favorable pricing variance, mainly driven by higher combustible tobacco pricing;

and favorable volume/mix, mainly driven by higher smoke-free products volume.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.3%, reflecting a favorable pricing variance driven by higher combustible tobacco pricing;

and favorable volume/mix driven by higher smoke-free products volume, notwithstanding lower volumes and unfavorable mix for cigarettes.

Operating income increased by 3.2%.

Operating income, excluding currency and acquisitions/divestitures, decreased by 3.5%, primarily reflecting a restructuring charge in 2025 of $243 million and an impairment of goodwill charge in 2025 of $41 million, partly offset by a favorable pricing variance and favorable volume/mix.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 7,794 $ 7,350 6.0 % 7.9 % $ 444 $ (50) $ (88) $ 427 $ 155 $ —

Operating Income $ 3,105 $ 3,028 2.5 % 0.6 % $ 77 $ 25 $ 35 $ 427 $ 87 $ (497)

For the six months ended June 30, 2025, net revenues increased by 6.0%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.9%, reflecting a favorable pricing variance predominantly due to higher combustible tobacco pricing;

and favorable volume/mix driven by higher smoke-free volume, notwithstanding unfavorable mix and lower volumes for cigarettes.

The pricing variance for 2024 and 2025 was negatively impacted by the supplemental tax surcharge on heated tobacco products ("HTPs") in Germany, which went into effect in 2022.

5 unchanged sentences

PMI currently accounts for the surcharge as a reduction in net revenues, with amounts withdrawn before May 15, 2024, currently under a payment suspension.

Despite this payment suspension and, in

order to avoid the future addition of interest, PMI elected, on January 14, 2025, to pay the amount outstanding of EUR 721 million (approximately $751 million), excluding accrued interest.

Despite this payment suspension and, in order to avoid the future addition of interest, PMI elected, on January 14, 2025, to pay the amount outstanding of EUR 721 million (approximately $751 million), excluding accrued interest.

An unfavorable outcome to the appeal would negatively impact PMI’s future cash provided by operating activities for the amounts of unpaid interest.

2 unchanged sentences

Operating income, excluding currency and acquisitions/divestitures, increased by 0.6%, primarily reflecting the same factors as for net revenues;

largely offset by higher marketing, administration and research costs.

largely offset by a restructuring charge in 2025 of $243 million and higher marketing, administration and research costs, as well as an impairment of goodwill charge in 2025 of $41 million.

Europe - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs decreased by 4.8% to 118.3 billion units, with a 6.6% decrease for cigarettes and continued HTU growth.

Notable decreases in the estimated total market in Poland (down by 16.0%) and France (down by 12.8%) were partly offset by Bulgaria (up by 7.2%) and Luxembourg (up by 20.3%).

In the first quarter, our total cigarette and HTU shipment volume was stable (48.4 billion units), with decreases in Poland (down by 14.4%) and Sweden (down by 66.9%, driven by prior year inventory movements) offset by increases in Italy (up by 8.5%) and Spain (up by 13.9%).

In the first quarter, our HTU share of the total cigarette and HTU market increased by 1.2 points on an adjusted basis.

In the second quarter, the estimated market for cigarettes and HTUs decreased by 1.2% to 136.7 billion units, with a 2.8% decrease for cigarettes and continued HTU growth.

Notable decreases in Poland (down by 7.8%), Ukraine (down by 7.6%), and the Netherlands (down by 23.5%) were partly offset by Germany (up by 6.5%) and Italy (up by 4.0%).

For the six months year-to-date, the estimated market for cigarettes and HTUs decreased by 2.9% to 255.3 billion units, with a 4.5% decrease for cigarettes and continued HTU growth.

In the second quarter, our cigarette and HTU shipment volume decreased by 2.4% to 55.1 billion units, predominantly due to decreases in France (down by 17.5%), Italy (down by 4.1%), and Poland (down by 4.6%) driven by cigarette shipments.

In the second quarter, our HTU share of the total cigarette and HTU market increased by 1.2 points on an adjusted basis.

For the six months year-to-date, our cigarette and HTU shipment volume decreased by 1.3% to 103.5 billion, with decreases in Poland (down by 9.3%), France (down by 12.9%) and the Netherlands (down by 26.8%) driven by cigarette shipments.

For the six months year-to-date, our HTU share of the total cigarette and HTU market increased by 1.2 points on an adjusted basis.

Other Oral SFP includes chew bags and tobacco bits

Sum may not foot due to rounding.

In the first quarter, oral SFP shipment volume decreased by 2.5% to 72.2 million cans mainly due to snus, partly offset by nicotine pouches.

In the second quarter, oral SFP shipment volume was stable at 70.8 million cans.

For the six months year-to-date, oral SFP shipments decreased by 1.3% to 142.9 million cans mainly due to snus, partly offset by nicotine pouches.

SSEA, CIS & MEA:

Financial Summary

Quarters Ended March 31, Change

Quarters Ended June 30, Change

Fav./(Unfav.) Variance

12 unchanged sentences

Operating income, excluding currency and acquisitions/divestitures, increased by 17.4%, primarily reflecting:

a favorable pricing variance, predominantly driven by higher combustible tobacco pricing, as well as higher cigarette and HTU volume, partly offset by higher manufacturing costs (notably tobacco leaf) as well as marketing, administration and research costs.

a favorable pricing variance, predominantly driven by higher combustible tobacco pricing, as well as higher cigarette and HTU volume, partly offset by higher marketing, administration and research costs as well as manufacturing costs (notably tobacco leaf).

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 5,669 $ 5,429 4.4 % 5.7 % $ 240 $ (69) $ — $ 342 $ (30) $ (3)

Operating Income $ 1,920 $ 1,663 15.5 % 15.9 % $ 257 $ (38) $ 31 $ 342 $ 134 $ (212)

For the six months ended June 30, 2025, net revenues increased by 4.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.7%, mainly reflecting:

a favorable pricing variance, predominantly driven by higher combustible tobacco pricing;

while higher cigarette and SFP volume was offset by unfavorable cigarette mix due to the below mentioned commercial model change in Indonesia.

A change in our commercial model for the below tier-one cigarette segment in Indonesia in the fourth quarter of 2024 resulted in lower net revenue and cost of sales, with no meaningful impact on operating income.

Operating income increased by 15.5%.

Operating income, excluding currency and acquisitions/divestitures, increased by 15.9%, primarily reflecting:

a favorable pricing variance, and higher cigarette and SFP volume, partly offset by higher marketing, administration and research costs as well as manufacturing costs (notably tobacco leaf).

SSEA, CIS & MEA - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs increased by 0.9% to 377.3 billion units.

The increase in the estimated total market was mainly due to Turkey (up by 8.5%), India (up by 8.7%), and Indonesia (up by 2.6%), partly offset by Bangladesh (down by 16.2%).

In the first quarter, our total cigarette and HTU shipment volume increased by 4.6% to 90.2 billion units, with increases in Turkey (up by 6.5%) and India (up 47.4%), partly offset by Saudi Arabia (down by 10.4%) and Tunisia (down by 31.7%).

PMI's estimated HTU adjusted in-market sales volume increased by an estimated 11.1% .

In the second quarter, the estimated market for cigarettes and HTUs increased by 0.8% to 392.6 billion units, mainly due to Egypt (up by 17.9%), India (up by 10.5%), and Turkey (up by 4.3%), partly offset by Indonesia (down by 7.0%) and Bangladesh (down by 8.9%).

For the six months year-to-date, the estimated market for cigarettes and HTUs increased by 0.6% to 761.0 billion units.

