Philip Morris International Inc. (PM): Business Model Canvas [Dec-2025 Updated]

You're trying to map out the future of Philip Morris International Inc. (PM), and honestly, it's not a simple story anymore; you're looking at a company executing a massive, two-front war. Forget the old image; the 2025 data shows a business split right down the middle: a massive, high-margin combustible cash cow still funding a high-stakes tech pivot. We see smoke-free products hitting 41% of net revenues in the first nine months of 2025, driven by platforms like IQOS and ZYN, which now commands a dominant 69.3% share in the US oral nicotine space, all while they've poured over $14 billion into R&D since 2008. To understand where the next dollar comes from and what risks that aggressive transformation entails, you need to break down the core engine of their Business Model Canvas below.

Philip Morris International Inc. (PM) - Canvas Business Model: Key Partnerships

You're looking at the critical external relationships Philip Morris International Inc. (PMI) relies on to drive its smoke-free future, which is a massive undertaking. These partnerships are essential for market access, brand building, and product innovation, so let's look at the hard numbers defining these alliances as of late 2025.

Strategic alliances with Scuderia Ferrari HP for ZYN brand visibility

The visibility play with Scuderia Ferrari HP is a clear push to elevate the ZYN brand in high-profile, adult-focused environments. This collaboration reinforces the company's commitment to its smoke-free portfolio, which is now a significant part of the overall business.

The expanded agreement for the 2026 season and beyond will see ZYN branding debut on the Scuderia Ferrari HP Formula 1 car livery at select races, starting with the Formula 1 Etihad Airways Abu Dhabi Grand Prix on December 7, 2025. This renewed collaboration continues a relationship that has lasted for over fifty years.

Here are key metrics tied to the success of the ZYN brand, which is central to this partnership:

• ZYN is described as the number one nicotine pouch brand globally based on PMI reported shipment volumes and in-market sales estimates from January to July 2025.
• In the United States, ZYN nicotine pouch shipment volume grew by +53.8% to 202.4 million cans in the first quarter of 2025.
• ZYN U.S. offtake growth accelerated to a remarkable 39% in Q3 2025 as estimated by Nielsen.

Global network of tobacco farmers and raw material suppliers

While the strategic focus is shifting, the legacy supply chain remains important, especially for combustible products, though the smoke-free segment is the growth engine. The scale of the transformation is evident in the revenue split.

The company has invested over $14 billion since 2008 to develop, scientifically substantiate, and commercialize innovative smoke-free products. This investment underpins the shift away from traditional supply chains toward new technology and product inputs.

The current business scale highlights the importance of the entire portfolio, including the smoke-free segment:

Metric	Value (Late 2025 Data)
Smoke-Free Business Share of Total Net Revenues (First Nine Months 2025)	41%
Smoke-Free Business Share of Total Gross Profit (Q3 2025)	Over 42%
Estimated Global Legal-Age Consumers of Smoke-Free Products (as of June 30, 2025)	Over 41 million

The company's Q1 2025 results noted that adjusted operating income performance was partly offset by higher manufacturing costs, notably related to tobacco leaf, which was largely mitigated by productivity improvements.

Collaborations with technology and innovation partners for device R&D

The development of smoke-free alternatives like IQOS and VEEV requires deep collaboration with scientific and technology experts. PMI continuously strengthens its internal governance processes to ensure a robust scientific review process that leverages external experts and key opinion leaders.

The company prioritizes targeted investments in a digital strategy that leverages artificial intelligence to optimize resources and accelerate the delivery of robust, credible science substantiating new smoke-free alternatives.

Key financial commitments related to this innovation focus include:

• Total investment since 2008 in developing and scientifically substantiating smoke-free products: Over $14 billion.
• Full-year amortization of acquired intangibles for 2025, including amortization related to the IQOS commercialization rights in the U.S. (from the agreement to end the commercial relationship with Altria Group, Inc.): $0.50 per share.

Extensive partnerships with wholesalers and distributors worldwide

Getting products like IQOS, ZYN, and VEEV to adult consumers requires a vast and effective global distribution network. The reach of these partnerships is measured by market penetration and shipment growth.

Philip Morris International's smoke-free products are now available in 100 markets as of the third quarter of 2025. Furthermore, nearly half of these markets have at least two of the three flagship smoke-free brands (IQOS, ZYN, and VEEV) available for sale.

