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Item 2. Management’s Discussion and Analysis

2026-04-24 compared with 2025-10-24 · 552 added, 1043 removed, 768 unchanged (67% of the section changed)

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This investment includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies.

In November 2022, we acquired Swedish Match AB ("Swedish Match") – a leader in oral nicotine delivery – creating a global smoke-free combination led by the companies’ IQOS and ZYN brands.

As of April 30, 2024, we hold the full rights to commercialize IQOS in the U.S.

after reaching an agreement to end our U.S.

commercial relationship covering IQOS with Altria Group, Inc.

Following a robust science-based review, the U.S.

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Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").

Following the sale of Vectura Group Ltd.

on December 31, 2024, we updated our segment reporting in January 2025, by including the ongoing Wellness & Healthcare results in the Europe segment.

In addition, we renamed our “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025.

As a result of this change, our segment that includes our duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

Our four geographical segments are as follows:

• Europe Region, including our Wellness & Healthcare business;

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

• East Asia, Australia, and PMI Global Travel Retail (“EA, AU & PMI GTR”);

• 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:

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

business, PMI has implemented an evolved organizational model with two primary business units:

International and U.S.

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.

This change was implemented effective January 1, 2026, and as a result PMI realigned its reportable segments accordingly.

The four geographic segments have been replaced with the following three new reportable segments:

• International Smoke-Free;

• International Combustibles;

(including our wellness business unit, Aspeya).

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

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

SFB also includes wellness and healthcare products, as well as consumer accessories, such as lighters and matches.

SFB also includes wellness products, as well as consumer accessories, such as lighters and matches.

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

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

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.

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

The Swedish Match acquisition was a key milestone in PMI’s transformation to becoming a smoke-free company.

The Swedish Match product portfolio is complementary to our portfolio, permitting us to bring together a leading oral nicotine product with the leading heat-not-burn product.

In 2022, we reached an agreement with Altria Group, Inc.

to end our commercial relationship in the U.S.

covering IQOS as of April 30, 2024.

PMI now holds the full rights to commercialize IQOS in the U.S.

As of March 31, 2026, our smoke-free products were available for sale in 108 markets.

With a strong foundation and significant expertise in life sciences, PMI has a long-term ambition to expand into wellness areas.

The business strategy of our wellness unit, Aspeya, currently focuses on developing and commercializing primarily oral consumer wellness offerings.

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

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

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

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

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).

"Other” also includes the currency-neutral net revenue variance attributable to the restructuring of distribution terms in certain markets.

Our cost of sales consists primarily of:

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Estimated costs associated with device warranty programs are generally provided for in cost of sales in the period the related revenues are recognized.

Our marketing, administration and research costs include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (including general corporate expenses), and costs incurred to develop new products.

Our marketing, administration and research costs include the costs of marketing and selling our products, other costs generally not related to the manufacture of our products (excluding corporate expenses and other), and costs incurred to develop new products.

The most significant components of our marketing, administration and research costs are marketing and sales expenses and general and administrative expenses.

Philip Morris International Inc.

is a legal entity separate and distinct from its direct and indirect subsidiaries.

Accordingly, our right, and thus the right of our creditors and stockholders, to participate in any distribution of the assets or earnings of any subsidiary is subject to the prior rights of creditors of such subsidiary, except to the extent that claims of our company itself as a creditor may be recognized.

As a holding company, our principal sources of funds, including funds to make payment on our debt securities, are from the receipt of dividends and repayment of debt from our subsidiaries.

Our principal wholly owned and majority-owned subsidiaries currently are not limited by long-term debt or other agreements in their ability to pay cash dividends or to make other distributions that are otherwise compliant with law, including governmental capital and foreign currency exchange controls.

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

Executive Summary

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

Consolidated Operating Results for the 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 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 nine months ended September 30, 2024 $ 4.89

2024 Restructuring charges 0.09

2024 Impairment of other intangibles 0.01

2024 Amortization of intangibles 0.29

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)

2024 Tax items (0.03)

Subtotal of 2024 items 0.12

2025 Restructuring charges (0.13)

2025 Impairment of goodwill (0.03)

2025 Amortization of intangibles (0.37)

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

2025 Tax items 0.11

Subtotal of 2025 items 0.06

Currency 0.02

Interest 0.03

Change in tax rate —

Operations 0.77

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.

Restructuring Activities .

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

During the second quarter of 2025, after the completion of our annual review of goodwill, it was determined that the estimated fair value of a reporting unit included within the Europe segment was lower than its carrying value.

Consequently, PMI recorded a goodwill impairment charge of $41 million (representing a $0.03 per share decrease in diluted EPS).

For further details on the goodwill impairment charge, see Note 5.

Goodwill and Other Intangible Assets, net .

Amortization of intangibles – During the 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.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

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 .

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.

tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI’s investment in C.A.

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

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:

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

Consolidated Operating Results for the Three Months Ended March 31, 2026

• Net Revenues - Net revenues of $10.1 billion for the three months ended March 31, 2026, increased by $0.8 billion, or 9.1%, from the comparable 2025 amount.

The change in our net revenues from the comparable 2025 amount was driven by the following (variances not to scale with quarterly results):

During the quarter, net revenues increased by 9.1%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.9%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

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

Net revenues by product category for the three months ended 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:

Net revenues, excluding currency, increased by 2.7%, mainly reflecting:

a favorable pricing variance mainly driven by International Combustibles;

partly offset by an unfavorable volume/mix/other, mainly driven by lower International Combustibles and U.S.

volumes, notwithstanding higher International Smoke-Free volumes.

Net revenues by product category for the three months ended March 31, 2026 and 2025, are shown below:

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

• Diluted Earnings Per Share - The changes in our diluted earnings per share (“diluted EPS”) for the three months ended March 31, 2026, from the comparable 2025 amounts, were as follows:

Diluted EPS % Change

For the three months ended September 30, 2024 $ 1.97

For the three months ended March 31, 2025 $ 1.72

2025 Amortization of intangibles 0.12

2025 Fair value adjustment for equity security investments (0.09)

2024 Loss on sale of Vectura Group 0.13

2024 Egypt sales tax charge 0.03

2025 Income tax impact associated with Swedish Match AB financing (0.06)

2024 Tax items —

Subtotal of 2025 items

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2026 Fair value adjustment for equity security investments (0.22)

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)

2026 Restructuring charges (0.01)

2026 Income tax impact associated with Swedish Match AB financing (0.05)

2025 Tax items 0.14

Subtotal of 2026 items

Currency 0.18

Interest (0.02)

Change in tax rate 0.06

Operations 0.03

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 .

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.

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.

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 the three months ended March 31, 2026 $ 1.56 (9.3) %

Amortization of intangibles – During the first quarter of 2025 and 2026, we recorded amortization of intangible expense of $246 million (representing $191 million net of income tax or $0.12 per share decrease in diluted EPS) and $251 million (representing $196 million net of income tax or $0.12 per share decrease in diluted EPS), respectively.

Fair value adjustment for equity security investments – During the first quarter of 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $143 million gain after tax (or $0.09 per share increase in diluted EPS) and $338 million loss after tax (or $0.22 per share decrease in diluted EPS), respectively.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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.

Restructuring charges – During the first quarter of 2026, we recorded pre-tax restructuring charges of $24 million (representing $19 million net of income tax and a diluted EPS charge of $0.01 per share), related to a series of footprint optimization initiatives in the U.S.

For further details, see Note 15.

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;

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

Restructuring Activities .

Income taxes – The income tax impact associated with the Swedish Match acquisition financing that increased our 2025 diluted EPS by $0.06 and decreased our 2026 diluted EPS by $0.05 in the table above was due to a deferred tax impact for unrealized foreign currency gains and losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in the condensed consolidated statements of stockholders' (deficit) equity.

The change in the tax rate that increased our diluted EPS by $0.06 per share in the table above was primarily driven by a reduction in tax costs associated with global intangible low-taxed income and discrete tax benefits recognized during the period.

Currency – The favorable impact of $0.18 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S.

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

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

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

Interest – The 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:

Favorable pricing and favorable volume/mix;

• SSEA, CIS & MEA:

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.

Operations – The increase in diluted EPS of $0.03 from our operations in the table above was due primarily to the following:

• International Smoke-Free segment:

Favorable volume/mix/other and favorable pricing;

• International Combustibles segment:

Favorable pricing, partly offset by unfavorable volume/mix/other, including the favorable impact related to the restructuring of distribution terms in certain markets this quarter;

Unfavorable volume/mix/other, unfavorable pricing (mainly driven by increased consumer promotions) and higher manufacturing costs;

• Higher marketing, administration and research costs.

Discussion and Analysis

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Consolidated Operating Results

See pages 102 - 115 for a discussion of our " Cautionary Factors That May Affect Future Results ." Net revenues, significant expenses, and operating income by segment were as follows:

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

For the Nine Months Ended September 30, 2025

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

Cost of sales 3,286 3,800 1,512 1,208 9,806

Marketing, administration and research costs 3,931 1,987 1,083 1,919 8,920

Impairment of goodwill 41 — — — 41

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

For the Nine Months Ended September 30, 2024

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

Cost of sales 3,318 3,909 1,573 1,106 9,906

Marketing, administration and research costs 3,432 1,861 1,082 1,748 8,123

Operating income $ 4,797 $ 2,623 $ 2,304 $ 419 $ 10,143

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

For the Three Months Ended September 30, 2025

See pages 70 - 82 for a discussion of our " Cautionary Factors That May Affect Future Results ." Net revenues, cost of sales and gross profit by segment, as well as total significant expenses and operating income were as follows:

(in millions) International Smoke-Free International Combustibles U.S.

For the Three Months Ended March 31, 2026

Net revenues $ 3,836 $ 5,688 $ 622 $ 10,146

Cost of sales 1,152 1,847 242 3,241

Gross profit 2,684 3,842 380 6,905

Marketing, administration and research costs 2,857

Corporate expenses and other 155

Operating income $ 3,893

For the Three Months Ended September 30, 2024

For the Three Months Ended March 31, 2025

Net revenues $ 3,076 $ 5,326 $ 899 $ 9,301

Cost of sales 990 1,827 215 3,031

Gross profit 2,087 3,499 685 6,270

Marketing, administration and research costs 2,428

Corporate expenses and other 298

Operating income $ 3,544

Amounts may not foot due to rounding

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

• Restructuring charges – See Note 15.

Restructuring Activities for details of the $24 million pre-tax charges included in marketing, administration and research costs for the three months ended March 31, 2026.

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

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

PMI Net Revenues by Product Category

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

2025 2024 Change 2025 2024 Change

Combustible tobacco:

Europe $ 6,713 $ 6,467 3.8 % $ 2,478 $ 2,322 6.7 %

SSEA, CIS & MEA

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

2026 2025 Change

International Smoke-Free $ 3,836 $ 3,076 24.7 %

543 818 (33.6) %

EA, AU & PMI GTR

of which, Wellness 62 51 20.4 %

Total Smoke-free 4,379 3,895 12.4 %

Combustible tobacco:

International Combustibles 5,688 5,326 6.8 %

79 81 (2.5) %

Americas 1,551 1,653 (6.1) % 520 527 (1.2) %

Total Combustible tobacco 5,767 5,407 6.7 %

Europe 5,800 5,080 14.2 % 2,241 1,875 19.5 %

of which, Wellness & Healthcare 166 246 (32.5) % 57 76 (24.3) %

SSEA, CIS & MEA

1,272 1,003 26.8 % 520 352 47.9 %

EA, AU & PMI GTR

3,356 3,070 9.3 % 1,119 929 20.4 %

Americas 2,073 1,620 27.9 % 565 621 (9.1) %

Total Smoke-free 12,500 10,773 16.0 % 4,445 3,777 17.7 %

Total PMI net revenues $ 10,146 $ 9,301 9.1 %

Sum of product categories or Regions might not foot to total PMI due to rounding

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

• Restructuring charges – See Note 16.

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 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.

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

Net revenues related to smoke-free, excluding wellness, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable.

These net revenue amounts consist of the sale of our products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories.

Net revenues related to wellness refer to the operating revenues generated from the sale of product, primarily associated with oral and intra-oral delivery systems.

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

Net revenues related to combustible tobacco refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

1 unchanged sentence

Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include smoke-free products.

Net revenues related to smoke-free, excluding wellness and healthcare, refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable.

These net revenue amounts consist of the sale of our products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories.

Net revenues related to wellness and healthcare refer to the operating revenues generated from the sale of products, primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems.

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

References to "Cost/Other" in the Consolidated Financial Summary table of total PMI and the four segments throughout this "Discussion and Analysis" reflects the currency and acquisition/divestiture-neutral variances of:

References to "Cost" in the Consolidated Financial Summary table of total PMI and the three reportable segments throughout this "Discussion and Analysis" reflects the currency-neutral variances of:

cost of sales (excluding the volume/mix cost component);

marketing, administration and research costs (including restructuring charges);

and amortization and impairment of intangibles.

“Cost/Other” also includes the currency and acquisition/divestiture-neutral net revenue variance, unrelated to volume/mix and price components, attributable to:

fees for certain distribution rights billed to customers in certain markets in the SSEA, CIS & MEA Region.

Our shipment volume for cigarettes, HTUs and Oral SFP is shown in the table below:

Shipment Volume

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

Cigarettes 457,941 464,047 (1.3) % 157,940 163,238 (3.2) %

Heated Tobacco Units 116,735 104,025 12.2 % 40,836 35,347 15.5 %

Total Cigarettes and Heated Tobacco Units 574,676 568,072 1.2 % 198,776 198,585 0.1 %

Oral SFP Volume (million cans) (1)

Nicotine Pouches 662.7 460.2 44.0 % 224.6 164.6 36.4 %

Snus 176.0 181.5 (3.0) % 56.2 61.3 (8.2) %

Moist Snuff 98.7 102.6 (3.9) % 31.6 34.1 (7.2) %

Other Oral SFP (2)

2.1 2.7 (23.0) % 0.8 0.7 9.8 %

Total Oral Products 939.5 747.0 25.8 % 313.2 260.7 20.2 %

(1) Excluding snuff, snuff leaf and U.S.

chewing tobacco

(2) Includes chew bags and tobacco bits

Sum may not foot due to rounding

and where applicable, marketing, administration and research costs (including restructuring charges);

corporate expenses and other, and amortization and impairment of intangibles.

