Shares of Rheinmetall surged nearly 10% to €1,153 after the German defense giant dropped preliminary second-quarter numbers that blew past Wall Street expectations on every major line — a sharp reversal for a stock that had shed roughly a third of its value earlier this year. The question now: whether execution can keep pace with ambition.
Revenue Jumped 69%, Proving the Backlog Is Finally Shipping
Revenue rose about 69% year over year to approximately €3.29 billion, while operating profit climbed to €562 million — nearly 20% above analysts' consensus estimate of €469.9 million.
All segments contributed to the improvement. For months, investors questioned whether Rheinmetall could convert its massive order book into actual sales. At the end of Q1, the backlog stood at €73 billion, yet first-quarter revenue had grown only 8%. The Q2 acceleration answers that concern decisively — for now.
An €80 Billion Order Book Backed by Big New Contracts
The order backlog surpassed €80 billion after the company secured €11.4 billion in new nominations, including contracts for loitering munitions from the German armed forces and a major order package from Romania under the EU's SAFE programme.
The Romania deal alone — covering combat vehicles, air defense systems, ammunition, and four naval vessels — totals €5.7 billion , the largest international package in Rheinmetall's history. That backlog represents roughly five-plus years of revenue at current run rates, giving shareholders rare long-term visibility.
The Cash Flow Catch: Growth Costs Money Upfront
The company warned of significantly negative operating free cash flow in Q2, as advance payments from customers were delayed, capacity expansions continued, and inventories were built up for future deliveries. In plain terms, Rheinmetall is spending heavily now — building factories, stockpiling materials — to fill orders that won't generate cash for quarters to come. Full details arrive August 6.
Germany's Budget Shift Adds a Cloud on the Horizon
A draft 2027 German budget shows munitions spending at roughly €9.6 billion, down from €11 billion in 2026.
The reduction reflects a reallocation toward drones, IT, and air defense. Still, Germany's overall 2027 core defense budget jumps 34% to €109.8 billion, with total defense and security costs hitting €130.1 billion — a massive spending envelope that keeps Rheinmetall at the center of European rearmament. Meanwhile, the sale of Rheinmetall's civilian automotive division turns it into a pure defense company, with closing expected in Q4 2026.
The blowout quarter proves the growth story is real. Whether that justifies today's valuation depends entirely on converting that record backlog into free cash flow — something management has yet to demonstrate at scale.