British American Tobacco Defies Decline with 3.7% U.S. Revenue Surge Led by Velo Nicotine Pouches

British American Tobacco (LON: BATS) topped analyst estimates in the first half of 2025, posting a 1.7% rise in profit at constant currency despite the ongoing challenges in the traditional tobacco sector. One standout in the results was the company's U.S. operations, which showed a surprising return to growth.

Revenue from the U.S. market climbed 3.7% on a constant currency basis, fueled largely by gains from the Velo nicotine pouch brand. These oral nicotine products continue to gain traction as BAT and competitors such as Philip Morris, Imperial Brands (OTC: IMBBY), and Altria (NYSE: MO) battle shrinking sales of traditional cigarettes by expanding into vaporizers, heated tobacco, and nicotine alternatives.

BATS reported adjusted diluted earnings per share of 162 pence for the six months ending June 30, up from 159.4 pence the previous year and comfortably ahead of the consensus estimate sitting at 154.8 pence. Growth in newer product categories contributed to a 3.9% bump in overall sales, signaling the evolving preferences of consumers away from classic tobacco products.

The company's portfolio, including established cigarette brands like Lucky Strike and Dunhill, is navigating shifting market dynamics as health concerns and regulatory pressure mount. Yet, the recent figures hint that BAT's diversification strategy may be starting to pay off, especially in the U.S., where the nicotine pouch segment appears to be gaining serious steam.

With the tobacco giant quietly flexing green shoots in its American business, it raises an interesting question: as traditional smoking declines, how aggressively will BAT and its peers pivot to these alternative nicotine streams to keep revenue growing?