Following the deconsolidation of our Canadian subsidiary, we continue to report the volume and corresponding royalty revenues of brands sold by RBH for which other PMI subsidiaries are the trademark owners.

3 unchanged sentences

chew) and e-vapor shipment volume in equivalent units, unless otherwise stated.

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS , DELIA , HEETS , HEETS Creations (defined collectively as HEETS ), SENTIA , TEREA, TEREA CRAFTED and TEREA Dimensions, as well as the KT&G-licensed brands, Fiit and Miix (outside of South Korea).

Heated tobacco units ("HTUs") is the term we use to refer to heated tobacco consumables, which include our BLENDS , DELIA , HEETS and HEETS Creations (defined collectively as HEETS ), SENTIA , TEREA, TEREA CRAFTED and TEREA Dimensions, as well as the KT&G-licensed brands, Fiit and Miix (outside of South Korea).

HTUs also include zero tobacco heat-not-burn consumables ( LEVIA ).

1 unchanged sentence

chew and is measured in cans or, for the purposes of total shipment volumes, in pouches or pouch equivalents.

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

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:

the total international market, EA, AU & PMI GTR Region, and Japanese domestic market.

In-market sales ("IMS") is defined as sales to the trade channels, which serve the end legal age nicotine users.

2 unchanged sentences

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

References to total international market, defined as worldwide cigarette and heated tobacco unit volume excluding the United States, total industry (or total market) and market shares throughout this "Discussion and Analysis" are our estimates for tax-paid products based on data from a number of internal and external sources and may, in defined instances, exclude China.

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

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

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

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

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

Past reported periods may be updated to ensure comparability and to incorporate the most current information for industry and market share reporting.

3 unchanged sentences

Management also believes that disclosing PMI's shipment volumes, IMS, and estimated total industry/market volumes and estimated market shares in such circumstances on a basis that excludes the impact of distributor and/or estimated trade inventory movements improves the comparability of performance and trends for these measures over different reporting periods.

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

For the Nine Months Ended September 30,

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

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

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

Total (1) (2)

1,925.9 1,939.2 574.7 568.1 457.9 464.0 116.7 104.0 29.3 28.9 5.8 5.2

France 18.1 19.8 7.4 8.3 7.3 8.2 0.1 0.1 40.2 41.0 0.5 0.6

52.8 53.0 19.5 20.1 15.9 17.0 3.6 3.1 37.7 38.7 7.0 6.0

55.8 55.7 29.6 29.0 19.7 20.9 10.0 8.1 53.5 53.7 18.1 17.0

39.5 44.5 17.7 19.4 14.0 15.4 3.8 4.0 44.8 43.3 9.7 9.0

Spain 32.8 33.3 10.1 9.9 9.0 9.0 1.0 0.9 29.4 29.2 3.3 2.7

SSEA, CIS & MEA

Egypt 64.3 60.3 19.5 18.5 18.4 17.4 1.0 1.1 30.2 30.4 1.9 1.9

Indonesia (4)

192.3 199.7 59.4 60.5 58.4 59.7 1.1 0.8 30.9 30.3 0.5 0.4

Philippines 34.7 33.7 16.4 15.8 16.1 15.6 0.3 0.2 47.4 46.9 1.0 0.6

Russia 164.1 161.7 53.1 51.9 38.5 38.9 14.6 13.0 31.9 32.1 9.2 8.5

Turkey 118.2 111.9 55.5 57.8 55.5 57.8 — — 47.1 51.6 — —

EA, AU & PMI GTR

Australia 2.3 4.0 0.8 1.4 0.8 1.4 — — 35.0 35.8 — —

Japan (2) (3)

112.2 112.2 54.6 51.1 12.4 12.6 42.1 38.5 42.8 41.1 31.8 29.5

South Korea 51.9 52.9 10.7 10.6 5.8 6.3 4.9 4.3 20.5 20.0 9.3 8.0

Argentina 19.9 19.1 12.6 11.8 12.6 11.8 — — 63.6 61.9 — —

Mexico 20.8 22.0 12.0 12.9 11.8 12.8 0.2 0.2 57.8 58.6 1.0 0.7

(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

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

Total Market is based on reported IMS

(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) %

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

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

Total (1) (2)

668.5 673.8 198.8 198.6 157.9 163.2 40.8 35.3 29.5 29.6 5.8 5.3

France 6.2 6.8 2.3 2.4 2.3 2.4 — — 40.1 41.0 0.5 0.6

18.9 19.7 6.6 7.0 5.4 5.9 1.2 1.1 36.7 37.6 6.5 5.8

19.9 20.1 10.8 10.5 6.7 7.2 4.1 3.3 53.9 54.9 18.2 16.6

13.9 15.4 6.4 6.9 5.0 5.5 1.4 1.3 45.5 43.9 9.5 8.6

Spain 12.2 12.3 3.4 3.6 3.0 3.2 0.4 0.4 29.6 29.6 3.3 2.7

SSEA, CIS & MEA

Egypt 21.8 21.6 6.8 6.5 6.3 6.0 0.5 0.5 32.0 30.2 2.1 1.9

Indonesia (4)

65.8 67.6 20.2 20.7 19.8 20.3 0.4 0.3 30.7 30.6 0.6 0.5

Philippines 11.5 11.3 5.4 5.3 5.3 5.2 0.1 0.1 46.9 46.5 1.1 0.7

Russia 59.8 59.8 18.4 19.0 13.2 14.5 5.2 4.6 31.2 32.3 8.7 7.9

Turkey 42.4 41.4 19.8 21.4 19.8 21.4 — — 46.7 51.8 — —

EA, AU & PMI GTR

Australia 0.5 1.3 0.2 0.5 0.2 0.5 — — 27.9 37.2 — —

Japan (2) (3)

38.8 38.6 17.7 15.7 4.3 4.2 13.4 11.5 42.6 41.3 31.7 29.9

South Korea 18.7 18.2 3.8 3.7 2.1 2.2 1.7 1.5 20.3 19.9 9.1 8.2

Argentina 6.5 6.1 4.1 3.9 4.1 3.9 — — 64.0 62.7 — —

Mexico 6.9 7.8 4.0 4.6 3.9 4.5 0.1 0.1 57.5 58.6 1.1 0.6

(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

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

Total Market is based on reported IMS

(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

Nine Months Ended September 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

Consolidated Operating Results for the Three Months Ended March 31, 2026

The following discussion compares our consolidated operating results for the three months ended March 31, 2026, with the three months ended March 31, 2025.

During the quarter, estimated industry volume (excluding China and the U.S.) for cigarettes and HTUs declined by 1.0%.

For the full year 2026, we currently expect an estimated industry volume decline of around 2% for cigarettes and HTUs, excluding China and the U.S.

Total Shipment Volume

(equivalent units in billions)

592.7 134.8 116.7 15.7 2.4 457.9

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

Oral smoke-free products conversion:

(i) nicotine pouches:

15 pouches per can in the U.S.

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

(ii) snus products:

weighted average 21 pouches equivalent per can;

(iii) moist snuff products:

weighted average 17 pouches equivalent per can;

(iv) tobacco bits products:

weighted average 30 pouches equivalent per can;

(v) chew bags products:

weighted average 20 pouches per can.

E-vapor products conversion:

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

Shipment Volume

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), increased by 1.8% with smoke-free volumes up by 14.3%, with all SFP categories growing strongly, and cigarette volumes down by 1.3%.

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

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)

Nine Months Year-to-Date

2025 2024 Change (pp)

Total International Market Share (1)

29.3 % 28.9 % 0.4

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

Shipment Volume (equivalent units in billions)

For the Three Months Ended March 31,

2026 2025 Change

Total 184.3 187.8 (1.9) %

Cigarettes 137.3 144.8 (5.1) %

HTU 5.8 % 5.2 % 0.6

Cigarette over Cigarette Market Share (2)

25.4 % 25.5 % (0.1)

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

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

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

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 30,286 $ 28,172 7.5 % 7.5 % $ 2,114 $ 116 $ (126) $ 1,251 $ 847 $ 26

Cost of Sales (9,806) (9,906) 1.0 % 0.4 % 100 (63) 128 — 162 (127)

Marketing, Administration and Research Costs (1)

(8,920) (8,123) (9.8) % (11.6) % (797) 61 82 — — (940)

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

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, $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.

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 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.

Operating income increased by 13.6%.

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

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%, excluding discrete tax events.

For further details, see Note 10.

Income Taxes .

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 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 September 30, 2025

Total PMI SFP HTU Oral SFP E-vapor Cigarettes

Total Shipment Volume

(equivalent units in billions)

204.9 46.9 40.8 5.2 0.9 157.9

Smoke-Free Products (1)

47.0 43.0 9.1 %

HTU 41.3 37.1 11.3 %

Oral SFP 4.5 5.3 (16.1) %

E-vapor 1.2 0.6 94.8 %

(1) Includes HTUs, e-vapor unit equivalents and oral SFP in pouch or pouch equivalents, excluding snuff, snuff leaf and U.S.

chewing tobacco

Amounts may not foot due to rounding

Oral smoke-free products conversion:

12 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 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)

Third-Quarter

2025 2024 Change (pp)

Total International Market Share (1)

29.5 % 29.6 % (0.1)

Cigarettes 23.7 % 24.3 % (0.6)

HTU 5.8 % 5.3 % 0.5

Cigarette over Cigarette Market Share (2)

25.6 % 26.1 % (0.5)

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

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

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), decreased by 1.9% with cigarette volumes down by 5.1%, partly offset by smoke-free volumes, up by 9.1%, driven by HTU and E-vapor categories.

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

Financial Summary

1 unchanged sentence

Fav./(Unfav.)

Quarters Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

Quarters Ended March 31, 2026 2025 Total Excl.

rency Price Vol/

Mix/Other Cost

(in millions)

1 unchanged sentence

Cost of Sales (3,241) (3,031) (6.9) % (0.6) % (210) (193) — 11 (28)

Gross Profit 6,905 6,270 10.1 % 3.8 % 635 397 461 (195) (28)

Marketing, Administration and Research Costs (1)

(2,857) (2,428) (17.7) % (9.5) % (429) (199) — — (230)

Corporate Expenses and Other (155) (298) 48.0 % (0.3) % 143 144 — — (1)

Operating Income $ 3,893 $ 3,544 9.8 % 0.2 % $ 349 $ 342 $ 461 $ (195) $ (259)

(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.

(1) Cost variance includes charges in 2026 of $24 million related to restructuring charges.

For more details, see Note 15.

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

Contingencies .

Restructuring Activities .

During the quarter, net revenues increased by 9.1%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.9%, mainly reflecting:

a favorable pricing variance due to higher combustible tobacco pricing;

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

The favorable currency impact in net revenues was due primarily to the Euro, 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.

Net revenues, excluding currency, increased by 2.7%, mainly reflecting:

a favorable pricing variance mainly driven by International Combustibles;

partly offset by an unfavorable volume/mix/other, mainly driven by lower International Combustibles and U.S.

volumes, notwithstanding higher International Smoke-Free

The favorable currency impact in net revenues was due primarily to the Euro and Russian ruble.

Gross profit increased by 10.1%.

Gross profit, excluding currency, increased by 3.8%, mainly reflecting the same factors as for net revenues.

Operating income increased by 9.8%.

Operating income, excluding currency and acquisitions/divestitures, increased by 10.8%, mainly reflecting:

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.

Operating income, excluding currency, increased by 0.2%, mainly reflecting:

the same factors as for net revenues, and higher marketing, administration and research costs.

Our effective tax rate decreased by 1.5 percentage points to 18.5%.

We estimate that our 2026 effective tax rate will be around 21.5%, excluding discrete tax events.

For further details, see Note 10.

Income Taxes .

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.

Equity investments and securities (income)/loss net was a loss of $403 million in 2026 compared to income of $(205) million in 2025.

The variance was primarily due to the unfavorable fair value adjustments for our equity security investments in India and Sri Lanka.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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, 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 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.

Net earnings attributable to PMI of $2.4 billion decreased by $0.3 billion or 9.4%.

This decrease was due primarily to unfavorable fair value adjustments for our equity security investments mentioned above, partly offset by a higher operating income.

Basic and diluted EPS of $1.56 both decreased by 9.3%.

Excluding a favorable currency impact of $0.18, diluted EPS decreased by 19.8%.

Operating Results by Reportable Segment

Segment Operating Results – Three Months Ended March 31, 2026

The following discussion compares operating results within each of our segments for the three months ended March 31, 2026, with the three months ended March 31, 2025.

International Smoke-Free Segment:

Financial Summary

Quarters Ended September 30, Change

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2026 2025 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

rency Price Vol/

Mix/Other Cost

(in millions)

Net Revenues $ 3,836 $ 3,076 24.7 % 15.8 % $ 759 $ 273 $ 88 $ 399 $ —

Operating Income $ 2,150 $ 1,769 21.5 % 11.4 % $ 381 $ 162 $ 18 $ 220 $ 10 $ (29)

Gross Profit $ 2,684 $ 2,087 28.6 % 19.4 % $ 597 $ 192 $ 88 $ 290 $ 27

During the quarter, net revenues increased by 24.7%.

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, 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

Fav./(Unfav.) Variance

Fav./(Unfav.)

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 12,513 $ 11,547 8.4 % 7.4 % $ 966 $ 241 $ (126) $ 647 $ 204 $ —

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

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.