The performance driven through these channels is strong:

Smoke-Free Product Category	Shipment Volume Growth (H1 2025)
Overall Smoke-Free Shipment Volumes	Grew by over 13%
Heated Tobacco Unit (HTU) Shipments (Q2 2025)	Grew 9.2%
Oral SFP (Pouch Equivalents) (Q3 2025)	Increased by 16.9%

The company is raising its full-year 2025 forecast for smoke-free shipment growth to a range of +12% to +14%, which relies heavily on the continued effectiveness of these wholesaler and distributor relationships to normalize supply and drive consumer offtake.

Philip Morris International Inc. (PM) - Canvas Business Model: Key Activities

Scientific research and development of smoke-free products.

Philip Morris International Inc. (PMI) employed approximately 1,460 research and development scientists, engineers and technicians as of year-end 2024. For the fiscal year 2024, Adjusted R&D expenditure was USD 759 million. In 2024, 99.5% of Adjusted R&D expenditure was dedicated to smoke-free products. The cumulative investment behind smoke-free products since 2008 reached $14.0 billion as of year-end 2024.

Global manufacturing and supply chain management.

Philip Morris International Inc. operated and owned a total of 51 production facilities across its segments as of December 31, 2024. Of these, 9 factories produced heated tobacco units and 7 factories produced oral nicotine products in 2024. One of the largest manufacturing facilities, in Wilson, North Carolina, received a $37 million investment in October 2025 to support expanded operations, including production of HEETS for IQOS 3.0. Supply chain direct spend expenditure allocated to smoke-free products was 40% of the total in 2024.

Regulatory engagement and securing market authorizations (e.g., FDA).

Philip Morris International Inc.'s smoke-free products are now available in 100 markets as of October 2025. The U.S. Food and Drug Administration (FDA) authorized the IQOS 3.0 (HEETS) as a modified risk tobacco product (MRTP) with reduced exposure claims. Furthermore, the FDA authorized the Number 1 nicotine pouch brand, ZYN, in 2025, making it the first of its kind to receive such authorization.

Marketing and commercialization of the IQOS and ZYN platforms.

The smoke-free business accounted for 41% of total net revenues in the second quarter of 2025. IQOS quarterly net revenues exceeded $3 billion in the second quarter of 2025. IQOS HTU adjusted in-market sales (IMS) volume reaccelerated to double-digit growth of 11.4% in the second quarter of 2025. IQOS holds approximately 76% volume share of the global heat-not-burn category. For ZYN, U.S. offtake growth was a remarkable 39% in the third quarter of 2025. ZYN U.S. shipment volume grew by 37% in the third quarter of 2025, reaching 205 million cans. The 2025 full-year forecast assumed an acceleration in U.S. nicotine pouch shipment volume to reach 800 to 840 million cans.

You can see the scale of the commercialization efforts here:

Platform	Metric	Latest Reported Figure	Period/Date
IQOS	Global Heat-Not-Burn Volume Share	76%	Q2 2025
IQOS	Market Share (Europe)	11.4% (record)	Q2 2025
ZYN	U.S. Q3 Offtake Growth	39%	Q3 2025
ZYN	U.S. Q3 Shipment Volume	205 million cans	Q3 2025
Smoke-Free Products	Markets Available	100	October 2025

Maximizing pricing power in the combustible tobacco segment.

Combustible products represented 61.7% of Philip Morris International Inc.'s total revenue in 2024. In the third quarter of 2025, combustible net revenues grew by 4.3%, fueled by high single-digit pricing. Similarly, in the second quarter of 2025, combustible net revenues grew by 2.1%, driven by strong pricing. Marlboro achieved 10.9% category share in the third quarter of 2025.

The financial impact of this pricing power is clear:

• Combustible net revenue growth (Q3 2025): 4.3%.
• Pricing variance contribution (Q3 2025): High single-digit.
• Marlboro category share (Q3 2025): 10.9%.
• Combustibles revenue share of total revenue (2024): 61.7%.

Finance: draft 13-week cash view by Friday.

Philip Morris International Inc. (PM) - Canvas Business Model: Key Resources

You're looking at the core assets Philip Morris International Inc. (PMI) deploys to run its business, especially as it pivots hard toward smoke-free alternatives. These aren't just line items; they are the engine driving the transformation.

