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Item 2. Management’s Discussion and Analysis

2026-07-24 compared with 2026-04-24 · 479 added, 267 removed, 1053 unchanged (41% of the section changed)

5 unchanged sentences

Our current product portfolio primarily consists of cigarettes and smoke-free products, including heat-not-burn, nicotine pouch and e-vapor products.

Since 2008, we have invested over $16 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes.

Since 2008, we have invested over $16 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke or use other nicotine-containing consumer products, with the goal of completely ending the sale of cigarettes.

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

5 unchanged sentences

Food and Drug Administration (the "FDA") has authorized the marketing of Swedish Match’s General snus and ZYN nicotine pouches and versions of PMI’s IQOS devices and consumables - the first-ever such authorizations in their respective categories.

Versions of IQOS devices and consumables and General snus also obtained the first-ever Modified Risk Tobacco Product ("MRTP") authorizations from the FDA.

Versions of IQOS devices and consumables , General snus and 20 ZYN nicotine pouch variants also obtained the first-ever Modified Risk Tobacco Product ("MRTP") authorizations from the FDA.

We describe the MRTP orders in more detail in the "Business Environment" section of this Item 2.

12 unchanged sentences

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

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

SFB also includes wellness products, as well as consumer accessories.

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

1 unchanged sentence

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

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

As of June 30, 2026, our smoke-free products were available for sale in 109 markets.

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

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

Consolidated Operating Results for the Three Months Ended March 31, 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, increased by 2.7%, mainly reflecting:

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

• Net Revenues - Net revenues of $21.3 billion for the six months ended June 30, 2026, increased by $1.9 billion, or 9.8%, from the comparable 2025 amount.

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

For the six months ended June 30, 2026, net revenues increased by 9.8%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.3%, mainly reflecting:

a favorable pricing variance mainly driven by international combustibles;

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

partly offset by unfavorable volume/mix, 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:

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

Diluted EPS % Change

For the three months ended March 31, 2025 $ 1.72

For the six months ended June 30, 2025 $ 3.67

2025 Restructuring charges 0.13

2025 Impairment of goodwill 0.03

2025 Amortization of intangibles 0.24

1 unchanged sentence

2025 Income tax impact associated with Swedish Match AB financing (0.24)

2025 Tax items 0.03

Subtotal of 2025 items (0.07)

2026 Restructuring charges (0.01)

2026 Impairment related to RBH equity investment (0.33)

2026 Egypt sales tax settlement adjustment 0.01

2026 Amortization of intangibles (0.25)

2026 Fair value adjustment for equity security investments (0.16)

2026 Restructuring charges (0.01)

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

1 unchanged sentence

Currency 0.22

Interest 0.02

Change in tax rate 0.11

Operations 0.21

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 the six months ended June 30, 2026 $ 3.36 (8.4) %

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

During the six months ended June 30, 2026, we recorded pre-tax restructuring charges of $30 million (representing $24 million net of income tax and a diluted EPS charge of $0.01 per share), related to a series of footprint optimization initiatives in the U.S.

For further details, see Note 15.

Restructuring Activities .

Impairment of goodwill – During the second quarter of 2025, after the completion of our annual review of goodwill, it was determined that the estimated fair value of a business, which was a separate reporting unit in 2025, related to the consumer accessories products acquired as part of the Swedish Match acquisition in 2022 was lower than its carrying value.

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

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

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

Impairment related to RBH equity investment – In May 2026, pursuant to its obligation under its court-approved plan of compromise and arrangement (the "Plan"), RBH provided an annual business plan to its Plan Administrator containing updated five-year financial projections reflecting current industry dynamics.

As a result, PMI determined that the estimated fair value of its investment in RBH was lower than its carrying value and recorded a non-cash impairment charge of $511 million (representing $0.33 per share decrease in diluted EPS) in the second quarter of 2026.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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.

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

Pursuant to tax amnesty legislation enacted in Egypt in December 2024, PMI submitted review requests with the Dispute Resolution Committee, which issued settlement recommendations subject to court approval.

In May 2026, court approval was obtained for the settlement covering the 2016 year, which then became effective.

As a result, PMI recorded a favorable sales tax settlement adjustment during the second quarter of 2026 of $18 million net of income tax (representing an increase of $0.01 to diluted EPS).

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

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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

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

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

For further details, see Note 10.

Income Taxes .

Currency – The favorable impact of $0.22 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S.

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

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

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

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

• International Smoke-Free segment:

Favorable volume/mix and favorable pricing;

• International Combustibles segment:

Favorable pricing, partly offset by unfavorable volume/mix;

partly offset by

Unfavorable volume/mix, unfavorable pricing and higher manufacturing costs;

• Higher marketing, administration and research costs.

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

• Net Revenues - Net revenues of $11.2 billion for the three months ended June 30, 2026, increased by $1.1 billion, or 10.4%, from the comparable 2025 amount.

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

During the quarter, net revenues increased by 10.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.6%, mainly reflecting:

a favorable pricing variance mainly driven by international combustibles;

supported by favorable volume/mix, driven by international smoke-free volumes, notwithstanding adverse international combustibles mix.

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

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

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

Diluted EPS % Change

For the three months ended June 30, 2025 $ 1.95

2025 Restructuring charges 0.13

2025 Impairment of goodwill 0.03

2025 Amortization of intangibles 0.12

2025 Fair value adjustment for equity security investments (0.17)

2025 Income tax impact associated with Swedish Match AB financing (0.18)

2025 Tax items 0.03

Subtotal of 2025 items

2026 Restructuring charges —

2026 Impairment related to RBH equity investment (0.33)

2026 Egypt sales tax settlement adjustment 0.01

2026 Amortization of intangibles (0.13)

2026 Fair value adjustment for equity security investments 0.06

2026 Income tax impact associated with Swedish Match AB financing (0.01)

Subtotal of 2026 items

Currency 0.03

Interest 0.02

Change in tax rate 0.05

Operations 0.19

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

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

For further details, see Note 15.

