Dear Shareholder,

2025 was another remarkable year for PMI, with a fifth consecutive

year of volume growth, net revenues surpassing $40 billion, including

close to $17 billion from our smoke-free business, and further

operating margin expansion. Our performance continues to be

fueled by the international business, which generated most of our

organic net revenue growth, led by smoke-free products.

Our business yet again delivered best-in-class top- and bottom-line

growth and outperformed the industry. This demonstrates not only

the strength of our global organization but also the sustainability

of our evolved business model as we continued to advance our

smoke‑free leadership.

Our achievements this year are a testament to the dedication of

PMI’s around 84,900 employees worldwide, who once again brought

their passion, resilience, and talent to everything they do. We extend

our sincere thanks for their unwavering commitment and hard work.

2025 vs. 2024 Results

Estimated international industry4 volume for cigarettes and heated

tobacco units (HTUs) was broadly stable, with a 1.1% decrease for

cigarettes, largely offset by 10.2% growth of HTUs.

In the fifth consecutive year of total shipment volume growth

(up by 1.4%), our smoke-free shipments increased by 12.8%. This

impressive increase reflects strong HTU growth, accelerating

traction in nicotine pouches, and a doubling of e‑vapor volumes.

Cigarette shipment volumes declined by 1.5%.

Our total cigarette and HTU volume share reached 29.2% of the

international industry, up by 0.2 percentage points fueled by HTU

performance (up by 0.5 percentage points).

Net revenues increased by 7.3% to $40.6 billion. On an organic basis

net revenues increased by 6.5%, mainly driven by favorable pricing

as well as smoke-free volume growth and a corresponding positive

product mix impact.

Operating income increased by 11.1% to $14.9 billion (10.6% on an

organic basis), supported by the same drivers as net revenues, partly

offset by higher marketing, administration and research costs.

Diluted EPS increased to $7.26 compared to $4.52 in 2024. Adjusted

diluted EPS of $7.54 increased by 14.2%, excluding currency.

In 2025 PMI delivered operating cash flow of $12.2 billion, matching

the record performance in 2024. On a currency-neutral basis,

operating cash flow decreased by 3.8% primarily due to higher

working capital requirements.

In September, the Board of Directors approved an 8.9% increase

in the quarterly dividend to an annualized rate of $5.88 per share.

This represented the highest increase since 2013 and the eighteenth

consecutive year of dividend growth since becoming a public

company in 2008.

Delivering a Smoke-Free Future

In 2025, our smoke-free business accounted for 41.5% of total

net revenues. In the fourth quarter we achieved a key milestone:

over 50% of net revenues generated by the smoke-free business

in three of our four regions. On a full-year basis, we reached the

same milestone in 27 markets and 8 markets exceeded 75%. As of

year-end, our smoke-free products were available in 106 markets,

with over 43 million estimated adult consumers.5 Our smoke-free

business continued its upward trajectory in profitability. IQOS was

again the primary driver of this performance, combining global top-

line momentum with increasing scale and cost efficiencies, coupled

with VEEV’s improving profitability and ZYN’s best-in-class gross

margins.

IQOS continued to strengthen its position as the second-largest

nicotine ‘brand’ in markets where present, with the number one

volume share position in 13 markets, and drove the growth of the

global heat-not-burn category, where PMI holds approximately 76%

volume share. This was supported by brand engagement initiatives

and continuous innovation across devices and consumables,

including the expansion of ILUMA i, which is now6 available in 55

out of 79 IQOS markets. In December 2025 an important landmark

was reached in Japan, where over 50% of the total industry was

smoke-free on an offtake volume basis, driven by the heat-not-

burn category where IQOS holds the number one position. To

complement IQOS, PMI continues to invest in a range of innovative

and high-quality heat-not-burn alternatives. This includes BONDS,

our peripheral heating system.

We continue to expand in the attractive oral smoke-free category,

with ZYN modern oral pouches now6 available in 56 markets across

the globe. Total oral smoke-free shipment volume7 in pouches or

pouch equivalents increased versus the prior year by 18.5%, driven by

nicotine pouches, which grew by 36%. The nicotine pouch category

remains nascent in most geographies.

In the vaping category, VEEV is the fastest-growing brand of any

major player in international closed pods and holds the number one

position in eight markets. The pod segment is growing rapidly as

disposables decline, and VEEV is gaining significant volume share in a

fragmented landscape, sourcing primarily from consumers of other

vaping products and adult smokers. VEEV’s profitability improved

further while shipment volumes more than doubled.

PMI’s complementary brand portfolio with high-quality products in

all three smoke-free categories allows us to better serve consumers

and enhance our financial performance. Our multicategory strategy

is a critical catalyst for smoke-free product adoption by adult

consumers and an important driver of our long-term growth. It has

already been deployed in 52 markets, including over 25 markets with

the IQOS, ZYN and VEEV brands now commercialized together.

Smoke-Free Product Regulation

2025 was a critical year for advancing regulatory frameworks for

smoke‑free products around the world. While progress remains

uneven across geographies, we saw growing recognition of harm

reduction principles and more consistent differentiation between

categories.

