Key Takeaways
- Shares of Rheinmetall declined over 2% following first-quarter results that trailed market forecasts
- First-quarter revenue reached €1.94 billion, representing 8% growth year-over-year, though falling short of the €2.27 billion estimate
- Operating profit climbed 17% to €224 million, remaining below the anticipated €262 million figure
- Order backlog expanded 31% to an unprecedented €73 billion, marking the first inclusion of Naval Systems
- Management reaffirmed 2026 targets calling for €14–€14.5 billion in revenue and approximately 19% operating margin
The German defense manufacturer reported first-quarter revenue of €1.94 billion, advancing 8% compared to €1.80 billion in the corresponding period last year. The figure substantially underperformed the analyst consensus projection of €2.27 billion.
Operating profit registered at €224 million, marking a 17% year-over-year advance, while trailing the market’s €262 million expectation. The operating margin expanded to 11.6% from the previous year’s 10.6%.
Basic earnings per share from continuing operations increased to €2.18 compared to €1.78 in the prior year, though coming in below the €2.70 analyst forecast.
Operating free cash flow registered a negative €285 million for the three-month period, contrasting sharply with the positive €243 million generated a year earlier and missing the positive €181 million analyst projection.
Shares declined more than 2% on Thursday after the quarterly disclosure. The underperformance across several critical financial metrics drew considerable attention from market participants, despite evidence of underlying business expansion.
Unprecedented Order Book Provides Reassurance
A bright spot in the quarterly announcement came from the order backlog, which surged 31% to €73 billion from €56 billion in the year-ago period. The company integrated Naval Systems into its reporting for the first time, contributing an order backlog of €5.50 billion.
Order intake, meanwhile, decreased 55% to €4.90 billion versus €10.70 billion in the comparable quarter of the previous year. Rheinmetall attributed this decline to several multi-billion euro contracts that boosted the prior-year comparison.
Goldman Sachs analysts suggested that market attention would center on the German demand environment and the timing of anticipated orders.
Strategic Missile Development and Industry Alliances
Beyond financial metrics, the defense contractor gained attention for advancing its cruise missile capabilities. Management announced plans to commence production of sophisticated cruise missiles alongside Dutch partner Destinus beginning in the fourth quarter of 2026 or early 2027. The collaboration operates through Rheinmetall Destinus Strike Systems, a newly established joint venture where Rheinmetall maintains a 51% ownership position.
The Destinus Ruta Block 2 missile successfully completed flight testing in late April. The weapon system features a range exceeding 700 kilometers and targets critical infrastructure.
Chief Executive Armin Papperger disclosed that negotiations with Lockheed Martin regarding rocket and missile production facilities in Germany have progressed more slowly than anticipated, pointing to disputes over financial arrangements. He mentioned that the company is simultaneously pursuing missile collaboration opportunities with Raytheon.
Papperger expressed optimism about second-quarter performance, highlighting substantial pending orders in naval systems and vehicles, along with full operational capacity at the Murcia ammunition facility in Spain following last year’s incident.
The company has submitted a preliminary offer for German Naval Yards Kiel and is evaluating the potential acquisition of a portion of Romania’s Mangalia shipyard to support its naval business expansion.
Management revealed ongoing discussions with multiple Middle Eastern governments to supply as many as 10 air defense systems during the current year, responding to heightened regional security concerns following escalating U.S.-Israel tensions with Iran.
The company maintained its full-year 2026 outlook: revenue between €14 billion and €14.5 billion with an operating margin near 19%.
