Key facts
- Volvo Cars will not meet its previous full-year outlook for volume and cash flow.
- Fourth-quarter revenue declined 15.8% year-over-year to SEK 94.38 billion.
- Operating income (EBIT) plummeted 51.1% to SEK 1.89 billion in the fourth quarter.
- Net income swung to a loss of SEK 0.4 billion in the fourth quarter.
- Global vehicle sales declined 7.4% year-over-year through August 2026.
- Electrified vehicle sales increased 13% in the June-August 2026 period.
Volvo Cars has warned that it will not meet its previous full-year outlook for sales volume and cash flow, citing an increasingly challenging market situation and a deteriorating near-term outlook. The company reported fourth-quarter earnings that fell short of market expectations, with revenue and operating income declining sharply.
For the quarter ended December 2025, Volvo Cars posted revenue of SEK 94.38 billion, a 15.8% year-over-year decrease. Operating income (EBIT) plummeted 51.1% to SEK 1.89 billion, resulting in an EBIT margin of 2.0%. The company's net income swung to a loss of SEK 0.4 billion, compared to a profit in the same period of the prior year. Wholesale vehicle volumes fell 8% to 191,200 units, while retail sales declined 3% to 195,700 vehicles.
Chief Executive Håkan Samuelsson attributed the weak results to a "challenging external environment," including EU-US import tariffs, a stronger Swedish krona, weak demand pressuring prices, and the removal of electric vehicle incentives in the United States. The stronger krona alone reduced revenue by SEK 6.5 billion.
Despite the overall sales decline, electrified vehicles accounted for 49% of quarterly retail sales, with fully electric models representing 24% of the total. The company's free cash flow for the quarter was SEK 8.85 billion, driven by an improvement in working capital. Samuelsson stated that the company had successfully executed an SEK 18 billion cost and cash action plan, which included removing 3,000 positions and lowering costs.
Looking ahead, Volvo Cars aims to return to profitable growth in 2026, targeting long-term EBIT margins of over 8% and strong positive cash flows. The company plans to focus on its electrified product portfolio, including the new fully electric EX60 SUV. However, management cautioned that 2026 will remain challenging due to continued pricing pressure, tariff effects, regulatory uncertainty, and softer consumer sentiment.
Analysts at Kepler Cheuvreux expressed concern about the near-term outlook, seeing downside risk to consensus expectations for a 5.3% adjusted EBIT margin in 2026. For the full year 2025, Volvo Cars recorded an adjusted operating income of SEK 12.5 billion and an adjusted EBIT margin of 3.5%, with full-year free cash flow at SEK 2.4 billion.
Volvo Cars experienced a 7.4% decline in global vehicle sales through August 2026, largely due to market pressures in the U.S. and China. Sales of electrified models increased 13% during the June-August 2026 period, accounting for approximately 53.5% of total deliveries, with fully electric vehicle sales rising 27%. However, sales of mild-hybrid and internal-combustion-engine models dropped 23%.