Restructuring Activities .

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

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

For further details, see Note 13.

Related Parties - Equity Investments and Other .

In May 2026, court approval was obtained for the settlement covering the 2016 year, which then became effective.

As a result, PMI recorded a favorable sales tax settlement adjustment during the second quarter of 2026 of $18 million net of income tax (representing an increase of $0.01 to diluted EPS).

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

Fair value adjustment for equity security investments – During the second quarter of 2025 and 2026, we recorded fair value adjustments for our equity security investments in India and Sri Lanka of $267 million gain after tax (or $0.17 per share increase in diluted EPS) and $98 million gain after tax (or $0.06 per share increase in diluted EPS), respectively.

For further details, see Note 13.

Related Parties - Equity Investments and Other .

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

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

Currency – The favorable impact of $0.03 per share from currency over the comparable 2025 period primarily results from the fluctuations of the U.S.

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

dollar, especially against the Euro and the Russian ruble.

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

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

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

• International Smoke-Free segment:

Favorable volume/mix/other and favorable pricing;

Favorable volume/mix 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;

Favorable pricing, partly offset by unfavorable mix;

partly offset by

Unfavorable volume/mix, mostly driven by cigars, and higher manufacturing costs;

• Higher marketing, administration and research costs.

5 unchanged sentences

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

For the Three Months Ended March 31, 2026

For the Six Months Ended June 30, 2026

Net revenues $ 7,713 $ 12,147 $ 1,478 $ 21,338

4 unchanged sentences

Operating income $ 8,423

For the Three Months Ended March 31, 2025

For the Six Months Ended June 30, 2025

Net revenues $ 6,471 $ 11,209 $ 1,762 $ 19,441

2 unchanged sentences

Marketing, administration and research costs (5,416)

Impairment of goodwill (41)

Corporate expenses and other (423)

Operating income $ 7,256

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

For the Three Months Ended June 30, 2026

Net revenues $ 3,877 $ 6,459 $ 856 $ 11,192

Cost of sales (1,161) (2,071) (301) (3,533)

Gross profit 2,716 4,388 555 7,659

Marketing, administration and research costs (2,981)

Corporate expenses and other (148)

Operating income $ 4,530

For the Three Months Ended June 30, 2025

Net revenues $ 3,395 $ 5,883 $ 862 $ 10,140

Cost of sales (1,076) (1,947) (252) (3,274)

Gross profit 2,319 3,936 611 6,866

Marketing, administration and research costs (2,988)

Impairment of goodwill (41)

Corporate expenses and other (125)

Operating income $ 3,712

Amounts may not foot due to rounding

1 unchanged sentence

• 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.

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

• Impairment of goodwill – See Note 5.

Goodwill and Other Intangible Assets, net for details of the goodwill impairment charge recorded for the six months and three months ended June 30, 2025.

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

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

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

2026 2025 Change

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

2026 2025 Change 2026 2025 Change

International Smoke-Free $ 7,713 $ 6,471 19.2 % $ 3,877 $ 3,395 14.2 %

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Total PMI net revenues $ 21,338 $ 19,441 9.8 % $ 11,192 $ 10,140 10.4 %

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

Amounts may not foot due to rounding

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

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

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

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

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

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

These include Next, TEREA and VEEV .

These include Next, Parliament, TEREA and VEEV .

The volume and corresponding royalty revenues of these brands sold by RBH were not material to PMI for all periods presented.

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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 ).

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

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

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

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

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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.

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

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

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

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.

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

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

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

Total Shipment Volume

1 unchanged sentence

Shipment Volume (equivalent units in billions)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

2026 2025 Change

2 unchanged sentences

Smoke-Free Products 95.2 87.9 8.3 %

47.0 43.0 9.1 %

HTU 83.1 75.9 9.4 %

1 unchanged sentence

E-vapor 2.6 1.5 72.0 %

(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:

(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.

1 pouch equals 1 unit.

E-vapor products conversion:

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

Our shipment volume, including cigarettes and smoke-free products (in equivalent units), 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%.

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

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

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

Financial Summary

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Fav./(Unfav.)

Quarters Ended March 31, 2026 2025 Total Excl.

rency Price Vol/

Six Months Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Mix/Other Cost

(in millions)

$ 10,146 $ 9,301 9.1 % 2.7 % $ 845 $ 590 $ 461 $ (206) $ —

Net Revenues $ 21,338 $ 19,441 9.8 % 5.3 % $ 1,897 $ 889 $ (17) $ 1,150 $ (125) $ —

Cost of Sales (6,774) (6,305) (7.4) % (3.0) % (469) (294) 13 — (113) (75)

2 unchanged sentences

(5,838) (5,416) (7.8) % (2.1) % (422) (308) 2 — — (116)

Impairment of Goodwill — (41) +100% +100% 41 — — — — 41

Corporate Expenses and Other (303) (423) 28.4 % (2.6) % 120 131 — — — (11)

Operating Income $ 8,423 $ 7,256 16.1 % 10.4 % $ 1,167 $ 418 $ (2) $ 1,150 $ (238) $ (161)

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

(1) Cost variance includes charges in 2026 and 2025 of $30 million and $243 million, respectively, related to restructuring charges.