Brand Equity and Market Penetration

The strength of the portfolio rests on a few massive global brands. While Marlboro remains a globally recognized cigarette brand, the growth story is now centered on the smoke-free portfolio. IQOS is the flagship heated tobacco product, and ZYN is the leading oral nicotine pouch in the U.S. market, following the acquisition of Swedish Match.

Here's a snapshot of the brand performance and market presence as of late 2025 data:

Key Resource	Metric/Data Point	Context/Date
Smoke-Free Revenue Contribution	41% of total net revenues	Q2 2025
IQOS Market Share (Japan)	32.2%	Q1 2025
ZYN U.S. Offtake Growth	39% increase	Q3 2025
Marlboro Category Share	10.9%	Q3 2025
Total Smoke-Free Product Availability	100 markets	As of Q3 2025

The smoke-free business is definitely the growth driver now.

Intellectual Property and R&D Commitment

A massive financial commitment underpins the development of these new products, protected by significant intellectual property.

• Cumulative investment in smoke-free Research and Development since 2008: $14 billion+.
• Patents granted in 5 key jurisdictions relating to smoke-free products (cumulative since 2015): 4,250.
• R&D staff (FTEs) as of 2024: 1,460.
• Adjusted R&D expenditure ratio (smoke-free/total) for 2024: 99.5%.

Manufacturing and Operational Footprint

Philip Morris International Inc. maintains a global manufacturing base to support worldwide distribution of its portfolio.

The global manufacturing network comprised 51 facilities as of year-end 2024. Of those, 16 facilities were specifically dedicated to producing smoke-free products. The company aims for over 50% of low- and middle-income markets to have smoke-free products available by the end of 2025.

Scientific Substantiation and Regulatory Approvals

The credibility of the reduced-risk claims is a critical resource, backed by regulatory acceptance and scientific rigor. The scientific assessment program includes distinct research steps, such as aerosol chemistry, toxicology, and clinical studies.

• FDA Marketing Authorization: Received for versions of IQOS devices and consumables, as well as Generalsnus and ZYN nicotine pouches.
• IQOS users estimated to have switched and stopped smoking (cumulative by end of 2024): 23.0 million.
• Markets where smoke-free products are available for sale (as of end of 2024): 95.

Finance: draft 13-week cash view by Friday.

Philip Morris International Inc. (PM) - Canvas Business Model: Value Propositions

Philip Morris International Inc. provides adult smokers with less harmful alternatives to continued smoking, alongside its established premium combustible portfolio.

The smoke-free business (SFB) is a primary value driver, accounting for 41% of total net revenues in the third quarter of 2025, up by 2.9 percentage points versus Q3 2024. This segment also represented over 42% of total gross profit in Q3 2025. For the first nine months of 2025, smoke-free net revenues reached $12.5 billion, a 16.0% increase from the previous year.

The performance of the key smoke-free pillars in Q3 2025 is detailed below:

Metric	IQOS (Heated Tobacco)	ZYN (Oral Nicotine)
Shipment Volume Growth (YoY)	15.5% to 40.8 billion units	16.9% in pouch or pouch equivalents
Net Revenue Growth (Reported)	Implied by SFB growth of 17.7%	Implied by SFB growth of 17.7%
Gross Profit Growth (Reported)	Implied by SFB growth of 19.5%	Implied by SFB growth of 19.5%
Key Market Share/Position	76% global heat-not-burn volume share	69.3% U.S. value share (Q2 2025)

For adult smokers who prefer traditional cigarettes, Philip Morris International Inc. maintains a value proposition centered on high-quality, premium combustible products, headlined by the Marlboro brand.

The legacy combustible business still provides significant cash flow, with net revenues rising by 4.3% in Q3 2025 (or 10% organically). Marlboro specifically delivered robust pricing-driven profit growth. In Q3 2025, Marlboro achieved its highest quarterly market share since the 2008 spin.

The discreet, convenient oral nicotine products, specifically ZYN in the U.S., represent a major component of the value proposition for adult nicotine users seeking alternatives to inhalation products.

• ZYN U.S. offtake growth accelerated to a remarkable 39% in Q3 2025, according to Nielsen.
• In Q2 2025, ZYN reached a 69.3% value share in the U.S. market.
• Nicotine pouch shipment volume in the Americas grew by 37% to 205 million cans in Q3 2025.
• Philip Morris International Inc. is investing $600 million to open a manufacturing plant in Colorado to meet surging demand.

Technological innovation is central to the heat-not-burn devices and consumables, primarily through the IQOS platform.

