Rheinmetall earnings: Formidable growth, but the market expected more

Europe’s leading defense industry company, Rheinmetall, published its results today. Despite strong revenue growth, a solid improvement in margins, and optimistic guidance, it was not enough to meet market expectations. The company’s shares are down by around 6% following the release.

2025 results, key highlights:

• Consolidated group sales increased to EUR 9.9 billion, up 29% year-on-year.
• Profit came in at EUR 1.84 billion, up 33% year-on-year.
• Group operating margin rose to 18.5%.
• The order backlog in 2025 increased to EUR 63.76 billion, up 36% year-on-year.

The company’s results were objectively excellent, especially given that this is an industrial business rather than a services or technology company. However, the market expected more.
The market appeared to be positioned for revenue of around EUR 10.2 billion and profit above EUR 1.9 billion. With a P/E ratio in the 90–100 range, this translates into a fairly sharp valuation reaction to a relatively small disappointment.

Breakdown by segment

• Land Systems:
  • Revenue: EUR 4.9 billion, up 31.7%
  • Profit: EUR 0.58 billion, up 37.2%
  • Margin: 11.7%
• Weapons and Ammunition:
  • Revenue: EUR 3.5 billion, up 26.9%
  • Profit: EUR 1.03 billion, up 31.2%
  • Margin: 29.3%
• Electronics:
  • Revenue: EUR 2.5 billion, up 45.1%
  • Profit: EUR 0.36 billion, up 68.1%
  • Margin: 14.6%

Guidance and dividend policy

The group announced a dividend of EUR 11.5 per share. This implies a net profit payout ratio of 45.5% and a 42% year-on-year increase.

The company expects that in 2026, revenue will exceed EUR 14 billion. The operating margin is expected to rise to 19%, implying EBIT of more than EUR 2.6 billion.

The company’s management did not shy away from referencing the ongoing conflict in Iran. In its earnings presentation, the company notes that its air-defence systems, engines for ballistic missiles, and its growing portfolio of combat drones are in an ideal position to benefit from an increasingly large gap in the inventories and capabilities of the U.S. armed forces.

RHM.DE (D1)

Source: xStation5
Rheinmetall shares tend to move in cycles. However, this movement takes place within a very clear price channel, suggesting the company has a certain level of fundamental, non-negotiable value, but also strong structural constraints.