Volvo Cars Q4 2025 Financial Report: Profit Drops, Cash Improves

Read Volvo Cars’ Q4 and full-year 2025 results, including revenue decline, lower EBIT margin, stronger free cash flow, and electrified sales growth.

Volvo Cars has published its financial results for the fourth quarter and full year 2025, and the message is clear: the turnaround plan is progressing, but the road ahead remains rough. Profitability weakened sharply, yet the company managed to deliver stronger cash performance — a combination that highlights both the pressure on the market and Volvo’s efforts to stabilise its business.

In Q4 2025, revenue dropped to SEK 94.4 billion, which is roughly €8.3 billion. Operating income (EBIT) fell to SEK 1.9 billion, or around €170 million, leaving Volvo Cars with an EBIT margin of 2.0 percent.

The company pointed to a mix of external headwinds behind the decline: EU–US import tariffs, the negative currency impact of a stronger Swedish krona, weak demand pushing pricing lower, and the removal of electric vehicle incentives in the United States, which reduced sales momentum during the quarter.

Still, Volvo Cars delivered one figure that stood out in a more positive way. Free cash flow reached SEK 8.8 billion — approximately €770 million — supported by the successful execution of its SEK 18 billion cost and cash action plan, worth about €1.6 billion. Volvo says the programme has helped establish a structurally lower cost base and strengthened its ability to navigate an unstable market.

Full-year results show the same mixed pattern. Adjusted operating income for 2025 came in at SEK 12.5 billion, roughly €1.1 billion, while free cash flow for the year totalled SEK 2.4 billion — around €210 million. In a difficult environment, Volvo Cars appears to be prioritising resilience and cash discipline, even as margins remain under strain.

Electrification continues to reshape the sales mix. Fully electric vehicles represented 24 percent of sales in Q4, while electrified models overall accounted for 49 percent. Volvo Cars also reported that fully electric sales grew for three consecutive months through December, with retail orders continuing to rise.

China stood out as a relative bright spot. Volvo Cars highlighted encouraging demand for the XC70 long-range plug-in hybrid SUV, which supported performance and helped the company increase its premium market share in what remains one of the most competitive automotive markets globally.

Looking ahead, Volvo Cars is not promising an easy 2026. The company expects continued pricing pressure, tariff effects, regulatory uncertainty and softer consumer sentiment, with the overall premium market forecast to shrink. In the first half of the year, cash performance will also be weighed down by a temporary inventory build-up of XC90 and XC60 models at the Torslanda plant, as Volvo prepares for the production start of the new EX60.

At the same time, the product pipeline is central to Volvo’s recovery strategy. Deliveries of the fully electric EX60, recently presented by the company, are expected to ramp up in the second half of 2026 following strong early customer interest. The XC70 will enter its first full year of production and sales, the updated model year 2026 EX90 is set to reach more customers, and the EX30 will complete its first full year of production in Ghent.

Volvo Cars says it aims to return to year-on-year volume growth in 2026 and to generate clearly stronger free cash flow than in 2025. The long-term ambition remains unchanged: building a business capable of delivering EBIT margins above 8 percent, supported by electrified products and tighter cost control — though the latest report shows that reaching that level will take time.