Rheinmetall’s Record €73bn Backlog Fails to Mask a Cash-Drain Quarter

Rheinmetall posts €1.94bn Q1 revenue, missing €2.3bn forecast, but operating profit meets targets. Cash flow swings to -€285m, while order backlog hits record €73bn.

The Düsseldorf-based defence giant posted first-quarter revenues of €1.94bn, a 7.7% improvement on the prior year, but the figure fell well short of the €2.3bn analysts had pencilled in. The miss sent shares initially lower before they clawed back ground to trade at €1,439.20 — a gain of roughly 5% on the day.

Investors took some comfort from the fact that operating profit hit €224m, delivering an 11.6% margin that landed squarely on consensus. But the revenue gap raised eyebrows, particularly given the company’s ambitious full-year target of €14bn to €14.5bn in sales.

Management pointed to timing as the culprit. Deliveries and project milestones are expected to cluster more heavily in the second quarter, with the new munitions plant in Murcia, Spain, ramping up to full output and a batch of pre-produced trucks awaiting handover to the German military.

Naval acquisition distorts the picture

The revenue shortfall was exacerbated by the way the newly acquired Naval Systems division — bought from shipbuilder NVL — fed into the numbers. The segment contributed only a single consolidated month to the first-quarter tally, though analysts had apparently baked in a fuller contribution. The unit is being run on a ten-month basis with around €1.3bn in projected sales.

The order book tells a far more buoyant story. The backlog surged 31% year-on-year to a record €73bn, partly reflecting the inclusion of the naval business and a new segment structure that also folds in Air Defence. A single €4.9bn nomination helped drive the leap.

Cash flow turns sharply negative

The most worrying figure in the release was the operating free cash flow, which swung to minus €285m — a stark contrast to the €181m inflow the market had expected. The company is ploughing heavily into capacity expansion, tying up capital in working capital, while customer advance payments remain subdued.

The question hanging over the 7 May full quarterly report is whether this cash drain is a one-off phenomenon linked to the acquisition and start-up costs, or a sign of deeper capital constraints. The management’s decision to hold the full-year guidance — 40-45% revenue growth and an operating margin of around 19% — suggests they see it as temporary, but the market will want proof.

A tale of two halves

Rheinmetall’s stock has had a bruising start to 2026, losing more than 14% since January and trading near its 12-month low of roughly €1,370. The 200-day moving average is now 18% above the current price, and the relative strength index has climbed above 76, signalling an overbought condition after the recent bounce.

The second quarter is shaping up as the proving ground. The Murcia plant’s full commissioning, along with planned truck deliveries to the Bundeswehr, should provide a visible acceleration in both revenue and cash conversion. If those milestones slip, the gap between the record order mountain and the cash-strapped reality will only widen.