Hensoldt’s Factory Floor Becomes the Battleground for Europe’s Defence Boom

Hensoldt's orders outpace production with a 1.9 book-to-bill ratio; €1B investment and 1,600 new hires aim to close the gap as revenue lags.

The defence electronics group Hensoldt is caught in a paradox that is becoming increasingly familiar across Europe’s arms industry: orders are flooding in faster than the production lines can handle them. With a book-to-bill ratio of 1.9, the company is taking on nearly twice as many contracts as it can deliver, and the pressure is now shifting from winning business to actually building the hardware.

The scale of the challenge is laid bare in the numbers. In 2025, order intake surged 62 percent, yet revenue crept up just ten percent to €2.46 billion. Thales, the French defence peer, offered a stark point of comparison last week: its defence division saw first-quarter orders jump 75 percent to €2.24 billion, demonstrating what a functioning supply chain can achieve. For Hensoldt, the question is whether its own capacity can catch up.

Management is betting big that it can. The company plans to invest roughly €1 billion by 2027 in new production facilities, primarily for radar systems in Germany. The most visible sign of this push is in Ulm, where Hensoldt has moved into the “Energon” office building, a passive-house-standard structure that adds capacity for more than 400 new employees. Site manager Peter Schlote described the expansion as one of the largest in the company’s recent history, driven by surging demand for modern defence technology and pressure from international customers for faster delivery.

The hiring spree is equally ambitious. After adding 1,200 staff in 2025, Hensoldt plans another 1,600 hires this year. A partnership with technology firm Aumovio aims to ease the transition for workers from the struggling automotive sector, targeting up to 600 employees at sites in Ulm, Lindau and Markdorf. On the supply side, the company has secured a deal with United Monolithic Semiconductors to deliver 900,000 gallium nitride components through 2030, critical for the Spexer radars used in air-defence systems such as Skyranger and IRIS-T.

For 2026, Hensoldt is guiding for revenue of around €2.75 billion and an adjusted EBITDA margin between 18.5 and 19 percent. Analysts expect first-quarter sales of roughly €493 million, a near-25 percent increase year-on-year. The interim report on 6 May will be the first real test of whether the expanded capacity is starting to translate into output.

The stock, however, remains well below its highs. After touching a 52-week peak of €115.10 in October 2025, the shares have struggled to recover. They traded at €76.50 on Wednesday, up around three percent on the day and 15 percent higher year-to-date, but still roughly 35 percent below that October level. The 200-day moving average of €84.54 offers a reminder of the ground still to be made up.

A further catalyst could emerge this week, with market watchers expecting details of Germany’s 2027 defence budget. A potential 21 percent increase from the previous year would provide a powerful tailwind for a company whose fortunes are tightly tied to state spending. Germany’s overall defence budget is already set to exceed the €108 billion mark in 2026.

The China factor has also weighed on sentiment. Late April, Beijing placed Hensoldt on an export restriction list, briefly pushing the stock to €73.32. The company told Bloomberg it did not expect any material impact, and the market has since steadied, but the episode underscored the geopolitical risks that come with the defence sector.

Hensoldt’s annual general meeting is scheduled for 22 May 2026 as a virtual event. In the meantime, all eyes are on the first-quarter numbers due next week. The structural tailwinds from Europe’s rearmament are undeniable. The question is whether Hensoldt can turn that tailwind into a measurable uplift in revenue — and whether the factory floor can finally keep pace with the order book.