PM · Earnings call · 2026Q3T · Full report

Gross Margin Drivers

Philip Morris International Inc. · 2026-10-21 · Importance 25 · Surprise 32

Adjusted operating margin expanded 130 basis points organically in Q3 to almost 45%, and 60 basis points year-to-date. Gross margin expansion contributed 80 basis points in both periods, supported by pricing, favorable smoke-free mix, increasing smoke-free scale benefits, and manufacturing productivity gains. International smoke-free gross margin expanded 120 basis points year-to-date to 70%, while international combustibles expanded 140 basis points; together, international businesses expanded gross margin 140 basis points to 68.8%.

Key facts

• Adjusted operating margin expanded organically 60 basis points year-to-date and 130 basis points in Q3, reaching almost 45% in Q3.
• Gross margin expansion contributed 80 basis points in both Q3 and year-to-date, supported by pricing, smoke-free mix, scale benefits, and manufacturing productivity gains.
• U.S. net revenue increased almost 23%, gross profit increased 24%, and organic gross margin expanded 60 basis points to 64.4%.
• Year-to-date PMI expanded gross margin by 80 basis points and operating margin by 60 basis points.