In the second quarter, our cigarette and HTU shipment volume increased by 1.1% to 95.3 billion units, with increases in India (up by 41.9%) and the Philippines (up 8.0%), partly offset by Turkey (down by 8.0% due to supply chain issues following a change in regulatory requirements) and Indonesia (down by 3.7%).

In the second quarter, our HTU adjusted in-market sales volume, fueled by broad growth across the region, increased by an estimated 19.8%.

For the six months year-to-date, our cigarette and HTU shipment volume in the Region increased by 2.8% to 185.6 billion units, mainly driven by India (up by 44.6%) and Egypt (up by 5.7%), partly offset by Saudi Arabia (down by 16.9%) and Indonesia (down by 1.5%).

For the six months year-to-date, our HTU adjusted in-market sales volume increased by an estimated 15.5%.

EA, AU & PMI GTR:

Financial Summary

Quarters Ended March 31, Change

Quarters Ended June 30, Change

Fav./(Unfav.) Variance

6 unchanged sentences

During the quarter, net revenues increased by 2.1%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.5%, primarily reflecting a favorable volume/mix, driven by higher smoke-free products volume.

Net revenues, excluding currency and acquisitions/divestitures, increased by 1.6%, predominantly reflecting a favorable volume/mix, driven by higher smoke-free products volume.

Operating income increased by 13.3%.

Operating income, excluding currency and acquisitions/divestitures, increased by 22.8%, driven by the same main factor as for net revenues and a comparison benefit from higher device shipments in the prior year, when ILUMA i was launched in Japan.

Operating income, excluding currency and acquisitions/divestitures, increased by 9.4%, driven by the same factor as for net revenues.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 3,439 $ 3,357 2.4 % 4.0 % $ 82 $ (53) $ — $ 33 $ 102 $ —

Operating Income $ 1,766 $ 1,516 16.5 % 16.2 % $ 250 $ 5 $ — $ 33 $ 184 $ 28

For the six months ended June 30, 2025, net revenues increased by 2.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 4.0%, primarily due to favorable volume/mix, driven by higher SFP volume.

Operating income increased by 16.5%.

Operating income, excluding currency and acquisitions/divestitures, increased by 16.2%, driven by the same factors as for net revenues.

EA, AU & PMI GTR - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs, excluding China, decreased by 2.0% to 74.4 billion units, with a decrease in cigarettes partly offset by HTU growth.

The decrease in the estimated total market was mainly driven by South Korea (down by 6.4%) and Japan (down by 1.0%), partly offset by Global Travel Retail (up by 5.4%).

In the first quarter, our total cigarette and HTU shipment volume increased by 5.9% to 28.8 billion units with growth in Japan (up by 5.3%) and Global Travel Retail (up by 25.7%), partly offset by Taiwan (down by 18.3%).

Our estimated HTU adjusted in-market sales volume increased by an estimated 10.7%.

In the second quarter, the estimated market for cigarettes and HTUs, excluding China, decreased by 0.7% to 79.8 billion units, with a decrease in cigarettes largely offset by HTU growth.

The decrease in the estimated market was mainly driven by Australia (down by 50.2%) and South Korea (down by 2.4%), partly offset by Global Travel Retail (up by 7.8%).

For the six months year-to-date, the estimated market for cigarettes and HTUs in the Region, excluding China, decreased by 1.1%, with a decrease in cigarettes, largely offset by HTU growth.

In the second quarter, our cigarette and HTU shipment volume increased by 3.6% to 28.3 billion units with growth in Global Travel Retail (up by 23.0%) and Japan (up by 2.9%), partly offset by Australia (down by 83.4% predominantly due to shipment phasing).

In the second quarter, our HTU adjusted in-market sales volume increased by an estimated 9.6%.

For the six months year-to-date, our cigarette and HTU shipment volume increased by 4.7% to 57.1 billion units, driven by Japan (up by 4.1%), partly offset by Australia (down by 39.1%).

For the six months year-to-date, our HTU adjusted in-market sales volume in the Region increased by 10.2%.

Financial Summary

Quarters Ended March 31, Change

Quarters Ended June 30, Change

Fav./(Unfav.) Variance

7 unchanged sentences

Net revenues, excluding currency and acquisitions/divestitures, increased by 17.0%, primarily reflecting:

favorable volume/mix, predominantly driven by U.S.

nicotine pouches, as well as a favorable pricing variance, driven by U.S.

favorable volume/mix, predominantly driven by nicotine pouches in the U.S.

Operating income increased by 4.4%.

Operating income, excluding currency and acquisitions/divestitures, increased by 24.0%, primarily reflecting:

the same factors as for net revenues;

partly offset by higher marketing, administration and research costs, including incremental U.S.

investments, as well as higher amortization of intangibles.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 2,539 $ 2,125 19.5 % 24.0 % $ 414 $ (97) $ — $ 144 $ 375 $ (8)

Operating Income $ 465 $ 282 64.9 % 91.1 % $ 183 $ (74) $ — $ 144 $ 346 $ (233)

For the six months ended June 30, 2025, net revenues increased by 19.5%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 24.0%, primarily reflecting:

favorable volume/mix, predominantly driven by SFP volume, as well as a favorable pricing variance, due to U.S.

smoke-free products and cigarettes outside of the U.S.

2 unchanged sentences

the same factors as for net revenues, and a favorable comparison to 2024 reflecting the restructuring charges of $168 million in 2024;

partly offset by higher marketing, administration and research costs, including incremental U.S.

investments, as well as higher amortization of intangibles.

partly offset by higher manufacturing costs, higher marketing, administration and research costs, as well as higher amortization of intangibles.

Americas - Total Market and PMI Shipment Volume

In the first quarter, the estimated total market for cigarettes and HTUs, excluding the U.S., increased by 1.3% to 45.2 billion units, predominantly reflecting an increase in the cigarette market.

The increase in the estimated total market was mainly due to Brazil (up by 12.7%), partly offset by Mexico (down by 9.9%) and Canada (down by 19.3%).

In the first quarter, our total cigarette and HTU shipment volume was flat (14.4 billion units), with decreases in Mexico (down by 10.9%) and Colombia (down by 12.3%), offset by increases in Brazil (up by 7.4%) and Argentina (up by 1.8%).

In the second quarter, the estimated market for cigarettes and HTUs, excluding the U.S., decreased by 0.7% to 45.3 billion units, predominantly reflecting a decrease in the cigarette market.

The decrease was mainly due to Canada (down by 11.3%) and Brazil (down by 1.6%), partly offset by Argentina (up by 8.3%) and Mexico (up by 3.6%).

For the six months year-to-date, the estimated market for cigarettes and HTUs, excluding the U.S., was broadly stable.

In the second quarter, our cigarette and HTU shipment volume increased by 1.6% to 15.3 billion units, with increases in Argentina (up by 12.3%) and Mexico (up by 2.3%), partly offset by decreases in Brazil (down by 2.7%) and Colombia (down by 7.9%).

For the six months year-to-date, our cigarette and HTU shipment volume increased by 0.7% to 29.8 billion units, mainly due to Argentina (up by 6.5%), partly offset by Mexico (down by 3.6%).

(1) Excluding U.S.

In the first quarter, oral SFP shipments increased by 42.0% to 237 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

travel retail volumes of approximately 2.5 million and 2.9 million nicotine pouch cans are recorded in the Americas segment for the second quarter and six months year-to-date 2025, respectively, while financial impacts are recorded in the EA, AU & PMI GTR segment.