Net revenues, excluding currency, increased by 15.8%, reflecting:

favorable volume/mix/other driven by higher HTU and e-vapor volumes and a favorable pricing variance due to higher HTU pricing.

The net revenues for 2024, 2025 and 2026 were negatively impacted by the supplemental tax surcharge on heated tobacco products ("HTPs") in Germany, which went into effect in 2022.

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.

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The negative impact will continue, at least until the appeal ruling on the legality of the surcharge is concluded.

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

PMI currently accounts for the surcharge as a reduction in net revenues.

The amounts withdrawn before May 15, 2024, were under a payment suspension.

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

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

A favorable outcome to the appeal would positively impact future PMI’s operating results and future cash provided by operating activities for the amounts paid in January 2025.

Operating income increased by 9.5%.

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 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 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 September 30, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 3,273 $ 2,964 10.4 % 7.8 % $ 309 $ 77 $ — $ 254 $ (62) $ 40

Operating Income $ 1,235 $ 960 28.6 % 23.5 % $ 275 $ 49 $ — $ 254 $ 26 $ (54)

During the quarter, net revenues increased by 10.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.8%, primarily reflecting:

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

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 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

Fav./(Unfav.) Variance

Fav./(Unfav.)

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 8,942 $ 8,393 6.5 % 6.4 % $ 549 $ 8 $ — $ 596 $ (92) $ 37

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

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 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 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 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:

A favorable outcome to the appeal

would positively impact future PMI’s operating results and future cash provided by operating activities for the amounts paid in January 2025.

Gross profit increased by 28.6%.

Gross profit, excluding currency, increased by 19.4%, mainly due to the same factors as for net revenues.

International Smoke-Free Segment Shipment Volume

Amounts may not foot due to rounding

In the first quarter, our International Smoke-Free shipment volume increased by 11.9% to 44.1 billion in equivalent units, notably due to Italy, Global Travel Retail, Taiwan and Russia.

In the heat-not-burn category, HTU adjusted in-market sales (IMS) volume, which excludes the net impact of estimated distributor and wholesaler inventory movements, grew by 10.9%, broadly in line with shipment volume growth of 11.3%.

The growth in IQOS was broad-based across geographies with all key consumables product lines ( TEREA, DELIA/SENTIA and LEVIA ) contributing.

Excluding the impact of consumer pantry-loading in Japan ahead of the excise-driven price increase on April 1, adjusted IMS grew by an estimated 9.4%.

In the Oral Smoke-Free category, modern oral volume growth of 0.5 billion pouches was more than offset by snus declines in the Nordics, resulting in a total oral SFP shipment volume decrease of 5.1%.

In the E-vapor category, VEEV quarterly shipments exceeded one billion equivalent units for the first time.

VEEV now shares the #1 closed pod position in Europe, estimated based on Nielsen offtake data, with growth in Germany, France, Romania, Italy, Greece and Bulgaria.

International Combustibles Segment:

Financial Summary

Quarters Ended September 30, Change

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

1 unchanged sentence

2026 2025 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

rency Price Vol/

Mix/Other Cost

(in millions)

Net Revenues $ 5,688 $ 5,326 6.8 % 1.0 % $ 363 $ 310 $ 454 $ (402) $ —

Operating Income $ 846 $ 788 7.4 % 11.9 % $ 58 $ (36) $ — $ 35 $ 86 $ (27)

Gross Profit $ 3,842 $ 3,499 9.8 % 3.9 % $ 343 $ 205 $ 454 $ (304) $ (12)

During the quarter, net revenues increased by 6.8%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 8.9%, predominantly reflecting a favorable volume/mix, driven by higher smoke-free products volume.

Operating income increased by 7.4%.

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

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 5,207 $ 4,959 5.0 % 5.6 % $ 248 $ (30) $ — $ 68 $ 210 $ —

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

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 14.7%, reflecting the same factors as for net revenues.

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

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%.

Net revenues, excluding currency, increased by 1.0%, reflecting:

a favorable pricing variance, partly offset by unfavorable volume/mix/other, including the favorable impact related to the restructuring of distribution terms in certain markets this quarter.

Gross profit increased by 9.8%.

Gross profit, excluding currency, increased by 3.9%, due to the same factors as for net revenues.

International Combustibles Segment Shipment Volume

In the first quarter, our cigarette shipment volume in the International Combustibles segment decreased by 5.1% to 137.3 billion units, with notable decreases in Indonesia, Russia, Germany and Mexico.

Our overall cigarette category volume share was 24.8% (down by 0.6pp) due to unfavorable market mix as well as lower share in Indonesia, Russia and Turkey, partly offset by gains in Egypt.

Marlboro continued to gain category share (up by 0.4pp) to 10.7%.

Financial Summary

Quarters Ended September 30, Change

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

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2026 2025 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

rency Price Vol/

Mix/Other Cost

(in millions)

Net Revenues $ 622 $ 899 (30.8) % (31.6) % $ (277) $ 7 $ (80) $ (203) $ —

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

Gross Profit $ 380 $ 685 (44.5) % (44.5) % $ (305) $ — $ (80) $ (181) $ (43)

During the quarter, net revenues decreased by 30.8%.

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;

and higher marketing, administration and research costs.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Nine Months Ended September 30, 2025 2024 Total Excl.

rency Acqui-sitions / Dives-titures Price Vol/

(in millions)

Net Revenues $ 3,624 $ 3,273 10.7 % 13.9 % $ 351 $ (103) $ — $ (60) $ 525 $ (11)

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

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, 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%.

Operating income, excluding currency and acquisitions/divestitures, increased by 31.3%, mainly reflecting:

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

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

Americas - Total Market and PMI Shipment Volume

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 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 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.

Net revenues, excluding currency, decreased by 31.6%, reflecting:

lower ZYN volumes due to distributor and trade inventory movements in both the current and prior year periods and an unfavorable price comparison due to low levels of ZYN promotional activity in the prior year.

Gross profit decreased by 44.5%, reflecting the same factors as for net revenues and higher manufacturing costs.

Smoke-Free Shipment Volume

In the first quarter, our U.S.

smoke-free product shipment volume decreased by 21.2%.

oral smoke-free products shipment volume decreased by 21.3% to 2.8 billion in equivalent units, including a 23.5% decline in ZYN shipments to 2.3 billion pouches or 155 million cans.

Distributor and trade inventory movements in both the current and prior year periods, and a challenging promotional comparison, led to a decline in volumes.

ZYN offtake volumes, as estimated by Nielsen, grew by 10%, notwithstanding an uneven competitive landscape where we do not yet have access to all of the most dynamic strength and flavor segments.

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.

The industries we operate in 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 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;

• regulatory restrictions on our products, including restrictions on the product formulation, 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;

• fiscal challenges, such as excessive excise tax increases and discriminatory tax structures;

• illicit trade in cigarettes and other tobacco and nicotine-containing products, including counterfeit, contraband and other non-compliant or otherwise illicit products;

• illicit trade in tobacco and nicotine-containing products, including counterfeit, contraband and other non-compliant or otherwise illicit products;

• intense competition, including unfair competition from non-tax paid volume by certain manufacturers;

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

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

Nevertheless, according to World Health Organization ("WHO") estimates, there are approximately one billion smokers globally.

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

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Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and adult users of nicotine-containing products.

We put in significant effort to restrict access to our products from non-nicotine users and youth.

We take significant measures to restrict access to our products from underage persons.

For adult smokers who would otherwise continue to smoke cigarettes, we believe that SFPs, while not risk-free, offer a much better choice.

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

We recognize that no single product will appeal to all adult

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

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

• Heat-not-burn products, which use a precisely controlled heating device incorporating our IQOS HeatControl technology, into which a specially designed and proprietary tobacco unit is inserted in a holder and heated to generate an aerosol.

• Heat-not-burn products, which use a precisely controlled heating device incorporating our patented technologies, into which a specially designed and proprietary tobacco unit is inserted in a holder and heated to generate an aerosol.

We have conducted a series of clinical studies for this platform, the results of which were included in our submissions to the U.S.

3 unchanged sentences

We believe that there is full comparability between the bladed versions of IQOS and the subsequent induction versions of IQOS , and that the data from the studies conducted with the blade version of IQOS remain valid and applicable to the newer and adjacent versions of IQOS .

We also produce a heat-not-burn product that utilizes external resistive heating technology, which is commercialized under the BONDS by IQOS brand, and has been launched in certain initial markets.

• Oral tobacco and nicotine products, which include snus and modern oral nicotine pouches.

We also produce a heat-not-burn product that utilizes external resistive heating technology, which is commercialized under the BONDS by IQOS brand, and has been launched in certain markets.

• Oral tobacco and nicotine products, which include snus and modern oral pouches.

Snus refers to (a) dried loose tobacco, or snuff, which is consumed by sniffing the product through the nose;

1 unchanged sentence

and (c) snus pouches which contain ground tobacco, water, salt and flavors.

Modern oral nicotine pouches consist of white pre-conditioned pouches containing nicotine derived from tobacco, and they primarily contain nicotine, flavors, and cellulose substrate.

Modern oral pouches mainly refer to pre-portioned pouches containing nicotine, flavors, and cellulose substrate.

In some markets, modern oral pouches may also contain small amounts of tobacco.

Users place a pouch between the upper lip and gum and leave it there while the nicotine and flavor are being released.

Like snus, nicotine pouches are inherently smoke-free as they are consumed orally, and no combustion process occurs during use.

The pouches contain pharmaceutical-grade tobacco-derived nicotine like the nicotine used in medicinal products, such as nicotine-containing gums and inhalers, and flavors approved for use in food in accordance with the product quality standards for nicotine pouches developed by the Swedish Institute for Standards and the British Standards Institute.

The nicotine in modern oral pouches is pharmaceutical-grade tobacco-derived nicotine like the nicotine used in medicinal products, such as nicotine-containing gums and inhalers, and flavors approved for use in food in accordance with the product quality standards for nicotine pouches developed by the Swedish Institute for Standards and the British Standards Institute.

In 2022, we significantly expanded our oral smokeless products portfolio with the acquisition of Swedish Match.

Swedish Match's ZYN is the leading nicotine pouch brand in the U.S.

Swedish Match's ZYN is the leading smoke-free product brand in the U.S.

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

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

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

Our tobacco flavored e-liquids use patented technology to extract flavors and nicotine directly from tobacco leaves, which are captured in a tobacco-free liquid solution, without having to add flavoring ingredients.

Data show that, in a stable regulatory environment, only a very small percentage of adult smokers who convert to IQOS switch back to cigarettes.

4 unchanged sentences

We focus our commercialization efforts on consumer retail experience, guided consumer trials and customer care, and increasingly, digital communication programs and e-commerce.

In order to accelerate switching to our SFPs, our initial market introductions typically entail one-on-one consumer engagement (in person or by digital means) and device discounts.

In order to accelerate switching to our SFPs, our initial market introductions typically entail one-on-one consumer engagement (in person or by digital means) and, where applicable, device discounts.

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.

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Since then, we have continuously expanded our commercialization activities.

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

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

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

We discuss product warranties in more detail in Note 15.

Product Warranty in this report.

The significance of warranty claims depends on a number of factors, including device version mix, product failure rates, logistics and service delivery costs, and warranty policies, and may increase with the number of devices sold.

As of March 31, 2026, PMI's smoke-free products were available for sale in 108 markets.

We discuss certain risks related to the commercialization and supply of our SFP portfolio in Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Factors That May Affect Future Results in this report.

On October 20, 2022, PMI announced that it had reached an agreement with Altria Group, Inc., ("Altria") to end the companies' commercial relationship as of April 30, 2024, with respect to IQOS in the U.S.

1 unchanged sentence

Under the Altria Agreement, PMI now holds the full rights to commercialize IQOS in the United States - the world’s largest smoke-free market.

The Altria Agreement provides a clear path to expanding IQOS ’s international success in a market where over 30 million adults continue to smoke cigarettes.

The Altria Agreement provides a clear path to expanding IQOS ’s international success in a market where approximately 25 million adults continue to smoke cigarettes.

On March 27, 2025, we began selling IQOS 3.0, the blade version of IQOS , in Austin, Texas.

2 unchanged sentences

In January 2020, we announced an agreement with KT&G, a leading tobacco and nicotine company in South Korea, for the commercialization of KT&G’s smoke-free products outside of South Korea on an exclusive basis.

On January 30, 2023, we announced a renewal and extension of this arrangement.

On January 30, 2023, building on three years of collaboration, we announced a long-term collaboration with KT&G to continue to commercialize KT&G's innovative smoke-free devices and consumables on such an exclusive basis.

In November 2025, the parties reached an agreement that will facilitate the continuation of the collaboration with a new and revised volume commitment for the 2026-2028 period.

For more information, see Acquisitions, Divestitures and Other Business Arrangements below.

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

• Since 2022, we began commercializing BONDS devices and BLENDS consumables in 4 markets.

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

• Since August 2020, we have launched and expanded our portfolio of vaping products (branded VEEV ) in 49 markets.

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

They are currently available in 47 markets.

• Following our acquisition of Swedish Match, we have access to a strong portfolio of Swedish Match brands, and more specifically to ZYN .

Modern oral pouches are currently available in 59 markets.

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

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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.

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

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

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

In July 2025, the EU Commission published a legislative proposal for the revision of the EU Tobacco Excise Directive ("TED").

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

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

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

Legislative and Regulatory Environment

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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.

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

The main objective of the FCTC is to establish a global agenda for tobacco regulation, with the purpose of reducing tobacco use.

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

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

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

The WHO study group on tobacco product regulation published their ninth and tenth reports on the scientific basis of tobacco product regulation in August 2023 and November 2025, respectively.

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

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

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

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

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

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

The Eleventh Session of the CoP ("CoP11") took place in November 2025.

No specific new decisions or policy recommendations on novel and emerging tobacco or nicotine products were adopted, though the parties were invited to "consider comprehensive regulatory options regarding tobacco and nicotine product components, and related external components that increase environmental harms, taking into consideration public health impacts." The WHO's reports and other FCTC guidelines or recommendations are not binding on the WHO Member States or on Parties to the FCTC.