For more details, see Note 15.

Restructuring Activities .

During the quarter, net revenues increased by 9.1%.

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

For the six months ended June 30, 2026, net revenues increased by 9.8%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 5.3%, mainly reflecting:

a favorable pricing variance mainly driven by international combustibles;

partly offset by 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.

partly offset by unfavorable volume/mix, mainly driven by lower international combustibles and U.S.

volumes, notwithstanding higher international smoke-free volumes.

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

Gross profit increased by 10.9%.

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

Gross profit, excluding currency and acquisitions/divestitures, increased by 6.4%, mainly reflecting the same factors as for net revenues, partly offset by higher manufacturing costs.

Operating income increased by 16.1%.

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%.

Operating income, excluding currency and acquisitions/divestitures, increased by 10.4%, mainly reflecting:

the same factors as for net revenues and lower restructuring charges in 2026, partially offset by higher marketing, administration and research costs.

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

Our effective tax rate increased by 1.0 percentage point to 20.5%.

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

1 unchanged sentence

Income Taxes .

We recorded a non-cash impairment charge of $511 million related to our RBH equity investment in the condensed consolidated statement of earnings for the six months ended June 30, 2026.

For further details, see Note 13.

Related Parties - Equity Investments and Other.

Equity investments and securities (income)/loss net was a loss of $244 million in 2026 compared to income of $(581) million in 2025.

3 unchanged sentences

Net earnings attributable to PMI of $5.3 billion decreased by $0.5 billion or 8.3%.

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

This decrease was primarily due to the unfavorable fair value adjustments for our equity security investments, the non-cash impairment charge related to our RBH equity investment and a higher effective tax rate, partly offset by higher operating income and lower interest expense, net.

Basic and diluted EPS of $3.36 both decreased by 8.4%.

Excluding a favorable currency impact of $0.22, diluted EPS decreased by 14.4%.

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

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

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

Total Shipment Volume

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

Shipment Volume (equivalent units in billions)

For the Three Months Ended June 30,

2026 2025 Change

Total 205.2 200.1 2.5 %

Cigarettes 156.9 155.2 1.1 %

Smoke-Free Products 48.2 44.8 7.5 %

HTU 41.8 38.8 7.6 %

Oral SFP 5.1 5.2 (1.2) %

E-vapor 1.3 0.9 55.1 %

Amounts may not foot due to rounding.

Oral smoke-free products conversion:

1 pouch equals 1 unit.

E-vapor products conversion:

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

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

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Quarters Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Mix/Other Cost

(in millions)

$ 11,192 $ 10,140 10.4 % 7.6 % $ 1,052 $ 299 $ (17) $ 689 $ 81 $ —

Cost of Sales (3,533) (3,274) (7.9) % (5.2) % (259) (101) 13 — (124) (47)

Gross Profit 7,659 6,866 11.5 % 8.7 % 793 198 (4) 689 (43) (47)

Marketing, Administration and Research Costs (1)

(2,981) (2,988) 0.2 % 3.8 % 7 (109) 2 — — 114

Impairment of Goodwill — (41) +100% +100% 41 — — — — 41

Corporate Expenses and Other (148) (125) (18.4) % (8.0) % (23) (13) — — — (10)

Operating Income $ 4,530 $ 3,712 22.0 % 20.0 % $ 818 $ 76 $ (2) $ 689 $ (43) $ 98

(1) Cost variance includes charges in 2026 and 2025 of $6 million and $243 million, respectively, related to restructuring charges.

For more details, see Note 15.

Restructuring Activities .

During the quarter, net revenues increased by 10.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 7.6%, mainly reflecting:

a favorable pricing variance mainly driven by international combustibles;

supported by favorable volume/mix, driven by international smoke-free volumes, notwithstanding adverse international combustibles mix.

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

Gross profit increased by 11.5%.

Gross profit, excluding currency and acquisitions/divestitures, increased by 8.7%, mainly reflecting a favorable pricing variance as mentioned in net revenues.

Operating income increased by 22.0%.

Operating income, excluding currency and acquisitions/divestitures, increased by 20.0%, mainly reflecting:

a favorable pricing variance and lower restructuring charges in 2026, partly offset by unfavorable volume/mix.

Interest expense, net, of $243 million decreased by $34 million or 12.3%, primarily due to higher interest income on investments.

Our effective tax rate increased by 3.3 percentage points to 22.3%.

For further details, see Note 10.

Income Taxes .

We recorded an impairment charge of $511 million related to our RBH equity investment in the condensed consolidated statement of earnings for the three months ended June 30, 2026.

For further details, see Note 13.

Related Parties - Equity Investments and Other.

Equity investments and securities (income)/loss net was income of $(159) million in 2026 compared to income of $(376) million in 2025.

The variance was primarily due to the 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 $2.8 billion decreased by $0.2 billion or 7.3%.

This decrease was primarily due to lower income from our equity security investments, the non-cash impairment charge related to our RBH equity investment and a higher effective tax rate, partly offset by higher operating income and lower interest expense, net.

Basic and diluted EPS of $1.80 both decreased by 7.7%.

Excluding a favorable currency impact of $0.03, diluted EPS decreased by 9.2%.

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.

Segment Operating Results – Three Months and Six Months Ended June 30, 2026

The following discussion compares operating results within each of our segments for the three months and six months ended June 30, 2026, with the three months and six months ended June 30, 2025.

International Smoke-Free Segment:

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2026 2025 Total Excl.

rency Price Vol/

Mix/Other Cost

Quarters Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest

Price Vol/Mix/Other Cost

(in millions)

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During the quarter, net revenues increased by 14.2%.

