Key Takeaways
- Rheinmetall shares declined over 2% following first-quarter results that underperformed Wall Street expectations
- First-quarter revenue reached €1.94 billion, representing 8% annual growth but falling short of the €2.27 billion analyst estimate
- Operating income increased 17% to €224 million, yet trailed the anticipated €262 million
- Order backlog expanded 31% to an unprecedented €73 billion, incorporating Naval Systems figures for the first time
- Management reaffirmed 2026 targets of €14–€14.5 billion in revenue with approximately 19% operating margins
The German defense manufacturer reported first-quarter revenue of €1.94 billion, marking an 8% improvement from the prior year’s €1.80 billion. Despite the growth, the figure significantly underperformed the Street’s €2.27 billion projection.
Operating income reached €224 million, representing a 17% annual gain, though it failed to meet the €262 million analyst forecast. The operating margin expanded to 11.6% compared to 10.6% in the year-ago period.
Basic earnings per share from continuing operations climbed to €2.18 versus €1.78 previously, but came in below the €2.70 consensus target.
Operating free cash flow turned negative at €285 million during the quarter, a substantial reversal from the positive €243 million recorded last year and missing the positive €181 million Wall Street projection.
Shares fell more than 2% in Thursday trading after the release. The widespread underperformance across major financial metrics proved difficult for investors to overlook, despite signs of fundamental expansion.
Unprecedented Order Book Provides Optimism
A bright spot in the quarterly report was the order backlog, which surged 31% to €73 billion from €56 billion year-over-year. The addition of Naval Systems contributed an order backlog of €5.50 billion in its inaugural inclusion.
Order intake, meanwhile, declined 55% to €4.90 billion versus €10.70 billion in the comparable quarter. Rheinmetall attributed the comparison to several large multi-billion euro contracts secured in the previous year.
Goldman Sachs analysts observed that investors would probably concentrate on Germany’s defense spending environment and the timing of anticipated contract awards.
Missile Development and Strategic Alliances
Beyond financial metrics, Rheinmetall announced significant developments in cruise missile manufacturing. The defense contractor revealed plans to begin producing sophisticated cruise missiles with Netherlands-based Destinus beginning in Q4 2026 or early 2027 via a newly established joint venture, Rheinmetall Destinus Strike Systems, where Rheinmetall maintains a 51% ownership position.
The Destinus Ruta Block 2 missile successfully completed flight testing in late April. The weapon features an operational range exceeding 700 kilometers and targets strategic infrastructure.
Chief Executive Armin Papperger indicated that negotiations with Lockheed Martin regarding rocket and missile manufacturing in Germany are progressing more gradually than anticipated, citing disputes over financial burden-sharing. He mentioned Rheinmetall is simultaneously exploring missile collaboration opportunities with Raytheon.
Papperger highlighted optimistic Q2 projections, referencing substantial order volume in naval and vehicle segments, alongside full operational capacity at the Murcia ammunition facility in Spain following last year’s incident.
Rheinmetall has also submitted a preliminary offer for German Naval Yards Kiel and is evaluating the potential acquisition of portions of the Mangalia shipyard in Romania as part of its naval sector expansion strategy.
The corporation disclosed ongoing negotiations with multiple Middle Eastern nations to supply up to 10 air defense platforms this year, responding to heightened regional instability related to U.S.-Israel tensions with Iran.
Full-year 2026 projections remain unmodified: revenue targets of €14 billion to €14.5 billion with operating margins near 19%.
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