CoP12 will take place in 2027.

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.

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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.

Importantly, regulation must include measures designed to prevent initiation by youth and non-nicotine users.

Importantly, regulation must include measures designed to prevent initiation by underage persons and non-nicotine users.

We support mandated accurate and factual health warnings on packaging, minimum age laws, restrictions on advertising, and smoking restrictions in public spaces.

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SFP Sales Prohibitions :

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.

Some governments have, or 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, 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.

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

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

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In February 2024, the European Commission published an updated implementation roadmap to Europe's Beating Cancer Plan (the "Plan").

Further developments concerning a revision of the TPD are expected during the mandate of the European Commission that took office in December 2024.

On December 16, 2025, the European Commission published the "EU Cardiovascular Health Plan — Safe Hearts Plan," where it announced its intention to propose a revision of the legislative framework on tobacco control (including TPD) in 2026.

In May 2024, the EU-wide systems of traceability and security features for tobacco products were extended to include tobacco products other than cigarettes and roll-your-own tobacco products.

As such, all tobacco products are covered by the traceability system.

EU Tobacco Excise Directive ("TED") :

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

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

Plain Packaging and Other Packaging Restrictions :

Plain packaging legislation bans the use of branding, logos and colors on packaging other than the brand name and variant that may be printed only in specified locations and in a uniform font.

To date, plain packaging laws have been adopted in certain markets in all of our operating segments, including the key markets of Australia, France, Saudi Arabia and Turkey.

Some countries, such as Canada, Denmark and Israel, adopted plain packaging regulations that apply to all tobacco products, including SFPs.

To date, plain packaging laws have been adopted in certain markets, including the key markets of Australia, France, Saudi Arabia and Turkey.

Some countries, such as Denmark and Israel, adopted plain packaging regulations that apply to all tobacco products, including SFPs.

Other countries are also considering plain packaging legislation.

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Restrictions and Bans on the Use of Ingredients :

The WHO and others in the public health community have recommended restrictions or total bans on the use of some or all ingredients in both combustible and SFPs, including menthol.

The WHO and others in the public health community have recommended restrictions or total bans on the use of some or all ingredients in both combustible products and SFPs, including menthol.

Broad restrictions and ingredient bans would require us to reformulate our American blend tobacco products, which could reduce our ability to differentiate these products in the market in the long term.

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

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 EU Member States have 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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Other countries may follow the EU’s approach toward tobacco product ingredients.

Turkey banned menthol as of May 2020.

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

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

Specific bans were introduced in countries such as Turkey, which has banned menthol.

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

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

These Specific Guidelines are non-binding on WHO Member States and FCTC Parties.

Product Standards and Restrictions on Product Design :

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

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.

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, including, for example, Algeria, Angola, Armenia, Bahrain, Colombia, Costa Rica, Dominican Republic, Egypt, Indonesia, Jordan, Kazakhstan, Kyrgyzstan, Lebanon, Morocco, the Philippines, Russia, Saudi Arabia, Tajikistan, Tunisia, the United Arab Emirates ("UAE"), the United Kingdom ("UK"), Ukraine, Uzbekistan and Vietnam.

These standards may be mandatory or voluntary, depending on the market.

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, 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.

For e-Vapor products, national standards setting minimum quality and safety requirements have been adopted in several markets, including, for example, Armenia, Australia, Bahrain, China, Costa Rica, Egypt, France, Indonesia, Jordan, Morocco, New Zealand, the Philippines, Russia, Saudi Arabia, Tajikistan, the UAE, the UK, and Ukraine.

These standards may be mandatory or voluntary, depending on the market.

Currently, national standards setting minimum quality and safety requirements for modern oral pouches have been adopted by the East African Community, as well as in several countries, including, for example, Angola, Armenia, Bahrain, Costa Rica, France, Malawi, Mexico, Moldova, Morocco, Pakistan, the Philippines, Sweden, UAE, the UK, Ukraine and Zimbabwe.

These standards may be mandatory or voluntary, depending on the market.

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.

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Generation Bans :

Certain regulators are considering generation sales bans, which prohibit the sale of certain tobacco or nicotine products to people born after a certain year.

In December 2022, New Zealand adopted regulatory measures restricting the sale and supply of smoked tobacco products, including prohibiting the sale of smoked tobacco products to anyone born on or after January 1, 2009.

Certain jurisdictions are considering generation sales bans, which prohibit the sale of certain tobacco or nicotine products to people born after a particular year.

In December 2022, New Zealand adopted regulatory measures prohibiting the sale of smoked tobacco products to anyone born on or after January 1, 2009.

These measures were limited to smoked tobacco products and did not apply to heated tobacco products and e-cigarettes.

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

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

The bill formally completed the parliamentary stages on April 21, 2026, and is now awaiting royal assent, after which it will become law.

Nicotine Content :

Certain jurisdictions have implemented, or are considering to implement, a cap on the nicotine content of certain nicotine-containing products.

In addition, some jurisdictions have also indicated that they are exploring reducing nicotine levels further, in some cases to levels that they describe as minimally or non-addictive.

Other Regulatory Issues :

Some regulators are considering, or in some cases have adopted, regulatory measures designed to reduce the supply of tobacco products.

These include regulations intended to reduce the number of retailers selling tobacco products by, for example, reducing the overall number of tobacco retail licenses available or banning the sale of tobacco products within specified distances of certain public facilities.

Some jurisdictions are considering, or in some cases have adopted, measures designed to reduce the supply of tobacco products.

specified distances of certain public facilities.

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

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.

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, and subsequently all 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.

We currently expect further adoption of similar laws in other jurisdictions, and we are monitoring developments in this area.

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FDA Authorization Process and Status of PMI SFPs :

In the United States, an established regulatory framework for assessing “New Tobacco Products” and “Modified Risk Tobacco Products” ("MRTP") exists under the jurisdiction of the FDA.

In the United States, an established regulatory framework for assessing tobacco products including “Modified Risk Tobacco Products” ("MRTP") exists under the jurisdiction of the FDA.

FDA actions may influence the regulatory approach of other governments and international regulatory agencies.

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

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

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

marketing granted order.

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

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

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

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

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

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.

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

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

On July 5, 2023, we submitted applications to the FDA requesting renewal of the MRTP authorizations previously granted to the IQOS 2.4 device and three related consumables as well as the IQOS 3.0 device in the United States.

On April 17, 2026, the FDA renewed the exposure modification orders with a stated expiration date in April 2031.

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

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Overall, the review continues to support the finding that IQOS THS is "appropriate for the promotion of public health."

FDA Review of Swedish Match Products :

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

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

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

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.”

FDA Review of Oral Tobacco and Nicotine Products :

PMTAs for 20 varieties of ZYN nicotine pouches were submitted in March 2020.

On January 16, 2025, the FDA determined that all 20 ZYN nicotine pouch varieties 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.”

On January 16, 2026, we submitted the first Annual Report for ZYN products to the FDA.

The report included a systematic review of the literature covering publications related to ZYN products between January 16, 2025, and October 31, 2025.

The report included publications in various scientific fields including observational studies on trends related to the potential health impact of the products, and behavioral studies analyzing the impact on former and never smokers, impact on cessation, product acceptance and the impact of marketing approaches.

Our review of publications revealed no significant new findings.

Overall, the review continues to support the FDA's conclusion that marketing of these ZYN products is "appropriate for the protection of public health."

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.

The FDA referred our MRTPAs to TPSAC, which met on January 22, 2026.

We have made a number of ZYN submissions to the FDA that are at various stages of the regulatory process and we are preparing to bring innovations to market in the coming months.

We are aware that certain of our competitors have recently marketed, or stated their intention to market, products that were not previously marketed in the United States and did not have a marketing granted order.

We continue to evaluate the practices of the FDA and other regulators regarding products with respect to which regulatory submissions have been made.

We may decide to commercialize products for which we have not received a marketing granted order where we believe that FDA enforcement would be inconsistent with its present practices and the Family Smoking Prevention and Tobacco Control Act.

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

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The dissemination of scientifically unsubstantiated information or studies with a strong confirmation bias by third parties may cause confusion among adult smokers and affect their decision to switch from continued smoking to better alternatives, such as our SFPs.

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

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

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

Although we believe that this is sensible from the public health perspective, some jurisdictions have considered or adopted taxation regimes with SFP taxation rates approaching or equal to cigarettes and there is no guarantee regulators will maintain current levels of differentiation.

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:

In December 2017, at the request of the U.K.

Department of Health and Public Health England, the U.K.

Committee on Toxicity published its assessment of the risk of heat-not-burn products relative to cigarette smoking.

In December 2017, at the request of the UK Department of Health and Public Health England, the UK Committee on Toxicity published its assessment of the risk of heat-not-burn products relative to cigarette smoking.

This assessment included analysis of scientific data for two heat-not-burn products, one of which was IQOS .

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Subsequent to that decision, and after exchanges between the parties, the case was closed.

In August 2018, the Science & Technology Committee of the U.K.

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

In August 2018, the Science & Technology Committee of the UK House of Commons published a report of its inquiry into e-cigarettes and heat-not-burn products.

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

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The report called for a risk-proportionate regulatory environment for both e-cigarettes and heat-not-burn products and noted that e-cigarettes should remain the least taxed, cigarettes the most taxed, with heat-not-burn products falling between the two.

Committee on Advertising Practice announced the removal of a prohibition of health claims in the advertising of e-cigarettes in the U.K., effective November 2018.

The UK Committee on Advertising Practice announced the removal of a prohibition of health claims in the advertising of e-cigarettes in the UK, effective November 2018.

In November 2018, the Eurasian Economic Commission (regulatory body of the Eurasian Union consisting of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) published the results of its commissioned study on novel nicotine-containing products, including IQOS .

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and unfair competition.

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

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

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 discontinued sales through the e-commerce shop associated with ZYN.com in the United States.

Illicit Trade

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this includes counterfeit, contraband and the persistent problem of “illicit whites,” which are cigarettes legally purchased in one jurisdiction for the sole purpose of being exported and illegally sold in another jurisdiction where they have no legitimate market.

Currently, we estimate that illicit trade in the EU accounted for approximately 9% of total cigarette consumption in 2024.

We estimate that illicit trade in the EU accounted for approximately 9% of total cigarette consumption in 2024.

Illicit trade also increasingly targets SFPs.

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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.

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

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Since then, implementation in national legislations has been ongoing.

In February 2024, the third Meeting of the Parties to the Protocol took place.

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 fourth Meeting of the Parties ("MOP4") concluded in November 2025, with no restrictions decided as regards duty-free tobacco sales, or as to whether the Protocol’s provisions cover electronic nicotine and non-nicotine delivery systems.

MOP5 will take place in 2027.

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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We have taken appropriate actions in response to the latest sanctions to ensure full compliance with the relevant restrictions.

We are subject to various trade restrictions imposed by the U.S., the EU, Switzerland, the U.K., and other jurisdictions in which we do business (“Trade Sanctions”), including the trade and economic sanctions administered by the U.S.

We are subject to various trade restrictions imposed by the U.S., the EU, Switzerland, the UK, and other jurisdictions in which we do business (“Trade Sanctions”), including the trade and economic sanctions administered by the U.S.

Department of the Treasury's Office of Foreign Assets Control (“OFAC”) and the U.S.

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

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

Certain states within the U.S.

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We do not believe such legislation has had a material effect on the price of our shares.

Following the start of the conflict in Ukraine on February 24, 2022, the U.S., the EU, the U.K., Switzerland, Canada, Australia, New Zealand, Singapore, South Korea, Japan and other countries introduced extensive economic sanctions and export controls in relation to Russia.

Following the start of the conflict in Ukraine on February 24, 2022, the U.S., the EU, the UK, Switzerland, Canada, Australia, New Zealand, Singapore, South Korea, Japan and other countries introduced extensive economic sanctions and export controls in relation to Russia.

While the introduced sanctions vary from jurisdiction to jurisdiction, they are largely aligned.

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The U.S., the EU, Switzerland and Japan introduced additional trade restrictions banning, among many other goods, the export of certain non-tobacco materials used to produce cigarettes and heated tobacco consumables in Russia.

The EU, Switzerland and the U.K.

also prohibited technical assistance and other services related to restricted goods.

The EU, Switzerland and the U.K.

prohibited import into their territories of certain goods, including cigarettes, among others, which might generate significant revenues for Russia if they originate in Russia or are exported from Russia.

The EU, Switzerland and the UK also prohibited technical assistance and other services related to restricted goods.

The EU, Switzerland and the UK prohibited import into their territories of certain goods, including cigarettes, among others, which might generate significant revenues for Russia if they originate in Russia or are exported from Russia.

The EU and Switzerland prohibited transfer and licensing of intellectual property rights in relation to restricted goods.

Additionally, the EU, the U.S., the U.K., Switzerland, Canada, Australia, New Zealand and Ukraine imposed sanctions on Mr.

Igor Kesaev, a non-majority shareholder of Megapolis Distribution B.V.

The U.S., the U.K., Switzerland and the EU banned the export of electric accumulators, static converters and electronic cigarettes and similar personal electric vaporizing devices, including IQOS devices, to Russia.

PMI holds a 23% equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of December 31, 2025 had a carrying value of $303 million.

Previously, TKM was a subsidiary of Megapolis Distribution B.V.

("MDBV"), a Dutch holding company in which PMI held a 23% equity interest.

In June 2024, the Russian government included TKM in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which referred to the mandatory removal of a foreign holding company from the shareholding structure.

On August 8, 2024, the Arbitrazh Court of the Moscow Region granted the forced localization of MDBV as requested by the Ministry of Industry and Trade on July 18, 2024.

As a result, MDBV’s shares in TKM were transferred to TKM and subsequently transferred to the Russian subsidiaries of its indirect shareholders during the fourth quarter of 2024.

