Net profit soared by 90 percent to 5.94 billion kronor ($628 million) while sales climbed by ten percent to 180.6 billion kronor, Volvo Cars said in a statement.
The brand sold more than 534,000 cars in 2016, six percent more than its 2015 record.
“I foresee that 2017 will also be a record year in terms of sales,” said chief executive Håkan Samuelsson.
Volvo has made a remarkable comeback since 2010, when the loss-making carmaker was taken over by Chinese group Geely.
In December, it succeeded in raising 5.0 billion kronor by selling preferential shares to three prudent Swedish investors: public pension funds AMF and AP1, and insurance group Folksam.
On Tuesday, Swedish media revealed the company plans to hire up to 800 people at its plant in Gothenburg, Sweden's second city. The company is also expected to begin manufacturing cars in the US in 2018, where it is building a factory near Charleston, South Carolina.
The carmaker is also leading the drive to develop self-driving cars. In January, it provided test cars to a number of families in Gothenburg, and it is expected to continue the test in London later this year.