Company Reports

Rheinmetall became a pure-play defense company after classifying power systems as discontinued operations in December 2025. From 2026, all revenue is generated by defense activities, positioning the group to benefit from the structural increase in European military spending after decades of underinvestment.

Rheinmetall shares were down 3.5% on Aug. 6 despite second-quarter sales rising 69% and operating profit increasing 115%. Margin reached 17.1%, while EUR 11.4 billion of nominations lifted the backlog to EUR 80.5 billion.

Rheinmetall shares fell around 15% after Germany canceled the F126 frigate program, removing one of the largest components of the roughly EUR 12 billion naval nomination opportunity management had targeted for 2026.

After strong outperformance since 2022, Rheinmetall has recently lagged defense peers, with the pullback coinciding with procurement delays, weaker upfront payments, and growing concern that ammunition demand may normalize after peace talks.

After a standout 2025, shares have lost momentum, now trading at EUR 1,209 versus the median consensus forecast of EUR 2,125, as five investor concerns weigh on sentiment: execution misses, slow backlog conversion, ammunition- and drone-related risk, naval uncertainty, and ceasefire vulnerability.

Rheinmetall's first-quarter sales increased about 8%, operating profit rose 17% to EUR 224 million, operating margin improved to 11.6%, and order backlog reached roughly EUR 73 billion, including naval.

Rheinmetall’s 2025 defense sales rose 29% to EUR 9.9 billion, operating profit grew 33% to EUR 1.84 billion, margin expanded to 18.5%. Backlog rose 36% to a record EUR 63.8 billion. Shares shed 8% as 2026 guidance of EUR 14.0 billion-EUR 14.5 billion fell short of consensus near EUR 15 billion.

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 80% of its revenue from its defense business and 20% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. Given the latest developments, including talks about a potential US pullback and increasing pressure from the US for Europe to boost defense budgets, we expect European defense spending to reach 3.1% of gross domestic product by 2029, up from 2.4%, and to reach 3.5% by 2032 (2.8% previously). This situation offers a significant opportunity for Rheinmetall to benefit from its well-diversified geographical presence and product portfolio.

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.

Rheinmetall group sales rose 13% to EUR 2.8 billion, led by 17% defense growth to EUR 2.3 billion. Operating income rose 19% to EUR 360 million, with margins of 12.9% groupwide and 15.7% in defense. Order intake fell 36% amid the German election, but backlog grew 23% to EUR 63.8 billion.

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 80% of its revenue from its defense business and 20% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. Given the latest developments including talks about a

Rheinmetall agreed on the terms to acquire Naval Vessels Lürssen, a shipbuilder with EUR 1 billion sales, a EUR 5 billion backlog, and EBIT margins at 10%, above the peer median. Closure of the deal is targeted for early 2026, subject to approvals.

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.

Rheinmetall group sales rose 9% to EUR 2.4 billion, entirely driven by defense. EBIT grew 2% to EUR 276 million (11.3% margin), held back by F-35 ramp costs and civil drag. Nominations were flat at EUR 2.6 billion. Free cash flow fell to EUR 911 million due to delayed prepayments and elevated capex.

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 80% of its revenue from its defense business and 20% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. Given the latest developments including talks about a

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.

Wide-moat Rheinmetall reported group backlog rising 56% year on year to EUR 62.6 billion, supported by EUR 11 billion in new nominations. Management confirmed that around EUR 55 billion of framework agreements—mainly from Germany—are actively converting into firm contracts, providing over four years of visibility. Revenue rose 46% year on year to EUR 2.31 billion, almost entirely from organic defense growth, while defense margins reached a first-quarter record of 11.5%.

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.