IQOS continues to strengthen its position globally, now accounting for 9.1% of combined cigarette and HTU industry volumes in markets where it is present. In Japan, the IQOS HTU adjusted market share of total nicotine increased by 1.8 percentage points to reach 31.7%. The e-vapor product, VEEV, saw shipment volumes soar by 91.0% and is available in 46 markets.

The company raised its full-year 2025 adjusted diluted EPS guidance to a range of $7.46-$7.56.

Philip Morris International Inc. (PM) - Canvas Business Model: Customer Relationships

Philip Morris International Inc. (PMI) manages distinct relationship strategies tailored to its smoke-free product users versus its traditional cigarette base, all while navigating a complex regulatory environment.

Direct-to-Consumer (DTC) engagement for smoke-free users (IQOS Club)

The engagement model for smoke-free users centers on building loyalty and driving conversion through dedicated platforms like the IQOS Club. As of June 30, 2025, PMI estimates over 41 million legal-age consumers globally use their smoke-free products. The momentum in the inhalable smoke-free products (SFP) category is significant, with Heat-not-Burn (HTU) adjusted in-market sales (IMS) volume reaccelerating to double-digit growth of 11.4% in the second quarter of 2025. PMI holds approximately 76% volume share in the global heat-not-burn category as of the third quarter of 2025. The DTC relationship is reinforced through localized engagement programs.

For example, in the Philippines, the SMOKE FREE SUMMIT IQOS CLUB PROMO 2025 is structured around specific device purchases and offers engagement mechanics like a Claw machine for prizes such as Stanley Tumblers, Headphones, Swatch x Omega items, Tote Bags, and TEREA Packs. The platform also facilitates direct interaction through features like Refer a Friend and experiential events such as IQOS Curious X Discover a world of transformative experiences. The online store, operated by an authorized distributor, handles all order fulfillment and deliveries.

Mass-market retail relationships for traditional cigarette brands

For combustibles, the relationship remains heavily reliant on established mass-market retail channels, though volumes are declining. PMI forecasts a ~2% decline for the full year 2025 in combustible volumes, following a 1.5% decline in the second quarter of 2025. Despite this volume pressure, the premium brand Marlboro achieved its highest quarterly market share since 2008, reaching 10.9% category share in the third quarter of 2025. The company's aspirational target for cigarette shipments of 550 billion sticks by 2025 is projected to be missed, as the decline in cigarette sales has stalled markedly since 2020, according to trend analysis.

Dedicated scientific communication with regulators and public health bodies

Scientific validation is a core component of the relationship with regulatory bodies, underpinning market access and credibility. PMI has poured over $12.5 billion cumulatively behind smoke-free product development since 2008. This investment supports the scientific communication required for market authorizations. Notably, versions of IQOS devices and consumables obtained the first-ever Modified Risk Tobacco Product authorizations from the U.S. Food and Drug Administration (FDA). The availability of PMI's smoke-free products continues to expand, reaching 97 markets by the second quarter of 2025 and growing to 100 markets by the third quarter of 2025.

Personalized digital marketing to adult nicotine users in legal markets

Digital marketing focuses heavily on the high-growth oral smoke-free segment, particularly ZYN in the U.S. The U.S. nicotine pouch shipment volume is forecast to reach 800 to 840 million cans for the full year 2025, representing growth of 38% to 45%. In the second quarter of 2025 alone, ZYN U.S. shipments grew by over 40% to 190 million cans. Nielsen data indicates ZYN maintained a strong over 70% value share in the U.S. market, despite competitor discounting. The oral SFP segment shipment volume outside the U.S. more than doubled in the second quarter of 2025.

The reach of the multicategory smoke-free portfolio is expanding, with nearly half of the 97 markets where products were available in Q2 2025 having at least two of the three flagship brands (IQOS, ZYN, and VEEV) available for sale.