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.

Net revenues, excluding currency and acquisitions/divestitures, increased by 11.8%, reflecting:

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

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.

On May 15, 2024, following the decision issued by CJEU, the Fiscal Court in Dusseldorf (the "FCD") also ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

On May 15, 2024, following the decision issued by the CJEU, the Fiscal Court in Dusseldorf (the "FCD") also ruled that the German fiscal regulation imposing an additional excise tax on HTPs does not contravene EU law.

The FCD admitted an appeal to the Federal Tax Court.

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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.

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

Gross profit increased by 17.1%.

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

Gross profit, excluding currency and acquisitions/divestitures, increased by 14.6%, mainly due to the same factors as for net revenues.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest

Price Vol/Mix/Other Cost

(in millions)

Net Revenues $ 7,713 $ 6,471 19.2 % 13.7 % $ 1,242 $ 371 $ (17) $ 174 $ 715 $ —

Gross Profit $ 5,400 $ 4,405 22.6 % 16.9 % $ 995 $ 254 $ (4) $ 174 $ 488 $ 83

For the six months ended June 30, 2026, net revenues increased by 19.2%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 13.7%, reflecting:

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

Gross profit increased by 22.6%.

Gross profit, excluding currency and acquisitions/divestitures, increased by 16.9%, 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.

In the second quarter, our International Smoke-Free shipment volume increased by 8.0% to 44.7 billion equivalent units, with broad based growth across markets, notably Taiwan, Romania and Greece.

In the heat-not-burn category, IQOS grew shipment volumes by 7.6%.

HTU adjusted in-market sales (IMS) volume grew by 5.1%, reflecting broad-based growth notwithstanding the expected pantry de-loading and initial consumer adjustment following

the April 1 excise-driven price increase in Japan, and the impact of the characterizing flavor ban in Poland.

Excluding Japan and Poland, adjusted IMS grew by 10%.

In the Oral Smoke-Free category, modern oral volume growth of 14.7% (26.3% excluding the Nordics) to 0.6 billion pouches was more than offset by continued declines in the legacy snus business in the Nordics, resulting in a total oral SFP volume decrease of 7.0%.

In the E-vapor category, VEEV quarterly shipments grew by 55.1%.

VEEV now holds the #1 closed pod position in Europe, with continued growth across a range of markets, notably Germany, Romania and Greece.

For the six months year-to-date, our International Smoke-Free shipment volume increased by 9.9% to 88.8 billion equivalent units, notably due to Taiwan, Italy and Global Travel Retail.

In the heat-not-burn category, IQOS grew shipment volumes by 9.4%.

In the Oral Smoke-Free category, modern oral volume growth of 17.0% to 1.1 billion pouches.

In the E-vapor category, VEEV shipments grew by 72.0%.

International Combustibles Segment:

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2026 2025 Total Excl.

rency Price Vol/

Mix/Other Cost

Quarters Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Price Vol/Mix/Other Cost

(in millions)

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During the quarter, net revenues increased by 9.8%.

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.

Net revenues, excluding currency and acquisitions/divestitures, increased by 6.4%, reflecting:

a favorable pricing variance, partially offset by unfavorable mix as growth in developing economies more than offset declines in Europe.

Gross profit increased by 11.5%.

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

Gross profit, excluding currency and acquisitions/divestitures, increased by 8.0%, due to the same factors as for net revenues.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Price Vol/Mix/Other Cost

(in millions)

Net Revenues $ 12,147 $ 11,209 8.4 % 3.8 % $ 938 $ 510 $ — $ 1,042 $ (614) $ —

Gross Profit $ 8,229 $ 7,435 10.7 % 6.1 % $ 795 $ 342 $ — $ 1,042 $ (522) $ (68)

For the six months ended June 30, 2026, net revenues increased by 8.4%.

Net revenues, excluding currency and acquisitions/divestitures, increased by 3.8%, reflecting:

an unfavorable volume/mix;

more than offset by a favorable pricing variance.

Gross profit increased by 10.7%.

Gross profit, excluding currency and acquisitions/divestitures, increased by 6.1%, 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%.

In the second quarter, our cigarette shipment volume in the International Combustibles segment increased by 1.1% to 156.9 billion units, with notable increases in Turkey, Indonesia and Egypt.

Our cigarette category volume share stood at 25.3% (flat versus the prior year) despite adverse market mix.

Marlboro continued to gain share (up by 0.3 percentage points) matching its record category share of 11.0%.

For the six months year-to-date, our cigarette shipment volume in the International Combustibles segment decreased by 1.9% to 294.2 billion units, with notable decreases in Russia, Mexico and Germany.

Financial Summary

Quarters Ended March 31, Change

Fav./(Unfav.) Variance

Fav./(Unfav.)

2026 2025 Total Excl.

rency Price Vol/

Mix/Other Cost

Quarters Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Price Vol/Mix/Other Cost

(in millions)

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During the quarter, net revenues decreased by 0.7%.

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.

Net revenues, excluding currency and acquisitions/divestitures, decreased by 0.9%, primarily reflecting:

broadly stable ZYN revenues, declines in the cigar business, and unfavorable phasing dynamics in Wellness.

Gross profit decreased by 9.2%.

Gross profit, excluding currency and acquisitions/divestitures, decreased by 9.0%, due to the same factors as for net revenues and higher manufacturing costs linked to the expansion of our U.S.footprint.

Financial Summary

Fav./(Unfav.) Variance

Fav./(Unfav.)

Six Months Ended June 30, 2026 2025 Total Excl.

