Volvo swung back to a thin second-quarter operating profit on Friday, helped by faster-than-planned cost cuts and record EV sales, even as revenue fell 16.9% and demand in China slumped.
The Sweden-based automaker, majority-owned by China’s Geely, reported operating income of 800 million Swedish kronor and an operating margin of 1.1% for the April-to-June quarter, against a loss of 10.0 billion kronor a year earlier.
Net income came in at 400 million kronor, reversing an 8.1 billion-kronor loss, with basic earnings of 0.42 kronor a share.
The year-earlier figures had been dragged down by an 11.4 billion-kronor writedown on the EX90 and ES90 platform and 1.4 billion kronor in restructuring costs, Volvo‘s first operating loss since its 2021 stock-market listing, neither of which recurred.
The impairment stemmed largely from the EX90, Volvo‘s first software-defined vehicle, which reached customers late and with software problems.
Stripped of one-off items, operating profit fell 72.0% from 2.9 billion kronor, underlining how far the underlying business has weakened.
A Thin Return to the Black
Chief executive Håkan Samuelsson framed the quarter as progress against a difficult backdrop.
“In this very challenging external environment, we made progress on our strategic actions,” he said.
Revenue dropped to 77.7 billion kronor from 93.5 billion, which Volvo attributed to lower wholesale volumes, a weaker sales mix and pricing, a prior-year one-time sale of subscription-car portfolios worth 3.3 billion kronor, and currency effects.
The gross margin nonetheless improved to 16.8% from 13.5%, and the company said the year-earlier comparison had been flattered by about 4.0 billion kronor in positive one-off effects.
The result leaned heavily on the group’s turnaround.
Volvo said it had delivered a targeted 5 billion kronor of full-year cost savings six months ahead of schedule, on top of 8 billion kronor cut in 2025, extending an 18 billion-kronor cost-and-cash plan launched in 2025 that also saw it withdraw guidance and reduce its office workforce by about 15.0%.
Headcount was down by roughly 3,000 positions against the first half of last year.
Free cash flow came in at negative 5.2 billion kronor, which the company said reflected an inventory build-up tied to the start of EX60 production rather than a deterioration in the business.
The company also flagged up to 3.6 billion kronor in costs from recalls of EX30 battery cells and the XC40, which it expects to recover from its suppliers.
For the first half, revenue fell 15.0% to 150.3 billion kronor, with operating income of 2.4 billion kronor against an 8.0 billion-kronor loss a year earlier.
Sequentially, revenue rose from 72.6 billion kronor in the first quarter, while operating income eased from 1.6 billion kronor and net income from 0.7 billion kronor, as the EX60 production ramp weighed on margins.
China Drags, Europe and US Hold
Retail sales fell 5.6% to 171,501 vehicles, with the decline concentrated in China.
Sales in Greater China dropped 35.0% to 24,900 units, as the world’s largest car market stayed mired in a price war and a fast pace of new launches from domestic brands.
Even there, electrified sales jumped 144.0% to about 9,900 vehicles, driven by the plug-in hybrid XC70, though not enough to offset the broader fall.
Europe and the rest of the world, Volvo‘s biggest region, edged up 2.0% to 104,300 vehicles, while the Americas rose 4.0%, led by a 9.0% gain in the US as the market showed early signs of recovery after months of decline.
Samuelsson said the US had posted two straight months of growth in May and June and that Volvo expected the rebound to continue as the drag from withdrawn incentives eased.
EVs: The Bright Spot
Deliveries of fully electric vehicles rose 14.0% globally, a ninth straight month of growth, led by strong demand for the EX30 and EX40 in Europe, where battery-electric sales jumped 25.0%.
Electrified cars, including plug-in hybrids, made up 52.0% of sales, up from 44.0% a year earlier, while pure battery-electric models accounted for 25.0%, up from 21.0%. Volvo is targeting 90.0% to 100.0% electrified sales by 2030 and net-zero emissions by 2040.
Volvo began customer deliveries of its new EX60 in Europe this month, after starting production at its Torslanda plant in April.
The mid-size SUV is the first car built on the company’s SPA3 electric architecture, offers a range of up to 810 kilometres and charges from 10.0% to 80.0% in 16 minutes, and is priced in line with the best-selling XC60 plug-in hybrid.
The EX60 “continues to surpass expectations with robust customer orders,” chief commercial officer Erik Severinson said. Order intake has run ahead of the company’s forecasts, with more than 3,000 firm orders in Sweden alone in the model’s first month, outpacing the cheaper EX30, and Volvo expects to sell around 40,000 EX60s this year.
Order books have also opened in the US, where the SUV starts at $58,400, and the company is offering it through a new fixed-monthly-payment subscription that begins in Sweden.
During the quarter, Volvo also became the first major carmaker to roll out Google’s Gemini assistant, delivered over the air to models dating back to 2020, and won a US authorisation to keep selling connected cars despite its Chinese ownership under Washington’s connected-vehicle rule.
Betting on a Stronger Second Half
Volvo reiterated that it expects significantly stronger sales in the second half than the first, on the back of growth in Europe, a continued US recovery and a still-challenging China.
The company also expects strong positive free cash flow late in the year, ending 2026 roughly at break even on that measure.
Samuelsson said Volvo would reveal two new models after the summer to strengthen its electrified line-up, and would lay out the next phase of its strategy in September, including what it called the most ambitious product plan in its history and its approach to regionalisation.
After the quarter closed, Volvo signed a memorandum of understanding with the Belgian federal government and the region of Flanders to shore up its plant in Ghent, backed by up to 119 million euros in support, a deal it said could open the door to contract manufacturing of other brands’ cars.
During the quarter, Volvo converted $65.5 million of a loan to its affiliate Polestar into shares, keeping a 19.9% holding.
Volvo, which is listed in Stockholm and about 78.9% owned by Geely, said its carbon dioxide emissions per car in the first half were 32.0% below 2018 levels as it pursues an all-electric future.
