What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-24 compared with 2025-07-25 · 402 added, 298 removed, 1409 unchanged (33% of the section changed)

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• Americas Region.

With our smoke-free business now operating at scale across our regions, including substantial growth from our U.S.

business, PMI plans to implement an evolved organizational model with two primary business units:

International and U.S.

The updated organizational structure is designed to enhance our agility and to support our journey to become a smoke-free company under the leadership of CEO Jacek Olczak.

This change is scheduled for implementation effective January 1, 2026, and as a result we anticipate realigning our reportable segments.

The current four geographic segments will be replaced with three new segments:

International Smoke-Free, International Combustibles, and U.S.

The company plans to report its financial results based on the new segments as of the first quarter of 2026.

Our cigarettes are sold in approximately 170 markets, and in many of these markets they hold the number one or number two market share position.

We have a wide range of premium, mid-price and low-price brands.

Our portfolio comprises both international and local brands.

Our portfolio is comprised of both international and local brands.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products.

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

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

As of October 2025, our smoke-free products were available for sale in 100 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.

This includes medical and pharmaceutical cannabinoids, and non-recreational cannabinoid products (including CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

This includes medical and pharmaceutical cannabinoids, and non-recreational cannabinoid products (including

CBD), in line with applicable regulatory requirements, though any revenue related to cannabinoids is expected to be negligible in the near to medium term.

In 2022, we acquired Swedish Match AB, a market leader in oral nicotine delivery with a significant presence in the United States market.

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We use the term net revenues to refer to our operating revenues from the sale of our products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

Our net revenues and operating income are affected by various factors, including the volume of products we sell, the price of our products, changes in currency exchange rates and the mix of products we sell.

Our net revenues and operating income are affected by various factors, including the volume and mix of products we sell, the price of our products and changes in currency exchange rates.

"Mix" is a term used to refer to the proportionate value of premium-price brands to mid-price or low-price brands in any given market (product mix).

Mix can also refer to the proportion of shipment volume in more profitable markets versus shipment volume in less profitable markets (geographic mix).

Our cost of sales consists principally of:

Our cost of sales consists primarily of:

tobacco leaf, non-tobacco raw materials, labor and manufacturing costs;

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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 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.

Consolidated Operating Results for the Nine Months Ended September 30, 2025

• Net Revenues - Net revenues of $30.3 billion for the nine months ended September 30, 2025, increased by $2.1 billion, or 7.5%, 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, 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:

For the nine months ended September 30, 2025, net revenues increased by 7.5%.

Net revenues, excluding currency and acquisitions/divestitures, also increased by 7.5%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

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

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

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

Diluted EPS % Change

For the six months ended June 30, 2024 $ 2.92

For the nine months ended September 30, 2024 $ 4.89

2024 Restructuring charges 0.09

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2024 Fair value adjustment for equity security investments (0.39)

2024 Loss on sale of Vectura Group 0.13

2024 Egypt sales tax charge 0.03

2024 Income tax impact associated with Swedish Match AB financing (0.01)

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2025 Fair value adjustment for equity security investments 0.33

2025 Germany excise tax classification litigation charge (0.10)

2025 RBH (Canada) Plan implementation, including dividend income, net 0.10

2025 Impairment of Wellness & Healthcare related equity investment (0.09)

2025 Income tax impact associated with Swedish Match AB financing 0.24

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Operations 0.77

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 the nine months ended September 30, 2025 $ 5.89 20.4 %

Restructuring charges – During the nine months ended September 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 nine months ended September 30, 2025, we recorded pre-tax restructuring charges of $243 million, representing $200 million net of income tax and a diluted EPS charge of $0.13 per share, related to the end of combustible tobacco production in two of our factories in Germany.

For further details, see Note 16.

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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.

Amortization of intangibles – During the nine months ended September 30, 2024 and 2025, we recorded amortization of intangible expense of $588 million (representing $459 million net of income tax or $0.29 per share decrease in diluted EPS) and $746 million (representing $580 million net of income tax or $0.37 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.

from Altria Group, Inc., effective in May 2024.

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Goodwill and Other Intangible Assets, net .

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.

Fair value adjustment for equity security investments – During the nine months ended September 30, 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $614 million after tax gain (or $0.39 per share increase in diluted EPS) and $513 million after tax gain (or $0.33 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 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.

Loss on sale of Vectura Group – In September 2024, we announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, we recorded in the third quarter of 2024 an impairment charge of $198 million (representing a diluted EPS charge of $0.13 per share) related to Vectura's classification as held for sale.

The impairment charge was recorded in marketing, administration and research costs in PMI’s condensed consolidated statements of earnings for nine months ended September 30, 2024, and was included in the Europe segment results.

On December 31, 2024, we completed the sale.

For further details, see Note 2.

Acquisitions and Divestitures .

Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, we concluded that an adverse outcome was probable and recorded a pre-tax charge of $45 million (representing $39 million net of income tax and a diluted EPS charge of $0.03 per share) in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016.

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the nine months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

Germany excise tax classification litigation charge – In August 2024, the German Main Custom Office (“MCO”) notified Philip Morris (Germany) GmbH (“PM Germany”) of its decision to classify TEREA consumables as a cigarette for excise tax purposes with the associated tax assessment totaling EUR 151 million (approximately $176 million) covering the period of February 15, 2023, through August 1, 2024.

In April 2025, PM Germany paid the outstanding amount, which was recorded in Other assets on the consolidated balance sheets (with no impact on the income statement at that time), while it challenged the MCO’s decision in court.

On September 17, 2025, PM Germany filed a request to withdraw the proceedings.

As a result, the tax assessment amount of $176 million (representing $150 million net of income tax and a diluted EPS charge of $0.10 per share) was recorded as a pre-tax charge in marketing, administration and research costs in the condensed consolidated statements of earnings in the third quarter of 2025, and was included in the Europe segment results.

For further details, see Note 9.

Contingencies .

RBH (Canada) Plan implementation, including dividend income, net – On August 29, 2025, the plan of compromise and arrangement (the “Plan”) setting forth the terms of a resolution of Canadian tobacco claims and related litigation became effective.

For the nine months ended September 30, 2025, we recorded after-tax income of $156 million ($0.10 per share increase in diluted EPS) following the Plan implementation, including $303 million of dividend income net of the corresponding decrease in the carrying value of the RBH investment, $19 million of other income and the related income tax charge of ($166) million.

For further details regarding the Plan, see Note 9.

Contingencies , Note 10.

Income Taxes and Note 13.

Related Parties - Equity Investments and Other .

Impairment of Wellness & Healthcare related equity investment – In the third quarter of 2025, PMI recorded a non-cash after-tax charge of $146 million (representing a diluted EPS charge of $0.09 per share), primarily representing an other-than-temporary impairment of one equity method investment within the Wellness & Healthcare business following a reassessment of its estimated fair value triggered by the amendment of existing investment agreements in the third quarter of 2025.