Metric Category	Key Data Point	Period/Context	Value
Smoke-Free User Base	Total Estimated Legal-Age Consumers (Smoke-Free)	As of June 30, 2025	Over 41 million
Smoke-Free Penetration	Smoke-Free Business Share of Total Net Revenues	Q3 2025	41%
IQOS Market Position	Global Heat-Not-Burn Category Volume Share	Q3 2025	Approximately 76%
IQOS Growth	HTU Adjusted In-Market Sales (IMS) Volume Growth	Q2 2025	11.4%
Cigarette Retail Strength	Marlboro Quarterly Category Share	Q3 2025	10.9%
Cigarette Trend	Forecasted Full-Year 2025 Combustible Volume Decline	Full Year 2025 Forecast	~2%
Oral SFP Growth	Forecasted Full-Year 2025 U.S. ZYN Shipment Volume (Cans)	Full Year 2025 Forecast	800 to 840 million
Regulatory Achievement	Cumulative Investment in Smoke-Free Products	Since 2008	Over $12.5 billion

The relationship strategy is clearly bifurcated: deep, loyalty-driven engagement for the high-growth smoke-free segment, and managing the decline through premium brand strength in the traditional retail space.

• Smoke-free products available in 100 markets as of Q3 2025.
• IQOS HTU adjusted market share in Japan reached a record 32.2% in Q1 2025.
• IQOS HTU adjusted market share in Europe reached a record 11.4% in Q1 2025.
• ZYN U.S. value share maintained over 70%.
• ZYN is present in 38 markets globally (as of Q2 2025 context).

Finance: review Q3 2025 marketing spend allocation between DTC digital channels and traditional trade support by Monday.

Philip Morris International Inc. (PM) - Canvas Business Model: Channels

Philip Morris International Inc. (PMI) utilizes a multi-faceted channel strategy to ensure its portfolio, increasingly weighted towards smoke-free products, reaches adult consumers across its vast international footprint.

Global network of retailers (convenience stores, supermarkets).

The core distribution relies on established trade channels, which include convenience stores and supermarkets, to reach the broadest base of adult nicotine users. The scale of this network is defined by the sheer number of territories served, which is extensive for both combustible and smoke-free products.

The reach of the overall product portfolio extends to approximately 170 markets or over 180 countries. For the smoke-free portfolio specifically, availability as of mid-2025 spanned over 100 markets.

The table below illustrates the market penetration of the key smoke-free product lines as of the third quarter of 2025:

Product Category	Availability Metric	Latest Reported Figure (as of late 2025)
Smoke-Free Products (SFP) Overall	Markets with availability	100
IQOS, ZYN, and VEEV	Markets with at least two flagship brands	Nearly half of the 100+ markets
IQOS, ZYN, and VEEV	Markets with all three flagship brands	20 markets (as of Q2 2025)
VEEV (E-vapor)	Markets with availability (Q3 2025)	46 markets
ZYN (Nicotine Pouch)	International markets with availability (Q3 2025)	46 markets

Specialized IQOS stores and dedicated retail kiosks.

For the premium smoke-free devices like IQOS, Philip Morris International Inc. employs direct-to-consumer touchpoints to drive trial, education, and adoption. This is particularly evident in newer or strategically important markets.

In the United States, following the launch in Austin, Texas in the second quarter of 2025, the device was sold through:

• Pop-up stores
• Mobile units, including one location in downtown Austin set for several months
• Contracts with around 15 adult-only venues like bars where mobile units and 'IQOS coaches' were active

E-commerce platforms for device and consumable sales.

While the search results focus heavily on physical in-market sales (IMS) and shipments, the management of inventory movements through distributors and wholesalers is a key operational element that directly impacts channel reporting. The reported Adjusted In-Market Sales (IMS) volume specifically excludes the net impact of estimated distributor and/or wholesaler inventory movements, indicating these trade partners are a critical layer in the channel structure.

The growth of the U.S. nicotine pouch brand, ZYN, is tracked via shipment volumes, with U.S. shipments growing by 37% to 205 million cans in Q3 2025, and by over 40% to 190 million cans in Q2 2025. This suggests direct or managed e-commerce/direct-to-consumer channels play a role, especially in the U.S. oral products segment, though specific e-commerce revenue figures aren't detailed.

Wholesalers and distributors managing logistics across 100+ markets.

The logistical backbone for Philip Morris International Inc. involves extensive use of wholesalers and distributors to manage the flow of products across its global footprint, which is necessary to support the availability in over 100 markets. The company's financial reporting explicitly separates sales to the trade channels (IMS) from shipment volumes to account for the inventory held by these trade partners.

For instance, the expected smoke-free product volume growth of 12% to 14% for the full year 2025 is partly offset by cigarette volume declines of around 2%. Managing the inventory levels of both growing smoke-free products and declining combustibles through this distribution network is a constant balancing act.

