Volvo Group (ST: VOLVb) reported stronger second-quarter earnings as solid truck demand and growth in its service business outweighed rising US tariff costs.
The Swedish commercial vehicle manufacturer said adjusted operating income increased to SEK 14.78 billion in the second quarter of 2026, compared with SEK 13.48 billion during the same period last year.
Volvo Q2 Revenue and Profit Increase
Volvo Group’s adjusted operating margin rose to 11.7%, up from 11% in the second quarter of 2025.
Net sales increased by 3% year over year, reaching SEK 126.27 billion from SEK 122.90 billion. On an organic basis, sales grew by 7%.
Organic vehicle sales increased by 6%, while service revenue grew by 7%. The stronger performance helped Volvo absorb higher freight, material and tariff-related expenses.
President and CEO Martin Lundstedt said the company achieved the improvement despite significant pressure from US tariffs and increased operating costs.
According to Lundstedt, stronger service revenue, a favourable mix of brands and markets, and lower net research and development expenses more than offset those headwinds.
Truck Orders Surge 33%
Demand for Volvo trucks strengthened considerably during the quarter.
Net truck orders jumped by 33% year over year to 63,412 vehicles. Orders in North America more than doubled, while demand in Europe and South America improved more gradually.
Total truck deliveries increased by 6%.
The order growth suggests that demand remained resilient across several important markets, despite economic uncertainty and higher trade-related costs.
US Tariffs Cost Volvo SEK 1.2 Billion
US tariffs had a negative impact of SEK 1.2 billion during the second quarter.
More than half of this cost affected Volvo’s Construction Equipment division. During the same quarter last year, tariff expenses totalled only SEK 0.2 billion.
Despite the sharp increase, Volvo’s stronger operations and service revenue helped protect overall profitability.
The company also faced higher freight and material expenses during the period.
Reported Operating Income Climbs
Reported operating income reached SEK 13.48 billion, up from SEK 9.96 billion one year earlier.
The corresponding reported operating margin improved to 10.7% from 8.1%.
Volvo excluded SEK 1.31 billion in costs and one-off items from its adjusted operating result.
These adjustments included a negative SEK 1.83 billion charge linked to Volvo Group North America’s settlement with the California Air Resources Board.
The charge was partly offset by a SEK 405 million gain from the sale of the Flexis joint venture.
Volvo also recorded a positive effect of SEK 119 million after reversing restructuring costs previously recognised in connection with its European bus operations.
Earnings Per Share Rise
Volvo Group’s earnings per share increased to SEK 5.10, compared with SEK 3.64 in the second quarter of 2025.
Operating cash flow from Industrial Operations almost doubled to SEK 5.84 billion from SEK 2.95 billion.
The company attributed the improvement mainly to higher operating income and a smaller increase in working capital.
Higher income tax payments partly offset the cash flow gains.
Truck Division Delivers Strong Growth
The Trucks division generated net sales of SEK 86.85 billion, representing a 6% increase from the previous year.
Its adjusted operating margin improved to 11.2% from 10.3%.
Strong demand in North America and continued growth in Europe supported the segment’s performance.
The truck division remained Volvo Group’s largest business and the main contributor to its quarterly revenue.
Construction Equipment Margin Improves
Volvo Construction Equipment reported net sales of SEK 21.60 billion, down 6% from a year earlier.
The decline mainly reflected the divestment of SDLG. However, organic sales increased by 13%, indicating stronger underlying business activity.
The division’s adjusted operating margin rose to 14.4% from 13.1%, despite carrying more than half of the group’s US tariff expenses.
Bus Sales Remain Stable
Volvo Buses generated SEK 6.07 billion in net sales, broadly unchanged from the same period last year.
The division’s adjusted operating margin edged higher to 8.2% from 7.9%.
The modest improvement came as Volvo continued restructuring parts of its European bus business.
Volvo Penta Margin Declines
Volvo Penta reported largely unchanged net sales of SEK 5.43 billion.
However, its adjusted operating margin fell to 16.7% from 20.7%.
Volvo attributed the decline to lower sales volumes and higher operating costs.
Although Volvo Penta remained highly profitable, its weaker margin contrasted with improvements in the group’s other major divisions.
Volvo Highlights Business Resilience
Lundstedt said the second-quarter results demonstrated Volvo Group’s strength and ability to adapt to changing market conditions.
He added that profitability reached its highest level in several quarters, supported by strong truck orders, improved service sales and disciplined cost management.
The results showed that Volvo was able to absorb substantial tariff expenses while still improving earnings and margins.
Volvo Seeks US Tariff Refund
After the quarter ended, Volvo Group filed a refund request under the International Emergency Economic Powers Act.
The company expects to recognise the potential refund during the third quarter of 2026.
Volvo said the refund should offset a forecast SEK 1.1 billion negative impact on operating income from US tariffs.
However, the final financial effect will depend on the outcome and timing of the company’s refund application.
Volvo Outlook Supported by Truck Demand
Volvo Group enters the second half of 2026 with stronger truck orders, higher service revenue and improving cash flow.
Nevertheless, US tariffs, freight expenses and material costs remain important risks for future profitability.
The company’s ability to maintain strong demand in North America and Europe will be central to its performance in the coming quarters.
For now, Volvo’s second-quarter results suggest that its diversified operations and growing service business are helping the company manage rising trade costs.
