Volkswagen reports weaker-than-expected Q2 earnings, lowers 2026 sales forecast

Volkswagen reported weaker-than-expected second-quarter earnings on Friday and abandoned its forecast for revenue growth this year, underscoring the mounting pressure on Europe's largest automaker as it accelerates one of the biggest restructuring efforts in its history.

The German carmaker posted lower operating profit despite stronger-than-expected revenue, while warning that geopolitical tensions, trade conflicts and fierce competition from Chinese electric vehicle makers continue to weigh heavily on its business.

The results come weeks after the company confirmed plans to significantly expand its workforce reduction programme, highlighting the scale of the transformation underway across the Volkswagen Group.

Volkswagen's share price fell over 1% on Friday.

Profit falls as outlook deteriorates

Volkswagen reported operating profit of €3.5 billion ($3.98 billion) for the April-to-June quarter, down nearly 10% from the same period last year and well below analysts' expectations of €4.3 billion, according to LSEG data.

Quarterly revenue rose to €82.4 billion, exceeding market forecasts, although the higher sales were not enough to prevent profitability from weakening.

The company recorded an operating margin of 4.2%.

The automaker also lowered its full-year expectations, saying it now expects sales revenue in 2026 to decline by as much as 3%.

It had previously forecast revenue growth of up to 3%.

Chief Executive Oliver Blume acknowledged that Volkswagen had managed to absorb "continued unavoidable headwinds in the double-digit billions" during the first half of the year but warned that operating conditions remain exceptionally difficult.

"At the same time, the environment for the automotive industry remains extremely challenging," Blume said, citing geopolitical crises, trade conflicts, tighter regulations, volatile markets and intensifying competition.

Cost-cutting programme expands

The weaker earnings come as Volkswagen prepares a more aggressive restructuring programme aimed at restoring profitability.

Earlier this month, the company confirmed it is considering cutting up to 100,000 jobs globally, roughly double the number previously under discussion.

In an internal memo to employees, Blume said Volkswagen's costs remain about 20% higher than those of comparable manufacturers, making further efficiency measures necessary.

The company is also reviewing its manufacturing footprint in Germany.

Blume reportedly told employees that management had been unable to identify alternative uses for four facilities previously considered for closure, including plants in Hanover, Zwickau and Emden, along with Audi's Neckarsulm factory.

The proposals could reignite tensions with labour unions after Volkswagen reached an agreement in late 2024 to avoid factory closures in Germany and rule out compulsory redundancies through the end of 2030.

Blume has pledged to reduce global production capacity and cut the group's vehicle lineup by as much as half as part of the overhaul.

China remains the biggest challenge

Volkswagen's restructuring comes as it continues to lose ground in China, its most important market.

The company delivered 6.3% fewer vehicles globally during the first half of the year, largely reflecting ongoing weakness in China, where domestic electric vehicle manufacturers continue to intensify price competition.

The prolonged slowdown in the world's largest automobile market has forced international manufacturers to fight harder for market share while local brands continue to strengthen their positions.

Outside China, however, performance was more encouraging.

Volkswagen regained momentum in North America during the second quarter, while demand in Europe improved following the rollout of entry-level electric vehicles across its Volkswagen, Skoda and Cupra brands.

The company said those launches have supported orders as European manufacturers race to defend market share against expanding Chinese competitors.

Transformation enters a critical phase

Blume described the current period as one of the most challenging in the company's history but maintained that Volkswagen is entering the next stage of its transformation from a position of financial strength.

"In an unprecedented risk scenario, Volkswagen Group enters the next phase of its transformation from a position of strength and with a clear understanding of the opportunities ahead," he said.

The latest results illustrate the difficult balancing act facing Europe's largest automaker as it attempts to lower costs, protect profitability and accelerate its electric vehicle transition while navigating global trade tensions and rapidly changing competitive dynamics.