CSG’s Q1 Profit Surge Masks a 69% Plunge in Ammo+ Earnings

CSG net profit jumps 83% to €299m as defence sales soar, but commercial ammo unit struggles. Backlog hits €17bn, pipeline €27bn. Stock gains 14% despite headwinds.

CSG entered 2026 with a bang, more than doubling the pace of profitability while its order pipeline swelled to €27bn — yet a glaring weakness in its commercial ammunition arm kept a lid on investor enthusiasm. The stock still managed a 14% weekly gain, closing Friday at €18.70, though that remains a far cry from the 52-week high of €34.

Revenue in the first quarter climbed 13.8% to €1.544bn, lifted by relentless demand for defence systems and land-based military hardware. Net profit jumped 83% to €299m, pushing the reported profit margin from 12% a year earlier to 19%. Operating earnings before interest and tax reached €372m, with an EBIT margin of 24.1% — squarely within management’s full-year target band.

The backlog grew 15.1% to €17bn by the end of March, and the project pipeline under negotiation stands at €27bn, giving the Amsterdam-based group exceptional medium-term visibility. “If we convert even a portion of that pipeline into firm contracts, the revenue trajectory will stay strong for years,” the company said in its earnings release.

Defence systems surge; Ammo+ stumbles

The strongest performance came from the defence systems division, where sales rose 26.5%, driven by medium- and large-calibre ammunition and land systems. By contrast, the Ammo+ segment — a key profit centre focused on commercial ammunition and US law enforcement — saw revenue fall 20.5% to €291m. Operating earnings in the unit collapsed 68.5% to just €13m, compressing its margin to 4.3%.

CSG blamed tough conditions in the US commercial distribution channel for the first-quarter weakness. However, the company noted a clear improvement towards the end of the period, with demand picking up and prices firming. Investments are already under way to expand capacity for 5.56mm ammunition, including a deeper relationship with the FBI, and management expects the segment to recover over the remainder of the year.

Regional diversification gathers pace

A notable shift in the revenue mix saw NATO countries account for 64% of quarterly sales, while the share coming from Ukraine declined as CSG broadens its geographic footprint. The group recently secured a $2.5bn contract for a multi-layered air defence system in Southeast Asia, a move that aligns with its strategy to reduce dependency on any single conflict zone.

Guidance unchanged, Hunterbrook rebuttal in focus

Management reaffirmed its full-year outlook, targeting revenue between €7.4bn and €7.6bn and an operating EBIT margin of 24% to 25%. Capital expenditure is expected to run at about 8.5% of sales, while net working capital should end the year below 20% of revenue.

Separately, CSG issued a detailed response to criticisms levelled by short-seller Hunterbrook Media, pushing back on allegations concerning its business model, production capacity, IPO disclosures and governance. The rebuttal appears to have done little to dent the stock’s recent rebound, but the shares remain notably volatile.

For all the headline growth, the market’s attention is fixed on Ammo+. Should that business stabilise in the coming quarters, the hefty backlog and robust defence pipeline provide clear upside. Without that recovery, the margin pressure from commercial ammunition will stay the most visible blemish on an otherwise sparkling set of numbers.