There were no meaningful U.S.

travel retail volumes in prior year.

In the second quarter, oral SFP shipments increased by 32.5% to 225 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

For the six months year-to-date, oral SFP shipments increased by 37.3% to 462 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

Business Environment

11 unchanged sentences

We recognize that smoking cigarettes causes serious diseases and that the best way to avoid the harm of smoking is to never start or to quit.

Nevertheless, according to WHO estimates, there are approximately 1 billion smokers globally.

Nevertheless, according to WHO estimates, there are approximately one billion smokers globally.

This number has not meaningfully changed in decades and, based on current trends, is not expected to significantly change in the near future.

22 unchanged sentences

Our product development is based on the elimination of combustion via tobacco heating and other innovative systems, as well as through oral tobacco and nicotine products, which we believe are the most promising paths to providing a better consumer choice for those who would otherwise continue to smoke cigarettes.

We recognize that no single product will appeal to all adult smokers.

We recognize that no single product will appeal to all adult

Therefore, we are developing and commercializing a portfolio of products intended to appeal to a variety of distinct adult consumer preferences and achieve population harm reduction, including:

17 unchanged sentences

• e-Vapor products, which are battery-powered devices that produce an aerosol by vaporizing a tobacco-free liquid solution.

We have developed e-liquids for our e-Vapor products designed to deliver an authentic tobacco taste.

We have developed e-liquids for our e-Vapor products with different flavor profiles, including e-liquids designed to deliver an authentic tobacco taste.

Using patented technology, flavors and nicotine are extracted directly from the tobacco leaves and captured in a tobacco-free liquid solution, without having to add flavoring ingredients.

10 unchanged sentences

Since then, we have continuously expanded our commercialization activities.

As of December 31, 2024, PMI's smoke-free products were available for sale in 95 markets.

We have integrated the production of our heated tobacco units into several of our existing manufacturing facilities, are progressing with our plans to build manufacturing capacity for our other SFPs, and continue to optimize our manufacturing infrastructure and expand our commercialization activities for new products and markets.

As of June 30, 2025, PMI's smoke-free products were available for sale in 97 markets.

infrastructure and expand our commercialization activities for new products and markets.

We discuss certain risks related to the commercialization and supply of our SFP portfolio in " Cautionary Factors That May Affect Future Results " in this report.

13 unchanged sentences

Our commercialization efforts for the other PMI-developed SFPs are as follows:

• Since 2022, we began commercializing our BONDS product in 5 markets.

• Since 2022, we began commercializing BONDS devices and BLENDS consumables in 5 markets.

• Since August 2020, we have launched and expanded our portfolio of vaping products (branded VEEV ) in 42 markets.

• Following our acquisition of Swedish Match, we have access to a strong portfolio of Swedish Match brands in both the snus and nicotine pouch categories.

Nicotine pouches are currently available in 38 markets.

They are currently available in 44 markets.

Legislation, Regulation, Taxation and Other Matters Regarding the Manufacture, Marketing, Sale and Use of Tobacco and Other Nicotine-Containing Products

13 unchanged sentences

one on April 1, 2026 and the second on October 1, 2026.

The first increase in the harmonized HTP and cigarette excise tax will occur in April 2027, and the plan provides predictability on the future excise rate increases for all tobacco product categories until April 2029.

The first increase in the harmonized HTP and cigarette excise tax will occur in April 2027, and the plan provides predictability on future excise rate increases for all tobacco product categories until April 2029.

Legislative and Regulatory Environment

7 unchanged sentences

The FCTC governing body, the Conference of the Parties (“CoP”), has also adopted non-binding guidelines and policy recommendations related to certain articles of the FCTC that go beyond the text of the treaty.

In October 2018, the CoP recognized the need for more scientific assessment and improved reporting to define policy on heated tobacco products.

Similar to its previous policy recommendations on e-cigarettes, the CoP invited countries to regulate, restrict or prohibit heated tobacco products, as appropriate under their national laws.

In October 2018, the CoP recognized the need for more scientific assessment and improved reporting to define policy on HTPs.

Similar to its previous policy recommendations on e-cigarettes, the CoP invited countries to regulate, restrict or prohibit HTPs, as appropriate under their national laws.

The WHO study group on tobacco product regulation published their ninth report on the scientific basis of tobacco product regulation in August 2023.

The report is based on a review of scientific evidence related to novel and emerging nicotine and tobacco products, such as electronic nicotine delivery systems ("ENDS"), electronic non-nicotine delivery systems and HTPs.

The report concludes by making a number of policy recommendations on HTPs and ENDS that, if implemented, could restrict both the availability of these products and the access to accurate information about them.

The Tenth Session of the CoP took place in February 2024.

The report concludes by making a number of policy recommendations on HTPs and ENDS that, if implemented, could restrict both the availability of these products and access to accurate information about them.

The Tenth Session of the CoP ("CoP10") took place in February 2024.

No new decisions or policy recommendations on novel and emerging tobacco products were adopted.

Specific Guidelines were adopted to address cross-border Tobacco Advertising, Promotion, and Sponsorship (“TAPS”) and the depiction of tobacco in entertainment media.

The Eleventh session of the CoP is currently scheduled to take place in November 2025.

1 unchanged sentence

We believe that when better alternatives to cigarettes exist, the discussion should not be whether these alternatives should be made available to the more than one billion people who smoke cigarettes today, but how fast, and within what regulatory framework to maximize their adoption by adult smokers while minimizing unintended use.

Therefore, we advocate for

regulatory frameworks that are based on a continuum of risk where non-combustible products fall below combustible cigarettes.

Therefore, we advocate for regulatory frameworks that are based on a continuum of risk where non-combustible products fall below combustible cigarettes.

And we believe that regulation and taxation should differentiate between cigarettes and products that present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to these products versus continued smoking.

11 unchanged sentences

These regulations might foreclose or unreasonably restrict adult consumer access to products that might be a better consumer choice than continuing to smoke cigarettes.

We oppose blanket bans and unreasonable restrictions of products that have the potential to present less risk of harm compared to continued cigarette smoking.

We oppose blanket bans and unreasonable restrictions of products that have the

potential to present less risk of harm compared to continued cigarette smoking.

By contrast, we support regulation that sets clear standards for all SFP categories and propels innovation to benefit adult smokers who would otherwise continue to smoke cigarettes.

12 unchanged sentences

EU Tobacco Excise Directive ("TED") :

The EU Commission is preparing a legislative proposal for the revision of the 2011 EU Tobacco Excise Directive that may include definitions and tax treatment for novel tobacco and nicotine-containing products, including heated tobacco products, e-cigarettes and nicotine pouches.

The timeline for the revision has not been announced.

Any final amendments to TED require unanimous agreement by all EU Member States, followed by transposition of TED into national legislation.

In July 2025, the EU Commission published a legislative proposal for the revision of the 2011 EU Tobacco Excise Directive.

The proposal intends to review minimum excise tax rates for combustible tobacco products and expands the scope of the directive to include smoke-free products, such as heated tobacco, e-cigarettes, and nicotine pouches, providing differentiated tax treatment for novel tobacco and nicotine containing products.

This proposal marks the beginning of the formal legislative process which requires unanimous approval by all EU Member States and subsequent transposition of TED into national legislation in the EU 27 Member States.

The proposal contemplates an implementation date for this directive of January 1, 2028, and provides for an additional transitional period of four years for several categories, including heated tobacco and nicotine pouches.

