Oct 21, 2026 earnings call — Smoke-free growth and U.S. ZYN investment
Q3 adjusted operating income exceeded $5 billion for the first time, with adjusted diluted EPS at a record $2.36.
Revenue $11.4B (est $11.3B) · EPS $2.36 (est $2.30)
Key quotes
"The strong underlying momentum of our smoke-free business continued, with IQOS HTU shipments at the high end of our expectations and accelerated growth fundamentals across all 3 of our flagship brands."
"Total U.S. segment SG&A increased significantly to around $370 million in Q3, and we expect a further exceptional sequential increase of around 10% in Q4."
"Pricing remained a key driver, reaching +8.9% in the third quarter and +9.1% year-to-date, with broad-based contributions across markets including Turkey, the Philippines, Indonesia, and Poland."
Analyst Q&A 5
U.S. spending and cost pressure
Q (Bonnie Herzog · Goldman Sachs): The analyst asked whether higher costs and more U.S. spending (for example moving to 20 pouches per ZYN can) explain the weaker guide, and how these higher costs will affect profitability and EPS next year.
A: Management said the main drivers are geopolitical cost pressures and one-off supply disruptions, plus an exceptional level of U.S. investment in Q3 and Q4. They explained the U.S. move to 20-pouch cans and a 25% per-pouch price reduction, plus increased commercial support and higher marketing spend in Q4; they said Q3 spend is a good proxy for next year’s run rate. They noted the cost impacts would mostly fall in H2 and that, absent these inflationary pressures, results would sit higher in the range.
"We guided you through a full year impact of half a point of EPS." — Massimo Andolina (CFO)
Inflation impact and IQOS inventory
Q (Matt Smith · Stifel): The analyst asked if Q4 inflation is about a one-point drag on profit and what levers offset it. He also asked about the shipment vs in-market-sales gap for IQOS and inventory levels exiting 2026.
A: Management said the inflation is volatile and driven by geopolitical events raising energy and input costs, with the impact felt mostly in Q4. They pointed to supply-chain resilience, pricing power, and past experience mitigating these costs, and said IMS will run ahead of shipments in 2026 given earlier pantry loading, so inventories should come down to healthy levels.
"The Q4 is probably the quarter in which we are feeling it the most, purely from a timely perspective, because those higher priced inputs are coming in now." — Massimo Andolina (CFO)
International IQOS growth drivers
Q (Eric Serotta · Morgan Stanley): The analyst asked which factors will help or hurt international smoke-free (IQOS) growth next year, including tax and market openings, and why price mix softened this quarter.
A: Management said they will give formal guidance in February but described broad momentum: adjusted IMS growth was strong and geographically more diversified, with 7.7% year-to-date and 10.8% excluding Japan and Poland. They noted BONDS and BLENDS is encouraging switching from smokers, new market openings (like Taiwan, Argentina), and that price/mix softness this quarter reflected shipment comparisons, category mix, and some timing of pricing decisions in IQOS.
"If you take out the impact from Japan and Poland, we are at 10.8% IMS growth." — Massimo Andolina (CFO)
U.S. EBIT and future trajectory
Q (Pallav Mittal · Barclays): The analyst asked whether U.S. EBIT will decline next year given low EBIT growth now and continued investments into next year.
A: Management declined to give next-year guidance but said nicotine pouch volumes have grown for three straight quarters and they expect strong double-digit category growth going forward. They said Q3 cost levels are a good proxy for next year’s run rate, that volume growth and share gains should help absorb costs and investments (including the Colorado plant), and they will provide clearer guidance in February.
"You know that we are bold about the category going forward, and we said that it's going to be in strong double-digit growth going forward." — Massimo Andolina (CFO)
Germany tax and ZYN shipment gap
Q (Andrei Andon · Jefferies): The analyst asked how Germany’s new excise tax will affect combustibles and heated tobacco in 2027+, and why reported ZYN shipments (+4%) seem ahead of scanner data showing mid-single-digit declines.
A: Management said they have experience handling large tax increases and that Germany still leaves HTU with a tax advantage versus cigarettes; they noted Marlboro’s strong position and said IQOS is recording double-digit IMS growth in Germany. On ZYN, they said their shipment data shows 4.2% growth in the quarter, and that removing a nicotine-pouch promotion in September last year gives a 13% growth net of that comparison; increased distribution of new variants and ULTRA also contributed.
"This is the shipment data that we have, so we're growing 4.2% in the quarter." — Massimo Andolina (CFO)