The number of markets with a dedicated excise tax category for

heat-not-burn, e-vapor and modern oral is steadily growing. The

introduction of product definitions for all smoke-free categories

with an appropriate tax differential versus cigarettes is crucial to

accelerate the switching of smokers to better alternatives. Some

setbacks also occurred, including Japan’s adoption of an excise

equalization plan for heated tobacco and cigarettes in 2026, albeit

with a more consistent tax structure and visibility on future excise

increases on both cigarettes and heated tobacco.

Market access for smoke-free products continues to expand. The

number of markets that have either proceeded with a dedicated

or improved regulatory framework or lifted a regulatory ban for at

least one smoke-free product category reached 85. This includes

the long-awaited authorization of IQOS in Taiwan. We continue

to advocate for effective harm reduction measures, especially in

markets such as Turkey, India, Brazil and Vietnam, where smoke-

free products are banned, resulting in the perpetuation of cigarette

consumption.

Combustible Tobacco Product Portfolio

Our combustible portfolio continues to play a vital role in our quest

to transition adult smokers to better alternatives. It provides the

financial stability, infrastructure, and consumer relationships that

support long‑term investment in our smoke‑free journey.

Our combustibles business remained resilient and, with disciplined

management, delivered another year of strong performance.

Notwithstanding expected lower volumes, net revenues grew by

2.5%, driven by strong pricing, partly offset by geographic mix.

Marlboro remains the world’s best‑selling cigarette brand and

reached an all-time high of 11.0% volume share of the international

cigarette market in the fourth quarter of 2025, despite over-indexing

to IQOS cannibalization.

Organization

We continue to evolve and develop our organization, including the

introduction of a new organizational model effective January 1,

2026. With our smoke-free business now operating at scale across

our regions, including substantial growth from our U.S. business,

PMI has implemented an evolved organizational model with

two primary business units: International and U.S. The updated

organizational structure is designed to enhance our agility and to

support our journey to become a smoke-free company. As a result,

PMI realigned its reportable segments accordingly, with the four

geographic segments replaced with three new reportable segments:

International Smoke-Free, International Combustibles, and U.S. Our

reporting will reflect these changes as of the first quarter of 2026.

Our digital transformation is advancing rapidly, supported by

our global digital consumer platforms and the scaling of proven

initiatives enabled by artificial intelligence. To strengthen the

foundations for the future, we invest in our people by advancing

digitalization and artificial intelligence upskilling to accelerate the

transition from individual adoption to enterprise-wide impact.

Our key priority is to continue evolving PMI’s culture to fully support

our mission and the evolving requirements of a modern, highly

skilled workforce, while strengthening succession depth to ensure

leadership continuity, organizational resilience, and long-term

sustainable performance.

Sustainable Business Value

At PMI, the long-term sustainability of our business is not an outcome

of our strategy. It is the strategy itself. It informs how we secure

critical resources, manage risks, meet stakeholders’ expectations,

and future proof a business built to deliver results today while

securing the ability to deliver tomorrow.

Our approach to value creation extends beyond financial

performance to encompass the full range of resources and

relationships on which our long-term success depends. We recognize

that sustainable business results require investing deliberately in

multiple forms of capital: human, intellectual, natural, manufactured,

and social, alongside financial capital. By proactively addressing

environmental and social impacts in our products and operations, we

strengthen our ability to manage risks, capitalize on opportunities,

and build resilience in a dynamic operating environment.

For further information on how PMI creates, preserves, and enhances

value over the short, medium, and long term, we invite you to read

our 2025 Value Report, which we plan to publish in the coming weeks.

Board of Directors

In February 2026, Dessislava Temperley informed the Board that

she would not stand for re-election this year. On behalf of the

entire organization, we sincerely thank Dessislava, who joined the

Board in 2021, for her valued contributions to the company as a

Director and member of the Audit and Risk Committee, and as a

former member of the Consumer Relationships and Regulation, and

Finance Committees.

Looking Ahead

The past year was marked by persistent global uncertainty and a

demanding operating backdrop. It also clearly demonstrated the

strength of PMI and the leadership position we have built. Despite

ongoing volatility, our people delivered with focus and conviction,

achieving strong results and reaching important milestones in our

smoke-free journey. These achievements reinforce our confidence

in the long-term potential of our strategic shift away from

combustible tobacco, anchored by our leadership in smoke-free

products, and complemented by growth opportunities in wellness

over the long term.

As outlined in our 2025 full-year results announcement, we are

confident in the company’s next growth phase and are targeting

compound annual growth rates for 2026 - 2028 of: 6% to 8% for net

revenues, on an organic basis, including smoke-free products volume

growth of high single-digit to low-teens driving total shipment

volume growth; 8% to 10% for adjusted operating income on an

organic basis; and 9% to 11% for adjusted diluted EPS, excluding

currency, assuming current corporate income tax rates and no share

repurchases.

We remain committed to science, innovation, responsible marketing,

and transparency as we scale our smoke‑free portfolio and broaden

our impact. PMI’s ambition remains clear: to replace cigarettes with

smoke‑free products and to deliver sustainable, long‑term value

to our shareholders while contributing to improved public‑health

outcomes globally.

Jacek Olczak,

Group CEO PMI

March 10, 2026

André Calantzopoulos,

Chairman of the Board