The impairment charge was recorded in equity investments and securities (income)/loss, net in in the condensed consolidated statements of earnings for the nine months ended September 30, 2025.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

Income taxes – The Income tax impact associated with the Swedish Match acquisition financing that increased our 2024 diluted EPS by $0.01 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.

state income tax expense.

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 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 $0.05 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.

The 2025 tax items that increased our 2025 diluted EPS by $0.11 per share in the table above were due to benefits related to an interest expense election primarily driven by a reduction in prior year tax costs associated with global intangible low-taxed income and refunds expected on amended tax returns filed in Germany;

partially offset by valuation allowances recorded on deferred tax assets related to U.S.

foreign tax credits and the recognition of current tax expense related to the potential disallowance of deductions for certain intercompany transactions in Indonesia.

For further details, see Note 10.

Income Taxes .

Currency – The favorable impact of $0.02 per share from currency over the comparable 2024 period primarily results from the fluctuations of the U.S.

dollar, especially against the Euro and Egyptian pound, 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 $0.03 per share from interest in the table above was primarily due to a lower weighted average cost of debt.

Operations – The increase in diluted EPS of $0.77 from our operations in the table above was due primarily to the following segments:

• 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;

• SSEA, CIS & MEA:

Favorable pricing and higher cigarette and SFP volume, 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.

Favorable volume/mix and a favorable pricing variance;

Favorable volume/mix, partly offset by an unfavorable pricing variance, higher marketing, administration and research costs, and higher manufacturing costs.

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

• Net Revenues - Net revenues of $10.8 billion for the three months ended September 30, 2025, increased by $0.9 billion, or 9.4%, 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):

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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:

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

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

Diluted EPS % Change

For the three months ended June 30, 2024 $ 1.54

For the three months ended September 30, 2024 $ 1.97

2024 Amortization of intangibles 0.12

2024 Fair value adjustment for equity security investments (0.24)

2024 Loss on sale of Vectura Group 0.13

2024 Egypt sales tax charge 0.03

2024 Income tax impact associated with Swedish Match AB financing (0.10)

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Subtotal of 2024 items (0.06)

2025 Restructuring charges (0.13)

2025 Impairment of goodwill (0.03)

2025 Amortization of intangibles (0.13)

2025 Fair value adjustment for equity security investments 0.07

2025 Germany excise tax classification litigation charge (0.10)

2025 RBH (Canada) Plan implementation, including dividend income, net 0.10

2025 Impairment of Wellness & Healthcare related equity investment (0.09)

2025 Income tax impact associated with Swedish Match AB financing —

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Operations 0.21

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 the three months ended September 30, 2025 $ 2.23 13.2 %

Amortization of intangibles – During the third quarter of 2024 and 2025, we recorded amortization of intangible expense of $256 million (representing $199 million net of income tax or $0.12 per share decrease in diluted EPS) and $250 million (representing $195 million net of income tax or $0.13 per share decrease in diluted EPS), respectively.

Fair value adjustment for equity security investments – During the third quarter of 2024 and 2025, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $372 million after tax gain (or $0.24 per share increase in diluted EPS) and $103 million after tax gain (or $0.07 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.

Loss on sale of Vectura Group – In September 2024, we announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, we recorded in the third quarter of 2024 an impairment charge of $198 million (representing a diluted EPS charge of $0.13 per share) related to Vectura's classification as held for sale.

The impairment charge was recorded in marketing, administration and research costs in PMI’s condensed consolidated statements of earnings, and was included in the Europe segment results.

On December 31, 2024, we completed the sale.

For further details, see Note 2.

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).

Acquisitions and Divestitures .

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the three months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

On September 17, 2025, PM Germany filed a request to withdraw the proceedings.

For further details, see Note 9.

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.

Contingencies .

For the three months ended September 30, 2025, we recorded after-tax income of $156 million ($0.10 per share increase in diluted EPS) following the Plan implementation, including $303 million of dividend income net of the corresponding decrease in the carrying value of the RBH investment, $19 million of other income and the related income tax charge of ($166) million.

For further details regarding the Plan, see Note 9.

Contingencies , Note 10.

Income Taxes and Note 13.

Related Parties - Equity Investments and Other .

The impairment charge was recorded in equity investments and securities (income)/loss, net in in the condensed consolidated statements of earnings.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

Income taxes – The Income tax impact associated with the Swedish Match acquisition financing that increased our 2024 diluted EPS by $0.10 per share in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

The 2025 tax items that increased our 2025 diluted EPS by $0.14 per share in the table above were due to benefits related to an interest expense election primarily driven by a reduction in prior year tax costs associated with global intangible low-taxed income and refunds expected on amended tax returns filed in Germany;

partially offset by valuation allowances recorded on deferred tax assets related to U.S.

foreign tax credits.

For further details, see Note 10.

Income Taxes .

The change in the tax rate that increased our diluted EPS by $0.06 per share in the table above was primarily due to benefits related to an interest expense election primarily driven by a reduction in current year tax costs associated with global intangible low-taxed income and decreases 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.

partially offset by increases in foreign statutory tax rates and repatriation cost differences.

Currency – The favorable impact of $0.08 per share from currency over the comparable 2024 period primarily results from the fluctuations of the U.S.

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

Interest – The unfavorable impact of $0.02 per share from interest in the table above was primarily due to the impact of derivative financial instruments.

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

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

Favorable pricing, partly offset by higher marketing, administration and research costs;

• EA, AU & PMI GTR:

Favorable volume/mix;

partly offset by

Unfavorable pricing variance and higher marketing, administration and research costs, partly offset by higher SFP volumes.

Discussion and Analysis

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

For the Six Months Ended June 30, 2025

For the Nine Months Ended September 30, 2025

Net revenues $ 12,513 $ 8,942 $ 5,207 $ 3,624 $ 30,286

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Operating income $ 5,255 $ 3,155 $ 2,612 $ 497 $ 11,519

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

Net revenues $ 11,547 $ 8,393 $ 4,959 $ 3,273 $ 28,172

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

For the Three Months Ended June 30, 2025

For the Three Months Ended September 30, 2025

Net revenues $ 4,719 $ 3,273 $ 1,768 $ 1,085 $ 10,845

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Marketing, administration and research costs 1,394 679 387 635 3,095

Impairment of goodwill 41 — — — 41

Operating income $ 2,150 $ 1,235 $ 846 $ 32 $ 4,263

For the Three Months Ended June 30, 2024

For the Three Months Ended September 30, 2024

Net revenues $ 4,197 $ 2,964 $ 1,602 $ 1,148 $ 9,911

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PMI Net Revenues by Product Category

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

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2025 2024 Change 2025 2024 Change

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• Restructuring charges – See Note 16.

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

Restructuring Activities for a breakdown of these costs by segment for the nine months ended September 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.

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

• Germany excise tax classification litigation charge – See Note 9.

Contingencies for details of the $176 million pre-tax charge recorded in the Europe segment for the nine months and three months ended September 30, 2025.

• Loss on sale of Vectura Group – In September 2024, PMI announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, PMI recorded in the third quarter of 2024 an impairment charge of $198 million related to Vectura's classification as held for sale.

This pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statement of earnings for the nine months and three months ended September 30, 2024, and was included in the Europe segment results.

On December 31, 2024, PMI completed the sale.

For further details, see Note 2.

Acquisitions and Divestitures .

• Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, PMI concluded that an adverse outcome was probable and recorded a pre-tax charge of $45 million in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016.

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

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

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References to total industry (or total market), our shipment volume and our market share performance reflect cigarettes and heated tobacco units, unless otherwise stated.

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

Total industry volume, PMI in-market sales volume and PMI market share for the following geographies include the cigarillo category in Japan:

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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.

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

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.

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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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,

For the Nine Months Ended September 30,

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

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

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

Consequently, past reported periods may be updated to ensure comparability and to incorporate the most current information.

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

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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,

(4) 2025 includes 6.4 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfillment services agent

For the Three Months Ended September 30,

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

28 unchanged sentences

Total Market is based on reported IMS

(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.

(4) 2025 includes 2.4 billion units of cigarettes shipment volume under an arrangement where PMI acts as brand management and fulfillment services agent

Consolidated Operating Results for the Nine Months Ended September 30, 2025

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

Estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs decreased by 0.7%.

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

Nine Months Ended September 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

2 unchanged sentences

592.7 134.8 116.7 15.7 2.4 457.9

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

September YTD 2024 1.8% 14.3% 12.2% 22.5% +100% (1.3)%

Oral smoke-free products conversion:

15 unchanged sentences

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.

We expect smoke-free product volume growth of 12% to 14% with growth of smoke-free shipments more likely to be in the lower half of this range, partly offset by cigarette volume declines of around 2%.

Smoke-free products volume growth continues to assume 10% to 12% growth in HTU adjusted IMS volumes, and U.S.

nicotine pouch second-half shipment growth broadly in-line with offtake growth before trade inventory movements.

In the U.S., the increase in ZYN nicotine pouch shipments in the third quarter was a result of underlying consumer offtake growth amplified by a wide range of commercial activities to further enhance the strength and presence of the brand, and ensure competitive price positioning following several quarters of reduced activity due to supply constraints.

In addition, we implemented select short-term promotions, which separately accounted for a single digit percentage of our third quarter shipments.

On a more short-term basis, we continue to expect second half shipment volume growth broadly in line with consumer offtake growth before channel inventory movements.

We anticipate a 20 to 30 million can inventory reduction in the coming months, this impact being effectively delayed from the third quarter given strong September promotional activity.

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

Six Months Year-to-Date

Nine Months Year-to-Date

2025 2024 Change (pp)

11 unchanged sentences

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

6 unchanged sentences

Operating Income $ 11,519 $ 10,143 13.6 % 11.6 % $ 1,376 $ 114 $ 84 $ 1,251 $ 1,009 $ (1,082)

(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.

(1) Cost/Other variance includes charges in 2025 of $243 million related to restructuring charges, $176 million related to Germany excise tax classification litigation and higher amortization of intangibles in 2025, partly offset by charges in 2024 of $168 million related to restructuring charges, $27 million related to impairment of other intangibles, $198 million related to the loss on sale of Vectura Group and $45 million related to the Egypt sales tax charge.

For more details, see Note 2.

Goodwill and Other Intangible Assets, net and Note 16.

Acquisitions and Divestitures , Note 5.

Goodwill and Other Intangible Assets, net , Note 8, Segment Reporting, Note 9.

Contingencies and Note 16.

Restructuring Activities .

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, 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.

For the nine months ended September 30, 2025, net revenues increased by 7.5%.

Net revenues, excluding currency and acquisitions/divestitures, also increased by 7.5%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

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

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

Net revenues include $12.5 billion in 2025 and $10.8 billion in 2024 related to smoke-free.

1 unchanged sentence

Operating income, excluding currency and acquisitions/divestitures, increased by 11.6%, mainly reflecting:

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.

the same factors as for net revenues, as well as a favorable comparison to 2024 reflecting a charge of $198 million related to the loss on sale of Vectura Group in 2024 and $45 million related to the Egypt sales tax charge in 2024, 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, as well as the 2025 Germany excise tax classification litigation charge of $176 million.

Interest expense, net, of $748 million decreased by $69 million or 8.4%, primarily due to a lower weighted average cost of debt.

Our effective tax rate decreased by 3.9 percentage points to 19.2%.

We estimate that our 2025 effective tax rate will be approximately 22% to 23%, excluding discrete tax events.

We estimate that our 2025 effective tax rate will be approximately 22%, excluding discrete tax events.

For further details, see Note 10.

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 $9.2 billion increased by $1.6 billion or 20.6%.

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.

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

Basic and diluted EPS of $5.90 and $5.89 both increased by 20.4%.

Excluding a favorable currency impact of $0.02, diluted EPS increased by 20.0%.

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

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

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

Total Shipment Volume

Quarters Ended June 30, 2025

Quarters Ended September 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

17 unchanged sentences

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.

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 0.7% with smoke-free volumes up by 16.6%, with all SFP categories growing strongly, and cigarette volumes down by 3.2% with declines in all regions.

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

Second-Quarter

Third-Quarter

2025 2024 Change (pp)

11 unchanged sentences

Fav./(Unfav.)

Quarters Ended June 30, 2025 2024 Total Excl.

Quarters Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

4 unchanged sentences

(3,095) (2,891) (7.1) % (6.2) % (204) (46) 20 — — (178)

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

Operating Income $ 4,263 $ 3,654 16.7 % 10.8 % $ 609 $ 196 $ 18 $ 305 $ 258 $ (168)

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

(1) Cost/Other variance includes charges in 2025 of $176 million related to Germany excise tax classification litigation, partly offset by charges in 2024 of $198 million related to the loss on sale of Vectura Group and $45 million related to the Egypt sales tax charge.

For more details, see Note 2.

Goodwill and Other Intangible Assets, net and Note 16.

Restructuring Activities .

Acquisitions and Divestitures , Note 8, Segment Reporting and Note 9.

Contingencies .

During the quarter, net revenues increased by 9.4%.

2 unchanged sentences

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.

The favorable currency impact in net revenues was due primarily to the Euro, Russian ruble, Polish zloty and Swiss franc.

Net revenues include $4.4 billion in 2025 and $3.8 billion in 2024 related to smoke-free.

1 unchanged sentence

Operating income, excluding currency and acquisitions/divestitures, increased by 10.8%, 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.

partly offset by higher marketing, administration and research costs and the 2025 Germany excise tax classification litigation charge of $176 million.

Interest expense, net, of $230 million increased by $41 million or 21.7%, primarily due to the impact of derivative financial instruments.

Our effective tax rate decreased by 2.6 percentage points to 18.7%.

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, see Note 10.

Income Taxes .

Income from equity investments and securities, net, decreased by $155 million, primarily due to a lower fair value adjustment for our equity security investments in India and Sri Lanka, the impairment of our Wellness & Healthcare related equity investment in 2025 and the decrease in the carrying value of the RBH investment, partly offset by dividend income received from RBH.

For further details, Note 13.

