Hensoldt's Italian Anchor: Leonardo's Long Game Amid a Record Order Book and a Skittish Market

Hensoldt's record €10.36B backlog and doubled orders fail to lift shares as guidance unchanged, fueling growth concerns.

When a company's order intake doubles and its backlog crosses a symbolic threshold, the usual script calls for celebration. Hensoldt's first-half results for 2026 delivered exactly that — and then some. Yet the market's response was anything but festive, with the defence electronics group's shares closing Friday at €79.76, down 4.64 percent on the day.

The disconnect between the numbers and the share price tells two stories at once: one about operational momentum that has rarely looked stronger, and another about investor expectations that have grown even faster.

A Backlog Milestone and the Numbers Behind It

The headline figure is hard to argue with. Hensoldt's order backlog reached €10.356 billion — a record — while incoming orders more than doubled to €2.812 billion in the first six months, up from €1.405 billion in the prior-year period. Revenue climbed 23.6 percent to €1.167 billion, and adjusted EBITDA rose 28.5 percent to €137 million, pushing the margin from 11.3 to 11.8 percent. Adjusted free cash flow remained negative at minus €136 million, though that marked an improvement from minus €181 million a year earlier.

The Optronics segment stood out in particular, with order intake leaping from €164 million to €971 million on the back of major contracts for the Puma infantry fighting vehicle and the Schakal reconnaissance vehicle — a reminder of how strongly demand for land systems is running at the moment.

CEO Oliver Dörre attributes the surge to policy shifts in Berlin, with higher German defence spending now showing up directly in the order book.

Why the Stock Slipped

The share price reaction appears to be less about disappointment with the actual figures and more about what they didn't include. With the first half looking this strong, many market participants had apparently positioned for an upward revision to the full-year guidance. Instead, management merely confirmed the existing targets: revenue of around €2.75 billion for 2026, an adjusted EBITDA margin between 18.5 and 19.0 percent, and a book-to-bill ratio in the range of 1.5x to 2.0x.

The absence of an upgrade, despite the record numbers, was read by some as a signal that growth may be hitting its limits. That interpretation found its way into commentary from several research houses and helped push the stock further away from its 52-week high of €115.10, reached in October. Friday's slide widened that gap to roughly 31 percent, even though the shares remain in positive territory for the year and have gained over the past 30 days.

There's also a lingering overhang from a decision made a month ago: Germany's move to abandon the F126 frigate programme. The loss of those naval orders had already fuelled concerns about Hensoldt's growth trajectory, and Friday's guidance confirmation was meant to put those worries to rest — with mixed success so far.

Analysts Split Down the Middle

The research community's response on Friday was anything but uniform. Jefferies stuck with its "Buy" rating and a €94.00 price target, praising the record backlog and a modest beat against its own forecasts. Warburg Research also reaffirmed "Buy" with a €91.00 target, describing the second quarter as convincing given that revenue growth was delivered profitably.

At the other end of the spectrum, mwb research held firm on "Sell" with a price target of just €62.00, pointing to a rich valuation of 13.4x EV/EBITDA based on 2028 estimates and questioning whether the current order intake level can be sustained beyond that year. JPMorgan sat in between with "Neutral" and an €85.00 target, noting that Hensoldt carries the highest valuation in its peer group — with analysts seeing more upside at competitors like the Renk Group.

The spread of price targets, from €62 to €94, underscores just how far apart the market's views on Hensoldt's valuation currently are.

Leonardo's Vote of Confidence

Amid the debate over valuation, one major shareholder has made its position clear. Leonardo, the Italian defence group that acquired a 25.1 percent stake in Hensoldt from the German state in 2021 for around €606 million, has no intention of selling — even though the stake's value has risen considerably since the investment was made.

Speaking during the conference call on Leonardo's first-half results, manager Lorenzo Mariani acknowledged that the original logic behind the investment has shifted. The initial aim of securing a majority stake in Hensoldt is no longer on the table. But the Italian group sees two compelling reasons to hold on.

First, the defence market is evolving so dynamically that Leonardo can maintain its stake without much risk of value erosion. Second — and more importantly — there remains untapped cooperation potential in the combat aircraft space. Mariani pointed to the Eurofighter programme and a possible sixth-generation fighter as areas where Hensoldt and the Italian and British electronics industries could work more closely together. A healthy Eurofighter order book could open new doors, he suggested, while the sixth-generation programme remains an option that can't yet be valued.

Leonardo's own numbers support the confidence. The group's order intake rose roughly 40 percent in the first half to about €16 billion, with revenue and profit up 10 percent and 74 percent respectively, prompting an upgrade to its full-year outlook. CFO Giuseppe Aurelio specifically highlighted contributions from MBDA and Hensoldt to the growth of the defence electronics division.

What's Next

The near-term calendar offers several potential catalysts. On July 24, Defence Minister Boris Pistorius joined Hensoldt's management to open a new corporate campus, with high-performance radars like the TRML-4D taking centre stage. The luWES tender for underwater weapon systems, expected in August, is seen as another possible trigger.

Investors will also be watching the corporate events circuit: Hensoldt appears at the Commerzbank & ODDO conference in Frankfurt on September 2, publishes its nine-month figures on November 5, and hosts a capital markets day in London on November 10.

Until then, the central question remains unresolved: is the current order intake level sustainable, or do the valuation concerns raised by mwb research carry more weight? With Leonardo firmly in the shareholder camp and the order book at record levels, the operational case looks solid. Whether that's enough to close the gap to the October high — and satisfy the market's appetite for more — is another matter entirely.