Rheinmetall Eyes Up to 45% Sales Growth Amid Soaring Global Defense Demand
German defense giant Rheinmetall forecasted a significant acceleration in sales for 2026, projecting growth of 40% to 45% to reach between 14 billion and 14.5 billion euros ($16.26 billion to $16.83 billion). The outlook, presented with its 2025 financial results, anticipates an operating result (EBIT) margin around 19%, up from 18.5%. This bullish guidance comes despite the company reporting 2025 revenue of 9.94 billion euros, a 29% year-over-year increase that fell short of market expectations of 10.53 billion euros.
CEO Armin Papperger emphasized the company’s strategic positioning, stating, “The world is changing rapidly, and Rheinmetall is well prepared. With our products, we will have a significant share in the increasing equipment spend of the armed forces and deliver what modern armed forces need in the 21st century.” The firm, Germany’s seventh-largest company by market capitalization, explicitly noted it is in a “prime position to help the US replenish their missile stockpiles,” specifically citing the supply of critical solid rocket motors used in conflicts. In its earnings presentation, Rheinmetall declared that higher spending for “missile restocking and air defence” was “inevitable” given the global security climate.
Record Backlog and Geopolitical Tailwinds
The company’s staggering order backlog reached a record 63.8 billion euros by the end of 2025, a 36% increase year-over-year. Rheinmetall now expects this backlog to more than double to approximately 135 billion euros in 2026. This surge is directly attributed to heightened government defense spending triggered by the ongoing war in Ukraine and broader geopolitical instability. “The tense security situation underpins the promising position of the Group, whose products are playing an increasingly important role for the increase in defence capabilities in Germany and its partner countries,” the company stated.
Analysts from Morningstar, Loredana Muharremi, noted prior to the results that “as budget approvals resumed toward year‑end and defence spending picked up across Europe – particularly in Germany – we expect delayed programmes to convert into contracts, supporting a rebound in nominations and reinforcing the company’s already elevated backlog.” This structural shift in European defense budgets is a primary driver of Rheinmetall’s forecast.
Market Reaction and Analyst Perspectives
Despite the robust long-term outlook, the stock reaction was negative. Shares of Rheinmetall fell 5.2% in early trading on Wednesday following the report, underperforming the 0.7% decline in the pan-European Stoxx 600 index. The miss on 2025 revenue and earnings before interest and tax (EBIT of 1.68 billion euros vs. 1.75 billion euros estimates) weighed on sentiment. This follows a 6.5% drop in February when the company first provided preliminary guidance that was below consensus forecasts.
Analysts at Barclays at the time called the February sell-off “a marked over-reaction,” arguing that “expectations are high, and shares continue to be very sensitive to any information that comes out.” They maintained that “from a structural perspective we think nothing has really changed here: the backlog growth in 2026 will be material.” Jefferies analysts subsequently called the new 2026 guidance “realistic but soft,” acknowledging the company’s strong position while suggesting the projections may be cautious.
Strategic Realignment and Long-Term Growth
Rheinmetall is executing a major strategic pivot, planning to sell its civilian automotive division to concentrate entirely on its high-margin defense business. This focus is being augmented by its recent entry into the naval sector following the February acquisition of shipbuilder Naval Vessels Lürssen. The company’s two largest divisions in 2025 were Vehicle Systems (tanks, military trucks), which grew 32% to 4.99 billion euros, and Weapon and Ammunition, which grew 27% to 3.53 billion euros.
The firm’s stunning share price appreciation—up approximately 540% over the past three years—has moderated recently, with the stock up only about 3.4% year-to-date before the earnings release. Some investors are now questioning if the valuation has fully priced in the growth and if the current geopolitical-driven demand surge is sustainable long-term. However, Rheinmetall and peers like Britain’s Bae Systems and Italy’s Leonardo are widely seen as primary beneficiaries of Europe’s committed multi-year defense spending increases.
Geopolitical Catalysts and the Iran Conflict
Rheinmetall’s outlook is further bolstered by escalating Middle East tensions. Defense stocks, including Rheinmetall, initially spiked after the U.S. and Israel launched attacks on Iran on February 28. The event raised fears of a wider regional conflict, which would drive additional global demand for military equipment. While gains have partially pared, with larger European defense stocks up 5-10% since the strikes, Rheinmetall has been relatively flat. Smaller German peer Renk’s CEO Alexander Sagel recently stated that the Iran war could drive increasing demand for defense capabilities in the Gulf region, a market where Rheinmetall is active.
Looking further ahead, Rheinmetall has previously predicted its sales could quintuple to 50 billion euros by 2030, with operating margins expanding to about 20%. The company proposed a dividend of 11.50 euros per share for 2025, up from 8.10 euros, returning cash to shareholders amid the profit boom. Its ability to convert its historic backlog into revenue, particularly in vehicle systems and ammunition, will be closely watched as a key indicator of sustained execution.
German Rheinmetall MAN tactical military transport vehicles parked in the Edvard Peperko military barracks. Luka Dakskobler | Lightrocket | Getty Images
