IQOS in America: One City So FarThin moat

Philip Morris International (PM) — moat facet

PMI paid Altria $2.8 billion for the American IQOS rights and, two years later, sells the device in one city.

PMI's heated product is only beginning in its home market. In October 2022 PMI agreed with Altria to end their American IQOS arrangement and took the full rights from 1 May 2024, at a total cash cost of $2.8 billion including interest: $1.0 billion at inception and $1.8 billion paid on 14 July 20231. The cost is amortised over five years2.

Payments for U.S. IQOS rights ($bn)1.0At inception, 20221.8Paid 14 Jul 20232.8Total incl. interestPMI Form 10-K FY2025
$2.8 billion for rights used in one city.

What it has bought so far is a trial. PMI began selling IQOS 3.0 in Austin, Texas on 27 March 20253. The product it sells internationally, IQOS ILUMA, still awaits an FDA decision; its future is covered under The Future Bets.

The opportunity is large. PMI notes that "approximately 25 million adults continue to smoke cigarettes" in the United States4, and PMI does not sell them cigarettes. Every American smoker who switches to IQOS is a new customer rather than a converted one.

The moat here is potential rather than present. PMI has the regulatory orders for IQOS 2.4 and 3.0, renewed to April 20315, and the rights; it does not yet have national distribution.

The American smoke-free business is the scoreboard, and it is still mostly ZYN: $2,858 million in 2025 against $2,534 million in 20246. A national IQOS launch that adds a visible heated-tobacco line to that figure would prove the $2.8 billion was well spent; another year confined to one city would not.

Moat trajectory: Holding steady

Limited Austin roll-out since March 2025; ILUMA pending.

The number that tests this moat
Reported
U.S. smoke-free net revenues, full year
$2,858M (2025), from $2,534M

The American smoke-free base, still mostly ZYN; IQOS has to become a visible part of it.

Source: PMI recast schedules 2025 vs 2024 ↗
⚠ Threats to the moat
⚠ THREAT 01
Paying for Rights It Barely Uses
PMI is amortising $2.8 billion of American IQOS rights over five years while the product is sold in one Texas city.
References
  1. ReportedIn October 2022 PMI agreed with Altria to end their American IQOS arrangement and took the full rights from 1 May 2024, at a total cash cost of $2.8 billion including interest: $1.0 billion at inception and $1.8 billion paid on 14 July 2023.
    Philip Morris International Form 10-K for fiscal 2025 - financial statements and notes: income statement, excise, cash flow, debt, acquisitions and impairments. — FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedThe cost is amortised over five years.
    Philip Morris International Form 10-K for fiscal 2025 - Item 1 business: markets, products, competitors, market shares, shipments and employees. — FY2025 · publ. 6 February 2026 · source ↗
  3. ReportedPMI began selling IQOS 3.0 in Austin, Texas on 27 March 2025.
    Philip Morris International Form 10-Q for the quarter ended 30 June 2026 - segment results, the balance sheet, FDA authorisations and shares outstanding. — Q2 2026 · publ. 24 July 2026 · source ↗
  4. ReportedPMI notes that "approximately 25 million adults continue to smoke cigarettes" in the United States, and PMI does not sell them cigarettes.
    Philip Morris International Form 10-Q for the quarter ended 30 June 2026 - segment results, the balance sheet, FDA authorisations and shares outstanding. — Q2 2026 · publ. 24 July 2026 · source ↗
  5. ReportedPMI has the regulatory orders for IQOS 2.4 and 3.0, renewed to April 2031, and the rights; it does not yet have national distribution.
    Philip Morris International Form 10-Q for the quarter ended 30 June 2026 - segment results, the balance sheet, FDA authorisations and shares outstanding. — Q2 2026 · publ. 24 July 2026 · source ↗
  6. ReportedThe American smoke-free business is the scoreboard, and it is still mostly ZYN: $2,858 million in 2025 against $2,534 million in 2024.
    Philip Morris International Form 8-K exhibit 99.1 - 2025 and 2024 results recast into the new segments International Smoke-Free, International Combustibles and U.S. — FY2025 · publ. 13 March 2026 · source ↗
Sources
Generated September 26, 2026