Rheinmetall Tightropes Between Record €73bn Backlog and F126 Cancellation as Stock Rebounds 24.7%

Rheinmetall shares recover 24.7% from June low as Thales deal lifts defense sector, but German frigate cancellation poses risk; record €73B order backlog underpins growth.

Rheinmetall’s share price has staged a remarkable recovery from its June trough, climbing 24.72 percent since hitting a 52-week low of €902.50 on 25 June. The stock traded at €1,134.60 on Tuesday, up 3.43 percent on the day, and has gained 16.67 percent over the past week. Yet the advance is occurring against a backdrop of conflicting signals — a cancelled multi-billion-euro frigate program on one hand and a record order book on the other.

The rally has been powered in part by a sector-wide revaluation. France’s Thales announced the acquisition of underwater drone specialist Exail Technologies for €3.9 billion, paying a 44 percent premium. That premium has spilled over to other European defense names, lifting Rheinmetall even as it contends with a significant political setback at home.

That setback came on 2 July, when the German defense ministry axed the F126 frigate program. Rheinmetall CEO Armin Papperger described the cancellation as a “blow” that caught the company off guard. Speaking at the World Security Summit in Berlin, he recalled the Merkel era when the defense industry was treated as the “Schmuddelecke” — the dirty corner — of the economy. The sector now enjoys far greater political acceptance, but the abrupt end to the frigate project shows that contracts remain vulnerable to fiscal and parliamentary scrutiny.

The financial impact of the cancellation is measurable but not crippling. The F126 program’s contribution to Rheinmetall’s 2030 medium-term forecast was below 3 percent. In the near term, however, the company could lose up to €300 million in 2026 revenue if no compensating orders emerge. That sum would bite into a quarter where revenue is nonetheless expected to grow by more than 60 percent year-on-year.

Papperger’s frustration with Germany’s procurement system was on full display at the summit. He demanded faster decision-making and binding contracts with firm purchase guarantees, arguing that the current framework of non-binding framework agreements no longer justifies the scale of investment the company is making. Rheinmetall is spending roughly €500 million on a new artillery plant alone, and such outlays carry more risk when orders are not guaranteed.

The bull case for the stock rests on the sheer weight of demand elsewhere. Rheinmetall’s order backlog hit a record €73 billion in May 2026. Among its recent wins: a multi-hundred-million-euro international order for four Skynex air defense systems in the second quarter; a high-double-digit-million-euro contract for 155mm artillery shells bound for Ukraine, signed at the end of June; and a Bundeswehr order in April for Loitering Munition Systems of the type FV-014, valued in the billions with an initial call-off of roughly €300 million. Production is already ramping up, with a target of 1.5 million 155mm rounds per year by 2030.

The company also strengthened its footprint in unmanned ground vehicles on 1 July, closing a majority stake in Croatia’s DOK-ING, which will operate as Rheinmetall Unmanned Vehicles d.o.o. and focus on heavy autonomous mine-clearance vehicles.

Germany’s broader defense spending trajectory provides a tailwind. The 2026 defense budget stands at €108 billion, and Chancellor Merz is expected to use this week’s NATO summit in Ankara to confirm plans to spend €124 billion on defense, with a target of roughly 5 percent of GDP combined on defense and infrastructure by 2029. These commitments are multi-year promises not immediate order flows, but they underpin the long-term growth narrative.

Technically, the stock has settled into a neutral zone. The relative strength index sits exactly at 50.0, indicating the extremes of both selling and buying have abated. Rheinmetall now trades 5.63 percent below its 50-day moving average of €1,192.77 and a sizeable 26.68 percent below the 200-day average of €1,535.13. Thirty-day annualized volatility remains elevated at 69.62 percent.

The company’s market capitalization stands at €50.89 billion, still far from the 52-week high of €1,995.00 reached in more euphoric times. The share is down 29.15 percent year-to-date and 36.67 percent over the past twelve months.

The next major inflection point is 6 August, when Rheinmetall releases second-quarter results. Investors will watch whether Papperger’s push for more binding procurement terms produces any concrete changes in contract structure. Until then, the market must weigh a record order pipeline against the reality that even the most promising programs can be cancelled with a single ministerial decision.