& Acquis/Divest Total Cur-

Price Vol/Mix/Other Cost

(in millions)

Net Revenues $ 1,478 $ 1,762 (16.1) % (16.5) % $ (283) $ 8 $ — $ (65) $ (226) $ —

Gross Profit $ 935 $ 1,296 (27.9) % (27.8) % $ (361) $ (1) $ — $ (65) $ (205) $ (89)

For the six months ended June 30, 2026, net revenues decreased by 16.1%.

Net revenues, excluding currency and acquisitions/divestitures, decreased by 16.5%, reflecting:

unfavorable dynamics in the first quarter with ZYN volumes impacted by distributor and trade inventory movements and an unfavorable price comparison due to low levels of ZYN promotional activity in the prior year.

Gross profit decreased by 27.9%.

Gross profit, excluding currency and acquisitions/divestitures, decreased by 27.8%, due to the same factors as for net revenues and higher manufacturing costs.

Smoke-Free Shipment Volume

In the first quarter, our U.S.

In the second quarter, our U.S.

smoke-free product shipment volume increased by 1.8%.

oral smoke-free products shipment volume increased by 1.8% to 3.5 billion equivalent units, including a 1.8% increase in ZYN shipments to 2.9 billion pouches, despite an inventory tailwind in the second quarter of 2025.

ZYN offtake volumes were flat to slightly growing versus the prior year in a growing category, largely as a result of the uneven competitive landscape.

In June, we expanded the ZYN portfolio with the first shipments of ZYN ULTRA (9mg and 11mg moist variants at a lower price-per-pouch), as well as additional flavors within the ZYN dry flagship lineup.

To support the newly expanded ZYN portfolio, we intend to accelerate U.S.

investments in the second half to maximize the long-term value of the brand and also prepare for the future launch of IQOS ILUMA.

For the six months year-to-date, our U.S.

smoke-free product shipment volume decreased by 10.0%.

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.

oral smoke-free products shipment volume decreased by 10.1% to 6.3 billion equivalent units, including a 11.2% decline in ZYN shipments to 5.2 billion pouches.

Business Environment

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Contingencies in this report.

Smoke-Free Products (SFPs)

Smoke-Free Products

Our Approach to SFPs

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We are committed to conducting rigorous scientific assessments of our SFPs to substantiate that they reduce exposure to HPHCs and, ultimately, that these products present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to SFPs versus continued cigarette smoking.

We draw upon a team of expert scientists and engineers from a broad spectrum of scientific disciplines, and our extensive learnings of adult consumer preferences, to further develop and assess our SFPs.

We draw upon a team of expert scientists and engineers from a broad spectrum of

scientific disciplines, and our extensive learnings of adult consumer preferences, to further develop and assess our SFPs.

Our efforts are guided by the following key objectives:

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• 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.

Food and Drug Administration (“FDA”).

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

In addition to the original version of IQOS , which relies on a heating technology using a blade, a newer version of IQOS uses induction heating.

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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.

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

We aim to continue to develop and expand our SFP brand portfolio and market positions.

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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.

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

These initial commercialization efforts require substantial investment, which we believe will moderate over time.

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

Since then, we have continuously expanded our commercialization activities.

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

As of June 30, 2026, PMI's smoke-free products were available for sale in 109 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 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.

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

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.

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

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

An oral hearing is expected at the earliest by the fourth quarter of 2026.

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

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

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

Under the plan, the excise tax for HTPs will be harmonized with cigarettes in two steps the first step took place in April 1, 2026, and the second step will be on October 1, 2026.

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

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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.

Significant markets that have prohibited or severely restricted the sale of one or more category of SFPs include 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.

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• a framework for the regulation of novel tobacco products and e-cigarettes, including requirements for health warnings and information leaflets, a prohibition on product packaging text related to reduced risk, and the introduction of notification requirements or authorization procedures in advance of commercialization.

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

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

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.

The European Commission has launched a stakeholder consultation for the revision of TPD in May 2026 and is expected to issue its potential legislative proposal by the end of 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EU law, which, if allowed, could lead to a de facto ban on manufactured cigarettes in the Netherlands and, potentially, in other EU countries.

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

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.

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, Egypt, Indonesia, Kazakhstan, Lebanon, Morocco, the Philippines, Russia, Saudi Arabia, the United Arab Emirates ("UAE"), the United Kingdom ("UK") and Ukraine.

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, 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.

For e-Vapor products, national standards setting minimum quality and safety requirements have been adopted in several markets, including, for example, Australia, China, Egypt, Indonesia, Morocco, the Philippines, Russia, Saudi Arabia, 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.

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, Mexico, Morocco, Pakistan, the Philippines, Sweden, UAE, the UK, and Ukraine.

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

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

Generation Bans :

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

Generational Bans :

Certain jurisdictions are considering generational 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.

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

On November 5, 2024, the UK government introduced a bill to 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, as well as enabling the government to ban cigarette filters.

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

On April 29, 2026, the UK government adopted a bill banning the sale of tobacco products, including HTPs, herbal smoking products and cigarette papers to those born on or after January 1, 2009, as well as enabling the government to ban cigarette filters.

The ban does not apply to products that do not contain tobacco, such as e-vapor products and nicotine pouches.

Nicotine Content :

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Some jurisdictions are considering, or in some cases have adopted, 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.

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

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FDA Authorization Process and Status of PMI SFPs :

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.

In the United States, an established regulatory framework for assessing tobacco products, including MRTPs, 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 December 7, 2020, the FDA reached the same determination for IQOS 3.0, authorizing that version of the device for sale in the United States.

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

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

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a risk modification order or an exposure modification order.

