British American Tobacco said it expects its 2026 revenue and profit to come in at the lower end of its mid-term targets as strong demand for its nicotine pouches were eroded by stiff competition in the US vape market.
Shares of the company fell nearly 5% in early trading.
The maker of Lucky Strike and Dunhill, however, said it was on track to deliver its 2025 goals and plans to buy back shares worth £1.3 billion next year.
Companies have lobbied the US government and the FDA for years to crack down on a booming market for unregulated vape products, largely from China, that have dented profits in the $22 billion US market for smoking alternatives.
Indeed, BAT said early signs of enforcement action against illicit vaping products were helping its US business gain momentum.
"Recent Vuse volume and revenue improvement in the U.S. is encouraging, although the Vapour category continues to be impacted by illicit proliferation," CEO Tadeu Marroco said in a statement.
Vuse is BAT's flagship vaping brand. In October, the company paused the rollout of an unlicensed disposable Vuse One vape in the US.
While the US Food and Drug Administration has been easing requirements for nicotine-pouch makers under a new pilot programme, the market for vapes remains challenging.
BAT expects its 2026 revenue at the lower end of its previously forecast growth range of 3% to 5% and growth in adjusted profit from operations of between 4% and 6% for the medium-term.
The company expects about 2% growth in revenue and adjusted profit from operations this year, with new-category revenue growth accelerating to double-digits in the second half, driven partly by its Velo nicotine pouches and improving demand for its Vuse vapes in the US.
Analysts, on average, expected total revenue growth of 2.1% for 2025, per a company-compiled poll.