Plain Packaging and Other Packaging Restrictions :

13 unchanged sentences

All EU Member States were required to apply the delegated directive as of October 23, 2023, which bans the use of characterizing flavors in heated tobacco products, impacting a significant proportion of our SFP products currently sold in the EU.

Currently, all but five EU Member States have transposed this directive, withdrawing the heated tobacco product exemption from the characterizing flavor ban into national law.

Currently, all but four EU Member States have transposed this directive, withdrawing the heated tobacco product exemption from the characterizing

flavor ban into national law.

Based on high consumer switching to non-flavored products in reaction to past bans on flavors in other categories and markets, we anticipated that, while short-term volatility would be possible, the ban’s impact on our shipment volumes in the EU would be relatively limited in the near term.

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The FCTC's non-binding guidelines recommend that governments prohibit all forms of communication with adult smokers.

In CoP10, Specific Guidelines were adopted to address cross-border Tobacco Advertising, Promotion, and Sponsorship (“TAPS”) and the depiction of tobacco in entertainment media.

These Specific Guidelines are non-binding on WHO Member States nor FCTC Parties.

Product Standards and Restrictions on Product Design :

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In the Netherlands, an anti-smoking organization has brought a lawsuit to force the government to require a different test method for measuring cigarette emissions than what is currently required under EU law, which, if allowed, could lead to a de facto ban on manufactured cigarettes in the Netherlands and, potentially, in other EU countries.

In addition, at its meeting in November 2016, the CoP adopted non-binding guidelines recommending that

countries regulate product design features that increase the attractiveness of tobacco products, such as the diameter of cigarettes and the use of flavor capsules.

In addition, at its meeting in November 2016, the CoP adopted non-binding guidelines recommending that countries regulate product design features that increase the attractiveness of tobacco products, such as the diameter of cigarettes and the use of flavor capsules.

Currently, national standards in certain countries set minimum quality and safety requirements for heat-not-burn products with technical heat-not-burn specifications and/or methods for demonstrating the absence of combustion.

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For e-Vapor products, national standards setting minimum quality and safety requirements have been adopted in several markets.

These standards are mandatory in Armenia, Bahrain, China, Egypt, Jordan, New Zealand, the Philippines, Russia, the UAE, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, Dominican Republic, France, Indonesia, Kazakhstan, the Philippines, Russia, the U.K., and Ukraine.

Currently, industry standards setting minimum quality and safety requirements for modern oral nicotine pouches have been adopted in Angola, Armenia, Bahrain, Costa Rica, Malawi, Mexico, Pakistan, Sweden, the UAE, the U.K., and Ukraine.

These standards are mandatory in Armenia, Australia, Bahrain, China, Egypt, Jordan, New Zealand, the Philippines, Russia, the UAE, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, Dominican Republic, France, Indonesia, Kazakhstan, the Philippines, Russia, the U.K., and Ukraine.

Currently, national standards setting minimum quality and safety requirements for modern oral nicotine pouches have been adopted in Angola, Armenia, Bahrain, Costa Rica, Malawi, Mexico, Pakistan, Sweden, the UAE, the U.K., and Ukraine.

These standards are voluntary, except for the UAE, where they are mandatory.

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The pace and scope of restrictions on the use of our products have increased significantly in most of our markets.

Many countries around the world have adopted, or are likely to adopt, regulations that restrict or ban smoking and use of certain nicotine-containing products in public and/or workplaces, restaurants, bars and nightclubs.

Many countries around the world have adopted, or are likely to adopt, regulations that restrict or ban smoking and use of certain nicotine-containing products in public and/or

workplaces, restaurants, bars and nightclubs.

Some public health groups have called for, and some countries, regional governments and municipalities have adopted or proposed, bans on smoking in outdoor places, as well as bans on smoking in cars (typically, when minors are present) and private homes.

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The New Zealand parliament repealed the measures in February 2024, before they were implemented.

On November 5, 2024, the UK government introduced a bill to the parliament, which if adopted, would ban the sale of tobacco products, including HTPs, herbal smoking products and cigarette papers to those born on or after January 1, 2009.

On November 5, 2024, the UK government introduced a bill to its Parliament, which if adopted, would ban the sale of tobacco products, including HTPs, herbal smoking products and cigarette papers to those born on or after January 1, 2009.

Other Regulatory Issues :

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FDA Review of IQOS :

We submitted to the FDA a Modified Risk Tobacco Product Application (“MRTPA”) for IQOS in December 2016, and a Premarket Tobacco Product Application (“PMTA”) for IQOS in March 2017.

On April 30, 2019, the FDA determined that a version of IQOS , namely, IQOS 2.4 and three related consumables, is appropriate for the protection of public health and authorized it for sale in the United States.

The FDA’s decision followed its comprehensive assessment of our PMTA.

On December 7, 2020, the FDA reached the same determination for the IQOS 3 device and authorized that version of IQOS for sale in the United States.

On July 7, 2020, the FDA determined that the available scientific evidence demonstrates that the issuance of an exposure modification order would be appropriate for the promotion of public health and authorized the marketing of a version of IQOS , namely IQOS 2.4 and three related consumables, as an MRTP with reduced exposure claims.

We submitted to the FDA a Modified Risk Tobacco Product Application (“MRTPA”) for the IQOS Tobacco Heating System, which includes both the corresponding device and consumables, ("THS") in December 2016, and a Premarket Tobacco Product Application (“PMTA”) for IQOS in March 2017.

On April 30, 2019, following its comprehensive assessment of our PMTA, the FDA determined that marketing a version of IQOS , namely, IQOS 2.4 and three related consumables, is appropriate for the protection of public health and authorized those products for sale in the United States.

On December 7, 2020, the FDA reached the same determination for IQOS 3.0, authorizing that version of the device for sale in the United States.

On March 11, 2022, the FDA reached the same determination for the IQOS 3.0 device.

The FDA authorized the marketing of this product in the U.S.

with the following information:

The FDA authorized the marketing of these products in the U.S.

with the following claims:

"AVAILABLE EVIDENCE TO DATE:

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We also received an exposure modification order for IQOS 3.0 in March 2022.

The FDA’s PMTA and MRTP orders do not mean that the agency “approved” IQOS .

The FDA’s PMTA and MRTP orders do not mean that the agency has “approved” IQOS products.

These authorizations are subject to strict marketing, reporting, and other requirements, and are not a guarantee that the product will remain authorized, particularly if there is a significant uptake in youth or non-smoker initiation.

The FDA will monitor the marketing of the product.

The FDA monitors the marketing of the products.

On January 26, 2023, the FDA authorized the marketing of two new tobacco-flavored consumables ( Marlboro Sienna HeatSticks and Marlboro Bronze HeatSticks ) and a modified version of the authorized Marlboro Amber HeatSticks .

These products are line extensions and/or modified versions of the tobacco-flavored consumables for which the FDA had previously issued a marketing granted order.

In its assessment, the FDA determined that the three variants of HeatSticks were comparable to the previously authorized tobacco-flavored consumables.

On July 5, 2023, we submitted renewal applications to the FDA requesting re-authorization to continue to market those IQOS products that previously received an exposure modification order with a modified exposure claim in the United States.

These products are line extensions and/or modified versions of the three consumables for which the FDA had previously issued a marketing granted order.

In its assessment, the FDA determined that these three variants of HeatSticks were comparable to the previously authorized tobacco-flavored consumables.

On July 5, 2023, we submitted applications to the FDA requesting renewal of the MRTP authorizations previously granted to IQOS products in the United States.

These renewal requests were received by the FDA 360 days prior to the stated July 2024 expiration date of the original exposure modification orders, as requested by the FDA in the original orders.

