Hensoldt's Order Intake Surges to €1.5 Billion, But Cash Flow Remains a Drag

Hensoldt posts record €1.5B orders in Q1 2026, but negative free cash flow of €95M tempers investor sentiment as defense spending surges.

The German defense electronics group Hensoldt has kicked off 2026 with a record-breaking quarter, as orders more than doubled against a backdrop of surging European military spending. Yet beneath the headline numbers, a familiar tension persists between the company's booming order book and its still-strained cash generation.

New orders at the Taufkirchen-based sensor specialist jumped 112% to nearly €1.5 billion in the first three months of the year, pushing the total backlog to a fresh all-time high of €9.8 billion. The book-to-bill ratio — a measure of incoming orders relative to revenue — hit roughly 3.0, meaning the company booked three euros in new business for every euro it invoiced. The surge was fuelled largely by equipment orders for the Puma and Schakal armored vehicle programs, reflecting the ongoing modernization push by the German armed forces.

Revenue climbed 25% to €496 million, slightly below analyst expectations, while adjusted EBITDA rose 47% to €44 million, landing exactly in line with market forecasts. The strongest performance came from the Optronics division, where the operating margin improved from 1.3% to 12.2%. That improvement, however, was overshadowed by a persistently weak free cash flow position. Adjusted free cash flow remained deep in negative territory at minus €95 million, tempering investor enthusiasm.

The company is investing heavily to keep pace with demand. Hensoldt plans to spend roughly €1 billion on capacity expansion by 2027, including a new radar production facility that is set to come online. This year alone, the group intends to hire 1,600 new employees, primarily in southern Germany. To avoid supply bottlenecks, it has secured a multi-year agreement with United Monolithic Semiconductors guaranteeing the delivery of 900,000 gallium-nitride components for radar systems through 2030.

Despite the strong operational performance, the stock slipped 0.77% on Wednesday to €80.24, trading about 3% above its 50-day moving average. Analysts at DZ Bank described the results as a clear confirmation of the company's growth trajectory, pointing to the high order momentum. But after a sustained rally in defense stocks, record metrics often appear already priced in.

Management has reaffirmed its full-year guidance. Revenue is expected to climb to around €2.75 billion, with an adjusted operating margin of up to 19%. The next major update will come at the annual general meeting in Munich on May 22, where the board will propose a dividend of €0.55 per share. If approved, the payout will follow five days later.