Rheinmetall and Telekom Team Up for Drone Defense as Share Price Hits 52-Week Low

Rheinmetall's drone-protection deal with Deutsche Telekom comes as shares hit one-year low on mixed Q1 results, despite record €73B order backlog and Romanian Lynx contract.

The defense giant has unveiled a strategic partnership with Deutsche Telekom to develop a drone-protection shield for German cities and critical infrastructure. Rheinmetall will supply sensor technology, laser systems and countermeasures, while the telecom group contributes mobile network infrastructure and digital applications. The collaboration, announced ahead of the AFCEA security fair in Bonn, also involves the Helmut-Schmidt University Hamburg to tackle the challenge of detecting drones that use cellular communications — a growing threat as roughly 10% of devices now rely on mobile networks rather than traditional ISM radio frequencies.

The news came as Rheinmetall’s stock touched its lowest level in a year, closing at €1,119.80 on Wednesday after an ex-dividend adjustment and a mixed set of first-quarter numbers. The shares have lost around 44% from their September 2025 peak of nearly €2,000, despite a raft of multi-billion-euro contracts. The relative strength index now stands at 91 — deep in oversold territory — but whether that signals a floor or further weakness depends on the company’s ability to convert its record order book into revenue.

Quarterly figures released on May 7 painted a split picture. Revenue rose 8% year-on-year to €1.94 billion, undershooting analyst estimates amid a tough comparison base caused by pull-forward effects in the prior-year period. Operating profit climbed 17% to €224 million, pushing the margin to 11.6%, while earnings per share improved from €1.78 to €2.18. The blemish was free cash flow, which swung to minus €285 million from plus €243 million a year earlier, driven by strategic inventory build-up and higher working capital requirements.

Management left its full-year guidance unchanged, targeting group revenue of €14.0–€14.5 billion and an operating margin of 18.5–19%. The order backlog hit a record €73 billion, thanks in large part to the first-time consolidation of the Naval Systems segment following the acquisition of Lürssen’s marine assets. That division alone contributed €5.5 billion. Chief executive Armin Papperger stressed that Rheinmetall now operates as a relevant player across all five defense domains: land, air, sea, cyber and space.

Separately, the company’s Lynx KF41 infantry fighting vehicle was selected by Romania’s defence ministry late April for a procurement programme worth €3.4 billion. Rheinmetall is presenting the vehicle at the BSDA defence exhibition in Bucharest, which runs until May 15. The group is also ramping up ammunition production: annual output of 155 mm artillery shells is targeted to hit 1.1 million units by 2027 and 1.5 million by 2030, while 120 mm tank ammunition capacity is set to reach 240,000 rounds per year from 2027.

Analyst reaction to the Q1 miss has been mixed. JPMorgan downgraded the stock from “Overweight” to “Neutral” and slashed its price target from €2,130 to €1,500, citing that Rheinmetall has missed market expectations in four of the past six months. Warburg Research, however, upgraded to “Buy” but lowered its target to €1,550, while mwb research also raised its rating to “Kaufen” with a €1,450 target. Barclays held firm at “Overweight” with a €2,125 target.

Shareholders approved a dividend of €11.50 per share for the 2025 financial year at the annual general meeting on May 12 — a 42% increase from the prior year’s €8.10. Payment is scheduled for May 15. The payout failed to lift sentiment, however, as the market focuses on execution in the current quarter. Around €300 million worth of planned deliveries were postponed from Q1 due to delays; if those shipments are realized in Q2, the expected growth acceleration could materialize, potentially vindicating the constructive stance of analysts who still point to rising global defence budgets and geopolitical tailwinds.