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The FDA may make further information requests or conduct subsequent inspections to verify the information we submitted.

The FDA referred our MRTP renewal to the Tobacco Product Scientific Advisory Committee (“TPSAC”).

TPSAC will hold a meeting on our renewal application on October 7, 2025.

The recommendations and votes of TPSAC are not binding on the FDA.

By regulation, the FDA’s decision on our renewal application will take into account, in addition to the views of TPSAC, scientific evidence as well as comments, data and information submitted by interested persons.

The FDA did not issue a decision on our MRTP renewal applications prior to the stated July 7, 2024, expiration date of the original exposure modification orders.

The MRTP renewal applications were timely filed in accordance with FDA direction, and we believe that

we should be permitted to continue to use the modified exposure claim with respect to those products that received exposure modification orders until the FDA decides on our MRTP renewal applications.

On October 20, 2023, we submitted bundled PMTAs for our IQOS ILUMA THS products together with MRTPAs requesting authorization of the exposure reduction marketing order previously granted for IQOS blade versions.

The MRTP renewal applications were timely filed in accordance with FDA direction, and we believe that we are permitted to continue to use the modified exposure claim with respect to those products that received exposure modification orders until the FDA decides on our MRTP renewal applications.

On October 20, 2023, we submitted bundled PMTAs for our IQOS ILUMA THS products together with MRTPAs requesting authorization of the modified exposure order previously granted for IQOS blade versions.

We submitted these applications at the same time for the FDA to evaluate the PMTAs and MRTPAs concurrently.

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These submissions were made in November 2022 (for the three initial IQOS consumables) and February 2023 (for the two new IQOS consumables) to enable domestic manufacturing of IQOS consumables utilizing materials purchased from vendors operating in the United States.

On April 29, 2024, we submitted the Annual Report for the IQOS Tobacco Heating System ("THS") to the FDA.

On April 30, 2025, we submitted the Annual Report for the IQOS THS to the FDA.

The report included a systematic review of the literature covering publications related to the IQOS THS between March 1, 2024, and February 28, 2025.

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Premarket tobacco applications for 20 varieties of ZYN nicotine pouches were submitted in March 2020.

In the same month, these applications were filed for scientific review and, in July 2020, the FDA issued a deficiency letter, which Swedish Match USA, Inc.

addressed in September 2020.

On January 16, 2025, the FDA determined that all 20 ZYN nicotine pouch varieties currently marketed in the U.S.

met the applicable public health standard and were appropriate for the protection of public health and, therefore, authorized them for sale in the United States.

met the applicable public health standard and were appropriate for the protection of public health and,

therefore, authorized them for sale in the United States.

In its assessment, the FDA concluded that “among several key considerations, the agency’s evaluation showed that, due to substantially lower amounts of harmful constituents than cigarettes and most smokeless tobacco products, such as moist snuff and snus, the authorized products pose lower risk of cancer and other serious health conditions than such products.” Prior to the authorization, these 20 varieties of ZYN pouches were marketed in the United States consistent with the FDA's practice not to take enforcement action to prevent products with respect to which applications were filed prior to a September 9, 2020 deadline from being marketed.

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The FDA has not issued a decision on these applications, and these ZYN products are not marketed in the United States.

In April 2024, we submitted MRTPAs for ZYN products currently marketed in the United States and requested authorization of the modified risk claim.

In February 2025, the FDA formally accepted our MRTPAs.

As these applications proceed through the review process, the FDA may request additional information or conduct subsequent inspections to verify the submitted information.

In April 2024, we submitted MRTPAs for ZYN products currently marketed in the United States and requested authorization of a modified risk claim.

In February 2025, the FDA formally accepted our MRTPAs and in June 2025, issued a filing letter for 20 ZYN nicotine pouch products.

This action initiated a scientific review of our MRTPAs which requested the following modified risk claim:

“Using ZYN instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.” During the review, the FDA will determine whether our applications provide the necessary evidence for ZYN products to be marketed with the requested claim.

On July 17, 2023, Swedish Match USA, Inc.

submitted a renewal application to the FDA requesting re-authorization to continue to market its eight snus smokeless tobacco products (sold under the General snus brand name) with a modified risk claim.

submitted an application to the FDA requesting re-authorization to continue to market its eight snus smokeless tobacco products (sold under the General snus brand name) with a modified risk claim.

General snus products received modified risk orders on October 22, 2019.

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A reduction in the concentration of chemical substances with recognized toxicity does not mean a corresponding reduction in risk for health.

The aerosol of this tobacco

product contains nicotine and other hazardous chemicals.

The aerosol of this tobacco product contains nicotine and other hazardous chemicals.

This tobacco product harms your health and is addictive.

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Although we believe that this is sensible from the public health perspective, there is no guarantee regulators will continue this approach.

Further, there can be no assurance that we will succeed in our efforts to replace cigarettes with SFPs or that regulation will allow us to commercialize SFPs in all markets, to communicate about our SFPs, including making scientifically substantiated risk-reduction claims, or to treat SFPs differently from cigarettes.

Further, there can be no assurance that we will succeed

in our efforts to replace cigarettes with SFPs or that regulation will allow us to commercialize SFPs in all markets, to communicate about our SFPs, including making scientifically substantiated risk-reduction claims, or to treat SFPs differently from cigarettes.

To date, several governmental agencies have published their scientific findings that analyze the harm-reduction potential of certain SFPs versus continuing to smoke cigarettes, including:

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House of Commons published a report of its inquiry into e-cigarettes and heat-not-burn products.

The report concluded that e-cigarettes are significantly less harmful to health than

smoking tobacco.

The report concluded that e-cigarettes are significantly less harmful to health than smoking tobacco.

The report also observed that for those smokers who do not accept e-cigarettes, heat-not-burn products may offer a public health benefit despite their relative risk.

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In November 2012, the FCTC adopted the Protocol to Eliminate Illicit Trade in Tobacco Products (the “Protocol”), which includes supply chain control measures, such as licensing of manufacturers and distributors, enforcement of these control measures in free trade zones, controls on duty free and Internet channels and the implementation of tracking and tracing technologies.

To date, 70 Parties, including the EU, have ratified it.

To date, 70 Parties, including the EU, have ratified the Protocol.

The Protocol came into force in September 2018.

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Pursuant to specific exemptions or licenses, or where sanctions do not apply to our business, PMI may make sales in countries subject to Trade Sanctions.

We do not do business or sell products in Belarus, Iran, North Korea or Syria.

The distribution agreement for the sale of our products in Cuba, under which we previously sold cigarettes in that market, has been terminated, effective February 1, 2025.

We no longer maintain an active distribution agreement for the sale of our products in Cuba.

We do not do business or sell products in Belarus, Iran, North Korea, Cuba and Syria.

We are exploring opportunities to sell our products in Cuba, as permitted by law.

Certain states within the U.S.

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Countermeasures include restrictions on export of certain goods from Russia, including tobacco-related production equipment, restrictions on lending to foreign borrowers, repatriation of dividends and transactions with securities and real estate involving companies from “hostile” countries (i.e., those which introduced sanctions in relation to Russia).

has adopted new and increased tariffs on countries and specific goods, subject to evolving exemptions, with additional tariff increases proposed but currently on pause.

has adopted new and increased tariffs on countries and specific goods, subject to evolving exemptions, with additional tariff increases proposed.

Those changes, along with retaliatory actions by some trading partners, non-tariff restrictions or requirements being considered in connection with trade dispute negotiations, and the likelihood of additional developments, have created a volatile environment for global trade.

