Rheinmetall’s €73bn Backlog and a €300m Drone Deal Mask a Revenue Miss

Rheinmetall shares climb 7% despite Q1 revenue miss, driven by strong margins, record €73bn order book, and new contract wins amid geopolitical tailwinds.

The defence contractor’s first-quarter numbers sent a mixed signal to investors, but the market chose to focus on the positives. Revenue came in below expectations, yet the shares climbed nearly 7% over the week, closing at €1,433.80. The reason lies in a combination of strong profitability, a record order book and fresh contract wins.

Revenue Disappointment, Margin Surprise

Rheinmetall generated sales of €1.94bn in the three months to March, a 7.7% increase year-on-year but well short of the €2.3bn analysts had pencilled in. Management blamed timing issues: pre-produced trucks for a German customer will only be delivered in the second quarter, while shipments from the new ammunition plant in Murcia, Spain, have also slipped.

The profit picture told a different story. Operating earnings rose 17% to €224m, pushing the margin to 11.6% from 10.5% a year earlier — bang in line with market forecasts. The group is extracting more value from its expanded production capacity, and the full-year guidance remains intact. Rheinmetall still targets group sales of €14bn to €14.5bn and an operating margin of around 19%.

Record Backlog and New Orders

The order book swelled to a record €73bn at the end of March, up 31% from the same point in 2025. New orders worth €4.9bn were booked in the quarter alone.

Among the fresh mandates, a €300m framework agreement with the German military for loitering munitions stands out. Rheinmetall has also expressed interest in the insolvent Romanian shipyard ?antierul Naval Mangalia, with a view to turning Romania into a hub for military and civilian shipbuilding.

CEO Armin Papperger used the results to highlight the group’s ammunition production leadership. Rheinmetall now churns out 1.1m artillery shells annually — nearly double the 600,000 units the US produced in 2024. In medium-calibre ammunition, capacity has surged from 800,000 to over 4m units a year.

Analyst Optimism and Geopolitical Tailwinds

The revenue miss has done little to dent analyst enthusiasm. Goldman Sachs has a €2,300 price target and a Buy rating, Jefferies sees fair value at €2,220, and the DZ Bank and Deutsche Bank targets stand at €2,188 and €2,100 respectively. Bernstein rates the stock Outperform with a €2,050 target, while Banco Santander recently upgraded to Outperform with a €1,735 price objective.

The shares currently trade roughly 28% below their 52-week high of €1,995. The relative strength index sits at 76, signalling a technically overbought condition in the near term.

Geopolitical developments are adding to the bullish case. Reports suggest the US Department of Defense has scrapped plans to station intermediate-range missiles in Germany, potentially opening the door for European defence contractors to fill the gap. Domestically, the German government’s planned increase of the defence budget to €150bn provides a structural backbone for the sector.

Institutional money could also flow more freely after the German sovereign wealth fund Kenfo lifted its restrictions on defence investments, removing a barrier for ESG-mandated capital that had previously shunned the sector.

What’s Next

The full quarterly report is due on 7 May, followed by the virtual annual general meeting on 12 May. Shareholders will vote on a dividend of €11.50 per share, with payment scheduled for mid-May if approved.

For the market, the focus will shift to the details of revenue recognition and, crucially, cash flow — the metric that will show how quickly Rheinmetall can convert its mountain of orders into hard currency.