We had requested both types of orders for IQOS 2.4 and an initial selection of three related consumables' variants.

We requested both types of orders for IQOS 2.4 and an initial selection of three related consumable variants.

After review, the FDA determined that the evidence did not support issuing a risk modification order at that time, but that it did support issuing an exposure modification order for the product.

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

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

The FDA monitors the marketing of the products.

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

These products are line extensions and/or modified versions of the 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.

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

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

We submitted these applications at

the same time for the FDA to evaluate the PMTAs and MRTPAs concurrently.

In March 2024, the FDA formally accepted our bundled PMTAs and MRTPAs.

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

On January 19, 2024, the FDA completed its review of our Requests for Exemption from Substantial Equivalence (the “EX REQs”) for the five submitted IQOS consumables and determined that these tobacco products were exempt from the requirements outlined for substantial equivalence (a regulatory pathway that can be used to introduce new tobacco products which have the same characteristics as a product previously authorized by the FDA).

On January 19, 2024, the FDA completed its review of our Requests for Exemption from Substantial Equivalence for the five submitted IQOS consumables and determined that these tobacco products were exempt from the requirements outlined for substantial equivalence (a regulatory pathway that can be used to introduce new tobacco products which have the same characteristics as a product previously authorized by the FDA).

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

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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.

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

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

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

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.

In April 2024, we submitted MRTPAs for the 20 varieties of ZYN products that received PMTAs and requested authorization of a modified risk claim.

In June 2026, the FDA concluded that the modified risk claim is scientifically accurate with respect to each of the 20 ZYN products, that consumers understand the claim, and that marketing the products with the claim would benefit the population as a whole.

As a result, these 20 ZYN nicotine pouch products can now be marketed with the following modified risk claim:

“Using ZYN instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema, and chronic bronchitis.” These 20 ZYN products are the only nicotine pouch products on the U.S.

market that have been authorized as MRTPs.

We have made a number of ZYN submissions to the FDA that are at various stages of the regulatory process, and we have brought and 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 May 8, 2026, the FDA issued final guidance stating that it does not intend to prioritize enforcement against certain unauthorized ENDS and nicotine pouch products that have demonstrated meaningful progress toward authorization.

We have commercialized and 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 public guidance, present practices or the Family Smoking Prevention and Tobacco Control Act.

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

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It regulates heated tobacco products and bans e-cigarettes.

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

The amendment particularly specifies that designated tobacco products (including heated tobacco products) that are not cigarettes, cut tobacco, cigars, snuff or chewing tobacco must undergo a health risk assessment as part of an authorization system.

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

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However, the KFDA stated that it could not establish that the tested heat-not-burn products are less harmful than cigarettes.

In October 2018, our Korean subsidiary filed a request with a local court seeking information underlying KFDA’s analysis, conclusions and public statements.

In October 2018, our Korean subsidiary filed a request with a local court seeking information underlying the KFDA’s analysis, conclusions and public statements.

In May 2020, the court ordered KFDA to produce certain records.

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The study confirms significantly lower levels of HPHCs in the aerosol generated by this product compared to cigarette smoke.

In January 2019, scientific media published the results of the study of the China National Tobacco Quality Supervision and Test Centre (“CNTQST”) comparing the aerosol generated by IQOS with cigarette smoke.

The CNTQST found that the former contained fewer, and lower levels of, harmful constituents than the latter and concluded that the lower temperature of heating tobacco in IQOS contributed to the difference.

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The SHC underlines that the vast majority of the risks of tobacco smoking are not caused by nicotine, but by the harmful substances that are released by the combustion of tobacco.

Based on the cited science, the SHC calls for legislation that makes a clear distinction between cigarettes and e-cigarettes by focusing on better informing smokers about the benefits of the lower-risk (but not risk-free) alternative, as well as on protecting non-smokers and young people.

The foregoing scientific findings of government agencies may not be indicative of the measures that the relevant government authorities could take in regulating our products.

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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

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.

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

Illicit Trade

Illicit trade creates a cheap and unregulated supply of tobacco and nicotine-containing products, undermines efforts to reduce smoking prevalence, especially among youth, damages legitimate businesses and intellectual property rights, stimulates organized crime, increases corruption and reduces government tax revenue.

Illicit trade creates a cheap and unregulated supply of tobacco and nicotine-containing products, undermines efforts to reduce smoking prevalence, especially among underage individuals, damages legitimate businesses and intellectual property rights, stimulates organized crime, increases corruption and reduces government tax revenue.

We generally estimate that, excluding China and the U.S., illicit trade may account for as much as 16% of global cigarette consumption;

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.

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 more than 10% of total cigarette consumption in 2025, mainly driven by counterfeit.

Illicit trade also increasingly targets SFPs.

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We also cooperate with governmental authorities to combat fraudulent imports of non-compliant or unauthorized tobacco and nicotine-containing products.

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.

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

Our ongoing anti-illicit trade 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.

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.

The fourth Meeting of the Parties 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.

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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.

Department of the Treasury's Office of Foreign Assets Control and the U.S.

Department of State.

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Because we do business in certain of these countries, consistent with our policy to fully comply with Trade Sanctions and as described above, these state pension funds may have divested of our stock or may not invest in our stock.

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

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

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.

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

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.

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

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

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Impact of Inflation on Our Business

Like many other global companies, we have experienced inflationary pressures in 2022, 2023, 2024, including:

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.

Like many other global companies, we experienced inflationary pressures in 2022, 2023, and 2024, including:

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, 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 impact of inflation on cost of sales during 2025 and during the first six months of 2026 was not material to our consolidated financial statements.

