Company Reports

Leonardo has a well-diversified portfolio across geographies and platforms, with 71% of its revenue from defense and 29% from civil. Escalating global security concerns are driving higher growth in the defense market, which is expected to be uninterrupted for at least several years as international tensions drive increased investment in global security solutions.

Leonardo raised 2026 guidance for orders to EUR 28.2 billion, EBITA to EUR 2.21 billion, and free operating cash flow to EUR 1.37 billion after organic first-half revenue rose 8% and EBITA 26%. Revenue guidance stayed at EUR 22.1 billion, bringing the 10% margin target forward by one year.

Leonardo continues to benefit from rising European defense spending, supported by recent progress in the Global Combat Air Programme, or GCAP, a major UK helicopter award, and strong order momentum across its defense businesses.

Leonardo has a well-diversified portfolio across geographies and platforms, with 71% of its revenue from defense and 29% from civil. Escalating global security concerns are driving higher growth in the defense market, which is expected to be uninterrupted for at least several years as international tensions drive increased investment in global security solutions.

Leonardo reported first-quarter 2026 orders of EUR 9 billion (31% increase year over year), a backlog of EUR 57 billion (23% increase), revenue of EUR 4.5 billion (10% increase at constant currency), and EBIT margin of 6.3% versus 5.1% in first-quarter 2025.

Leonardo reported 2025 orders of EUR 23.8 billion (up 14.5%), revenue of EUR 19.5 billion (up 10.9%), EBITA of EUR 1.75 billion (up 18.2%), a 9.0% return on sales, free operating cash flow just above EUR 1.0 billion, and net debt was reduced to EUR 1.0 billion.

European defense stocks rose on Jan. 8 after President Donald Trump called for a roughly 66% increase in the 2027 US defense budget, alongside renewed geopolitical risk from Washington’s rhetoric on Greenland.

Reports of the US-driven Russia-Ukraine peace deal triggered a downturn in European defense stocks, with names under our coverage down between 10%-20% since October highs.

Leonardo has a well-diversified portfolio across geographies and platforms, with 83% of its revenue from defense and 17% from civil. Escalating global security concerns are driving higher growth in the defense market, which will be uninterrupted for at least several years, as many countries in Europe have underspent since the end of the Cold War. The company is strategically well positioned to benefit, given its significant stakes in a broad array of major international defense projects.

Leonardo delivered another strong quarter, with orders up 24%, revenue up 12%, and EBITA rising 23%, lifting the EBIT margin to 7% from 6.4%. Free operating cash flow and net debt improved, supported by broad momentum across helicopters, electronics, aeronautics, and cybersecurity.

European defense stocks fell sharply after US President Donald Trump met with Russian President Vladimir Putin in Alaska and with Ukrainian President Volodymyr Zelenskyy in Washington. Markets linked the selloff to media reports of a potential ceasefire and US-led deals.

Leonardo posted a strong operational start to 2025. Order intake rose 20.6% to EUR 6.9 billion, revenue was up 14.9% to EUR 4.2 billion, and EBITDA improved 17.9% to EUR 211 million. The backlog hit EUR 46 billion and net debt fell to EUR 2.1 billion, helped by the UTM sale.

NATO set a new defense spending target of 5% of GDP, with 3.5% allocated to core defense and implementation shifted from 2032 to 2035. The agreement places renewed emphasis on European joint procurement as part of a broader push for defense integration.

On June 13, Israel launched a series of strikes against Iranian facilities and personnel targeting its nuclear enrichment and armament programs. Shares of global defense contractors appreciated as much as 4% in early trading in reaction to the news.

Narrow-moat Leonardo reported a robust start to 2025, underpinned by accelerating order momentum, expanding margins, and improving cash generation. Group order intake rose 20.6% year on year to EUR 6.9 billion, driving a record backlog of EUR 46 billion, with a healthy 1.7 times book/bill ratio. Revenue rose by 14.9% to EUR 4.2 billion, driven by strong performance in defense electronics, helicopters, and aircraft. EBITDA rose 17.9% to EUR 211 million, with the return on sales improving to 5.1%, and free operating cash flow turned positive at EUR 580 million, supported by working capital discipline and milestone payments. Net debt decreased to EUR 2.1 billion, aided by proceeds from the UAS business sale, driving rating upgrades by S&P and Moody’s. Management reaffirmed 2025 guidance.

Leonardo has a well-diversified portfolio across geographies and platforms, with 83% of its revenue from defense and 17% from civil. Escalating global security concerns are driving higher growth in the defense market, which will be uninterrupted for at least several years, as many countries in Europe have underspent since the end of the Cold War. The company is strategically well positioned to benefit, given its significant stakes in a broad array of major international defense projects.

While it is still too early to fully assess the implications of the proposed tariffs on the defense sector, it's important to consider the US' role in the global defense trade. The US remains a net exporter of military equipment, accounting for roughly 43% of global arms exports between 2021 and 2023 (based on SIPRI TIV data), while representing just 3% of global arms imports over the same period. Although the US defense industry is largely self-sufficient in end-product manufacturing, it remains exposed to risks tied to critical raw material imports—such as gallium, yttrium, and tantalum—which are vital for systems like fighter jets, helicopters, armored vehicles, and precision munitions.

After recently raising our fair value estimate in anticipation of European defense spending exceeding NATO’s 2% target, we are revising our projections upward. Given recent developments, including escalating discussions about a potential US pullback and increasing pressure from Washington, D.C., for Europe to boost its defense budgets, we now expect European defense spending to reach 3.1% of GDP by 2029 (previously 2.4%) and 3.5% by 2032 (previously 2.8%). We are raising Leonardo’s fair value estimate to EUR 42.4, as it will benefit from higher European defense spending, particularly in electronics and its land vehicle JV with RHM, and even more if Europe implements a debt break for defense. Italy and Spain, given their macroeconomic constraints, would otherwise struggle to meet the 2% GDP target by 2028. Italian Prime Minister Giorgia Meloni emphasized the EU's need to take further steps beyond simply excluding defense spending from fiscal rules.

Leonardo has a well-diversified portfolio across geographies and platforms, with 83% of its revenue from defense and 17% from civil. Escalating global security concerns are driving higher growth in the defense market, which will be uninterrupted for at least several years, as many countries in Europe have underspent since the end of the Cold War. The company is strategically well positioned to benefit, given its significant stakes in a broad array of major international defense projects.

Narrow-moat Leonardo delivered a strong 2024 performance with record orders and a book/bill ratio of 1.2 times, ensuring solid revenue visibility. Revenue grew 11% to EUR 17.8 billion with EBIT margin improving to 8.6%. Despite external challenges, including Boeing 787 delays and headwinds in the space telecom business, strong execution in its defense electronics, helicopter, and cyber businesses helped drive growth.