Volkswagen reported a loss of 1.67 billion euros ($1.83 billion) for the third quarter as the company set aside 6.7 billion euros to pay for recalling and fixing cars that were rigged to evade U.S. diesel emissions tests.
The company warned Wednesday that operating profit would be "down significantly" as a result of the scandal.
But it stayed with its prediction that unit sales would be on a level with last year's record 10.14 million.
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Company shares jumped 3.7 percent on the announcement in morning trading in Europe.
Volkswagen AG had already announced the 6.7 billion euros in charges, so market analysts expected a loss for the quarter. The result was in fact not as bad as analysts' expectations for a loss of 2.11 billion euros, as compiled by financial data provider FactSet. Sales revenue rose 5.3 percent to 51.5 billion euros.
Chief Financial Officer Frank Witter said Wednesday the company had "solid and robust" cash resources to meet the financial impact of the emissions scandal.
Analysts say the impact will likely be several times larger than the set-asides, including fines, recall and repair costs, and possible lost sales due to damage to the company's reputation.
The scandal became known on Sept. 18, near the end of the quarter, so any impact on quarterly sales was slight.
The U.S. Environmental Protection Agency says Volkswagen installed software on 482,000 cars from model years 2009-2015 that disabled diesel engine emission controls when the vehicles were not being tested. Up to 11 million cars worldwide have the deceptive software.
The scandal spoiled what would otherwise have been a profitable quarter, with 3.2 billion euros in earnings excluding interest, taxes and the scandal set-asides. The scandal has cost Volkswagen the position as the biggest automaker in the world by sales, which Toyota has regained.
"The figures show the core strength of the Volkswagen Group on the one hand, while on the other the initial impact of the current situation is becoming clear," said CEO Matthias Mueller. "We will do everything in our power to win back the trust we have lost."