Rheinmetall’s €20 Billion Order Wave Looms as Naval Ambitions and Auto Rivals Reshape the Landscape

Rheinmetall poised for Q2 orders >€20B, but stock slides ~30% YTD as revenue lags. Naval expansion via NVL and GNYK bids advances.

Rheinmetall is poised to announce second-quarter order intake of more than €20 billion, a figure that would reinforce its already bulging backlog but has done little to arrest the stock’s slide. The Düsseldorf-based defence group closed Friday at €1,123.80, down 2% on the day and nearly 7% on the week, leaving it just a whisker above the 52-week low of €1,118.00 touched on 13 May. Since the start of the year, the shares have shed roughly 30% of their value.

The gap between market sentiment and operating reality has rarely been wider. At the end of March, the order book stood at €73 billion, up from €56 billion a year earlier and now including the newly created Naval Systems division. By year-end, that figure could climb to around €135 billion, according to management. Yet investors remain focused on execution: first-quarter revenue of €1.94 billion missed the consensus estimate of €2.3 billion, even though it was up 8% on a year earlier. Operating profit, by contrast, rose 17% to €224 million, highlighting that profitability is not the problem — converting orders into revenue fast enough is.

Analyst reactions have been mixed. Berenberg retains a “Buy” rating but cut its price target to €1,750, while JPMorgan downgraded to “Neutral” with a €1,500 target. Barclays, however, argues the sell-off is overdone, calling Rheinmetall a clear beneficiary of Europe’s rearmament drive and the current market mood excessively negative.

The stock’s technical picture makes the €1,118.00 level a critical support. A breach would increase downside pressure, while stabilisation would shift attention back to operational momentum. CEO Armin Papperger expects second-quarter growth to accelerate sharply, driven by munitions, earlier truck call-offs, and rising sales in the Digital Systems unit. The full-year guidance remains unchanged: revenue between €14 billion and €14.5 billion with an operating margin of 19%.

Naval Expansion Takes Centre Stage

Rheinmetall is pressing ahead with its maritime strategy despite the share price weakness. On 7 May it submitted a non-binding offer for German Naval Yards Kiel (GNYK), with due diligence under way. Papperger expects results in the coming weeks, after which a binding bid should follow. The move pits Rheinmetall directly against Thyssenkrupp Marine Systems (TKMS), which expressed interest after its own IPO. A decision is expected by summer 2026. The prize is critical to the group’s ambition to push naval revenue to €5 billion by 2030.

That ambition rests on foundations already laid. On 1 March, Rheinmetall completed the acquisition of Lürssen’s marine division NVL, bringing four northern German shipyards — including the historic Blohm+Voss site — and around 2,100 employees into a new Naval Systems division. In March alone, the marine business generated €77 million in revenue, driven by the German fleet service boat FDB424 and the Bulgarian multi-purpose patrol vessel MMPV 90.

Meanwhile, the F126 frigate programme is entering a new phase. Rheinmetall has taken over as lead contractor after Damen Naval failed to meet its obligations. The six-ship contract is valued at roughly €12 billion, though deliveries are not expected before 2031 or 2032. New orders in the second quarter include around €2 billion for loitering munitions and €18 billion from Lynx tank programmes and ammunition for the F126.

Auto Industry Knocks on Defence’s Door

Just as Rheinmetall pushes deeper into naval and land systems, it faces the prospect of new competitors from an unexpected direction. Mercedes-Benz CEO Ola Källenius said in a 16 May interview with the Wall Street Journal that the carmaker could consider producing military goods if it proved economically viable — albeit likely as a niche. More concrete are reports from 15 May that Volkswagen is exploring the conversion of its Osnabrück plant to manufacture components for Israel’s Iron Dome missile defence system, potentially in a joint venture with Rafael.

For Rheinmetall, the entry of auto giants is not necessarily a threat. The group itself is scouting former automotive sites in Neuss and Berlin to expand its own production capacity, and the industry’s overarching bottleneck remains industrial throughput, not demand. The company is already working with Deutsche Telekom on drone defence shields for cities and has begun series production of the FV-014 “kamikaze” drone in Neuss, backed by a €300 million Bundeswehr order.

Still, the new competition for skilled labour, factory space, and political attention adds a layer of uncertainty that the stock can ill afford. With a record order book but a market demanding faster conversion, Rheinmetall’s next few quarters will be about proving that its industrial engine can match the scale of its ambition.