MDBV was dissolved in December of 2025.

Previously, Mr.

Igor Kesaev was a non-majority shareholder of MDBV.

The EU, the U.S., the UK, Switzerland, Canada, Australia, New Zealand and Ukraine imposed sanctions on Mr.

The U.S., the UK, Switzerland and the EU banned the export of electric accumulators, static converters and electronic cigarettes and similar personal electric vaporizing devices, including IQOS devices, to Russia.

Certain countries have also banned the delivery of services to Russia, such as information technology consultancy services, accounting and business and management consulting services, or require licenses to continue delivering these services to Russian persons or entities.

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

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

Although some of these tariffs were ruled unconstitutional by the U.S.

Supreme Court in February 2026, new U.S.

trade investigations, ongoing international investigations, and the likelihood of additional developments, have created a volatile environment for global trade.

We expect the global tariff environment to remain volatile throughout 2026.

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PMI continues to monitor the development of new sanctions and other trade laws in order to ensure full compliance.

Acquisitions, Divestitures and Other Business Arrangements

We discuss our acquisitions and divestitures in Note 2.

Acquisitions and Divestitures to our condensed consolidated financial statements.

On January 30, 2023, PMI announced a long-term collaboration with KT&G, South Korea’s leading tobacco and nicotine manufacturer, to continue to commercialize KT&G’s innovative smoke-free devices and consumables on an exclusive, worldwide basis (excluding South Korea).

The agreement covers fifteen years, to January 29, 2038, with performance-review cycles and associated commitments, based on volume, to be confirmed for each three-year period, to allow flexibility for evolving market conditions.

The agreement gives PMI continued exclusive access to KT&G’s smoke-free brands and product-innovation pipeline, including offerings for low- and middle-income markets, that will enhance PMI’s existing portfolio of smoke-free products.

Products sold under the agreement will be subject to assessment to ensure they meet the regulatory requirements in the markets where they are launched, as well as PMI’s high standards of quality and scientific substantiation.

PMI and KT&G will seek any necessary regulatory approvals that may be required on a market-by-market basis.

On July 30, 2024, PMI announced a memorandum of understanding with KT&G.

This non-binding memorandum establishes the parties’ intent to collaborate on regulatory submissions for those new KT&G heat-not-burn products that PMI selects to commercialize in the U.S.

KT&G’s new platform products are expected to be launched first outside the U.S.

Thereafter, the partners plan to work on a PMTA submission for review by the U.S.

FDA, in accordance with the memorandum.

Equity Investments

We discuss our equity investments in Note 13.

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

Climate Change Laws and Regulations

While, to date, the effect of climate-related laws and regulations on PMI has not been material to our business, results of operations or financial condition, consideration of environmental and climate-related laws and regulations is an integral aspect of PMI’s climate-related risk assessment process.

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 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

We apply highly inflationary accounting to the results of operations of our subsidiaries in Argentina, Egypt, Turkey and Lebanon as the cumulative inflation rate in these economies for a three-year period meets or exceeds 100%, in accordance with U.S.

As a result, monetary assets and liabilities denominated in local currencies are remeasured to the U.S.

Dollar at each balance sheet date, with remeasurement gains and losses recognized in consolidated statement of earnings.

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

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

We discuss restructuring activities in Note 16.

Restructuring Activities to our condensed consolidated financial statements.

Impact of Inflation on Our Business

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growing pressures on the cost of certain direct materials, wages, energy, transportation, and logistics as well as an increased cost of capital due to interest rate increases driven by the response to increased inflation.

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 nine months of 2025 was not material to our condensed consolidated financial statements.

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

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

The impact of inflation on cost of sales during the first three months of 2026 was not material to our condensed consolidated financial statements.

The current conflict in the Middle East, as discussed below, may result in increased inflationary pressures globally.

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 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.

During the first three months of 2026, 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 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.

For our risk factors related to the impact of tariffs, see our " Cautionary Factors That May Affect Future Results ” section of this Form 10-Q.

Conflict in the Middle East

The Middle East conflict had an immaterial impact on our business in the first quarter, which affected shipments to Global Travel Retail and certain markets in the region for both combustibles and HTUs.

While we have observed increased energy prices and some disruption in energy supply in a number of markets, this has not at this stage translated into a discernible shift in consumer behavior.

The situation remains uncertain in both duration and potential impact, and it is difficult to assess the broader implications for the consumer or the global cost environment.

This situation could lead to increased inflationary pressures, which could further impact consumer behavior as well as our transportation, energy, and other input costs.

We will continue to closely monitor developments to assess the mid-to-long term consequences across the main variables.

War in Ukraine

In Ukraine, our main priority remains the safety and security of our employees and their families in the country.

We continue commercial activities in select locations where safety allows, in order to provide product availability and service to adult consumers, and supplies the market from production centers outside Ukraine, as well as through a contract manufacturing arrangement.

Production at our factory in Kharkiv remains suspended.

On June 20, 2023, we announced the investment of $30 million in a new production facility in the Lviv region, in Western Ukraine.

Preparatory work for the facility began in July 2023.

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

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

We have invested over $30 million in a new production facility in the Lviv region, in Western Ukraine, where local production commenced in April 2024.

As of March 31, 2026, 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 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.

As of March 31, 2026, our Russian operations had approximately $5.0 billion in total assets, excluding intercompany balances, of which approximately $2.3 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, PMI holds a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia, which as of March 31, 2026 had a carrying value of $307 million.

For further details, see Note 13.

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For further details, see " Trade Policy " and " Cautionary Factors That May Affect Future Results " sections of this MD&A.

Restructuring Activities

We discuss restructuring activities in Note 15.

Restructuring Activities to our condensed consolidated financial statements.

GAAP Treatment of Highly Inflationary Economies

As a result, monetary assets and liabilities denominated in local currencies are remeasured to the U.S.

Dollar at each balance sheet date, with remeasurement gains and losses recognized in consolidated statement of earnings.

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

For the three months ended March 31, 2026 and 2025, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting were not material.

Environmental and Social Laws and Regulations

While, to date, the effect of environmental and social laws and regulations on PMI has not been material to our business, results of operations or financial condition, consideration of these laws and regulations is an integral aspect of PMI’s risk management process.

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

Acquisitions, Divestitures and Other Business Arrangements

We discuss our acquisitions and divestitures in Note 2.

Acquisitions and Divestitures to our condensed consolidated financial statements.

On March 31, 2026, the Indonesia Stock Exchange (“IDX”) issued new free float regulations.

Any listed company with a market capitalization of at least IDR 5 trillion and a public free float of less than 12.5% as of March 31, 2026 must increase its free float to at least 12.5% by March 31, 2027 and to at least 15% by March 31, 2028.

One of PMI’s Indonesian subsidiaries, PT Hanjaya Mandala Sampoerna Tbk (“HMS”), is listed on the IDX.

As of March 31, 2026, 7.5% of HMS’ equity, with a listed value of IDR 6.5 trillion (approximately $381 million), qualified as public free float under the new regulations.

HMS is assessing the implications of these new requirements.

PMI and KT&G will seek any necessary regulatory approvals that may be required on a market-by-market basis.

On July 30, 2024, PMI announced a memorandum of understanding with KT&G.

This non-binding memorandum establishes the parties’ intent to collaborate on regulatory submissions for those new KT&G heat-not-burn products that PMI selects to commercialize in the U.S.

KT&G’s new platform products are expected to be launched first outside the U.S.

Thereafter, the partners plan to work on a PMTA submission for review by the U.S.

FDA, in accordance with the memorandum.

Equity Investments

We discuss our equity investments in Note 13.

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

Financial Review

Cash Flow Highlights

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2026 2025

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Net Cash Provided by (Used in) Operating Activities

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).

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 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.

During the first three months of 2026, net cash used in operating activities was $399 million as compared to net cash used in operating activities of $350 million in the first three months of 2025.

The unfavorable variance was due primarily to lower currency-neutral net earnings, excluding non-cash losses recognized in the period related to the changes in the fair value of our investments in equity securities (for further details, see Note 13.

Related Parties – Equity Investments and Other ), other non-cash movements reflected in Other and fluctuations in the working capital requirements.

Cash used in the working capital in 2026 of $3.9 billion fluctuated by approximately 2% from the comparable 2025 period.

The working capital requirements in both years were primarily driven by cash used in inventories and cash used in accrued liabilities and other current assets, reflecting the timing of excise tax-paid tactical inventory movements primarily related to excise tax increases and the timing of the corresponding excise tax payments.

Additionally, excise tax payments in 2025 included the disputed supplemental tax surcharge on heated tobacco products in Germany of approximately $0.8 billion which PMI elected to pay in January 2025 to avoid the future addition of interest (for further details refer to the International Smoke-Free segment section of this MD&A where we describe the case).

Working capital used in accounts receivable in both years mainly reflected lower usage of our factoring arrangements to sell trade receivables, as well as the timing of sales and cash collections (for further details, see Note 14.

Sale of Accounts Receivable) .

For the full year 2026, we currently expect net cash provided by operating activities of around $13.5 billion at prevailing exchange rates, subject to year-end working capital requirements.

Net Cash Provided by (Used in) Investing Activities

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 $1,125 million during the first nine months of 2025 decreased by $41 million as compared with the first nine months of 2024.

During the first three months of 2026, net cash used in investing activities decreased by $0.4 billion as compared to the first three months of 2025.

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

dollar, favorable movements in investments in debt securities, and lower capital expenditures.

Capital expenditures of $353 million during the first three months of 2026 decreased by $51 million as compared with the first three months of 2025.

The 2026 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, the vast majority due to investments supporting the smoke-free business.

We expect total capital expenditures in 2026 to be $1.4 billion to $1.6 billion, predominantly supporting the smoke-free business.

Net Cash Provided by (Used in) Financing Activities

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

During the first three months of 2026, net cash provided by financing activities was $1.1 billion as compared to net cash provided by financing activities of $0.7 billion in the first three months of 2025.

The increase in net cash provided was primarily due to higher short-term borrowings in 2026 (primarily higher commercial paper outstanding in 2026) and changes in the cash collateral received for derivative instruments, reflecting the depreciation of the Euro and Swiss franc versus the U.S.

This increase was partially offset by higher long-term debt repayments in 2026 and higher dividend payments.

Liquidity and Capital Resources

As a holding company, we depend on dividends and debt repayments from our subsidiaries as our primary sources of funds to pay dividends to our stockholders, make payments on our debt securities and meet other obligations.

In certain jurisdictions, we are impacted by various capital controls and/or foreign currency exchange constraints that affect the ability of our subsidiaries in these jurisdictions to settle foreign currency denominated imports of goods and services and/or to pay dividends.

These factors increase foreign currency devaluation risks, which may have a negative impact on our financial condition, net assets and results of operations in these jurisdictions.

We define cash and cash equivalents as short-term, highly liquid investments, readily convertible to known amounts of cash that mature within a maximum of three months and have an insignificant risk of change in value due to interest rate or credit risk changes.

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Our cash and cash equivalents are mostly held with institutions that have investment-grade long-term credit rating.

In a number of jurisdictions, including Argentina and Russia, we are impacted by various capital controls and/or foreign currency exchange constraints that affect the ability of our subsidiaries in these jurisdictions to settle foreign currency denominated imports of goods and services and/or to pay dividends.

These factors increase foreign currency devaluation risks, which may have a negative impact on our financial condition, net assets and results of operations in these jurisdictions.

We utilize long-term and short-term debt financing, including a commercial paper program that is regularly used to finance ongoing liquidity requirements, as part of our overall cash management strategy.

As of March 31, 2026 and December 31, 2025, we had cash and cash equivalent of $5.5 billion and $4.9 billion, respectively, the majority of which was held by our foreign subsidiaries, including $2.3 billion held in Russia in both periods.

To meet our ongoing liquidity requirements, our principal source of liquidity is cash generated from operations.

Additionally, we utilize long-term and short-term debt financing, including a commercial paper program that is regularly used to finance ongoing liquidity requirements, as part of our overall cash management strategy.

Our ability to access the capital and credit markets as well as overall dynamics of these markets may impact borrowing costs.

We expect that the combination of our long-term and short-term debt financing, the commercial paper program and the committed credit facilities, coupled with our operating cash flows, will enable us to meet our liquidity requirements.

We expect that the combination of our long-term and short-term debt financing, the commercial paper program and the committed credit facilities, coupled with our cash generated from operations, will be adequate to meet our liquidity requirements.

Debt and Borrowing Arrangements

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

At March 31, 2026, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

Moody’s P-1 A2 Stable

P-1 A2 Stable

Standard & Poor’s A-2 A- Positive

Fitch F1 A Stable

Revolving Credit Facilities

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

Type (in billions) Committed

Revolving Credit

Multi-year $2.0 billion revolving credit, expiring February 10, 2026 (1)

Multi-year $2.5 billion revolving credit, expiring September 29, 2026 (2) (3)

Multi-year €1.5 billion revolving credit, expiring January 29, 2028

Total facilities

(1) On January 28, 2022, we entered into an agreement, effective February 10, 2022, to amend and extend the term of our $2.0 billion multi-year revolving credit facility, for an additional year covering the period February 11, 2026 to February 10, 2027, in the amount of $1.9 billion.

(2) Includes business transformation-linked pricing adjustments that may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets based on its business transformation goals.

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

On September 20, 2023, PMI entered into an agreement, effective September 29, 2023, to amend and further extend the term to September 29, 2028.

At 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.

We continuously monitor the credit quality of our banking group, and at this time we are not aware of any potential non-performing credit provider.

These committed revolving credit facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require us to post collateral.

We expect to continue to meet our covenants.

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 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

On June 23, 2022, PMI entered into a €5.5 billion (approximately $5.8 billion at the date of signing) senior unsecured term loan credit agreement consisting of a €3.0 billion (approximately $3.2 billion at the date of signing) tranche expiring three years after the occurrence of certain events and a €2.5 billion (approximately $2.6 billion at the date of signing) tranche expiring on June 23, 2027.