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To this end, we actively monitor the existing and potential impact on PMI of significant pending or existing climate change-related legislation, regulations, international accords, reporting frameworks, standards, principles, and other forms of guidance.

Examples include, but are not limited to, the EU Emissions Trading System, the 2015 Paris Climate Agreement, the work of the International Financial Reporting Standards Foundation, including the International Sustainability Standards Board proposed climate standard and the recommendations of the Task Force on Climate-related Financial Disclosures, the SEC’s rules regarding climate-related disclosures, the California Climate Corporate Accountability Act, the California Greenhouse Gases:

Climate-Related Financial Risk Act, the Task Force on Nature-related Financial Disclosures, the EU Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation, the EU Deforestation Regulation, the EU Corporate Sustainability Due Diligence Directive, CDP, the GHG Protocol, and carbon tax programs in Europe and Canada.

Examples include, but are not limited to, the EU Emissions Trading System, the 2015 Paris Climate Agreement, the work of the International Financial Reporting Standards Foundation, including the International Sustainability Standards Board proposed climate standard, the Transition Planning Task Force disclosure framework, and the recommendations of the Task Force on Climate-related Financial Disclosures, the SEC’s rules regarding climate-related disclosures, the California Climate Corporate Accountability Act, the California Greenhouse Gases:

Climate-Related Financial Risk Act, the Task Force on Nature-related Financial Disclosures, the EU Corporate Sustainability Reporting

Directive, the EU Taxonomy Regulation, the EU Deforestation Regulation, the EU Corporate Sustainability Due Diligence Directive, CDP, the GHG Protocol, and carbon tax programs in Europe and Canada.

GAAP Treatment of Highly Inflationary Economies

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This impact of currency fluctuations could negatively impact our financial condition and results of operations.

For the three months ended March 31, 2025 and 2024, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting, were not material.

For the six months ended June 30, 2025 and 2024, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting were not material.

Restructuring Activities

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In 2025, we expect certain inflationary elements such as direct materials and utilities to stabilize, with a moderate overall increase in inflationary pressures driven by tobacco leaf costs.

The impact of inflation on cost of sales during the first quarter of 2025 was not material to our condensed consolidated financial statements.

The impact of inflation on cost of sales during the first six months of 2025 was not material to our condensed consolidated financial statements.

Impact of Tariffs on Our Business

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manufacturing base for nicotine pouches, and existing supply chains that are largely self-contained within their respective trade regions, we currently believe we are well-positioned to mitigate potential supply chain challenges and that the changing tariff environment will not have a material impact on our business.

During the first quarter of 2025, the impact of new tariffs on our business was not material to our condensed consolidated financial statements.

During the first six months of 2025, the impact of new tariffs on our business was not material to our condensed consolidated financial statements.

We expect the global tariff environment to remain volatile throughout 2025.

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The new production facility was completed at the end of the first quarter of 2024 and local production commenced in April 2024.

As of March 31, 2025, our Ukrainian operations had approximately $0.6 billion in total assets, excluding intercompany balances.

As of June 30, 2025, our Ukrainian operations had approximately $0.7 billion in total assets, excluding intercompany balances.

In Russia, we are continuously assessing the evolving situation in the country.

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In the event of a divestment, our ability to fully realize the value of the business would likely be subject to material impairment.

As of March 31, 2025, our Russian operations had approximately $3.7 billion in total assets, excluding intercompany balances, of which approximately $1.3 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, PMI holds a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of March 31, 2025 had a carrying value of $353 million.

As of June 30, 2025, our Russian operations had approximately $4.3 billion in total assets, excluding intercompany balances, of which approximately $1.8 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, PMI holds a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of June 30, 2025 had a carrying value of $319 million.

For further details, see Note 13.

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Cash Flow Highlights

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions) 2025 2024

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Net Cash Provided by (Used in) Operating Activities

During the first three months of 2025, net cash used in operating activities was $350 million as compared to net cash provided by operating activities of $241 million in the first three months of 2024.

During the first six months of 2025, net cash provided by operating activities was $3.1 billion as compared to $4.9 billion in the first six months of 2024.

Excluding favorable currency movements, the unfavorable variance of $1.9 billion was due primarily to higher working capital requirements of $3.0 billion, partly offset by higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense.

The higher working capital requirements in 2025 as compared with 2024 were primarily due to more cash used in inventories, coupled with more cash used in accrued liabilities and other current assets, mainly reflecting the timing of excise tax-paid inventory movements primarily related to excise tax increases and the timing of the corresponding excise tax payments.

Excise tax payments included the disputed supplemental tax surcharge on heated tobacco products in Germany of approximately $0.8 billion as PMI elected to pay the supplemental tax surcharge in January 2025 to avoid the future addition of interest (for further details see – please refer to the MD&A segments Europe section where we describe the case in details).

For the full year 2025, we currently expect net cash provided by operating activities of more than $11 billion at prevailing exchange rates, subject to year-end working capital requirements.

This takes into account certain payments relating to the German tax surcharge and the U.S.

Tax Cuts and Jobs Act, which amount to approximately $1 billion.

Excise tax payments included the disputed supplemental tax surcharge on heated tobacco products in Germany of approximately $0.8 billion as PMI elected to pay the supplemental tax surcharge in January 2025 to avoid the future addition of interest (for further details refer to the MD&A Europe segment section where we describe the case).

Additionally, more cash used in income taxes primarily reflects the higher final 2017 U.S.

Tax Cuts and Jobs Act transition tax installment payment.

For the full year 2025, we currently expect net cash provided by operating activities of approximately $11.5 billion at prevailing exchange rates, subject to year-end working capital requirements.

Net Cash Provided by (Used in) Investing Activities

During the first three months of 2025, net cash used in investing activities was $434 million as compared to $193 million in the first three months of 2024.

During the first six months of 2025, net cash used in investing activities was $2.8 billion as compared to $530 million in the first six months of 2024.

This increase in net cash used was primarily due to changes in the cash collateral posted for derivative instruments, reflecting the appreciation of the Euro and Swiss franc versus U.S.

Capital expenditures of $404 million during the first three months of 2025 decreased by $13 million as compared with the first three months of 2024.

Capital expenditures of $760 million during the first six months of 2025 decreased by $27 million as compared with the first six months of 2024.

The 2025 capital expenditures were primarily related to our ongoing investments in smoke-free product manufacturing capacity.

We expect total capital expenditures in 2025 to be around $1.5 billion, including further investments in ZYN capacity in the U.S.

We expect total capital expenditures in 2025 to be around $1.6 billion, almost entirely due to investments supporting the smoke-free business.

Net Cash Provided by (Used in) Financing Activities

During the first three months of 2025, net cash provided by financing activities was $0.7 billion as compared to $1.1 billion in the first three months of 2024.

The decrease in net cash provided was primarily due to changes in the cash collateral received for derivative instruments, reflecting the appreciation of the Euro and Swiss franc versus U.S.

The decrease was partially offset by higher net borrowings in 2025 (primarily higher commercial paper outstanding in 2025, partly offset by long-term debt repayments in 2025 and long-term debt proceeds in 2024).

During the first six months of 2025, net cash used in financing activities was $890 million as compared to $2.4 billion in the first six months of 2024.

The decrease in net cash used was primarily due to higher net borrowings in 2025 (primarily higher commercial paper outstanding in 2025, partly offset by lower long-term debt proceeds in 2025), partially offset by changes in the cash collateral received for derivative instruments, reflecting the appreciation of the Euro and Swiss franc versus U.S.