1 unchanged sentence

Net earnings attributable to PMI of $3.5 billion increased by $0.4 billion or 12.8%.

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%.

This increase was due primarily to higher operating income, partly offset by lower income from equity investments and securities, net.

Basic and diluted EPS of $2.23 increased by 12.6% and 13.2%, respectively.

Excluding a favorable currency impact of $0.08, diluted EPS increased by 9.1%.

Operating Results by Business Segment

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.

Segment Operating Results – Three Months and Nine Months Ended September 30, 2025

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

Financial Summary

Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

6 unchanged sentences

During the quarter, net revenues increased by 12.4%.

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.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.4%, 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 21.5%.

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.

Operating income, excluding currency and acquisitions/divestitures, increased by 11.4%, mainly due to the same factors as for net revenues and a favorable comparison to 2024 reflecting a charge of $198 million related to the loss on sale of Vectura Group in 2024, partly offset by the 2025 Germany excise tax classification litigation charge of $176 million.

Financial Summary

1 unchanged sentence

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

2 unchanged sentences

Operating Income $ 5,255 $ 4,797 9.5 % 4.5 % $ 458 $ 187 $ 53 $ 647 $ 97 $ (526)

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.

For the nine months ended September 30, 2025, net revenues increased by 8.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.4%, reflecting a favorable price variance, predominantly 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 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.

9 unchanged sentences

Operating income increased by 9.5%.

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

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.

Operating income, excluding currency and acquisitions/divestitures, increased by 4.5%, primarily reflecting:

the same factors as for net revenues and a favorable comparison to 2024 reflecting a charge of $198 million related to the loss on sale of Vectura Group in 2024;

partly offset by higher marketing, administration and research costs, as well as the 2025 Germany excise tax classification litigation charge of $176 million and the 2025 restructuring charges of $243 million.

Europe - Total Market and PMI Shipment Volume

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.

In the third quarter, the estimated market for cigarettes and HTUs decreased by 4.8% to 141.9 billion units, with a 6.3% decrease for cigarettes and continued HTU growth.

Markets with notable decreases include Ukraine (down by 15.0%), Poland (down by 9.7%), and United Kingdom (down by 17.0%).

For the nine months year-to-date, the estimated market for cigarettes and HTUs decreased by 3.5% to 397.3 billion units, with a 5.1% decrease for cigarettes and continued HTU growth.

In the third quarter, our shipment volume (in equivalent units) decreased by 2.2% with cigarettes down by 6.8% and SFP up by 10.5%.

For the nine months year-to-date, our shipment volume (in equivalent units) decreased by 1.2% with cigarettes down by 6.0% and SFP up by 12.2%.

In the third quarter, our cigarette and HTU shipment volume decreased by 2.6% to 56.4 billion units, predominantly due to decreases in Poland (down by 6.8%), Germany (down by 5.1%), and Ukraine (down by 8.6%) driven by cigarette shipments.

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

For the nine months year-to-date, our cigarette and HTU shipment volume decreased by 1.8% to 159.9 billion, with decreases in Poland (down by 8.4%), France (down by 10.7%) and Germany (down by 3.0%) driven by cigarette shipments.

For the nine 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 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.

In the third quarter, oral SFP shipments decreased by 10.0% to 65.2 million cans.

For the nine months year-to-date, oral SFP shipments decreased by 4.2% to 208.1 million cans.

SSEA, CIS & MEA:

Financial Summary

Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

8 unchanged sentences

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

while higher cigarette and HTU 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.

while higher SFP volume was more than 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 growth, with no meaningful impact on operating income.

Operating income increased by 28.6%.

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 marketing, administration and research costs as well as manufacturing costs (notably tobacco leaf).

Operating income, excluding currency and acquisitions/divestitures, increased by 23.5%, mainly reflecting a favorable price variance (predominantly driven by higher combustible tobacco pricing) and a favorable comparison to 2024 reflecting a charge of $45 million related to the Egypt sales tax charge in 2024, partly offset by higher marketing, administration and research costs.

Financial Summary

1 unchanged sentence

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

2 unchanged sentences

Operating Income $ 3,155 $ 2,623 20.3 % 18.7 % $ 532 $ 11 $ 31 $ 596 $ 160 $ (266)

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

For the nine months ended September 30, 2025, net revenues increased by 6.5%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.4%, 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 favorable price variance, predominantly driven by combustible tobacco pricing;

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

Operating income increased by 20.3%.

Operating income, excluding currency and acquisitions/divestitures, increased by 18.7%, 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).

a favorable price variance, as well as higher cigarette and SFP volume and a favorable comparison to 2024 reflecting a charge of $45 million related to the Egypt sales tax charge in 2024, 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 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%.

In the third quarter, the estimated market for cigarettes and HTUs increased by 1.2% to 399.9 billion units, mainly due to Bangladesh (up by 23.5%), India (up by 9.1%), and Turkey (up by 2.5%), partly offset by Vietnam (down by 8.3%) and Indonesia (down by 2.7%).

For the nine months year-to-date, the estimated market for cigarettes and HTUs was broadly stable at 1,156.8 billion units.

In the third quarter, our shipment volume (in equivalent units) increased by 0.7% with SFP up by 23.3%, and cigarettes down by 1.1%.

For the nine months year-to-date, our shipment volume (in equivalent units) increased by 2.1% with SFP up by 15.8% and cigarettes up by 1.0%.

In the third quarter, our cigarette and HTU shipment volume increased by 0.6% to 99.2 billion units, with increases in India (up by 37.2%) and Saudi Arabia (up by 22.7%), partly offset by Turkey (down by 7.7%) and Indonesia (down by 2.5%).

In the third quarter, our HTU adjusted in-market sales volume, fueled by broad growth across the region, increased by an estimated 13.3%.

For the nine months year-to-date, our cigarette and HTU shipment volume increased by 2.0% to 284.7 billion units, mainly driven by India (up by 42.0%) and Egypt (up by 5.4%), partly offset by Turkey (down by 3.9%) and Indonesia (down by 1.9%).

For the nine months year-to-date, our HTU adjusted in-market sales volume increased by an estimated 14.6%.

EA, AU & PMI GTR:

Financial Summary

Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

8 unchanged sentences

Operating income increased by 7.4%.

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

Operating income, excluding currency and acquisitions/divestitures, increased by 11.9%, mainly due to the same factor as for net revenues.

Financial Summary

1 unchanged sentence

Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

2 unchanged sentences

Operating Income $ 2,612 $ 2,304 13.4 % 14.7 % $ 308 $ (31) $ — $ 68 $ 270 $ 1

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.

For the nine months ended September 30, 2025, net revenues increased by 5.0%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.6%, mainly reflecting favorable volume/mix, driven by SFP volume and favorable price variance, driven by higher combustible tobacco pricing.

Operating income increased by 13.4%.

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

Operating income, excluding currency and acquisitions/divestitures, increased by 14.7%, reflecting the same factors as for net revenues.

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

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%.

In the third quarter, the estimated market for cigarettes and HTUs, excluding China, was broadly stable (82.5 billion units), with a decrease in cigarettes offset by HTU growth.