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

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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 three months of 2026, the impact of new tariffs on our business was not material to our condensed consolidated financial statements.

During the first six 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.

For our risk factors related to the impact of tariffs, see the " Cautionary Factors That May Affect Future Results ” section of this MD&A.

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.

The Middle East conflict had an immaterial impact on our business in the first half of 2026.

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.

The situation remains uncertain in both duration and potential impact, and it is difficult to assess the broader long term 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.

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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.

We continue commercial activities in select locations where safety allows, in order to provide product availability and service to adult consumers, and supply the market from production centers outside Ukraine.

Production at our factory in Kharkiv remains suspended.

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.

As of June 30, 2026, our Ukrainian operations had approximately $0.6 billion in total assets, excluding intercompany balances.

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

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

As of March 31, 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.

As of June 30, 2026, our Russian operations had approximately $5.6 billion in total assets, excluding intercompany balances, of which approximately $2.8 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, PMI holds a 23% equity interest in JSC TK Megapolis, PMI's distributor in Russia.

For further details, see Note 13.

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These developments above have or may have a material adverse impact on our business, results of operations, cash flows and financial position, and may result in impairment charges.

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

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

Restructuring Activities

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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.

For the six months ended June 30, 2026 and 2025, we applied 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.

Dollar at each balance sheet date, with remeasurement gains and losses recognized in the 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.

For the six months ended June 30, 2026 and 2025, exchange gains (losses) recognized resulting from remeasurement adjustments related to highly inflationary accounting were not material.

As of July 1, 2026, PMI will no longer account for the operations of its Egyptian subsidiaries as highly inflationary and will stop using the U.S.

dollar as the functional currency of the subsidiaries.

The impact of this change is not expected to have a material impact to our consolidated financial statements.

Environmental and Social Laws and Regulations

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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.

As of June 30, 2026, 7.5% of HMS’ equity, with a listed value of IDR 5.8 trillion (approximately $351 million), qualified as public free float under the new regulations.

HMS is assessing the implications of these new requirements.

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Cash Flow Highlights

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(in millions) 2026 2025

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Net Cash Provided by (Used in) Operating Activities

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.

During the first six months of 2026, net cash provided by operating activities was $5.1 billion as compared to $3.1 billion in the first six months of 2025.

Excluding favorable currency movements, the favorable variance of $1.9 billion was primarily due to lower working capital requirements of $1.5 billion, and higher currency-neutral net earnings, excluding non-cash depreciation and amortization expense, non-cash movements in deferred income tax benefit, the impairment charge related to the RBH equity investment and non-cash movements related to the changes in the fair value of our investments in equity securities reflected in Other (for further details, see Note 13.

Related Parties – Equity Investments and Other ).

The lower working capital requirements in 2026 as compared with 2025 were primarily due to less cash used in inventories, and 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) .

Lower cash used in income taxes primarily reflects the final installment payment in 2025 related to the 2017 U.S.

Tax Cuts and Jobs Act transition tax liability.

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 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.

During the first six months of 2026, net cash provided by investing activities was $23 million as compared to net cash used in investing activities in 2025 of $2,750 million.

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

dollar, and favorable movements in investments in debt securities.

The 2026 capital expenditures were primarily related to our ongoing investments in smoke-free product manufacturing capacity.

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Net Cash Provided by (Used in) Financing Activities

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.

During the first six months of 2026, net cash used in financing activities was $3.9 billion as compared to $0.9 billion in the first six months of 2025.

The increase in net cash used was primarily due to lower long-term debt issuances in 2026, higher long-term debt repayments in 2026 and higher dividend payments.

The increase was partially offset by higher net short-term borrowings in 2026 and changes in the cash collateral received for derivative instruments, reflecting the depreciation of the Euro and the Swiss franc versus the U.S.

Liquidity and Capital Resources

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As a policy, we do not hold any investments in structured or equity-linked products.

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

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.

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

As of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $6.0 billion and $4.9 billion, respectively, the majority of which was held by our foreign subsidiaries, including $2.8 billion and $2.3 billion, respectively, held in Russia.

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

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

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

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

At June 30, 2026, our credit ratings and outlook by major credit rating agencies were as follows:

Short-term Long-term Outlook

P-1 A2 Stable

Moody’s P-1 A2 Positive

Standard & Poor’s A-2 A- Positive

Fitch F1 A Stable

(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.

Debt – Our total debt was $49.1 billion at June 30, 2026, and $48.8 billion at December 31, 2025.

Foreign currency denominated debt and the majority of our $52.2 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.

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, as well as our debt issuances in 2026, see Note 6.

Financial Instruments and Note 11.

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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.

Securities and Exchange Commission (the "SEC"), 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 March 31, 2026, we had $5.5 billion of commercial paper outstanding.

At June 30, 2026, we had $2.7 billion of commercial paper outstanding.

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

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

The average commercial paper balance outstanding during the first six months of 2026 was $4.7 billion.

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

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Indebtedness .

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

Revolving Credit Facilities – At June 30, 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.

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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.

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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.

Guarantees – At June 30, 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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On June 15, 2023, our wholly owned subsidiary, Swedish Match AB ("Swedish Match"), initiated a public consent solicitation of eligible holders of certain outstanding series of its notes to amend certain terms and conditions of these respective notes.

The eligible noteholders provided the requisite irrevocable consent instructions voting in favor of the amendments, which were subsequently passed by way of extraordinary resolution at the noteholders’ meeting held on July 28, 2023.

The eligible noteholders provided the requisite irrevocable consent instructions voting in favor of the amendments, which were

subsequently passed by way of extraordinary resolution at the noteholders’ meeting held on July 28, 2023.