On November 7, 2022, PMI delivered notices of borrowing for advances totaling €5.5 billion under the term loan facility, of which €3.0 billion would become due on November 9, 2025, and €2.5 billion would become due on June 23, 2027, unless prepaid pursuant to the terms of the credit agreement.

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 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.

(1) On April 14, 2026, Moody’s revised PMI's outlook from "Stable" to "Positive".

Debt – Our total debt was $51.9 billion at March 31, 2026, and $48.8 billion at December 31, 2025.

Foreign currency denominated debt and the majority of our $54.2 billion gross notional amount of derivative financial instruments are subject to foreign currency exchange rates fluctuation, primarily between the Euro and U.S.

Dollar, which could impact our debt levels

and the pace of anticipated deleveraging.

For further details, including the fair value and currency denomination of our debt, see Note 6.

Financial Instruments and Note 11.

Indebtedness .

The amount of debt that we can issue is subject to approval by our Board of Directors.

On February 6, 2026, 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.

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 September 30, 2025, we had $1.7

billion of commercial paper outstanding.

At March 31, 2026, we had $5.5 billion of commercial paper outstanding.

At December 31, 2025, we had no commercial paper outstanding.

The average commercial paper balance outstanding during the first nine months of 2025 was $3.6 billion.

The average commercial paper balance outstanding during the first three months of 2026 was $4.8 billion.

The average commercial paper balance outstanding during 2025 was $3.0 billion.

For further details, see Note 11.

Indebtedness .

Revolving Credit Facilities – At March 31, 2026, our total committed revolving credit facilities were $6.2 billion, and there were no borrowings outstanding.

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.

We continuously monitor the credit quality of our banking group, and at this time we are not aware of any potential non-performing credit provider.

These committed revolving credit facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require us to post collateral.

We expect to continue to meet our covenants.

For further details on our revolving credit facilities, including other short-term credit arrangements, see Note 11.

Indebtedness .

Term Loan Facility related to the Financing of the Swedish Match Acquisition – As of March 31, 2026, borrowings in the amount of €2.5 billion (approximately $2.9 billion) under the 5-year tranche of the term loan facility remained outstanding.

For further details, see Note 11.

Indebtedness.

Sale of Accounts Receivable – To mitigate credit risk and enhance cash and liquidity management, we sell trade receivables to unaffiliated financial institutions.

For further details, see Note 14.

Sale of Accounts Receivable to our condensed consolidated financial statements.

Sale of Accounts Receivable .

Supply Chain Financing – We engage with unaffiliated global financial institutions that offer a voluntary supply chain financing program to some of our suppliers.

For further details, see Note 17.

Supply Chain Financing to our condensed consolidated financial statements.

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 nine months of 2025 were as follows:

(in millions)

Type Face Value Interest Rate Issuance Maturity

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

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

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

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

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

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

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

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

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

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper and to refinance certain of our outstanding notes due in 2025.

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

Supply Chain Financing\ .

Guarantees – At March 31, 2026, 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 September 30, 2025 in Note 3.

We discuss our stock awards as of March 31, 2026 in Note 3.

Stock Plans to our condensed consolidated financial statements.

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

Dividends paid in the first three months of 2026 were $2.3 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.

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We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions.

Our SFPs constitute a relatively new product category that is less predictable than our mature cigarette business.

Achievement of future results is subject to risks, uncertainties and inaccurate assumptions.

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Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Additionally, the following disclosures reflect our beliefs and opinions as to future risks and uncertainties.

References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

We do not undertake to update any forward-looking statement that we may make from time to time, except in the normal course of our public disclosure obligations.

Overall Business Risks

We may be unsuccessful in our attempts to introduce, commercialize, and grow smoke-free products in existing and new markets, and regulators may prohibit or significantly restrict the commercialization of these products or the communication of scientifically substantiated information and claims.

Our key strategic priorities are to:

(i) continue developing and commercializing products that present less risk of harm to adult smokers who switch to smoke-free products versus continued cigarette smoking;

and (ii) encourage and educate current adult smokers who would otherwise continue to smoke cigarettes to switch to those products.

For our efforts to be successful, we must:

• develop SFPs that adult smokers who would otherwise continue to smoke cigarettes find to be satisfying alternatives to smoking;

• for those adult smokers, our goal is to develop and offer SFPs with a scientifically substantiated risk-reduction profile that approaches as closely as possible the risk-reduction profile associated with smoking cessation;

• substantiate the reduction of risk for the individual adult smoker and the reduction of harm to the population as a whole, based on scientific evidence of the highest standard that is made available for scrutiny and review by external independent scientists and relevant regulatory bodies;

• advocate for the development of science-based regulatory frameworks for the development and commercialization of SFPs, including the communication of scientifically substantiated information to enable adult smokers to make better choices.

We might not succeed in our effort to introduce, commercialize, and grow our SFPs in existing and new markets.

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

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

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

We cannot predict the extent to which regulators will permit the sale and/or marketing of SFPs.

Regulatory restrictions could limit the success of our SFPs.

The World Health Organization (the "WHO") study group on tobacco product regulation published their ninth report on the scientific basis of tobacco product regulation in August 2023.

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

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.

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.

However, the WHO proposals could lead to restrictions on the availability of certain of our SFPs and access to accurate information about them in one or more of our markets, which could have a material adverse effect on our results of operations.

Additionally, any claims, regardless of merit, challenging our research and clinical data available to date, may impact the development of science-based regulatory frameworks for the commercialization of the SFP category and the commercialization of the SFP category in general.

We may be unsuccessful in our efforts to introduce, commercialize, and grow smoke-free products in existing and new markets, and regulators may prohibit or significantly restrict the commercialization of these products or the communication of scientifically substantiated information and claims.

Our strategic priority is the continued introduction, commercialization, and growth of our SFPs and if these efforts are not successful, in key markets or systematically, our financial results and future growth prospects may be materially adversely impacted.

If other market participants are more successful in these efforts or if SFP categories where we hold a competitive advantage are inequitably regulated compared to cigarettes or other SFP categories without regard to the totality of the scientific evidence available for such products, we may be at a competitive disadvantage.

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

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

We cannot predict the extent to which regulators will permit — or continue to permit — the sale and/or marketing of SFPs and regulatory restrictions have, and could further limit, the commercialization of our SFPs.

Additionally, any claims, regardless of merit, challenging our research and clinical data available to date, may impact the development and maintenance of science-based regulatory frameworks for the commercialization of the SFP category and the commercialization of the SFP category in general.

Our SFPs and commercial activities for these products are designed for, and directed toward, current adult smokers and adult users of nicotine-containing products.

We put significant effort to restrict access of our products from non-nicotine users and youth.

We also put significant effort to restrict access of our products from underage persons.

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.

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.

The FDA’s premarket tobacco product and modified risk tobacco product authorizations of two versions of our IQOS product as well as the premarket tobacco authorizations of 20 varieties of ZYN nicotine pouches are subject to strict marketing, reporting and other requirements.

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

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

Failure to successfully manage compliance and to resolve any disputes that may arise regarding the application of legal and administrative requirements to our products could negatively impact the timing, manner, or success of our SFP commercialization in the United States, which could in turn have a material adverse effect on our results of operations, revenues, cash flows, or profitability.

The financial and business performance of our smoke-free products is less predictable than our cigarette business.

Our SFPs are novel products in a relatively new category, and the pace at which adult smokers adopt them may vary, depending on the competitive, regulatory, fiscal and cultural environment, and other factors in a specific market.

There may be periods of accelerated growth and periods of slower growth for these products, the timing and drivers of which may be more difficult for us to predict versus our mature cigarette business.

The impact of this lower predictability on our projected results for a specific period may be significant, due to geopolitical or macroeconomic events that negatively impact SFP availability or adoption, which in turn may have a material adverse effect on our results of operations.

We may be unsuccessful in our efforts to differentiate smoke-free products and cigarettes with respect to taxation.

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

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

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

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.

Consumption of tax-paid cigarettes continues to decline in many of our markets.

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Management's Discussion and Analysis of Financial Condition and Results of Operations — Business Environment section of this report.

A continuous decline in the consumption of cigarettes could have a material adverse effect on our revenues, cash flows and profitability, which in turn may have a material adverse effect on our ability to fund our smoke-free transformation.

Cigarettes are subject to substantial taxes.

Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

These tax increases may disproportionately affect our profitability and make us less competitive versus certain of our competitors.

Tax regimes, including excise taxes, sales taxes and import duties, can disproportionately affect the retail price of cigarettes versus other combustible tobacco products, or disproportionately affect the relative retail price of our cigarette brands versus cigarette brands manufactured by certain of our competitors.

Because our portfolio is weighted toward the premium-price cigarette category, tax regimes based on sales price can place us at a competitive disadvantage in certain markets.

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

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

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

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

Our business faces significant governmental action aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco or nicotine-containing products.

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volumes for our products in many of our markets, and we expect that such factors will continue to reduce consumption levels and will increase down-trading and the risk of counterfeiting, contraband, illicit trade and cross-border purchases.

Significant regulatory developments will continue to take place over the next few years in most of our markets, driven principally by the Framework Convention on Tobacco Control (the "FCTC").

Since it came into force in 2005, the FCTC has led to increased efforts by tobacco control advocates and public health organizations to promote increasingly restrictive regulatory measures on the marketing and sale of tobacco and nicotine-containing products to adult nicotine users.

The decline in the consumption of cigarettes could have a material adverse effect on our revenues, cash flows and profitability, which in turn may have a material adverse effect on our ability to fund our smoke-free transformation.

Our business faces significant governmental actions aimed at increasing regulatory requirements with the goal of reducing or preventing the use of tobacco or nicotine-containing products.

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volumes for our combustible products in many of our markets, and we expect that such factors will continue to reduce combustible consumption levels and will increase down-trading and the risk of counterfeiting, contraband, illicit trade and cross-border purchases.

Governmental actions to restrict or entirely prohibit the use of certain SFP categories have also been considered or adopted in various jurisdictions.

A significant factor influencing these developments are reports issued by the World Health Organization (the "WHO”) and Framework Convention on Tobacco Control (the "FCTC"), and related proposals, which make a number of policy recommendations on SFPs that, if implemented, could restrict both the availability of these products and the access to accurate information about them.

These reports and proposals 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 of the reports or proposals are implemented into regulations by Member States.

However, these proposed guidance documents could ultimately lead to restrictions on the availability of certain of our SFPs or access to accurate information about them in one or more of our current or future markets, which could have a material adverse effect on our financial results and growth prospects.

We anticipate that significant regulatory restrictions will continue to be considered and adopted in many markets.

Regulatory initiatives that have been contemplated, proposed, introduced, or enacted by governmental authorities in various jurisdictions include:

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generation sales bans, under which the sale of certain tobacco or nicotine-containing products to people born after a certain year would be prohibited;

Classification of the product as food such that any nicotine amounts beyond de minimis content de facto bans the nicotine product from the market

requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and/or other smoke or product constituents;

• disclosure, restrictions, or bans of tobacco and nicotine-containing product ingredients or components, including bans on the flavors of certain tobacco and nicotine-containing products;

• increased restrictions on smoking and use of tobacco and nicotine-containing products in public and work places and, in some instances, in private places and outdoors;

disclosure, restrictions, or bans of tobacco and nicotine-containing product ingredients, components or other product features, including bans on the flavors of certain tobacco and nicotine-containing products, and restrictions on certain device features;

increased restrictions on smoking and use of tobacco and nicotine-containing products in public or private spaces, both indoors or outdoors;

restrictions or prohibitions of novel tobacco or nicotine-containing products or related devices;

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Our financial results could be materially affected by regulatory initiatives resulting in a significant decrease in demand for our brands.

More specifically, requirements that lead to a commoditization of tobacco products or impede adult consumers' ability to convert to our SFPs, as well as any significant increase in the cost of complying with new regulatory requirements could have a material adverse effect on our financial results.

More specifically, requirements that lead to a commoditization of tobacco products or impede adult consumers' ability to access and convert to our SFPs, as well as any significant increase in the cost of complying with new regulatory requirements, could have a material adverse effect on our financial results and growth prospects.

The success of our business in the United States is dependent on an evolving legal and regulatory framework.

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 in our business in the United States.

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

We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations.

We are subject to highly competitive conditions in all aspects of our business.

See Item 1, Business—Competition of the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for a description of the competitive environment in which we operate.

The competitive environment and our competitive position can be significantly influenced by weak economic conditions;

erosion of consumer confidence;

competitors' introduction of lower-price products or innovative products;

adult smoker willingness to convert to our SFPs;

higher product taxes;

higher absolute prices and larger gaps between retail price categories;

unfair competition;

more effective adoption of artificial intelligence tools and processes by our competitors;

and product regulation that diminishes the ability to differentiate products, restricts adult consumer access to truthful and non-misleading information about our SFPs, or disproportionately impacts the commercialization of our products in relation to our competitors.

Some of our competitors have different profit, volume and regulatory objectives, some international competitors may be less susceptible than PMI to changes in currency exchange rates, and some competitors may sell products in circumvention of applicable regulations that compete directly with our products.

Certain SFP competitors may alienate consumers from innovative products through inappropriate marketing campaigns, messaging and inferior product satisfaction, and without scientific substantiation based on appropriate R&D protocols and standards, all of which could have a material adverse effect on our profitability and results of operations.

We may be unable to anticipate changes in adult consumer preferences.

Our business is subject to changes in adult consumer preferences and if we do not accurately assess market trends, are unable to adapt our product offerings to evolving consumer demands, or face challenges in product development, we could experience missed opportunities, supply chain challenges, reduced competitiveness, inefficient expenditures, and potential impacts on our customer base and brand reputation.

Furthermore, restrictions pertaining to packaging, labeling, or promotional and advertising activities may limit our ability to effectively communicate product innovations intended to address changing adult consumer preferences.

Any of these factors could have a material adverse effect on our results of operations, revenues, cash flows, profitability, and prospects for growth.

The financial and business performance of our smoke-free products is less predictable than our cigarette business.

Our SFPs compete in relatively new categories, and the pace at which adult smokers adopt them may vary, depending on the competitive, regulatory, fiscal and cultural environment, and other factors in a specific market.

Our ability to grow profitability may be limited by our inability to introduce new products, enter new markets, maintain sufficient production capacity, or improve our margins through higher pricing and improvements in our brand and geographic mix.

Our profit growth may be materially adversely impacted if we are unable to introduce new products or enter new markets successfully, to meet the demand for our products with increased production capacity, to raise prices, or to improve the proportion of our sales of higher margin products and in higher margin geographies.

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

In addition to our consolidated financial results, our management regularly reviews a number of operating, performance, risk, and financial metrics, including various revenue, user and sales metrics (such as market shares, in-market sales, adjusted in-market sales, and SFP users) to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We believe that these metrics are representative of our current business;

however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business evolves.

Furthermore, in some instances the metrics are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant uncertainties and contingencies.

If our management fails to account for other relevant information or to substitute the key business metrics they review as our business changes or if the assumptions or estimates underlying the metrics are inaccurate, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.

Our ability to achieve our strategic goals may be impaired if we fail to attract, motivate and retain the best global talent and effectively align our organizational design with the goals of our transformation.

To be successful, we must continue evolving our culture and ways of working, align our talent and organizational design with our increasingly complex business needs, and innovate and transform to a consumer-centric business.

We compete for talent with companies in the consumer products, technology, pharmaceutical and other sectors that enjoy greater societal acceptance.

As a result, we may be unable to attract, motivate and retain the best global talent with the right degree of diversity, experience and skills to achieve our strategic goals.

Risks Related to Taxation and Finance

Cigarettes are subject to substantial taxes.

Significant increases in cigarette-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

These tax increases may disproportionately affect our profitability and make us less competitive versus certain of our competitors.

Because our portfolio is weighted toward the premium-price cigarette category, tax regimes based on sales price can place us at a competitive disadvantage in certain markets.

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

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

We may be unsuccessful in our efforts to differentiate smoke-free products and cigarettes with respect to taxation.

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

Nevertheless, some jurisdictions have considered or adopted taxation regimes with SFP taxation rates approaching or equal to cigarettes and we are unable to predict whether new regulations, or reinterpretations of existing regulations, will result in SFPs being taxed in line with other tobacco products such as conventional cigarettes in additional jurisdictions, on a prospective or retroactive basis.

If we are not successful in our efforts to maintain differentiation, SFP unit margins may be materially adversely affected, which in turn may have a material adverse effect on our results of operations, revenues, cash flows, and profitability.

Changes in the earnings mix and changes in tax laws may result in significant variability in our effective tax rates.

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We are subject to income tax laws in the United States and numerous foreign jurisdictions.

Changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (the "OECD"), which recommended changes to numerous long-standing tax principles, and could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (the "OECD"), which could have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Such changes, as well as changes in taxing jurisdictions’ administrative interpretations, decisions, policies, or positions, could also have a material adverse impact on our effective tax rate thereby reducing our net earnings.

Currently, many countries have enacted or taken actions to align with the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

We will continue to evaluate and monitor as additional guidance and clarification becomes available.

In future periods, our ability to recover deferred tax assets could be subject to additional uncertainty as a result of such developments.

Furthermore, changes in the earnings mix or applicable foreign tax laws may result in significant variability in our effective tax rates.

Unstable geopolitical conditions or events in certain markets, including international conflicts, civil unrest, acts of war, terrorism, governmental changes, or changes in international relations could result in negative tax impacts.

As a result of Russia’s invasion of Ukraine, certain taxing jurisdictions, including the U.S., have proposed punitive tax legislation applicable to companies doing business in Russia, which could also have a material adverse impact on our effective tax rate if enacted thereby reducing our net earnings.

Because we are a U.S.

holding company, our most significant source of funds is distributions from our non-U.S.

We are a U.S.

holding company whose most significant source of funds is distributions from our non-U.S.

subsidiaries.

Certain countries in which we operate have adopted or could institute currency exchange controls and other regulations or policies that limit or prohibit our local subsidiaries' ability to convert local currency into U.S.

Certain countries in which we operate have adopted or could institute currency exchange controls and other regulations or policies that

limit or prohibit our local subsidiaries' ability to convert local currency into U.S.

dollars or to make payments outside the country.

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We currently generate significant cash flows from ongoing operations and have access to global credit markets through our various short- and long-term financing activities.

Our financial performance, credit ratings, interest rates, the stability of financial institutions with which we partner, geopolitical or national developments, the stability and liquidity of the credit markets and the state of the global economy could affect the availability and cost of financing.

Our financial performance, our credit ratings, interest rates, the stability of financial institutions with which we partner, geopolitical or national developments, the stability and liquidity of the credit markets and the state of the global economy could affect the availability and cost of financing.

Disruption in the credit markets, limitations on our ability to borrow, slower than anticipated debt deleveraging, or a downgrade of our current credit rating could increase our future borrowing costs which could materially and adversely affect our financial condition and results of operations.

In addition, tighter or more volatile credit markets may lead to business disruptions for certain of our suppliers, contract manufacturers or trade customers which could, in turn, adversely impact our business, results of operations, cash flows and financial condition.

We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We could decide - or laws, regulations, or administrative action could require us - to recall products due to the failure, or alleged failure, to meet quality or safety standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, manufacturing defects, or other product safety concerns, adulteration, misbranding or tampering.

A product recall or a product liability or other claim (even if unsuccessful or without merit) could generate negative publicity about us and our products, and our reputation or that of our brands may be adversely affected.

In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, adult nicotine consumers might reduce their overall consumption of products in that product category.

Any of these events could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We may be required to write down assets due to impairment, which could have a material adverse effect on our results of operations or financial position.

We continuously monitor the values of our long-lived assets, reporting units, intangible assets, as well as investments in equity securities, to determine whether events or changes in circumstances indicate that an impairment exists.

Additionally, we test goodwill and non-amortizable intangible assets for impairment annually.

We also test goodwill and non-amortizable intangible assets for impairment annually.

The values of these assets may be affected by several factors, including general macroeconomic and geopolitical conditions;

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

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

In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics, including various revenue, user and sales metrics (such as market shares, in-market sales, adjusted in-market sales, and SFP users) to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We believe that these metrics are representative of our current business;

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for additional information concerning impairment determination and calculation.

Risks Related to the Impact of the War in Ukraine on our Business

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Ukraine accounted for around 2% of our total cigarette and heated tobacco unit shipment volume, and around 1% of our total net revenues.

Historically, we also produced finished goods in Ukraine for export and manufactured products in Russia.

In 2022, as a result of Russia’s invasion of Ukraine, we suspended planned investments and scaled down our manufacturing operations in Russia.

The full implications of the Russian invasion of Ukraine for our operations in those countries are impossible to predict at this time.

The likelihood of retaliatory action by the Russian government against companies, including PMI, as a result of actions and statements made in response to the Russian invasion or otherwise, including the possibility of legal action against us or our employees;

The likelihood of action by the Russian government against PMI, including the possibility of legal action against us or our employees;

the deprivation of rights in, or access to, our Russian or Russia-related assets;

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The deprivation of rights in, or access to, our Russian or Russia-related assets could also result in a material impairment and could cause the deconsolidation of our Russian business.

In Ukraine, there is no way to know when and to what extent we will be able to fully normalize our operations or to what extent our workforce, facilities, inventory, and other assets will remain intact.

In Ukraine, it is not possible to know when and to what extent we will be able to fully normalize our operations or to what extent our workforce, facilities, inventory, and other assets will remain intact.

These developments have and will continue to have a material adverse impact on our business, results of operations, cash flows and financial position, and may result in further impairment charges.

The conflict also continues to elevate the likelihood of supply chain disruptions, both in the region and globally, and may inhibit our ability to timely source materials and services needed to make and sell our products.

For example, historically we sourced certain finished goods, production materials and components from both Russia and Ukraine, including printed materials and filters, and the invasion has, and may continue to, disrupt the availability of and impact our supply chain for these materials.

These disruptions, to the extent we are unable to find alternative sources or otherwise address these supply constraints, may impact the availability and cost of our products in other markets, which would adversely impact our business, results of operations, cash flows and financial position, and may result in impairment charges.

Furthermore, the imposition of various restrictions on transactions with parties from certain jurisdictions, the ban on exports of various products, and other economic and financial restrictions may adversely affect us or certain third parties with which we do business in Russia, such as customers, suppliers, intermediaries, service providers and banks.

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reduce demand for our products;

have a negative impact on our supply chains, manufacturing

capabilities, or distribution capabilities;

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

increase our exposure to currency fluctuations;

constrain our liquidity or our ability to access capital markets;

constrain our liquidity or our ability to

access capital markets;

create staffing or operations difficulties;

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While we will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop, the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.

The conflict may also heighten many other risks disclosed in this report, any of which could adversely affect our business, results of operations, cash flows or financial position.

The conflict may also heighten many other risks disclosed in this Form 10-K, any of which could adversely affect our business, results of operations, cash flows or financial position.

Such risks could affect, without limitation, the achievement of our strategic priorities, including achievement of our smoke-free business growth targets;

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and our loss of revenue from counterfeiting and similar illicit activities.

Risks Related to Sourcing and Distribution of Products, Services and Materials

Risks Related to Sourcing, Distribution and Quality of Products, Services and Materials

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.

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In addition, we may be unable to renew these agreements on satisfactory terms for numerous reasons, including government regulations, and the distribution of our products may be disrupted in certain markets or our costs may increase significantly if we must replace such third parties with other partners or our own resources.

The effects of climate change, other environmental issues, and related legal or regulatory responses may have a negative impact on our business and results of operations.

While we seek to mitigate our business risks associated with environmental issues, such as climate change, by enhancing our resilience to potential impacts on our business, establishing environmental goals and standards and seeking business partners, including within our supply chain, that are committed to operating in ways that protect the environment or mitigate environmental impacts, we recognize that there are inherent environmental-related risks, including climate change-related risks, wherever business is conducted.

Among other potential impacts, climate change could influence the quality and volume of the agricultural products we rely on, including tobacco, due to several factors beyond our control, including more frequent variations in weather patterns, extreme weather events causing unexpected downtime and inventory losses, other adverse weather conditions, and governmental restrictions on trade, all of which may lead to disruption of operations at factories, warehouses and other premises.

Furthermore, nature-related risks, including those related to natural ecosystems degradation, decreased agricultural productivity in certain regions of the world, biodiversity loss, water resource depletion and deforestation, which are partially driven or exacerbated by climate change, may negatively impact the resilience of, or otherwise disrupt, our business operations or those of our suppliers and business partners.

There is a continued and, in some cases, increased focus by certain regulatory and legislative bodies on environmental policies, including by the governmental authorities in certain international jurisdictions where we operate.

New environmental-related legal or regulatory requirements may lead to additional carbon taxation, raw or other materials taxation, energy price increases, new compliance costs, increased distribution and supply chain costs, and other expenses impacting our cost of operations.

Moreover, given that the regulatory framework in this regard is highly dynamic, additional uncertainties may be driven by further upcoming regulatory changes on which we might have limited visibility or limited time to implement, which could have an impact on several elements of our business, including elevating the cost or complexity of our operations.

Even if we make changes to align ourselves with legal or regulatory requirements, we may still be subject to significant penalties if such laws or regulations are interpreted and applied in a manner inconsistent with our practices.

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

Additionally, we expect that these third parties adhere to our applicable standards and to applicable laws related to product quality, responsible marketing, data protection, labor practices, and other areas.

Our ability to monitor and enforce compliance is inherently limited and these parties may fail to comply with our standards or to operate in accordance with our expectations or legal requirements, which could expose us to operational disruptions, legal or regulatory liabilities, reputational damage, or financial losses.

Risks related to the natural environment and related legal or regulatory developments may have a negative impact on our business and results of operations.

While we seek to mitigate the physical risks to our business associated with the natural environment through a comprehensive strategy that includes the development and implementation of robust mitigation and adaptation measures, we recognize that there are residual risks that lie beyond our operational control.

For example, increased frequency and intensity of extreme droughts, floods, and/or heatwaves could negatively affect our manufacturing operations, tobacco-growing areas, third-party operators and third-party manufacturers sites, and supply regions for products and raw materials, all of which may lead to disruption of our supply chain and of operations at factories, warehouses and other premises.

Furthermore, there is a continued and, in some cases, increased focus by certain regulatory and legislative bodies on environmental policies, including by the governmental authorities in certain international jurisdictions where we operate.These policies include, among others, carbon emissions and other environmentally focused taxation and fees as well as disclosure requirements, which could lead to additional taxation;

energy price increases;

disclosure and data assurance risks;

new compliance costs;

increased distribution and supply chain costs;

and other expenses impacting our cost of operations.

Moreover, given that the regulatory landscape in this regard is highly dynamic and fragmented across the many jurisdictions where we operate, additional uncertainties may be driven by regulatory changes with limited time for implementation and by contradictory requirements across jurisdictions, which could elevate the cost or complexity of our operations or create compliance risks.

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

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

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

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

Tobacco production in certain countries is subject to a variety of controls, including government mandated prices and production control programs.

Changes in the patterns of demand for agricultural products could cause farmers to produce less tobacco or cloves.

Changes in the patterns of demand

for agricultural products could cause farmers to produce less tobacco or cloves.

Any significant change in tobacco leaf and clove prices, quality and quantity could affect our profitability and our business.

A prolonged disruption of our production facilities could have a material adverse effect on our business, financial condition and results of operations.

A prolonged disruption at or shut-down of one or more of the facilities where our products are produced, especially our ZYN production facility in Kentucky, U.S., which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, supply chain constraints, or for any other reason, could limit our capacity to meet customer demands.

