ALV — Q3 2026 Financial Report Analysis
Q3 · Fiscal year 2026 · Published by Pham Hop
Autoliv's Q3 2026 sales slipped 0.5% to $2.69B, beating a 1.9% drop in global car output on India and Chinese-brand growth, but a 32.5% tax rate cut EPS 6.8% to $2.13 and full-year margin guidance was trimmed to around 10.5%.
At a glance
- Organic sales −1.1% vs. global vehicle production −1.9%. Autoliv beat its market by 0.8 percentage points even though the regions that shrank most (China's foreign-brand plants, Europe) are where it sells the most safety content per car.
- Adjusted operating margin 9.7%, down from 10.0%. That is with a $26 million timing benefit from engineering income. Full-year margin guidance was cut to the bottom of the range, "around 10.5%".
- EPS $2.13, down $0.15. Higher tax cost $0.16 and lower operating income cost $0.13. Buybacks, which cut the diluted share count 5%, added back $0.11.
- Revenue
- $2.7B
- -0.5% YoY
- Net income
- $155M
- -11.4% YoY
- Diluted EPS
- $2.13
- -6.8% YoY
- Operating margin
- 9.4%
This period vs a year ago
- Same period last year
- This period
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Asia carried the quarter, a tax charge took the EPS
Autoliv, which makes airbags, seatbelts and steering wheels for carmakers, sold $2,693 million of safety systems in the third quarter of 2026 (July–September), 0.5% less than a year earlier. Global light-vehicle production (LVP, the number of cars and light trucks built worldwide, which sets the ceiling on how many airbags carmakers order) fell 1.9%, and Autoliv's sales excluding currency moves fell less, by 1.1%. Growth in India and with Chinese carmakers offset most of the declines with Volkswagen, Ford and Stellantis. Diluted earnings per share fell 6.8% to $2.13, and the biggest single reason was not the business: a 32.5% tax rate, up from 26.9%, after tax audits were closed during the quarter.
The numbers
| Metric | Q3 2026 | Q3 2025 | YoY change |
|---|---|---|---|
| Net sales | $2,693M | $2,706M | −0.5% |
| Organic sales growth (excl. currency) | −1.1% | — | — |
| Global light-vehicle production | −1.9% | — | — |
| Gross margin | 18.4% | 19.3% | −0.9pp |
| Operating income | $254M | $267M | −5.0% |
| Operating margin | 9.4% | 9.9% | −0.4pp |
| Adjusted operating margin (non-GAAP) | 9.7% | 10.0% | −0.3pp |
| Effective tax rate | 32.5% | 26.9% | +5.6pp |
| Net income | $155M | $175M | −11.4% |
| Diluted EPS | $2.13 | $2.28 | −6.8% |
| Adjusted diluted EPS (non-GAAP) | $2.19 | $2.32 | −5.7% |
| Operating cash flow | $239M | $258M | −7.4% |
| Diluted shares | 72.9M | 76.7M | −5.0% |
Operating margin here means the share of sales left after paying for materials, factories, engineering and overheads, before interest and tax. For a parts supplier like Autoliv it depends mostly on two things: how full its plants are (fixed costs spread over more or fewer units) and whether it can pass rising raw-material and tariff costs on to carmakers.
Takeaway: Autoliv's sales held up better than global car output, but its margin did not: costs for raw materials, logistics and the Thailand floods grew faster than it could recover them, and a one-time engineering-income timing gain hid part of the squeeze. The full-year plan now depends on a much stronger fourth quarter.
Where sales grew and where they shrank
Autoliv reports two product groups and four regions. Currency added 0.6% to reported sales, so "organic" (excluding currency) growth was −1.1%.
| Q3 2026 sales | Reported change | Organic change | Vehicle production change | |
|---|---|---|---|---|
| Airbags, steering wheels & other | $1,847M | +0.9% | +0.2% | — |
| Seatbelt products & other | $845M | −3.5% | −3.9% | — |
| Americas | $901M | +0.4% | −2.9% | −3.0% |
| Europe, Middle East & Africa | $711M | −4.5% | −2.9% | +0.8% |
| Asia excl. China | $553M | +2.7% | +8.8% | +6.4% |
| China | $528M | +0.4% | −5.8% | −6.9% |
- India was the standout: organic sales rose 29%, which the company attributes to strong production growth and "the trend of increased safety content in vehicles in India" (more airbags fitted per car). Autoliv says it outgrew Indian vehicle production by 11 points.
- China shows how the market is splitting. Production by global brands in China fell 25%, while Chinese brands grew 1.4%. Autoliv's sales to Chinese carmakers rose about 21% and its sales to global carmakers fell about 29%. Chinese carmakers now make up 58% of Autoliv's China sales, up from about 46% a year ago.
- Europe was the weak spot: organic sales fell 2.9% while regional production grew 0.8%, a 3.7-point underperformance, with VW, BMW and Stellantis named as the main decliners.
- Americas was in line with production overall; North America alone beat production by close to 2 points. Ford, Stellantis and an EV carmaker were the main drags.
- Airbags grew a little (side, center and driver airbags up; passenger airbags, curtains and knee airbags down). Seatbelts fell 3.9% organically, with declines in China, the Americas and Europe.