Notable increases in South Korea (up by 2.6%) and Global Travel Retail (up by 4.6%) were offset by Australia (down by 59.2%) and Taiwan (down by 2.3%).

For the nine months year-to-date, the estimated market for cigarettes and HTUs, excluding China, decreased by 0.7%, with a decrease in cigarettes, largely offset by HTU growth.

In the third quarter, our shipment volume (in equivalent units) increased by 7.1% with SFP up by 17.8%, and cigarettes down by 4.6%.

For the nine months year-to-date, our shipment volume (in equivalent units) increased by 5.8% with SFP up by 12.1%, and cigarettes down by 2.1%.

In the third quarter, our cigarette and HTU shipment volume increased by 6.8% to 28.5 billion units with growth in Japan (up

by 12.5%) and South Korea (up by 4.5%), partly offset by Australia (down by 53.4%).

In the third quarter, our HTU adjusted in-market sales volume increased by an estimated 8.2%.

For the nine months year-to-date, our cigarette and HTU shipment volume increased by 5.4% to 85.6 billion units, driven by Japan (up by 6.7%), partly offset by Australia (down by 43.9%).

For the nine months year-to-date, our HTU adjusted in-market sales volume increased by an estimated 9.6%.

Financial Summary

Quarters Ended June 30, Change

Quarters Ended September 30, Change

Fav./(Unfav.) Variance

5 unchanged sentences

Operating Income $ 32 $ 137 (76.6) % (92.0) % $ (105) $ 21 $ — $ (204) $ 136 $ (58)

During the quarter, net revenues increased by 12.7%.

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

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:

During the quarter, net revenues decreased by 5.5%.

Net revenues, excluding currency and acquisitions/divestitures, decreased by 5.0%, mainly reflecting an unfavorable price variance in the U.S., including the impact of special promotions to mark ZYN 's return to full availability, with all promotional costs including retailer incentives taken in net revenues.

This was partly offset by higher SFP volumes.

Operating income decreased by 76.6%.

Operating income, excluding currency and acquisitions/divestitures, decreased by 92.0%, 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.

and higher marketing, administration and research costs.

Financial Summary

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Fav./(Unfav.)

Six Months Ended June 30, 2025 2024 Total Excl.

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

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Operating Income $ 497 $ 419 18.6 % 31.3 % $ 78 $ (53) $ — $ (60) $ 482 $ (291)

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

For the nine months ended September 30, 2025, net revenues increased by 10.7%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 13.9%, 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.

favorable volume/mix, driven by SFP volume and an unfavorable U.S.

price variance largely offset by cigarette pricing outside of the U.S.

Operating income increased by 18.6%.

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

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

Americas - Total Market and PMI Shipment Volume

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%).

In the third quarter, the estimated market for cigarettes and HTUs, excluding the U.S., decreased by 6.2% to 44.1 billion units, driven by a decrease in the cigarette market.

The decrease was mainly due to Brazil (down by 9.8%) and Mexico (down by 11.3%), partly offset by Argentina (up by 5.0%).

For the nine months year-to-date, the estimated market for cigarettes and HTUs, excluding the U.S., decreased by 1.9% to 134.6 billion units driven by a decrease in the cigarette market.

In the third quarter, our shipment volume (in equivalent units) increased by 0.6% with SFP up by 26.9%, and cigarettes down by 4.7%.

For the nine months year-to-date, our shipment volume (in equivalent units) increased by 4.2% with SFP up by 32.3% and cigarettes down by 1.2%.

In the third quarter, our cigarette and HTU shipment volume decreased by 4.5% to 14.7 billion units, with decreases in Mexico (down by 12.8%) and Brazil (down by 9.6%), partly offset by increases in Argentina (up by 7.1%).

For the nine months year-to-date, our cigarette and HTU shipment volume decreased by 1.1% to 44.5 billion units, mainly due to Mexico (down by 6.8%), partly offset by Argentina (up by 6.7%).

(1) Excluding 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.

travel retail volumes of approximately 5.2 million and 8.1 million nicotine pouch cans are recorded in the Americas segment for the third quarter and nine 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.

In the third quarter, oral SFP shipments increased by 29.1% to 238 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

ZYN growth in the U.S.

was driven by underlying consumer offtake growth amplified by the impact of increased commercial activities and, separately, of special short-term promotions in select U.S.

locations to mark ZYN 's return to full availability, which specifically accounted for a single digit percentage of our third quarter U.S.

For the nine months year-to-date, oral SFP shipments increased by 34.4% to 701 million cans, predominantly driven by ZYN nicotine pouches in the U.S.

Business Environment

The tobacco industry and our company face a number of challenges that may adversely affect our business, product sales volume, results of operations, cash flows and financial position.

These challenges, which are discussed below and " Cautionary Factors That May Affect Future Results " include:

These challenges, which are discussed below and in " Cautionary Factors That May Affect Future Results " include:

• regulatory restrictions on our products, including restrictions on the packaging, marketing, registration and sale of tobacco or other nicotine-containing products or related devices that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products;

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These initial commercialization efforts require substantial investment, which we believe will moderate over time and further benefit from the increased use of digital engagement capabilities.

PMI has, and continues to, invest in digital consumer engagement.

PMI has invested, and continues to invest, in digital consumer engagement.

In 2014, we introduced IQOS in pilot city launches in Nagoya, Japan, and in Milan, Italy.

Since then, we have continuously expanded our commercialization activities.

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

As of October 2025, PMI's smoke-free products were available for sale in 100 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

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Other jurisdictions have imposed, or are seeking to impose, levies or other taxes specifically on tobacco companies, such as taxes on revenues and/or profits.

On March 14, 2024, the Court of Justice of the European Union (the "CJEU") ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

On March 14, 2024, the Court of Justice of the European Union (the "CJEU") ruled that the German fiscal regulation imposing an additional excise tax on heated tobacco products ("HTPs") does not contravene EU law.

Fiscal Court in Dusseldorf (the "FCD") had previously referred that question to the CJEU.

On May 21, 2024, the FCD delivered its judgement and dismissed our local affiliate's, f6 Cigarettenfabrik GmbH & Co.KG, ("PM Germany") claim.

On May 21, 2024, the FCD delivered its judgment and dismissed the claim of our local affiliate, f6 Cigarettenfabrik GmbH & Co.KG, ("PM Germany").

PM Germany filed a notice of appeal to the Federal Fiscal Court on June 19, 2024.

To avoid further accumulation of interest, in January 2025, PM Germany provisionally paid the additional HTP excise tax relating to 2022, 2023 and 2024 (pending the outcome of the FCD decision).

An oral hearing is expected in or after September 2025.

An oral hearing is expected by the third quarter of 2026.

In March 2025, Japan adopted a multi-year tax plan that included changes to its excise tax structure and rates for tobacco products.

Under the plan, the excise tax for heated tobacco products ("HTPs") will be harmonized with cigarettes in two steps;

Under the plan, the excise tax for HTPs will be harmonized with cigarettes in two steps;

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

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The well-known risks of smoking have led regulators to impose significant restrictions and high excise taxes on cigarettes.

