Hensoldt’s Radar Milestone Arrives as the €100B FCAS Programme Unravels

Hensoldt begins ECRS Mk1 radar trials for Eurofighter as FCAS ends. Q1 revenue up 25%, order book record €9.8B, cash flow guidance raised. Stock at €78.12, 33% below high.

Hensoldt has begun live ground trials of its ECRS Mk1 radar for the Eurofighter, a key technology milestone for the German defence group. The tests, which kicked off in Ulm on Monday, will be followed by flight trials pencilled in for 2026, with deliveries to Germany and Spain expected from 2027. Yet the progress comes against a starkly different backdrop from the one the company anticipated just weeks ago: the collapse of the Franco-German FCAS next-generation fighter programme, a project that had earmarked Hensoldt for sensor and electronic warfare work worth billions.

The demise of FCAS was confirmed on Monday when German Chancellor Friedrich Merz and French President Emmanuel Macron agreed to scrap the joint venture after years of deadlock between Dassault Aviation and Airbus over leadership, work shares, and intellectual property. The programme, which would have replaced the Eurofighter and Rafale from 2040, carried an estimated total cost of over €100 billion and represented the largest defence project in Europe. Hensoldt was positioned as a central partner for sensorics. What survives is the Combat Cloud — the digital networking backbone for weapons systems — which will preserve at least part of the company’s technology roadmap, though it offers no substitute for the lost prime-contract role.

Operationally, Hensoldt’s first-quarter numbers show a business firing on all cylinders. Revenue jumped 25% year-on-year to €496 million, while the order book swelled to a record €9.8 billion. Management responded by raising its 2026 free cash flow guidance: adjusted free cash flow is now expected to reach around 50% of adjusted EBITDA, up from a prior target of 40%, thanks to higher customer advances. The updated forecast has not gone unnoticed by the analyst community. The consensus price target stands at €91.57, implying roughly 18% upside from the current share price. Deutsche Bank is the most bullish at €101, Jefferies holds at €90, and Barclays applies a more cautious "Equal Weight" rating with a €97 target.

BlackRock, meanwhile, has increased its stake to 4.78%, according to a voting rights disclosure dated June 8, signalling continued institutional confidence despite the political setback.

Despite the strong operational data, the stock remains under pressure. Hensoldt shares closed at €78.12, leaving them 33% below the 52-week high of €115.10 and roughly 19% lower than a year ago. Year-to-date, however, the stock has eked out a modest 2.25% gain — a contrast to the double-digit decline the broader defence sector has endured in recent months. Valuation remains a sticking point: with a trailing price-to-earnings multiple of 44.4, critics argue the stock is pricing in a continuation of the bumper order intake seen in recent years, which may prove unsustainable. Should new orders decelerate, the high multiple leaves little room for error.

The coming weeks offer several catalysts that could shift sentiment. Hensoldt is due to appear at the J.P. Morgan conference on June 16 and the Deutsche Bank Defence Conference on June 22, followed by its half-year report on July 31. The ILA Berlin air show from June 10 to 12 could also provide a platform for new partnerships or project announcements — a potential trigger if concrete deals emerge. More structurally, the German government is now exploring alternatives to FCAS, including a partnership with Sweden’s Saab or joining the UK-Japan-Italy GCAP programme. For Hensoldt, the key question is how prominently its sensor technology will feature in whichever consortium eventually picks up the baton.