A Hydrogen Play With a Military Edge: ITM Power’s Dual-Track Strategy

London-listed ITM Power rallies on a NATO-linked synthetic fuel partnership with Rheinmetall, as analysts pull forward profitability forecasts to 2028.

The intersection of green hydrogen and national security is proving a potent cocktail for one London-listed stock. ITM Power, the British electrolyser specialist, has become a magnet for investors chasing a narrative that blends defence contracts with a long-awaited profitability milestone.

The company’s shares have surged 157% since the start of 2026, a rally that has pushed the stock well beyond its historical norms. At roughly 38 times trailing sales, the valuation leaves little room for error. Yet the underlying story is shifting in ways that could justify at least part of the premium.

A New Customer: NATO

The catalyst that has electrified the stock is a strategic alliance with German defence giant Rheinmetall, announced in April. The partnership centres on Project Giga PtX, an ambitious plan to build a network of decentralised synthetic fuel production facilities across Europe, designed to supply NATO forces. ITM Power will provide the electrolyser systems, with each site capable of delivering up to 50 megawatts. The initial rollout will focus on the UK.

ITM chief executive Dennis Schulz has framed the deal as a fusion of the energy transition with defence priorities. Decentralised production, he argues, offers a far more resilient alternative to traditional fuel supply chains that are vulnerable to disruption. The resulting e-fuels are earmarked for military and other critical applications.

The defence angle is not the only source of momentum. ITM Power is also racking up civilian contracts. It has secured a deal to supply a 20-megawatt module for the MorGen Energy hydrogen project in Wales, along with a long-term service agreement. Additional agreements cover installations for Octopus Energy in the UK and design studies in Australia and Canada.

Profitability Pulled Forward

While the top line is accelerating, the bottom line remains deep in the red. The company posted a record first-half revenue of £18 million and subsequently raised its full-year guidance to as much as £43 million. The order book stands at £152 million, with 71% of those contracts considered profitable — a marked improvement from the loss-making legacy projects that have weighed on margins.

Morgan Stanley has taken notice. The bank recently upgraded ITM Power from Equal-Weight to Overweight and lifted its price target sharply from 60 pence to 170 pence. The rationale: profitability is arriving faster than expected. The analysts now forecast the company will reach EBITDA breakeven in fiscal 2028, a full year ahead of the previous consensus.

For the remainder of the year, Morgan Stanley sees several potential catalysts that could further boost the stock. These include final investment decisions on major hydrogen projects and the outcome of the UK’s second hydrogen allocation round. Both could significantly swell the company’s order book in the coming months.

A Well-Cushioned Balance Sheet

Expansion on this scale requires capital, and ITM Power is sitting on a healthy war chest. Net liquidity stands at nearly £198 million, which Morgan Stanley estimates covers the current cash burn rate roughly five times over. Additional funding is coming in: Great British Energy is investing £40 million, and the UK energy ministry has signalled a grant in the tens of millions.

That financial buffer gives the company room to execute on its growing pipeline. But with the stock now trading at a rich multiple, the pressure is on to deliver operationally. Any stumble in the quarters ahead could leave the shares exposed. For now, the combination of a military tailwind, a cleaner order book, and a path to profitability has created a story that few hydrogen stocks can match.