As a result of the passage of the extraordinary resolution, Philip Morris International Inc.

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Equity and Dividends

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

We discuss our stock awards as of June 30, 2026 in Note 3.

Stock Plans to our condensed consolidated financial statements.

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

Dividends paid in the first six months of 2026 were $4.6 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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any such statement is qualified by reference to the following cautionary statements.

We elaborate on these and other risks we face throughout this document, particularly in the Part I, Item 2.

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

We elaborate on these and other risks we face throughout this report, particularly in the Business Environment section of this MD&A.

You should understand that it is not possible to predict or identify all risk factors.

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

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.

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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.

In addition, actions of some market participants, such as the inappropriate marketing of e-vapor products to underage individuals, 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.

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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 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.

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

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

If there is significant usage, whether actual or perceived, of our products or competitive products among underage individuals 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.

This decline is due to multiple factors, including increased taxes and pricing, governmental actions, the diminishing social acceptance of smoking, health concerns, competition, continuing economic and geopolitical uncertainty, and the continuing prevalence of illicit products.

These factors and their potential consequences are discussed more fully below and in Part I, Item 2.

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

These factors and their potential consequences are discussed more fully below and in the Business Environment section of this MD&A.

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.

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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.

A significant factor influencing these developments are reports issued by the WHO and 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.

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.

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restrictions or bans on the display of product packaging at the point of sale and restrictions or bans on vending machines;

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

generational 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;

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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;

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

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

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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.

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 authorizations, particularly if there is a significant uptake in youth or non-nicotine user initiation.

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

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.

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

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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.

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 ability to grow profitability may be limited by our ability 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.

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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.

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.

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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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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.

Disruption in the credit markets, limitations on our ability to borrow, slower than anticipated debt deleveraging, or a downgrade of one or more of our current credit ratings 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.

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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.

The full implications of the Russian invasion of Ukraine for our operations in those countries are impossible to predict at this time.

The full implications of the Russian invasion of Ukraine to our operations in those countries are impossible to predict at this time.

The likelihood of action by the Russian government against PMI, including the possibility of legal action against us or our employees;

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or nationalization of foreign businesses or assets (including cash reserves held in Russia and intangible assets such as trademarks), is impossible to predict.

We are continuously assessing the evolving situation in Russia, including regulatory constraints in the market entailing very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

We are continually assessing the evolving situation in Russia, including regulatory constraints in the market involving very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

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

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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.

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.

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.

The broader consequences of the invasion are also impossible to predict, but could include reputational consequences;

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and adverse effects on macroeconomic conditions, security conditions, currency exchange rates, and financial markets.

Given the nature of our business and global operations, such geo-political instability and uncertainty could increase the costs of our materials and operations;

Given the nature of our business and global operations, such geopolitical instability and uncertainty could increase the costs of our materials and operations;

reduce demand for our products;

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increase our exposure to currency fluctuations;

constrain our liquidity or our ability to

access capital markets;

create staffing or operations difficulties;

constrain our liquidity or our ability to access capital markets;

create staffing or operational difficulties;

or subject us to increased cyber-attacks.

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 Form 10-K, 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 report, 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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While many of these arrangements improve efficiency and decrease our operating costs, they also diminish our direct control.

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

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.

Such diminished control, including, but not limited to, control over third-party manufacturers and the availability of semiconductors and other critical electronic components used in our electronic devices, may lead to disruption in the distribution of our products and may have a material adverse effect on the quality and availability of products or services, our supply chain, and the speed and flexibility in our response to changing market conditions and adult consumer preferences, all of which may place us at a competitive disadvantage or negatively impact our reputation.

In addition, we may be unable to renew these arrangements 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.

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.

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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;

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;

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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.

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.

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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.

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and price increases or other economic impacts that could reduce consumer demand.

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;

Additionally, while the impact of the Middle East conflict on our business in the first half of 2026 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;

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We anticipate that new cases will continue to be filed.

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

While we design our products 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.

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

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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 .

Contingencies—Other Litigation to our condensed consolidated financial statements and the Governmental Investigations section of this MD&A.

We may be unable to adequately protect our intellectual property rights, and disputes relating to intellectual property rights could harm our business.

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Competitors or other third parties may claim that we infringe their intellectual property rights.

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

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

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

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.

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 us to legal, regulatory, reputational and other risks.

Our Wellness business is researching and developing medical and pharmaceutical cannabinoids and non-recreational cannabinoid products (including CBD).

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misconfigurations;

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

or failure or inability by us, third-parties, or our business partners to adhere to cybersecurity industry best practices could place us at a competitive disadvantage, cause reputational damage;

impact our operations;

or result in data breaches, significant business disruption, litigation, regulatory action including significant fines or penalties, financial impact, or loss of revenue or assets, including our intellectual property, personal, confidential, or sensitive data.

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

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Cyberattacks, security incidents and vulnerabilities have impacted, and we expect will continue to impact, PMI, our business partners, and our third-party providers.

Cyberattacks continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents on the Company.

Cyberattacks continue to dynamically evolve in sophistication and volume, making it difficult for us to predict probability, frequency, and impact severity of security incidents on us.

We also have, and continue to face, immaterial third-party information security breaches.

While these types of incidents have occurred frequently within the last three years, none have been material to our business, financial condition, or results.

While these types of incidents have occurred frequently within the last three years, none have been material to our business, financial condition, or results of operations.

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.

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

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

Flaws, biases, data

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

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

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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.

Further, our divestiture activities may require us to recognize impairment charges.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis