Rheinmetall’s Stock Slump Masks a Deepening Defense Pipeline — and a Few Political Landmines

Rheinmetall shares plummet 40% from highs amid revenue delays and political risks, even as Germany plans €152B defence spending by 2029.

The arithmetic looks tantalising for Rheinmetall: Germany alone plans to spend €152 billion on defence by 2029, more than triple the 2023 level. Yet the company’s shares closed Friday at €1,196.60, having shed about 25% of their value since January and sitting a full 40% below their all-time high. The disconnect between a booming order pipeline and a collapsing stock price is one of the more striking puzzles in European equities right now.

Investors have been punishing the Düsseldorf-based group for near-term operational stumbles. Management admitted in May that first-quarter revenues fell short of expectations, even though the operating margin met forecasts. The shortfall was largely a timing issue: a sizeable chunk of sales was pushed into the second quarter. At a stock that trades on ambitious multiples, such slippage triggers an immediate sell-off. Technically, the bears are in control — the share stands 25% below its 200-day moving average and nearly 10% under the 50-day line.

Beyond the quarterly noise, the fundamental story remains intact. Rheinmetall is morphing into a pure-play defence contractor, with 80% of revenue already coming from military work and the automotive supply unit set to be sold by the end of 2026. The German military has accelerated procurement via a new federal purchasing law, and a potential order for 23 Bergepanzer armoured recovery vehicles could arrive as early as 2028. At the ILA Berlin air show, the company is showcasing air defence systems and partnerships.

Yet the biggest long-term catalyst is also a source of immediate political risk. The flagship Franco-German Main Ground Combat System (MGCS) tank programme, meant to replace the Leopard 2 and France’s Leclerc, is wobbling. After nearly a decade, only €25 million has been spent on development. Rheinmetall CEO Armin Papperger has openly questioned France’s commitment, warning that Paris may slash its MGCS budget by more than half. The company is already working on a Plan B — the Leopard 3, co-developed with KNDS Deutschland, which could be operational by the early 2030s and serve as a bridging solution for the Bundeswehr.

To hedge its bets further, Rheinmetall is moving into space. A new joint venture with OHB in Bremen will focus on military satellite communications for the Bundeswehr’s SATCOMBw project. The system envisions hundreds of low-earth-orbit satellites, with an initial fleet of 40 planned for 2029. The industry expects a formal contract award around the turn of the year.

The stock’s near-term direction will depend on two things: the Paris decision on MGCS funding and the visibility of that delayed second-quarter revenue. Once the shifted sales materialise in the next quarterly report, the market may refocus on the €152 billion government order promise. For now, though, the bulls are waiting — and the bears are having their day.