The regulatory landscape for novel nicotine-containing products is inconsistent and evolving but is, in some instances, even more restrictive.

The regulatory landscape for novel nicotine-containing products is inconsistent and evolving but is, in some instances, even more restrictive compared to the regulatory environment for cigarettes.

Much of the regulation that shapes the business environment in which we operate is driven by the World Health Organization's (the "WHO") Framework Convention on Tobacco Control (the "FCTC"), which entered into force in 2005.

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The WHO’s reports and other FCTC guidelines or recommendations are not binding on the WHO Member States or on Parties to the FCTC.

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.

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 they can be made available, 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.

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.

Product regulation should include measures that encourage and accelerate switching to non-combustible products, for example, by allowing adult consumers who would otherwise continue smoking cigarettes to receive truthful and non-misleading information about such alternatives to enable them to make informed decisions and by applying uniform product standards to enable manufacturers to demonstrate the reduction in HPHCs, as well as the absence of combustion.

Product regulation should include measures that encourage and accelerate switching to non-combustible products, for example, by allowing adult consumers who would otherwise continue smoking cigarettes to receive truthful and non-misleading information about such alternatives to enable them to make informed decisions and by applying uniform product standards to enable manufacturers to demonstrate the absence of combustion, as well as the reduction in HPHCs.

Regulation should also include specific rules for ingredients, labeling and consumer communication, and should ensure that the public is informed about the health risks of all combustible and non-combustible tobacco and nicotine-containing products.

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Some governments have banned, are seeking to ban, or severely restrict emerging tobacco and nicotine-containing products, such as our SFPs, and communication of truthful and non-misleading information about such products.

Significant markets that have prohibited or severely restricted the sale of one or more category of SFP include Argentina, Brazil, Canada, India, Mexico, Turkey, Australia, Thailand, and Vietnam.

Significant markets that have prohibited or severely restricted the sale of one or more category of SFP include Argentina, Brazil, Canada, France, India, Mexico, Turkey, Australia, Thailand, and Vietnam.

In the U.S., some states and municipalities have introduced stringent restrictions on the sale of certain SFPs, including those authorized by the FDA.

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.

These regulations could also constitute, in effect, non-tariff barriers to trade.

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.

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In many countries, menthol or flavor bans would eliminate entire product categories.

The EU banned cigarettes and roll-your-own tobacco products with characterizing flavors.

Other tobacco products are currently exempted under EU TPD from this characterizing flavor ban.

The EU banned cigarettes and roll-your-own tobacco products with characterizing flavors, while exempting other tobacco products under EU TPD from this characterizing flavor ban.

This was also the case for heated tobacco products until November 23, 2022, when the EU Commission published a delegated directive that eliminated this exemption.

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

flavor ban into national law.

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 one EU Member State has transposed this directive into national law, withdrawing the heated tobacco product exemption from the characterizing flavor ban.

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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There has been some short-term disruption in countries that have implemented the ban, most notably in Italy, but the impact has generally been limited in time and magnitude.

Nevertheless, it remains possible that the impact in countries that have yet to implement the ban, including Poland, could be more significant in duration or magnitude.

But our fundamental view remains that we do not expect a meaningful long-term change in the structural growth of the category.

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Turkey banned menthol as of May 2020.

Broader ingredient bans have been adopted by Brazil (pending a court decision) and Canada.

Broader ingredient bans have been adopted by, among others, Brazil (pending a court decision), Thailand, Hong Kong, and Canada.

In the U.S., certain states and localities have adopted, or are considering adopting, flavor bans that apply to SFPs.

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In some countries, including in the EU, cigarettes are subject to testing, disclosure and mandatory emissions limits for tar, nicotine, carbon monoxide and other smoke constituents.

Some members of the public health community are calling for the further standardization of tobacco products by requiring, for example, that cigarettes have a certain minimum diameter, which would result in a ban on slim cigarettes, or requiring the use of standardized filter and cigarette paper designs.

Some members of the public health community are calling for further standardization of tobacco products by requiring, for example, that cigarettes have a certain minimum diameter, which would result in a ban on slim cigarettes, or requiring the use of standardized filter and cigarette paper designs.

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.

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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.

These standards are mandatory in Armenia, Bahrain, Egypt, Jordan, Lebanon, the Philippines, Saudi Arabia, Tajikistan, Tunisia, the United Arab Emirates ("UAE") and Uzbekistan, and voluntary in Algeria, Azerbaijan, Colombia, Costa Rica, Dominican Republic, Indonesia, Kazakhstan, Kyrgyzstan, Morocco, Russia, South Africa, Vietnam, the U.K.

These standards are mandatory in Armenia, Bahrain, Egypt, Jordan, Lebanon, the Philippines, Saudi Arabia, Tajikistan, Tunisia, the United Arab Emirates ("UAE") and Uzbekistan, and voluntary in Algeria, Angola, Colombia, Costa Rica, Dominican Republic, Indonesia, Kazakhstan, Kyrgyzstan, Morocco, Russia, South Africa, Vietnam, the U.K.

In Japan, a voluntary standard sets minimum safety requirements for tobacco heating devices.

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

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.

These standards are mandatory in Armenia, Australia, Bahrain, China, Egypt, Jordan, Morocco, New Zealand, the Philippines, Russia, the UAE, and Saudi Arabia and Tajikistan, and voluntary in Azerbaijan, Costa Rica, France, Indonesia, 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 several countries.

These standards are mandatory in Bahrain, Morocco, Pakistan, and the UAE, and are voluntary in Angola, Armenia, Costa Rica, France, Malawi, Mexico, Moldova, the Philippines, Sweden, the U.K., Ukraine and Zimbabwe.

We expect other governments to consider similar product standards for all novel tobacco and nicotine-containing products and encourage making them 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.

On December 3, 2024, the EU Council adopted its legally non-binding recommendation on smoke- and aerosol-free environments.

While the recommendations recognize scientifically proven differences between smoke-free and combustible products, they nevertheless encourage EU member states to restrict usage of both conventional and novel tobacco products in indoor public spaces and some outdoor areas.

While the recommendations recognize scientifically proven differences between smoke-free and combustible products, they nevertheless encourage EU member states to restrict usage of both conventional tobacco products and inhalable smoke-free products in indoor public spaces and some outdoor areas.

Each member state is to decide whether or not to implement these recommendations.

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In a limited number of markets, most notably Japan, we are dependent on governmental approvals that may limit our pricing flexibility.

The EU Single-Use Plastics Directive, which will require tobacco manufacturers and importers to cover the costs of public collection systems for tobacco product filters, under Extended Producer Responsibility ("EPR") schemes, came into force on July 2, 2019.

The EU Single-Use Plastics Directive, which requires tobacco manufacturers and importers to cover the costs of public collection systems for tobacco product filters, under Extended Producer Responsibility ("EPR") schemes, came into force on July 2, 2019.

As of December 31, 2024, the majority of EU Member States transposed the directive into national legislation and brought into force mandatory EPR schemes and related EPR costs for tobacco manufacturers and importers.

