International Paper (IP -0.69%), a global leader in paper and packaging, released results for the second quarter of fiscal 2025 on July 31, 2025. The headline news was the first full-quarter impact of its major acquisition of DS Smith, which drove GAAP revenue sharply higher to $6.8 billion, beating analyst forecasts for revenue (GAAP). However, earnings per share (EPS) of $0.20 on a non-GAAP basis missed the $0.39 estimate by a significant margin, with profitability compressed by higher costs and integration expenses. Net earnings (GAAP) declined to $75 million from $498 million in Q2 2024, while Free cash flow (non-GAAP) came in below prior period levels, and special items weighed on the bottom line. The quarter highlighted both ambitious transformation efforts and significant near-term challenges.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.20 | $0.39 | $0.55 | (63.6 % decrease) |
| EPS (GAAP) | $0.14 | $1.41 | (90.1 % decrease) | |
| Revenue (GAAP) | $6.8 billion | N/A | $4.7 billion | 44.7 % |
| Net Earnings (GAAP) | $75 million | $498 million | (84.9 %) | |
| Free Cash Flow (Non-GAAP) | $54 million | $167 million | (67.7 % decrease) |
Source: Analyst estimates for the quarter provided by FactSet.
About International Paper and Its Current Focus
International Paper produces containerboard, corrugated packaging, and cellulose fibers, serving businesses worldwide.
In recent years, International Paper has concentrated on transforming its core operations by acquiring DS Smith and implementing a strategic 80/20 approach. This focuses company resources on its largest, most valuable customers while driving efficiency and lowering costs. Key factors for the company’s future success are successful integration of DS Smith, achieving significant cost savings, and continuing to lead in sustainable packaging innovations.
Quarter in Detail: Integration and Operating Results
The quarter was notable for the first full impact of the DS Smith acquisition. DS Smith’s results are now integrated within the North America and EMEA (Europe, Middle East, and Africa) Packaging Solutions segments. In North America, segment profit increased to $277 million from $142 million in Q1 2025, boosted by improved prices and volumes, but was tempered by cost pressures, outages, and a $33 million segment loss from the DS Smith North America operations. In EMEA, Sales reached $2.3 billion in EMEA, but the segment posted a $1 million operating loss. DS Smith’s legacy EMEA assets contributed a $10 million segment loss, largely offsetting benefits of higher prices as demand remained subdued and integration-related costs rose.
Outside the core packaging business, Global Cellulose Fibers, which supplies pulp for diapers and hygiene products, continued to struggle. Sales declined to $628 million, and the segment swung to a $4 million loss. The company cited heavy scheduled downtime in its mills and higher operating expenses as contributing factors.
Margins at the consolidated company level came under pressure, due in part to $29 million in transaction expenses and $34 million in severance costs, and a $40 million after-tax gain from required European plant divestitures linked to regulatory approvals for the merger. Depreciation and amortization expenses (GAAP) increased to $480 million from the added value of newly acquired DS Smith assets. Operating profit in the North America packaging segment rose 95.1% from the prior quarter, but year-over-year results for most segments were flat or lower despite the large revenue increase -- reflecting the cost of absorbing and restructuring acquired operations.
On special items, after-tax net charges totaled $34 million. These items encompassed expenses from integrating DS Smith, severance, strategic review of the cellulose business, and offsets from plant sales in Europe. The company’s free cash flow (non-GAAP) of $54 million dropped 67.7% from Q2 2024, impacted by these restructuring and integration costs. Cash provided by operations was $476 million, up from negative free cash flow (non-GAAP) in Q1 2025 but still pressured by outflows tied to the transformation.
Shareholders received $488 million in dividends during the first half of 2025. The transaction also vastly expanded International Paper’s employee base to 65,000 and increased long-term debt to $9.7 billion as of June 30, 2025, reflecting the scale and financial commitment of the deal.
International Paper also advanced on regulatory compliance requirements, including divesting five box plants in Europe and completing a secondary stock listing on the London Stock Exchange. No new quantitative updates were provided for sustainability or workforce metrics this period, though DS Smith’s geographic reach is expected to increase exposure to European sustainability standards.
Looking Forward: Guidance and Investor Watchpoints
Management expressed optimism for the third quarter, expecting increased global revenue and earnings as the integration of DS Smith progresses and cost-saving actions continue. However, leadership cautioned that the softness in European markets could curb the full benefit of recent price increases if demand fails to rebound.
The leadership team reaffirmed its commitment to improving full-year EBITDA (earnings before interest, tax, depreciation, and amortization) and achieving synergy and cost-out targets. However, it did not provide specific new financial guidance figures for the upcoming periods. Investors should monitor progress toward margin recovery in Europe, further realization of cost synergies from the DS Smith deal, and any updates regarding the Global Cellulose Fibers business, which remains under strategic review. With higher debt and increased goodwill on the post-merger balance sheet, financial discipline and execution on promised efficiencies are key focus areas in the coming quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