Debt and Liquidity

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Credit Ratings – The cost and terms of our financing arrangements as well as our access to commercial paper markets may be affected by applicable credit ratings.

On March 12, 2025, Fitch revised our outlook from “Negative” to “Stable”, while affirming the long-term rating at “A” and the short-term rating at “F1”.

At March 31, 2025, our credit ratings and outlook by major credit rating agencies were as follows:

At June 30, 2025, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

Moody’s P-1 A2 Stable

Standard & Poor’s A-2 A- Stable *

Standard & Poor’s A-2 A- Positive

Fitch F1 A Stable

* On April 3, 2025, Standard & Poor’s revised our outlook from “Stable” to “Positive”, while affirming the long-term rating at “A-“ and the short-term rating at “A-2”.

Revolving Credit Facilities

At March 31, 2025, our committed revolving credit facilities were as follows:

At June 30, 2025, our committed revolving credit facilities were as follows:

Type (in billions) Committed

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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 March 31, 2025, there were no borrowings under the committed revolving credit facilities, and the entire committed amounts were available for borrowing.

At June 30, 2025, there were no borrowings under the committed revolving credit facilities, and the entire committed amounts were available for borrowing.

All banks participating in our committed revolving credit facilities have an investment-grade long-term credit rating from the credit rating agencies.

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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 $3.4 billion at March 31, 2025, and approximately $2.1 billion at December 31, 2024.

Borrowings under these arrangements and other bank loans amounted to $269 million at March 31, 2025, and $137 million at December 31, 2024.

These credit arrangements amounted to approximately $3.8 billion at June 30, 2025, and approximately $2.1 billion at December 31, 2024.

Borrowings under these arrangements and other bank loans amounted to $230 million at June 30, 2025, and $137 million at December 31, 2024.

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

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On November 21, 2024, PMI prepaid approximately €3 billion (approximately $3.2 billion), including outstanding principal and accrued interest, representing all borrowings outstanding under the 3-year tranche of the senior unsecured term loan facility.

As of March 31, 2025, borrowings in the amount of €2.5 billion (approximately $2.7 billion) under the 5-year tranche of the term loan facility remained outstanding.

As of June 30, 2025, borrowings in the amount of €2.5 billion (approximately $2.9 billion) under the 5-year tranche of the term loan facility remained outstanding.

Commercial Paper Program – We continue 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.

At March 31, 2025, we had $4.2 billion of commercial paper outstanding.

At June 30, 2025, we had $2.3 billion of commercial paper outstanding.

At December 31, 2024, we had no commercial paper outstanding.

The average commercial

paper balance outstanding during the first three months of 2025 was $2.4 billion.

paper balance outstanding during the first six months of 2025 was $3.5 billion.

The average commercial paper balance outstanding during 2024 was $1.3 billion.

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Supply Chain Financing to our condensed consolidated financial statements.

Debt – Our total debt was $49.6 billion at March 31, 2025 and $45.7 billion at December 31, 2024.

Debt – Our total debt was $51.5 billion at June 30, 2025 and $45.7 billion at December 31, 2024.

On February 10, 2023, we filed a shelf registration statement with the U.S.

Securities and Exchange Commission, under which we may from time to time sell debt securities and/or warrants to purchase debt securities over a three-year period.

Guarantees – At March 31, 2025, we have guarantees of our own performance, which are primarily related to excise taxes on the shipment of our products.

PMI's debt issuances in the first six months of 2025 were as follows:

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a) $400 Floating April 2025 April 2028

dollar notes (b) $750 4.125% April 2025 April 2028

dollar notes (b) $750 4.375% April 2025 April 2030

dollar notes (b) $600 4.875% April 2025 April 2035

Euro notes (c) (d) €500 (approximately $569) 2.750% June 2025 June 2029

Euro notes (c) (d) €500 (approximately $569) 3.250% June 2025 June 2032

(a) Interest is payable quarterly, commencing in July 2025

(b) Interest is payable semi-annually, commencing in October 2025

(d) USD equivalents for foreign currency notes were calculated based on exchange rates on the date of issuance

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 and to refinance certain of our outstanding notes due in 2025.

Guarantees – At June 30, 2025, we have guarantees of our own performance, which are primarily related to excise taxes on the shipment of our products.

There is no liability in the condensed consolidated financial statements associated with these guarantees.

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Equity and Dividends

We discuss our stock awards as of March 31, 2025 in Note 3.

We discuss our stock awards as of June 30, 2025 in Note 3.

Stock Plans to our condensed consolidated financial statements.

Dividends paid in the first three months of 2025 were $2.1 billion.

Dividends paid in the first six months of 2025 were $4.2 billion.

During the third quarter of 2024, our Board of Directors approved a 3.8% increase in the quarterly dividend to $1.35 per common share.

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If we do not succeed, but others do, or if heat-not-burn products are inequitably regulated compared to other SFP categories without regard to the totality of the scientific evidence available for such products, we may be at a competitive disadvantage.

actions of some market participants, such as the inappropriate marketing of e-vapor products to youth, as well as alleged health consequences associated with the use of certain e-vapor products, may unfavorably impact public opinion and/or mischaracterize the health consequences of all e-vapor products or other SFPs to consumers, regulators and policy makers without regard to the totality of scientific evidence available for specific products.

In addition, actions of some market participants, such as the inappropriate marketing of e-vapor products to youth, as well as alleged health consequences associated with the use of certain e-vapor products, may unfavorably impact public opinion and/or mischaracterize the health consequences of all e-vapor products or other SFPs to consumers, regulators and policy makers without regard to the totality of scientific evidence available for specific products.

This may impede our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs.

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Substantive decisions based on these reports were deferred to the Tenth Session of the CoP ("CoP 10").

CoP 10 to the FCTC took place in February 2024.

CoP 10 took place in February 2024, in which Specific Guidelines were adopted to address cross-border tobacco advertising, promotion and sponsorship and the depiction of tobacco in entertainment media.

According to reports and decisions published, neither new decisions nor new policy recommendations on novel and emerging tobacco products were adopted.

Specific Guidelines were adopted to address cross-border Tobacco Advertising, Promotion, and Sponsorship ("TAPS") and the depiction of tobacco in entertainment media.

The Eleventh Session of the CoP is currently scheduled to take place in November 2025.

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Despite our efforts, technological, operational, regulatory and/or commercial developments might impact the implementation or effectiveness of youth access prevention mechanisms and surrounding infrastructure.

If there is significant usage, whether actual or perceived, of our products or competitive products among youth or non-nicotine users, even in situations over which we have no control, our reputation and credibility may suffer, the regulatory approach to our products may become more restrictive, and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs may be significantly impacted.

If there is significant

usage, whether actual or perceived, of our products or competitive products among youth or non-nicotine users, even in situations over which we have no control, our reputation and credibility may suffer, the regulatory approach to our products may become more restrictive, and our efforts to advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs may be significantly impacted.

In the U.S., any federal, state or local government action, including regulatory actions and inaction by the FDA, may have a material adverse impact on our commercialization of SFPs and business.

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Although we have received these authorizations from the FDA, there is no guarantee that the products will remain authorized for sale in the United States, or that new versions of IQOS or other ZYN products will receive necessary authorizations, particularly if there is a significant uptake in youth or non-nicotine user initiation.

Moreover, we also submitted additional premarket tobacco applications for other ZYN products The FDA has not issued a decision on these applications, and these ZYN products are not presently marketed in the United States.

In April 2024, we also submitted MRTPAs for ZYN products currently marketed in the U.S.

and requested authorization of the modified risk claim.