Additionally, we source the vast majority of our tobacco from a global network of farmers across multiple countries, rather than through commodity markets, which helps ensure the consistency, quality, and traceability of our tobacco supply.

However, this model also means that disruptions to farmer livelihoods, if not actively mitigated, could lead to supply chain disruption through farmer exit, reduced crop quality, unsustainable farming practices, increased regulatory scrutiny, and reputational risks.

A prolonged disruption of facilities used to produce our products could have a material adverse effect on our business, financial condition and results of operations.

A prolonged disruption at or shut-down of one or more of the facilities where our products or product components are produced, or sourced from, especially our ZYN production facility in Kentucky, U.S., which currently supplies substantially all of our capacity for ZYN sales in the U.S., due to natural- or man-made disasters or other events outside of our control, such as equipment malfunction or widespread outbreaks of acute illness, including COVID-19, supply chain constraints, a cybersecurity incident, or for any other reason, could limit our capacity to meet customer demands.

Such an event could disrupt our operations;

delay production, shipments and revenue;

and result in significant expense to repair or replace our affected facilities.

and result in significant expense to repair or replace affected facilities.

As a result, we could forgo revenue opportunities and potentially lose market share, which could materially and adversely affect our business, financial condition and results of operations.

Risks Related to our International Operations

We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

Any of these events could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

Risks Related to our Global Operations

Because we have operations in numerous countries, our results may be adversely impacted by economic, regulatory and political developments, natural disasters, pandemics or conflicts.

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In others, nationalization, terrorism, conflict and the threats of war or acts of war may have a significant impact on the business environment.

Factors beyond our control, such as, without limitation, natural disasters, extreme weather events, pandemics (including COVID-19), economic, political, regulatory, acts of war or threats of war, or other developments could disrupt or increase the expenses related to our supply chain, manufacturing capabilities, distribution capabilities, or the energy and other utility services required to operate our factories, warehouses, and other premises.

Factors beyond our control, such as, without limitation, natural disasters;

extreme weather events;

adverse economic, political or regulatory events;

acts of war or threats of war;

formal or informal bans or boycotts or changes in consumer preferences resulting from geopolitical developments;

geopolitical instability affecting international trade;

or other developments, could disrupt or increase the expenses related to our supply chain, manufacturing capabilities, distribution capabilities, or the energy and other utility services required to operate our factories, warehouses, and other premises.

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

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

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

and other countries will materially impact our business, the global tariff environment is volatile and further tariff or trade related developments could result in risks to PMI’s business, including increased production costs;

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and price increases or other economic impacts that could reduce consumer demand.

Any of these developments could cause significant volume declines in our Global Travel Retail business and certain other key markets;

Additionally, while the impact of the Middle East conflict on our business in the first quarter was immaterial, the duration and potential impact of the situation remain uncertain and it could lead to increased inflationary pressures, which could impact consumer behavior as well as our transportation, energy, and other input costs;

broader geopolitical instability;

security or cybersecurity incidents;

or other consequences that, individually or in the aggregate, may materially adversely affect our business, results of operations, cash flows, or financial condition.

Any of the foregoing developments could cause significant volume declines in our Global Travel Retail business and certain other key markets;

disrupt or delay our distribution, manufacturing or supply chain;

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increase costs of our materials and operations and lead to loss of property or equipment that are critical to our business in certain markets and difficulty in staffing and managing our operations, all of which could have a material adverse effect on our business, operations, volumes, revenues, cash flows, financial position, net earnings and profitability.

We discuss additional risks associated with Russia's invasion of Ukraine and climate change, above.

We discuss additional risks associated with Russia's invasion of Ukraine above.

In certain markets, we are dependent on governmental approvals of various actions such as price changes, and failure to obtain such approvals could impair growth of our profitability.

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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.

These factors may also increase foreign currency devaluation risks, which may have a negative impact on our net assets and results of operations in these jurisdictions.

All of which could have a material adverse effect on our financial condition, including our leverage ratios, cash flows, net earnings, and profitability.

All of which could have a material adverse effect on our financial condition, including our leverage ratios, cash flows, liquidity, net earnings, and profitability.

A sustained period of elevated inflation across the markets in which we operate could result in higher operating and financing costs and lead to reduced demand for our products.

Increasing inflationary pressures have and may continue to result in significant increases to our expenses, including direct materials, wages, energy, and transportation costs.

Inflationary pressures have and may continue to result in significant increases to our expenses, including direct materials, wages, energy, transportation, and logistics costs.

Inflation can also increase financing costs due to related increases in benchmark interest rates.

While we take actions, wherever possible, to reduce the impact of the effects of inflation, in cases of sustained and elevated inflation across several of our major markets, it may be difficult to effectively control the increases to our costs.

In recent periods, increased inflation has and may continue to lead to growing pressures on the cost of certain direct materials, wages, energy, transportation, and logistics as well as an increased cost of capital due to interest rate increases driven by the response to increased inflation.

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 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.

Risks Related to Legal Challenges and Investigations

Litigation related to tobacco products and nicotine products could substantially reduce our profitability and could severely impair our liquidity.

Litigation related to tobacco and nicotine products could substantially reduce our profitability and could severely impair our liquidity.

There is litigation related to tobacco products and/or nicotine products pending in certain jurisdictions in which we operate.

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Also, see Note 9.

Contingencies to our consolidated financial statements for a discussion of pending litigation.

Contingencies to our condensed consolidated financial statements for a discussion of pending litigation.

From time to time, we are subject to governmental investigations on a range of matters.

Investigations include allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of income taxes, customs duties and/or excise taxes, allegations of false and misleading usage of descriptors, allegations of unlawful advertising or distribution, product safety or specification allegations, and allegations of unlawful labor practices.

Investigations include, among other matters, allegations of contraband shipments of cigarettes, allegations of unlawful pricing activities within certain markets, allegations of underpayment of income taxes, customs duties and/or excise taxes, allegations of false and misleading usage of descriptors, allegations of unlawful advertising or distribution, product safety or specification allegations, and allegations of unlawful labor practices.

We cannot predict the outcome of those investigations or whether additional investigations may be commenced, and it is possible that our business could be materially adversely affected by an unfavorable outcome of pending or future investigations.

Contingencies—Other Litigation to our condensed consolidated financial statements and Part I, Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Operating Results by Business Segment—Business Environment—Governmental Investigations in this report for a description of certain governmental investigations to which we are subject.

Management's Discussion and Analysis of Financial Condition and Results of Operations—Operating Results by Business Segment—Business Environment—Governmental Investigations .

We may be unable to adequately protect our intellectual property rights, and disputes relating to intellectual property rights could harm our business.

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.

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

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

Contingencies— Other Litigation to our condensed consolidated financial statements

for a description of certain intellectual property proceedings.

The research, development, and commercialization of non-recreational cannabinoid products subjects the Company to legal, regulatory, reputational and other risks.

Our Wellness and Healthcare business is researching, developing, and exploring the commercialization of medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

Our Wellness and Healthcare business currently anticipates pursuing these activities in select non-U.S.

While we will undertake the activities in a manner consistent with all applicable requirements, successful commercialization is dependent on compliance with a constantly evolving legal and regulatory environment, and subjects us to various legal, reputational and regulatory risks, which could have a material, adverse effect on our business and results of operations.

A failure by our Wellness and Healthcare business to comply with applicable laws could result in criminal, civil, or tax liability.

Risks Related to our Competitive Environment

We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations.

We are subject to highly competitive conditions in all aspects of our business.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, R&D, innovation, packaging, customer service, marketing, advertising and retail price.

The competitive environment and our competitive position can be significantly influenced by weak economic conditions;

erosion of consumer confidence;

competitors' introduction of lower-price products or innovative products;

adult smoker willingness to convert to our SFPs;

higher product taxes;

higher absolute prices and larger gaps between retail price categories;

unfair competition;

and product regulation that diminishes the ability to differentiate tobacco products, restricts adult consumer access to truthful and non-misleading information about our SFPs, or disproportionately impacts the commercialization of our products in relation to our competitors.

Competitors in our industry include Altria Group, Inc., British American Tobacco plc, Japan Tobacco Inc., Imperial Brands plc, new market entrants, particularly with respect to innovative products, several regional and local tobacco companies and, in some instances, state-owned tobacco enterprises, principally in Algeria, Egypt, China, Taiwan, Thailand and Vietnam.

Some competitors have different profit, volume and regulatory objectives, some international competitors may be less susceptible than PMI to changes in currency exchange rates, and some competitors may sell products in circumvention of applicable regulations that compete directly with our products.

Certain new market entrants in the non-combustible product category may alienate consumers from innovative products through inappropriate marketing campaigns, messaging and inferior product satisfaction, and without scientific substantiation based on appropriate R&D protocols and standards.

The growing use of digital media could increase the speed and extent of the dissemination of inaccurate and misleading information about our SFPs, all of which could have a material adverse effect on our profitability and results of operations.

Business—Competition of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a description of the competitive environment in which we operate.

We may be unable to anticipate changes in adult consumer preferences.

Our business is subject to changes in adult consumer preferences, which may be influenced by local economic conditions, accessibility to our products and availability of accurate information related to our products.

To be successful, we must:

• promote brand equity successfully;

• anticipate and respond to new adult consumer trends;

• ensure that our products meet our quality standards;

• develop new products and markets and broaden brand portfolios;

• improve productivity;

• educate and encourage adult smokers to convert to our SFPs;

• ensure effective adult consumer engagement, including communication about product characteristics and usage of SFPs;

• mitigate the impact of developments that cause damage to our reputation and that of our brands;

• provide excellent customer care;

• ensure adequate production capacity to meet demand for our products;

• be able to protect or enhance margins through price increases.

In periods of economic uncertainty, adult consumers may tend to purchase low-price brands, and the volume of our premium-price and mid-price brands and our profitability could be materially adversely impacted as a result.

Such down-trading trends may be reinforced by regulation that limits branding, communication and product differentiation.

In addition to economic uncertainty (including recessions and inflation) unusual weather events and global or local epidemics, endemics or pandemics (such as COVID-19) has and may change the preferences of our adult consumers and lower demand for our products, particularly for our mid-price or premium-price brands.

We may be unable to expand our brand portfolio through acquisitions or the development of strategic business relationships, and the intended benefits from our investments may not materialize.

One element of our growth strategy is to expand our brand portfolio and market positions through selective acquisitions and the development of strategic business relationships.

Acquisition and strategic business development opportunities are limited and present risks of failing to achieve efficient and effective integration, strategic objectives and/or anticipated revenue improvements and cost savings.

There is no assurance that we will be able to acquire attractive businesses or enter into strategic business relationships on favorable terms ahead of our competitors, or that such acquisitions or strategic business development relationships will be accretive to earnings or improve our competitive position.

In addition, we may not have a controlling position in certain strategic investments or relationships, which could impact the extent to which the intended financial growth and other benefits from these investments or relationships may ultimately materialize.

To be successful, we must continue transforming our culture and ways of working, align our talent and organizational design with our increasingly complex business needs, and innovate and transform to a consumer-centric business.

We compete for talent, including in areas that are relatively new to us such as digital, information technology, and life sciences, with companies in the consumer products, technology, pharmaceutical and other sectors that enjoy greater societal acceptance.

As a result, we may be unable to attract, motivate and retain the best global talent with the right degree of diversity, experience and skills to achieve our strategic goals.

Our Wellness business is researching and developing medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

Commercialization of these products is currently limited and exploratory.

Successful development and commercialization of these products, however, are dependent on compliance with a constantly evolving legal and regulatory environment, and subject to various legal, reputational and regulatory risks, which could have a material, adverse effect on our business and results of operations.

A failure by our Wellness business to comply with applicable laws could result in criminal, civil, or tax liability.

Risks Related to Illicit Trade

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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, 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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security vulnerabilities;

failure to timely respond and mitigate cybersecurity risks;

misconfigurations;

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While PMI works to mitigate these risks by implementing a cybersecurity risk program and a third-party cybersecurity risk management program, there can be no assurance that these programs are comprehensive or accurately identify and sufficiently mitigate all cybersecurity risks.

We continue to make investments in administrative, technical, and physical safeguards to maintain information security protections in line with industry standards and best practices.

We evaluate the adequacy of preventative actions to reduce security incidents on an ongoing basis.

Cyberattacks, security incidents and vulnerabilities have impacted, and we expect will continue to impact, PMI, our business partners, and our third-party providers.

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While these types of incidents have occurred frequently within the last three years, none have been material to our business, financial condition, or results.

Our safeguards may not, however, be effective in mitigating the impact of service disruptions or other failures of these information technology networks and systems.

Failure to timely respond and mitigate security incidents could result in wide-ranging business interruptions.

Such security incidents could place us at a competitive disadvantage;

result in financial impacts, a loss of revenue, assets, including our intellectual property, personal or other sensitive data;

result in litigation and regulatory action including significant fines or penalties;

impact our operations;

cause damage to our reputation and that of our brands;

result in significant remediation and other costs.

Cybersecurity of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a description of our cybersecurity risk management and strategy and governance.

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.

Our or our business partners’ failure or inability to adhere to privacy, data, artificial intelligence and information security laws could result in reputational harm, legal liability, and adversely affect our operating results.

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.

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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.

We may face additional risks related to divestitures.

For example, risks related to our ability to find appropriate buyers, execute transactions on favorable terms, separate divested business operations with minimal impact to our remaining operations, and effectively manage any transitional or long-term service arrangements.

effectively manage any transitional or long-term service arrangements.

Further, our divestiture activities may require us to recognize impairment charges.

Any of these factors could materially and adversely affect our financial condition and operating results.

Accounting adjustments related to acquisitions could adversely affect our financial results.

Given the nature of assets acquired through acquisitions, we may not be able to avoid future impairments of those assets, which may also have a material adverse impact on our future operating results and financial position.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis