Sales rose by 15 percent in the quarter from a year earlier to around 1 billion Danish crowns (118.88 million pounds), helped by a 30 percent increase in sales at B&O Play, the company's more affordable range of headphones and smaller speakers.

The company also raised its forecast for its full-year operating margin.

The sales boost is a significant milestone in Bang & Olufsen's efforts to bounce back from the 2008 financial crisis and its attempts to gain a foothold in a rapidly changing market for cheaper flat-screen TVs, streaming and smartphone services.

B&O's shares surged as much as 18 percent. At 1156 GMT, shares were up 10.6 percent at 178 crowns each.

"We've already reached our goal by the first half-year so it's very likely that we will maintain it for this financial year," said Chief Executive Henrik Clausen.

B&O Play is close to becoming the largest of Bang & Olufsen's two product categories.

"Bang & Olufsen is one business standing on two legs. That one leg is growing faster than the other is completely fine for us," Clausen told Reuters.

A TV from the classic Bang & Olufsen line sells at more than $28,000 and speakers can cost nearly $16,000. Products from the B&O Play range are in price from $190 to around $2,700.

Clausen also highlighted the changing nature of the global market for televisions, saying how consumers are using streaming and computers more.

Bang & Olufsen reported earnings before tax of 83 million Danish crowns compared to 37 million crowns in the same quarter last year and above analyst expectations of 67.4 million crowns in a Reuters' poll.

The company raised its forecast for its operating margin for the underlying business to around 3 percent from a previous forecast of 1-3 percent for 2017/18.

Bang & Olufsen's biggest shareholder is Chinese investor Qi Jianhong, who owns just under 20 percent in the company through his Sparkle Roll companies. In April 2016, Bang & Olufsen rejected a takeover bid by Sparkle Roll.

(Graphic for Bang & Olufsen share price, click http://reut.rs/2CRh5Es)

(Reporting by Julie Astrid Thomsen; editing by Jacob gronholt-Pedersen and Jane Merriman)

By Julie Astrid Thomsen