Finance: draft 13-week cash view by Friday

Philip Morris International Inc. (PM) - Canvas Business Model: Customer Segments

Philip Morris International Inc. (PMI) targets distinct groups of adult nicotine consumers across its evolving portfolio of combustible and smoke-free products.

Adult smokers seeking scientifically substantiated alternatives represent a core focus for Philip Morris International Inc. as the company accelerates its transformation. As of June 30, 2025, PMI estimates its smoke-free products were used by over 41 million legal-age consumers around the world, many of whom have moved away from cigarettes or significantly reduced their consumption. This segment is crucial, as the smoke-free business accounted for 41% of PMI's total net revenues in the first nine months of 2025. For instance, in the first quarter of 2025, the smoke-free business accounted for 42% of total net revenues.

The company's strategy heavily relies on transitioning these smokers to its multi-category smoke-free portfolio, which includes IQOS (heated tobacco), ZYN (nicotine pouches), and VEEV (e-vapor). IQOS, the flagship heated tobacco product, continues to gain traction globally, with its adjusted in-market sales (IMS) volume growing by 9.0% in the third quarter of 2025. In Japan, IQOS adjusted market share reached a record 32.2% in the first quarter of 2025.

Adult nicotine users preferring discreet oral products are primarily served by the ZYN brand in the U.S. market. This segment shows rapid adoption and category expansion. Here's a look at the recent U.S. ZYN performance data:

Metric	Value/Rate	Period/Date
U.S. Shipment Volume (H1 2025)	392 million cans	First Half 2025
U.S. Shipment Volume Growth (Q1 2025)	37%	Q1 2025
U.S. Offtake Growth (Q2 2025)	26%	Q2 2025
U.S. Offtake Growth (Early Q3 2025)	Around 32%	First 8 weeks of Q3 2025
2025 Shipment Guidance (Previous Assumption)	800 to 840 million cans	Full Year 2025

The pouch category in the U.S. tracked channels holds approximately 7% share of total tobacco spend today, with expectations for continued expansion into 2026. Philip Morris International Inc. is focused on switching legal-age smokers with a relevant product portfolio in nascent international pouch markets as well.

Traditional adult smokers loyal to established combustible brands still form a significant part of the customer base, though the strategic direction is away from this segment over the long term. Philip Morris International Inc. is focused on maximizing the value of the combustibles business over time to support the growth of its smoke-free offerings. While smoke-free products are available in over 100 markets, the company continues to manage its legacy portfolio.

The final segment includes Duty-Free/Global Travel Retail consumers. Philip Morris International Inc. has launched SmokeFreeTravel.com, a global digital platform specifically designed to support adult nicotine users who are seeking smoke-free alternatives while traveling by showing product availability across key airport hubs and domestic markets.

• Smoke-free products are available for sale in over 100 markets as of June 30, 2025.
• In Q1 2025, the smoke-free business gross profit was 44% of the total gross profit.
• The company has invested over $14 billion since 2008 to develop and commercialize smoke-free products.

Finance: draft 13-week cash view by Friday.

Philip Morris International Inc. (PM) - Canvas Business Model: Cost Structure

You're looking at the major outflows for Philip Morris International Inc. (PM) as they push hard into smoke-free products. The cost structure is heavily weighted toward investment and regulatory overhead, which is typical for a company undergoing this kind of transformation.

Excise Taxes and Duties

The burden of government levies on combustible products remains a massive, non-operational cost component. To give you a sense of scale, Philip Morris International's reported net revenue for the full fiscal year 2024 was $37.878 billion, but this figure specifically excludes excise taxes. This means the actual cash collected from consumers that goes straight to governments is substantial, dwarfing many other operational expenses.

Capital Expenditures for Smoke-Free Capacity

The pivot to smoke-free products demands significant upfront spending on manufacturing and supply chain. For the 2025 fiscal year, Philip Morris International projects total capital expenditures of around $1.6 billion. You should know that this entire amount is almost entirely dedicated to investments supporting the smoke-free business, like expanding capacity for products such as ZYN in the U.S..

Marketing, Administration, and Research Costs

Driving adoption for new categories like IQOS and ZYN requires heavy commercial investment, which you see reflected in the SG&A (Selling, General, and Administrative) line. For instance, the third quarter of 2025 saw elevated commercial spending to support brand equity expansion. On the innovation front, Research & Development (R&D) is a non-negotiable cost. For the Last Twelve Months ending Q3 2025, Philip Morris International reported R&D expenses of $604.2 million.

