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BERLIN—German auto maker Daimler AG on Thursday reported a sharp increase in third-quarter earnings on strong demand for its flagship S-class sedans and robust growth in Europe, Asia and the U.S.

Daimler said net profit rose 49% to €2.74 billion ($3.47 billion) in the quarter ended Sept. 30, as revenue increased 10% to €33.12 billion. Including non-controlling interests, net profit totaled €2.82 billion.

“Our strategy is paying off. We are growing profitably and look to the future with optimism also beyond the full year,” said Chairman Dieter Zetsche. “In all our divisions, both the product offensives and the efficiency programs are taking effect. We are confident that we will achieve the targets we have set on a sustained basis.”

Mercedes-Benz, Daimler’s luxury-car division, reported its strongest-ever quarter in terms of sales. Revenue in the division rose 13% to €18.68 billion and earnings before interest and taxes was €1.58 billion, up from €1.20 billion. The car division posted a return on sales of 8.5%, up from 7.3%.

Mercedes sold 431,000 cars in the quarter, an increase of 9% from a year earlier, with sales growth of 18% in Europe and China and a 5% increase in the U.S. Mercedes sales in Germany declined 5%.

Daimler said its earnings growth was driven by strong sales of its S-class sedans, which have struggled to compete with Tesla’s all-electric Model S sedan in the U.S., and the company’s growing range of compact cars. Daimler said Mercedes sold 28,200 S-class vehicles world-wide in the first nine months of the year, “three times as many as in the same period last year.”

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Daimler Profit Soars As Surging Mercedes-Benz S-Class Sedan Leads To 13% Rise in Revenue and 31% Profit Increase at Mercedes-Benz Cars Division - Profit Margin Rises to 8.5%

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