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On May 9, 2024, the FDA filed for scientific review of our MRTP renewal applications for IQOS products and posted materials from these applications.

As our applications proceed through the review process, we have responded to FDA requests for additional information.

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.

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

The recommendations 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.

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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.

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.

After the September 9, 2020 deadline, we also submitted additional applications for authorization to market other ZYN products.

The FDA has not issued a decision on these applications, and these ZYN products are not marketed 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.”

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

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“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.

Starting June 18, 2025, the public may submit public comments on our MRTPAs to a public docket on regulations.gov.

There is currently no deadline for public comments.

The FDA referred our MRTPAs to TPSAC, which is expected to meet in the first quarter of 2026.

We also submitted additional applications for authorization to market 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 September 2025, the FDA launched a pilot program that aims to increase efficiency and streamline the review process for PMTAs for nicotine pouches.

The pilot will involve increased real-time communication between the FDA and applicants with the goal of providing more frequent feedback and shorter review timeframes.

We are aware that certain of our competitors have recently marketed, or stated their intention to market, tobacco products that have pending PMTAs and have not been previously marketed in the United States.

We continue to evaluate the FDA’s and other regulators’ practices regarding products that have pending applications for marketing authorization and assess all potential pathways to market that might be available in connection with products for which we have a PMTA pending.

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

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The amendment particularly specifies that designated tobacco products (including heated tobacco products) that are not cigarettes, cut tobacco, cigars, snuff nor chewing tobacco, must undergo a health risk assessment as part of an authorization system.

We have filed an authorization request to commercialize IQOS in Taiwan pursuant to this Act, but this request is currently still pending authorization by the Ministry of Health of Taiwan.

In July 2023, we filed an authorization request to commercialize IQOS in Taiwan pursuant to this Act.

We have since received this authorization, which took effect on October 11, 2025.

On March 23, 2023, the Greek Ministry of Health authorized a claim for IQOS with HEETS AMBER to inform Greek IQOS users about reduction in emissions of toxicants when using such product compared to cigarette smoking.

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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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The outcomes of these matters may affect our SFP commercialization and public communication activities and performance in one or more markets.

As part of a previously announced sales and supply chain review, SMNA has discontinued sales through the e-commerce shop associated with ZYN.com and direct sales to dedicated online retailers in the United States indefinitely.

e-commerce previously represented a small fraction of sales of SMNA in the United States, and the current network of approximately 170,000 brick-and-mortar retailers will remain SMNA’s focus.

As part of a previously announced sales and supply chain review, SMNA discontinued sales through the e-commerce shop associated with ZYN.com in the United States.

Illicit Trade

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As an example, the recent commercial success of the nicotine pouch category makes it more prone to be affected by illicit trade.

Our ongoing anti-illicit initiatives for nicotine pouches include PMI’s ‘know-your-customer’ and ‘anti-diversion’ governance and other measures, such as volume monitoring, tracking and tracing, product security, as well as internal and external awareness training and communications.

awareness training and communications.

We are also expanding our market monitoring (both online and offline) and illicit trade research program to nicotine pouches.

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No additional restrictive measures were adopted, and a mandate to conduct further work will be considered at the next session, currently scheduled to take place in November 2025.

According to publicly available reports, the fourth Meeting of the Parties will look into future restrictions on duty-free tobacco sales, regulation of key inputs used in tobacco product manufacturing, and whether Protocol’s provisions cover electronic nicotine and non-nicotine delivery systems.

The tracking and tracing regulations for cigarettes and roll-your-own products manufactured or destined for the EU were extended to include tobacco products other than cigarettes, including some of our SFPs, as of May 20, 2024.

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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, 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.

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 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 the EU's Carbon Border Adjustment Mechanism (CBAM) as well as other carbon tax programs in Canada and other jurisdictions.

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

For the nine months ended September 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 six months of 2025 was not material to our condensed consolidated financial statements.

The impact of inflation on cost of sales during the first nine 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 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.

During the first nine 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 and 2026.

We are actively monitoring developments in the global tariff environment and will continue to evaluate the potential impact of the announced tariffs and related developments on our business and financial condition, as well as on our suppliers, and the actions we may take to mitigate any impact.

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

As of September 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 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.

As of September 30, 2025, our Russian operations had approximately $4.5 billion in total assets, excluding intercompany balances, of which approximately $2.0 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 September 30, 2025 had a carrying value of $305 million.

For further details, see Note 13.

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Cash Flow Highlights

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

(in millions) 2025 2024

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Net Cash Provided by (Used in) Operating Activities

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.

During the first nine months of 2025, net cash provided by operating activities was $7.5 billion as compared to $8.2 billion in the first nine months of 2024.

Excluding favorable currency movements, the unfavorable variance of $1.0 billion was due primarily to higher working capital requirements of $2.9 billion.

This was partly offset by higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense, non-cash movements in deferred income tax benefit and other non-cash movements primarily reflected in Other.

Our net cash provided by operating activities also includes dividend income from our deconsolidated Canadian affiliate of $0.5 billion received in the third quarter (for further details, see Note 13.

Related Parties – Equity Investments and Other to our condensed consolidated financial statements).

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 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.

In addition, more cash used in income taxes primarily reflected 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.

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

This now includes dividend income from our deconsolidated Canadian affiliate.

Net Cash Provided by (Used in) Investing Activities

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.

During the first nine months of 2025, net cash used in investing activities was $3.5 billion as compared to $1.5 billion in the first nine 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 $760 million during the first six months of 2025 decreased by $27 million as compared with the first six months of 2024.

Capital expenditures of $1,125 million during the first nine months of 2025 decreased by $41 million as compared with the first nine 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 $1.6 billion, almost entirely due to investments supporting the smoke-free business.

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

Net Cash Provided by (Used in) Financing Activities

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.

During the first nine months of 2025, net cash used in financing activities was $4.6 billion as compared to $5.4 billion in the first nine 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 higher dividend payments and 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.

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

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

Short-term Long-term Outlook

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Revolving Credit Facilities

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

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

At September 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 $3.8 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.

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

Borrowings under these arrangements and other bank loans amounted to $195 million at September 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 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.

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

At September 30, 2025, we had $1.7

billion of commercial paper outstanding.

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

The average commercial

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

The average commercial paper balance outstanding during the first nine months of 2025 was $3.6 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 $51.5 billion at June 30, 2025 and $45.7 billion at December 31, 2024.

Debt – Our total debt was $50.1 billion at September 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.

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

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

(in millions)

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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.

Guarantees – At September 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 June 30, 2025 in Note 3.

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

Stock Plans to our condensed consolidated financial statements.

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.

Dividends paid in the first nine months of 2025 were $6.3 billion.

During the third quarter of 2025, our Board of Directors approved an 8.9% increase in the quarterly dividend to $1.47 per common share.

As a result, the present annualized dividend rate is $5.88 per common share.

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In August 2021, the Framework Convention on Tobacco Control (the "FCTC") Secretariat published two reports on novel and emerging tobacco products to the Ninth Session of the CoP of the FCTC, which are not materially different from the WHO study group report.

