Hensoldt Shares Slide Despite Record Order Intake

German defense firm Hensoldt sees orders surge 62% to €4.7B, but shares fall over 10% as production struggles to keep pace, impacting 2026 outlook.

German defense contractor Hensoldt reported a surge in new orders but saw its stock price decline sharply as investors focused on operational challenges. The company's latest financial results revealed a significant backlog that is testing its production capabilities.

Record Orders Meet Capacity Constraints

For the 2025 fiscal year, Hensoldt secured orders worth €4.7 billion, representing a substantial 62% increase. This growth was fueled by major contracts for air defense radars, the Eurofighter program, and the P8 Poseidon aircraft. Consequently, the total order backlog expanded by one-third to reach €8.8 billion.

Despite this influx, the company's shares fell by more than ten percent. Market sentiment turned negative as management acknowledged difficulties in ramping up production to meet the soaring demand. Furthermore, the financial guidance for 2026 disappointed analysts who had anticipated more robust projections.

Financial Performance and Segment Analysis

Group revenue advanced by 9.6% to €2.5 billion. Adjusted EBITDA came in at €452 million, yielding a margin of 18.4%. However, performance in the final quarter was mixed, with the Sensors segment notably missing revenue forecasts by four percent.

A detailed look at the divisions shows divergent trajectories. The larger Sensors unit recorded orders of €3.1 billion and saw revenue grow 8% to €2.1 billion. The ramp-up of radar production was described as sluggish during the first half of the year.

In contrast, the Optronics segment experienced accelerated growth. Its order intake doubled to €1.6 billion, driven by demand for the Luchs 2 and Leopard 2 platforms. Revenue jumped 20% to €419 million, while adjusted EBITDA soared over 140% to €58 million, benefiting from scaling effects.

Cautious Outlook and Cash Flow

Management's forecast for 2026 anticipates revenue of approximately €2.75 billion, with an adjusted EBITDA margin between 18.5% and 19%. The midpoint of this guidance sits about two percent below the consensus estimate among market analysts.

The company reaffirmed its book-to-bill target of 1.5x to 2.0x but conceded that production is struggling to keep pace with the order surge. On a positive note, adjusted free cash flow reached €347 million, exceeding internal expectations due to customer advance payments and operational improvements.

Strategic Response: Hiring and Leadership

To address the capacity bottlenecks, Hensoldt plans to create around 1,600 new positions in 2026. This would expand its workforce of roughly 9,000 employees by nearly 18%. In a move signaling stability, the supervisory board extended the contract of CEO Oliver Dörre by five years through the end of 2031. Dörre oversees the group's "North Star" strategy, which focuses on capacity expansion, software solutions, and international growth.

The board has proposed a dividend of €0.55 per share, a ten percent increase from the previous year. Some market participants, however, had expected a more significant raise.

Mixed Analyst Reactions

Equity researchers offered varied interpretations of the results. Jefferies maintained a "Hold" rating with a €90 price target, citing the EBITDA and free cash flow guidance that fell short of consensus. JPMorgan also confirmed a "Neutral" stance and a €90 target, noting that while free cash flow was a positive surprise, the outlook remained cautious.

Warburg Research retained its "Buy" recommendation, setting a price target of €91. Its analysts argued that the substantial order intake signals intact growth momentum for the defense group.

In a separate strategic development, Hensoldt entered a partnership with Schwarz Digits in mid-February to develop cloud-based defense solutions for Germany and allied nations.

Investors will now look to upcoming reports for signs of operational progress. The audited group financial statements are due on March 26, followed by first-quarter 2026 figures on May 6. These releases will indicate whether the company can overcome its production constraints and convert its record backlog into stronger revenue growth.