In February 2025, the FDA formally accepted our MRTPAs.

The commercialization of our products in the United States is dependent on successfully managing compliance with federal, state, and local laws, regulations, legal agreements, and related interpretations.

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To date, we have been largely successful in demonstrating to regulators that our SFPs are not cigarettes due to the absence of combustion, and accordingly they are generally taxed either as a separate category or as other tobacco products, which typically yields more favorable tax rates than cigarettes.

Nevertheless, we are unable to predict whether regulators will be issuing new regulations under which SFPs will be equally taxed in line with other tobacco products such as conventional cigarettes.

Nevertheless, we are unable to predict whether new regulations, or reinterpretations of existing regulations, will result in SFPs being taxed in line with other tobacco products such as conventional cigarettes, on a prospective or retroactive basis.

If we cease to be successful in these efforts, SFP unit margins may be materially adversely affected, which in turn may have a material adverse effect on our results of operations, revenues, cash flows, and profitability.

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Furthermore, our volume and profitability may be adversely affected in these markets.

In addition, increases in cigarette taxes are expected to continue to have an adverse impact on our sales of cigarettes, due to resulting lower consumption levels, a shift in sales from manufactured cigarettes to other combustible tobacco products and from the premium-price to the mid-price or low-price cigarette categories, where we may be under-represented, from local sales to cross-border purchases of lower price products, or to illicit products such as contraband, counterfeit and other non-compliant or otherwise illicit products.

to cross-border purchases of lower price products, or to illicit products such as contraband, counterfeit and other non-compliant or otherwise illicit products.

Each of these risks could have a material adverse effect on our business, operations, results of operations, revenues, cash flows and profitability.

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If an impairment is determined to exist, we will incur impairment losses, which could have a material adverse effect on our results of operations or financial position.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for additional information concerning impairment determination and calculation.

Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for additional information concerning impairment determination and calculation.

Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to evolve.

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reduce demand for our products;

have a negative impact on our supply chains, manufacturing capabilities, or distribution capabilities;

have a negative impact on our supply chains, manufacturing

capabilities, or distribution capabilities;

increase our exposure to currency fluctuations;

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Use of third-parties may negatively impact the distribution, quality, and availability of our products and services, and we may be required to replace third-party contract distributors, manufacturers or service providers.

accessories), as well as to provide services, including to support our finance, commercialization and information technology processes.

We increasingly rely on third-parties and their subcontractors/suppliers, sometimes concentrated in a specific geographic area, for product distribution and to manufacture some of our products and product parts (particularly, the electronic devices and accessories), as well as to provide services, including to support our finance, commercialization and information technology processes.

While many of these arrangements improve efficiencies and decrease our operating costs, they also diminish our direct control.

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Additionally, government authorities, non-governmental organizations and external stakeholders are increasingly filing lawsuits or initiating regulatory actions, alleging that public statements regarding sustainability-related matters and practices are misleading or false.

Government mandated prices, production control programs, and shifts in crops driven by economic conditions may increase the cost or reduce the quality of the tobacco and other agricultural products used to manufacture our products.

Government mandated prices, production control programs, and shifts in crops driven by economic conditions may increase the cost or reduce the quality of tobacco and other agricultural products used to manufacture our products.

As with other agricultural commodities, the price of tobacco leaf and cloves can be influenced by imbalances in supply and demand and the impacts of natural disasters and pandemics such as COVID-19.

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dollars based on average exchange rates prevailing during a reporting period.

Foreign currencies may fluctuate significantly against the U.S.

Foreign currencies may

fluctuate significantly against the U.S.

dollar, reducing our net revenues, operating income and EPS.

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Damages claimed in some tobacco-related litigation are significant and, in certain cases, range into the billions of U.S.

As of March 2024, we began facing litigation related to our oral nicotine products before certain courts in the United States.

We anticipate that new cases will continue to be filed.

The FCTC encourages litigation against tobacco product manufacturers.

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We face various administrative and legal challenges related to certain SFP activities, including allegations concerning product classification, advertising and distribution restrictions, corporate communications, product coach activities, scientific substantiation, product liability, antitrust, and unfair competition.

As of March 2024, we began facing litigation related to our oral nicotine products before certain courts in the United States.

We anticipate that new cases will continue to be filed.

While we design our programs to comply with relevant regulations, we expect these or similar challenges to continue as we expand our efforts to commercialize SFPs and to communicate with the public.

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Our intellectual property rights are valuable assets, their protection is important to our business, and that protection may not be equally available in every country in which we operate or in which our products are sold.

If the steps we take to protect our intellectual property rights globally, including through applying for, prosecuting, maintaining and enforcing, where relevant, a combination of trademark, design, copyright, patent, trade secrets and other intellectual property rights, are inadequate, or if others infringe or misappropriate our intellectual property rights, notwithstanding legal protection, our business, financial condition, and results of operations could be adversely impacted.

If the steps we take to protect our

intellectual property rights globally, including through applying for, prosecuting, maintaining and enforcing, where relevant, a combination of trademark, design, copyright, patent, trade secrets and other intellectual property rights, are inadequate, or if others infringe or misappropriate our intellectual property rights, notwithstanding legal protection, our business, financial condition, and results of operations could be adversely impacted.

Moreover, failing to manage our existing and/or future intellectual property may place us at a competitive disadvantage.

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Any such claims, regardless of merit, could divert management’s attention, be costly, disruptive, time-consuming and unpredictable and expose us to significant litigation costs and damages, and may impede our ability to develop, manufacture and/or commercialize new or existing SFPs and improve our products, and thus have a material adverse effect on our revenues and our profitability.

In addition, if, as a result, we are unable to manufacture or sell our SFPs or improve their quality in one or more markets, our ability to convert adult smokers to our SFPs in such markets

would be adversely affected.

In addition, if, as a result, we are unable to manufacture or sell our SFPs or improve their quality in one or more markets, our ability to convert adult smokers to our SFPs in such markets would be adversely affected.

Contingencies— Other Litigation to our condensed consolidated financial statements for a description of certain intellectual property proceedings.

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or failure or inability by us, third-parties, or our business partners to adhere to cybersecurity industry best practices, could place us at a competitive disadvantage, cause reputational damage, impact our operations, result in data breaches, significant business disruption, litigation, regulatory action including significant fines or penalties, financial impact, loss of revenue or assets including our intellectual property, personal, confidential, or sensitive data.

Cyberattacks, security incidents and vulnerabilities impacting PMI, newly acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Cyberattacks, security incidents and vulnerabilities impacting PMI, acquired companies, our business partners, or our third-party providers, continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents.

Further, it may be inherently difficult to detect vulnerabilities during due diligence, for long periods of time, or soon enough to mitigate exploitation.

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An actual or alleged failure to comply with complex and changing privacy, data, artificial intelligence and information security laws and regulations under the EU General Data Protection Regulation, various U.S.

state and federal laws, and other similar privacy and information security laws across the jurisdictions in which PMI operates, such as the failure to protect personal data;

state and federal laws, and other similar privacy, data, and information security laws across the jurisdictions in which PMI operates, such as the failure to protect personal or company data;

implement appropriate technological and reasonable security measures;

implement and maintain appropriate safeguards for personal data being transferred internationally;

respect the privacy rights of data subjects;

provide sufficient detailed notices of personal data processing;

implement and maintain appropriate safeguards for personal or company data being transferred internationally;

respect the privacy or other rights of data subjects;

provide sufficient detailed notices of personal or other data processing;

retrieve consent and provide opt-outs;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis