Hensoldt's Software Push With Bosch Arrives as Its Order Book Crosses a Historic Threshold

Hensoldt shares rally 13% after record €10.36B backlog and Bosch software partnership, despite cautious H2 outlook and F-126 cancellation.

The defense electronics group's first-half results landed on July 31 with a thud that initially sent the shares lower, even though the headline numbers were anything but disappointing. Investors, it turned out, were less focused on the record backlog and more on management's caution that second-half revenue growth would moderate as one-off effects from 2025 fade and pass-through sales taper off.

That skepticism has since evaporated. By Friday's close, the stock had climbed 13.18 percent over seven trading sessions to settle at EUR 90.50, a daily gain of 1.09 percent. Even after that rally, however, the shares remain roughly 23 percent below their October 6, 2025 record of EUR 117.70.

A Backlog That Keeps Growing

The scale of the order intake is what caught the market's attention. First-half incoming orders more than doubled to EUR 2.81 billion, blowing past the consensus estimate of around EUR 1.23 billion and nearly doubling the EUR 1.41 billion booked a year earlier. That surge pushed the order backlog to a record EUR 10.36 billion — the first time the company has crossed the ten-figure threshold.

Revenue climbed 24 percent year over year to EUR 1.1 billion, while adjusted EBITDA rose 29 percent to EUR 137 million. The Optronics segment was the standout performer, with order intake soaring nearly 600 percent to over EUR 900 million, driven by the Puma and Sharkai defense programs. The second quarter alone saw revenue grow 22 percent to EUR 671 million, with order intake jumping 89 percent to EUR 1.33 billion.

One wrinkle: the German government's June cancellation of the F-126 frigate program stripped roughly EUR 130 million from the order book, though management said the impact on the financial position was not material. Adjusted free cash flow remained negative at minus EUR 136 million, though that was a marked improvement from the minus EUR 181 million recorded in the prior-year period.

Guidance Held Steady

For the full year, Hensoldt reaffirmed its outlook: revenue of approximately EUR 2.7 billion and an adjusted EBITDA margin between 18.5 and 19.0 percent — a figure well above the first-half level, reflecting the company's typical weighting of earnings toward the second half. Management also reiterated guidance for cash conversion of around 50 percent and leverage of roughly 1.5.

Bosch Partnership Targets Software-Defined Defense

Alongside the earnings release, the company unveiled a development partnership with Robert Bosch on August 5. A new engineering center in Leinfelden-Echterdingen near Stuttgart will focus on software architectures for networked, updatable defense systems, with around 300 positions to be built up by the end of 2027. The facility is expected to be operational by year-end.

CEO Oliver Dörre framed the move as a capability play: "Software-Defined Defence requires powerful software and data architectures that can be flexibly integrated into complex and sovereign defense systems." He noted that Bosch has built "outstanding competencies in software engineering" over recent years — expertise Hensoldt intends to harness at the new site.

The hiring push extends well beyond the Stuttgart suburb. After adding roughly 1,200 employees in 2025, Hensoldt plans another 1,600 hires in 2026, with existing sites in Ulm, Oberkochen/Aalen, and Immenstaad also set to benefit.

Analysts Split on Valuation

The analyst community has drawn divergent conclusions from the results. JPMorgan raised its price target from EUR 85 to EUR 100 on August 6 but kept a Neutral rating, with analyst David Perry pointing to investor conversations suggesting growing appetite for defense companies with products tied to the "future of warfare" and durable competitive advantages. Jefferies, meanwhile, downgraded the stock from Buy to Hold a day earlier while lifting its target from EUR 94 to EUR 98 — a signal that the recent share price appreciation has largely priced in the good news. A third house trimmed its target to EUR 94, describing the company's full-year guidance as conservatively framed. The current range of analyst targets spans EUR 94 to EUR 100, with ratings hovering between cautiously positive and neutral.

Institutional Interest Persists

BlackRock, for its part, has been adding to its position. The asset manager increased its direct and attributed stake from 2.81 percent to 3.17 percent in mid-July, while its exposure via financial instruments fell to 1.83 percent. That put BlackRock's total holding at 4.997 percent — just under the five percent reporting threshold — with a corresponding voting rights notification published in early August.

The next catalyst for the stock is likely to be the third-quarter report, expected in November. Until then, the debate over whether Hensoldt's valuation has run ahead of its fundamentals — or still has room to run — looks set to continue.