Key Takeaways
- Rheinmetall shares declined over 2% following first-quarter results that fell below analyst projections
- First-quarter revenue reached €1.94 billion, marking an 8% annual increase but missing the €2.27 billion estimate
- Operating earnings climbed 17% to €224 million, yet underperformed the €262 million projection
- Total order backlog expanded 31% to an all-time high of €73 billion, incorporating Naval Systems data for the first time
- Management reaffirmed 2026 targets of €14–€14.5 billion in revenue with approximately 19% operating margin
Rheinmetall delivered first-quarter revenue of €1.94 billion, representing an 8% climb from the prior year’s €1.80 billion. The figure significantly trailed the Street’s €2.27 billion projection.
Operating earnings registered at €224 million, marking a 17% yearly gain but falling below the anticipated €262 million. The operating margin expanded to 11.6% compared to 10.6% in the same quarter last year.
Basic earnings per share from ongoing operations improved to €2.18 versus €1.78 previously, though this lagged the €2.70 consensus forecast.
Operating free cash flow turned negative at €285 million during the period, a substantial reversal from the positive €243 million recorded a year ago and considerably below analyst expectations of positive €181 million.
Shares retreated more than 2% on Thursday in response to the quarterly report. The shortfall across several critical financial indicators proved difficult for investors to overlook, despite evidence of underlying business expansion.
Massive Order Book Provides Strategic Reassurance
A bright spot in the quarterly disclosure was the order backlog, which surged 31% to €73 billion from €56 billion in the comparable year-ago period. The inclusion of Naval Systems for the first time contributed an order backlog of €5.50 billion.
Order intake, conversely, declined 55% to €4.90 billion versus €10.70 billion in the previous year’s quarter. Rheinmetall attributed the comparison to several multi-billion euro contracts secured in the prior-year period.
Goldman Sachs analysts observed that investor attention would probably center on German demand dynamics and the timing of future contract awards.
Strategic Push Into Cruise Missile Manufacturing
Beyond financial metrics, Rheinmetall generated attention with its strategic expansion into cruise missile capabilities. The defense contractor announced plans to begin manufacturing sophisticated cruise missiles alongside Dutch technology firm Destinus beginning in Q4 2026 or early 2027 via a newly established joint venture called Rheinmetall Destinus Strike Systems, where Rheinmetall maintains a 51% controlling interest.
The Destinus Ruta Block 2 missile successfully completed flight testing in late April. The weapon system features a strike range exceeding 700 kilometers and targets critical infrastructure assets.
CEO Armin Papperger indicated that negotiations with Lockheed Martin regarding German production of rockets and missiles have progressed more slowly than anticipated, citing disputes over cost allocation. He mentioned that Rheinmetall is simultaneously exploring missile collaboration opportunities with Raytheon.
Papperger expressed optimism for second-quarter performance, referencing substantial order volume in naval systems and vehicle platforms, along with full-capacity operations at the Murcia ammunition facility in Spain following last year’s industrial incident.
Rheinmetall has also submitted a preliminary offer for German Naval Yards Kiel and is evaluating a potential acquisition of portions of the Mangalia shipyard facility in Romania as part of its naval business expansion strategy.
The company disclosed ongoing discussions with multiple Middle Eastern governments to supply up to 10 air defense systems during the current year, driven by heightened regional security concerns following the U.S.-Israel tensions with Iran.
Full-year 2026 financial guidance stands unchanged: revenue projections of €14 billion to €14.5 billion with an operating margin target of approximately 19%.