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

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.

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

The Eleventh Session of the CoP ("CoP 11") is currently scheduled to take place in November 2025.

In preparation for CoP 11, the FCTC Secretariat has released a number of reports.

They include proposals to curb tobacco use, address nicotine addiction, introduce generation sales bans and safeguard public health policies from industry interference

Reports issued by the WHO and other FCTC guidelines or recommendations are not binding on the WHO Member States or on parties to the FCTC, and so it is not possible to predict the extent to which any proposals it adopts will be implemented.

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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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changes in product volume growth rates;

changes in pricing strategies and costs bases;

changes in pricing strategies and cost bases;

discount rates;

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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.

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.

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, 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 efficiency and decrease our operating costs, they also diminish our direct control.

Such diminished control may lead to disruption in the distribution of our products and may have a material adverse effect on the quality and availability of products or services, our supply chain, and the speed and flexibility in our response to changing market conditions and adult consumer preferences, all of which may place us at a competitive disadvantage or negatively impact our reputation.

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Our business continuity plans and other safeguards might not always be effective to fully mitigate their impact.

For example, the global pandemic outbreak of the COVID-19 virus in 2020 created significant societal and economic disruption and the closure of stores, factories and offices, restrictions on manufacturing, distribution and travel, and supply chain disruptions, among other impacts.

Additionally, while we do not now expect that the recent and currently anticipated trade tariffs imposed by the U.S.

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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.

Our primary local currency cost bases may be different from our primary currency revenue markets, and U.S.

dollar fluctuations against various currencies may have disproportionate negative impact on cash flows and on net revenues as compared to our gross profit and operating income margins.

dollar fluctuations against various

currencies may have disproportionate negative impact on cash flows and on net revenues as compared to our gross profit and operating income margins.

Capital controls and/or foreign currency exchange constraints may affect the ability of our subsidiaries in impacted jurisdictions to settle foreign currency denominated imports of goods and services and/or to pay dividends and royalties.

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Inflationary pressures may also negatively impact consumer purchasing power, which could result in reduced demand for our products.

We expect a moderate inflationary increase in 2025.

We expect a moderate inflationary increase in the remainder of 2025.

If we are unable to increase our prices sufficiently or take other actions to mitigate the effect of inflationary pressures, our profitability and financial position could be negatively impacted.

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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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In addition, our revenues may be materially adversely affected by counterfeiting, contraband, cross-border purchases, non-tax-paid volume produced by local manufacturers and other non-compliant or illicit cigarettes or smoke-free products.

Risks Related to Cybersecurity and Data Governance

Risks Related to Cybersecurity, Data Governance and Artificial Intelligence

We are significantly dependent on our and third-party information technology networks and systems, and a cybersecurity incident or attack against those networks or systems may adversely impact our business and operations.

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Some of these information systems and networks are developed, supplied, or managed by third-party service providers that may make us vulnerable to “supply chain” style cyberattacks.

Additionally, some information technology systems may be supported by artificial intelligence capabilities that may not function as intended, posing cybersecurity and data protection risks.

Additionally, some information technology systems may be supported by artificial intelligence capabilities that may not function as intended, posing cybersecurity, data governance and data protection risks.

The failure or disruption of our information technology networks and systems, or those managed by third-party service providers or owned by our business partners and used in furtherance of PMI’s business, due to cybersecurity attacks;

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Our or our business partners’ failure or inability to adhere to privacy, data, artificial intelligence and information security laws could result in business disruption, loss of reputation and consumer trust, litigation, regulatory action including significant fines or penalties, financial impact, and loss of revenue, assets or personal, confidential, or sensitive data.

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, 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 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;

meet stringent timeframe requirements for incident reporting to regulatory authorities;

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

state and federal laws, and other similar privacy, data, and information security laws, regulations, or voluntary guidelines that could establish legal duties across the various jurisdictions in which PMI operates, such as the failure or inability to protect or safeguard personal or company data, or information systems and networks, including connected products;

implement or execute appropriate technological and reasonable security and organizational measures;

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

respect the privacy, digital, or other rights of data subjects;

provide sufficient detailed notices, information, or transparency obligations related to personal or other data processing;

obtain appropriate consent and opt-outs;

respond to data subject or other data requests in a timely fashion;

meet stringent timeframe requirements for incident reporting to regulatory authorities or data subjects;

notify all relevant regulatory authorities or data subjects;

comply with artificial intelligence regulations, and others, could have a material adverse effect on us, subject us to substantial fines and/or legal challenges, and/or harm our business, reputation, financial condition, or operating results.

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Although we maintain a cyber liability insurance policy to address many of these risks, such policy may not be sufficient to prevent a cybersecurity incident or attack from resulting in a material adverse effect on our business, reputation, financial condition, or operating results.

We increasingly use artificial intelligence-based solutions in our business, which could result in reputational harm, legal liability, and adversely affect our operating results.

We and our business partners are increasingly incorporating artificial intelligence ("AI")-based solutions in our ways of working and operations, but this process involves uncertainty and risks, which may or may not yield corresponding benefits.

Artificial intelligence technologies are complex, and there are technical and organizational challenges associated with achieving optimal levels of accuracy, efficiency, safety, explicability, reliability, and use for their intended purposes.

Flaws, biases, data sourcing issues, limitations, errors, misconfiguration, or malfunctions in these systems could result in operational disruptions, including data loss and corruption.

There is a risk of artificial intelligence system failures, disruptions, or vulnerabilities that could compromise PMI’s information technology networks and systems and the integrity, availability, security, or privacy of PMI data processed by or through such systems.

The emergence of AI and other technologies may also exacerbate other risks, including those related to regulation, litigation, compliance issues, ethical concerns, confidentiality, intellectual property ownership and infringement, and data privacy or security.

Separately, AI presents a new attack surface that cybercriminals will attempt to exploit as well as providing means to scale and automate targeted attacks.

Ineffective or inadequate artificial intelligence development, adoption, or deployment practices, including any use, reliance, or dependence on AI generated outputs, could result in unintended, unexpected, or otherwise unforeseen adverse consequences.

These risks could have a material adverse effect on our business, reputation, financial condition, or operating results.

Risks Related to Acquisitions and Divestitures

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Activities in such areas are regulated by numerous antitrust and competition laws in the United States, the European Union, the United Kingdom, and elsewhere.

We have in the past and may in the future be required to obtain approval of these transactions by competition or other regulatory authorities or to satisfy certain legal requirements, and we may be unable to obtain such approvals or satisfy such requirements, each of which may result in additional costs, delays, or our inability to complete such transactions.

We have in the past and may in the future be required to obtain approval of these transactions by competition or other regulatory authorities or to satisfy

certain legal requirements, and we may be unable to obtain such approvals or satisfy such requirements, each of which may result in additional costs, delays, or our inability to complete such transactions.

Any of these factors could prevent us from realizing the anticipated benefits of any such transaction and/or could materially and adversely affect our financial condition and operating results.

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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