Autoliv estimates that the mix of which regions and models were built cost it about 0.9 points of sales growth. Production shifted toward places and models where it sells less per car.
Why profit fell
Gross profit fell $26 million to $496 million. The 10-Q gives three reasons: the $13 million supplier settlement that boosted gross profit in Q3 2025 (not repeated), lower sales and higher logistics costs. Taking the $13 million out of last year, gross margin went from about 18.8% to 18.4%. That 0.4-point decline is the real cost squeeze, smaller than the headline 0.9 points.
Raw materials were a gross headwind of about $42 million in the quarter, and the company now expects about $120 million for the full year. Tariffs cost about $6 million net after customers reimbursed more than 80% of them. Including the dilution from passing costs through at zero margin, tariffs took about 0.35 points off operating margin.
Research, development and engineering cost, net, fell $18 million to $99 million, mainly because of "$26 million of higher engineering income related to timing effects". Carmakers pay Autoliv for engineering work, and when those payments are booked shifts from quarter to quarter. This is what kept adjusted operating income down only 3.4% ($262 million vs. $271 million). Without the timing gain, the quarter would have been noticeably weaker.
Other expense of $5 million was mostly capacity-alignment (restructuring) costs for the plant closures in Türkiye.
What the headline numbers hide
- The EPS drop is mostly tax, not operations. Discrete tax items, mainly from tax audits closed in the quarter, added 4.9 points to the tax rate. A year ago, discrete items had lowered it by 1.3 points. The company's EPS bridge: −$0.16 from higher tax, −$0.13 from lower operating income, +$0.11 from fewer shares, +$0.05 from lower financial and non-operating costs. At last year's tax rate, EPS would have been roughly flat.
- The operating line was flattered, not hurt, by one-offs this year. The $26 million engineering-income timing benefit lifted this quarter. Last year's quarter had the $13 million supplier settlement, which was later reversed in Q2 2026 after a court ruling. Strip both out and underlying operating income fell more than the reported 5%.
- GAAP vs. adjusted gap is small this quarter. Adjusted operating income excludes $8 million of capacity-alignment costs (Türkiye). Adjusted net income was $160 million vs. $155 million GAAP. For the nine months the gap is large: $93 million of restructuring cost in operating income, which is why nine-month GAAP EPS fell 19% ($5.36 vs. $6.59) while adjusted EPS was flat at $6.67.
- Cash conversion is fine, but the year is back-loaded. Operating cash flow of $239 million was 1.5 times net income. Free operating cash flow (after capital spending) was $124 million, 80% of net income vs. 87% a year ago, because inventory rose $71 million in the quarter. Nine-month operating cash flow is $598 million against full-year guidance of about $1.2 billion, so the fourth quarter has to deliver roughly $600 million, about as much as the first nine months combined.
- Working capital is slightly heavier. Receivables were 22.5% of annualized sales vs. 21.8% a year ago. Inventory was steady at 9.5% vs. 9.6%.
- Buybacks are a large share of what goes to shareholders. Autoliv bought back 1.23 million shares for $150 million (average $121.69) and paid $63 million in dividends ($0.87 per share). Over 12 months it has repurchased 4.14 million shares for $500 million. Net debt was $1,763 million and the leverage ratio was 1.3x, under the company's 1.5x ceiling.
- Legal exposure is disclosed but not accrued. BMW is suing in Germany for about €95 million including interest over the conduct in a past EU antitrust case. Autoliv calls a loss "reasonably possible" and puts the range at €0–95 million, with nothing booked.
Guidance and outlook
Management cut the margin outlook and kept everything else:
| Full-year 2026 guidance | Now | Before |
|---|---|---|
| Organic sales growth | Around 0% | Around 0% (unchanged) |
| Adjusted operating margin | Around 10.5% | Around 10.5–11% |
| Operating cash flow | Around $1.2 billion | Around $1.2 billion (unchanged) |
| Capex, net, % of sales | Around 4% | — |
The assumptions are global vehicle production down about 2%, currency adding about 2.5% to sales and a tax rate of about 30% excluding unusual items. Management says cost headwinds "have increased materially" through the year, citing raw materials, logistics, the recent flooding in Thailand and lower call-off accuracy. Call-off accuracy is how closely carmakers' actual orders match their forecasts; when it is poor, a supplier's plants run inefficiently.
Our read: the nine-month adjusted margin is 9.4%, and the third quarter's was 9.7%. To reach about 10.5% for the year, the fourth quarter needs a margin well above that run-rate. Management is counting on "an increasing number of product launches and significant raw material recoveries", which means getting carmakers to pay back this year's metal and material cost increases. Management has kept the cash-flow and sales guidance unchanged, which suggests it has visibility on those negotiations. But the margin guidance was already cut once this year, and the roughly $600 million of Q4 operating cash flow depends on the same recoveries landing. The structural story is clearer than the near-term one. Autoliv is winning share with Chinese carmakers and in India, and losing volume with Western brands in Europe and in China. That shift lowers sales per car, and it could keep pressing margins even after the raw-material recoveries arrive. The next checkpoint is the fourth-quarter and full-year report in early 2027 (last year's annual report was filed on February 19, 2026). Autoliv will also hold an investor day in Shanghai on April 26–27, 2027, focused on its strategy with Chinese carmakers.