International Paper Company (NYSE: IP) reported a fourth-quarter 2025 GAAP net loss of $2.36 billion, or $(4.48) per diluted share, as a multi-billion dollar non-cash impairment charge outweighed significant top-line growth. The company’s revenue surged 53.1% year-over-year to $6.01 billion, primarily reflecting the consolidation of DS Smith assets. However, adjusted operating results fell short of market expectations, leading to a 7.3% decline in share price during regular trading on Thursday.
Simultaneous with its earnings release, the company announced a definitive strategic pivot: the separation of its North American and EMEA (Europe, Middle East, and Africa) businesses into two independent, publicly traded entities. This structural shift aims to address diverging regional performance metrics and allow for more localized capital allocation.
Analysis of Fourth-Quarter and Full-Year Earnings
The headline GAAP loss of $2.36 billion was heavily influenced by $2.72 billion in pre-tax special items. The largest component was a $2.47 billion non-cash goodwill impairment charge related to the EMEA reporting unit. Management indicated that this adjustment was necessary to reflect current market valuations and structural challenges within the European packaging landscape.
On a non-GAAP basis, the company reported an adjusted operating loss of $0.08 per share, a sharp reversal from the $0.38 profit per share reported in the fourth quarter of 2024. This result significantly missed the Wall Street consensus estimate of a $0.27 profit per share. The miss was attributed to higher-than-anticipated integration costs and margin compression in the newly expanded EMEA segment.
Key Financial Metrics: Fourth Quarter 2025
| Financial Metric | Q4 2025 | Q4 2024 | Variance |
| Net Sales | $6.01 Billion | $3.92 Billion | +53.1% |
| Adjusted EBITDA | $758 Million | $443 Million | +71.1% |
| Adj. Operating EPS | ($0.08) | $0.38 | -121.1% |
| Free Cash Flow | $255 Million | $137 Million | +86.1% |
For the full year 2025, total net sales reached $23.63 billion. While the company recorded a full-year net loss of $2.84 billion, adjusted EBITDA grew to $2.98 billion, up from $1.64 billion in 2024. This growth reflects the inclusion of DS Smith and the realization of approximately $710 million in cost-savings through the company’s restructuring initiatives.
Segment Realignment and Regional Divergence
The Q4 results highlighted a widening gap in regional profitability. The Packaging Solutions North America segment remained a core driver of stability, delivering an operating profit of $319 million. This represented a substantial recovery from the previous quarter’s $166 million loss. The segment benefited from the “80/20” commercial strategy, which focuses on high-margin customer accounts, leading to a 37% year-over-year improvement in adjusted EBITDA for the second half of 2025.
Conversely, the Packaging Solutions EMEA segment reported an operating loss of $223 million for the quarter. While the DS Smith acquisition provided the necessary scale, the region faced significant headwinds, including soft consumer demand and high energy costs. These factors necessitated the $2.47 billion impairment and provided the primary catalyst for the decision to spin off the EMEA business.
2026 Guidance and Strategic Outlook
International Paper provided an optimistic outlook for the 2026 fiscal year, forecasting full-year adjusted EBITDA between $3.5 billion and $3.7 billion. This target assumes above-industry growth and continued progress on structural cost-outs, though it does not yet account for potential price realization or the impact of severe winter weather across the U.S. in early 2026.
The planned separation into “International Paper” (North America) and “EMEA Packaging” is expected to be completed within 12 to 15 months. The EMEA entity is slated for dual listing in London and New York. By decoupling these regions, management intends to insulate the profitable North American core from the more volatile European market conditions that defined much of the 2025 performance.
As the company transitions toward this two-entity model, the focus for the first half of 2026 will likely center on the final integration of DS Smith assets and the stabilization of European margins ahead of the planned spin-off.
Reasons to Pass on IP
- Large Q4 GAAP loss: Reported a $2.36 billion net loss, driven by a $2.47 billion goodwill impairment in the EMEA business.
- Adjusted earnings miss: Adjusted operating EPS was a loss of $0.08, versus consensus expectations for a profit.
- EMEA operating losses: The EMEA segment posted a $223 million operating loss amid weak demand and high energy costs.
- Revenue growth largely acquisition-driven: The 53% increase in quarterly revenue primarily reflected DS Smith consolidation rather than organic growth.
- Integration costs weighing on results: Higher-than-expected DS Smith integration expenses pressured margins and earnings.
- Execution risk from planned split: The separation of North America and EMEA operations introduces restructuring and timing risk.
- Ongoing European market exposure: EMEA results remain vulnerable to macro and energy-cost volatility.
- Negative market reaction: Shares fell more than 7% following the earnings release.