Here's a quick look at some of the key quantified costs impacting the bottom line:

Cost Category Element	Reported/Projected Amount	Period/Context
Projected Capital Expenditures (CAPEX)	$1.6 billion	Fiscal Year 2025 Forecast
Research & Development (R&D) Expense	$604.2 million	LTM Q3 2025
Gross Profit (Proxy for COGS impact)	$20.5 billion	First Nine Months of 2025
Germany Excise Tax Litigation Charge (Adjustment)	$0.10 per share	2025 Forecast Adjustment

Cost of Goods Sold (COGS) Inputs

The direct costs associated with producing the actual products-the tobacco leaf for combustibles and the electronic components for devices-are captured within the Cost of Goods Sold, which is inversely represented by Gross Profit. For the first nine months of 2025, Philip Morris International generated $20.5 billion in Gross Profit. This figure reflects the costs incurred, including raw materials and manufacturing overhead, across both the combustible and smoke-free segments.

Litigation and Regulatory Compliance Expenses

Beyond standard operating costs, Philip Morris International faces specific, often large, expenses related to global legal challenges and adhering to varying regulations. These risks include litigation related to nicotine use and intellectual property. As a concrete example within the 2025 forecast adjustments, the company included a charge of $0.10 per share specifically for a Germany excise tax classification litigation.

The company is actively investing in its future, but that investment comes with a price tag.

Philip Morris International Inc. (PM) - Canvas Business Model: Revenue Streams

You're looking at the core ways Philip Morris International Inc. generates cash right now, late in 2025. It's a story of transition, with legacy products still providing a strong base while the smoke-free portfolio rapidly takes up a larger share of the pie. Honestly, the numbers show a clear pivot.

The overall financial outlook is strong, with the company reaffirming its guidance for the full year 2025. Philip Morris International Inc. projects a reported diluted EPS forecast for the full year 2025 to be between $7.39 and $7.49. This is built on the performance of its diverse revenue streams.

The shift is evident in the revenue mix. For the first nine months of 2025, the smoke-free products accounted for 41% of net revenues. This is a significant portion of the total $30.3 billion in net revenues reported for that nine-month period.

Here's a breakdown of the major revenue components:

• Sales of Heated Tobacco Units (HTUs) and devices (IQOS).
• Sales of Combustible Cigarettes (Marlboro, L&M) with strong pricing power.
• Sales of Oral Smoke-Free Products (ZYN nicotine pouches).

The pricing power in the combustible segment remains a key revenue stabilizer, even as volumes decline. For instance, in the third quarter of 2025, total shipment volume for cigarettes decreased by 3.2%, yet net revenues from combustibles still grew by 4.3%. This growth in revenue on falling volume is a direct result of effective pricing strategies.

The smoke-free segment, however, is the primary growth engine, driving both volume and revenue expansion. The smoke-free business net revenues for the first nine months of 2025 reached $12.5 billion.

Let's look closer at the specific product lines that make up these revenue streams:

Revenue Driver	Key Metric / Data Point	Period / Context
IQOS (HTUs/Devices)	Holds approximately 76% volume share of the global heat-not-burn category	Global Context
IQOS (HTUs/Devices)	Reached 9.1% share of combined cigarette and HTU industry volumes	Q3 2025
ZYN (Oral Nicotine Pouches)	U.S. shipment volume grew 37% to 205 million cans	Q3 2025
ZYN (Oral Nicotine Pouches)	U.S. offtake surged 39% following return to full availability	Q3 2025
VEEV (E-Vapor)	Shipment volumes soared by 91.0%	Q3 2025
Combustibles	Net revenues grew by 4.3%	Q3 2025
Smoke-Free Products	Net revenues grew by 17.7%	Q3 2025

The profitability difference is also stark; in the third quarter of 2025, gross margins for smoke-free products reached 70.0%, which was higher than the 66.5% margin for combustibles. This margin profile helps explain the aggressive investment in this area. The strong performance in Q3 2025 saw the reported diluted EPS grow 13.2% to $2.23, with adjusted diluted EPS growing 17.3% to $2.24.

You can see the revenue contribution by segment for the third quarter of 2025:

• Smoke-free business accounted for 41% of total net revenues (up by 2.9pp vs. Q3 last year).
• Smoke-free business accounted for over 42% of total gross profit (up by 2.5pp vs. Q3 last year).

The company is definitely leaning into the future. Finance: draft 13-week cash view by Friday.