Rheinmetall Deepens US Ties and Expands Baltic Output While Shares Languish at Half Their Peak

Rheinmetall's order backlog tops EUR 80 billion and Q2 revenue jumps 69%, yet the stock keeps falling as a trimmed sales forecast weighs on sentiment.

Rheinmetall finds itself in an unusual position: its order book has never been fuller, its quarterly figures have never been stronger, yet its stock keeps sliding. The disconnect widened this week as two developments — one diplomatic, one industrial — underscored the company's expanding footprint without moving the share price.

In Washington, US Defense Secretary Hegseth and his German counterpart Pistorius signed a memorandum of understanding that broadens defense cooperation between the two countries. The agreement covers joint development, production, licensed manufacturing and maintenance of military equipment. For Rheinmetall, the pact opens a tangible commercial avenue: the company is pitching its Lynx infantry fighting vehicle for a US Army contract covering more than 4,000 armored vehicles.

The market shrugged. After briefly climbing to around EUR 1,030, the stock reversed course by midday and touched EUR 1,021.80 at one point. Peer defense names in the MDAX offered little support — Hensoldt slipped modestly, while TKMS and Renk also lost ground. Traders attributed the muted reaction to investors fixating on the Federal Reserve's rate decision due that evening, with odds of a quarter-point hike running above 90 percent.

A Strategic Realignment Beyond One Deal

The memorandum fits into a broader shift. Germany is edging toward NATO's five-percent spending target, and the agreement is designed to channel more of the alliance's demand for weapons, ammunition and equipment toward German production. Roughly 38,000 US troops are currently stationed in Germany, including at Ramstein, Grafenwöhr and Stuttgart — a presence that gives the partnership practical weight.

While the transatlantic track advances, Rheinmetall is simultaneously deepening its European manufacturing base. In Baisogala, central Lithuania, the company is building a plant for heavy artillery ammunition through a joint venture with the Lithuanian state, backed by an investment of up to EUR 300 million — the country's largest defense investment to date. Initial production steps are slated for this year, with a gradual ramp-up from 2027. The site is designed to turn out several tens of thousands of 155-millimeter shells annually and could employ up to 150 people.

Record Quarter, Trimmed Outlook

Those expansion moves sit alongside an operating performance that has been nothing short of exceptional. Rheinmetall reported second-quarter 2026 revenue of EUR 3.289 billion in early August, a jump of 69 percent year over year. Operating profit reached EUR 562 million, beating the analyst consensus by 20 percent. The order backlog swelled past EUR 80 billion for the first time.

The market's response back then was counterintuitive: shares tumbled 8.5 percent to EUR 1,111. The trigger was a EUR 300 million cut to the full-year sales forecast, narrowing the guidance range to EUR 13.7–14.2 billion. The demise of the F126 frigate project drove the revision, pushing the company's underlying momentum into the background.

The first quarter had already hinted at this tension. Revenue of EUR 1.938 billion fell short of the EUR 2.3 billion market expected, even as operating profit came in at EUR 224 million with an 11.6 percent margin. At that point the backlog stood at EUR 73 billion, up 31 percent from a year earlier.

That gap between operational substance and a more cautious forecast shapes how the stock is valued today. A backlog above EUR 80 billion gives Rheinmetall years of revenue visibility, but the guidance cut is a reminder that individual large projects can fall through.

Steady Stream of Smaller Wins

Fresh orders have provided some tailwind. An international customer placed a contract for 155-mm artillery ammunition in the low triple-digit million-euro range, with production already underway and delivery set for 2027. Separately, Rheinmetall Canada secured a US Navy order roughly a week ago for replacement components for MSU-200NAV mobile launchers, worth a single-digit million-euro amount, with delivery running through the end of 2028.

Such deals don't deliver dramatic short-term share price catalysts, but they reinforce the picture of a company whose operating base remains intact across multiple defense segments despite occasional setbacks.

The Valuation Puzzle

For all the strategic and operational positives, the stock remains under pressure. It currently trades at EUR 1,012.40, down 1.2 percent from the previous day. Over the past month it has shed 17 percent, and since the start of the year it has lost roughly 35 percent. From its 52-week high of EUR 2,007 reached in early October last year, the shares have given up half their value. The Relative Strength Index sits at 39, signaling oversold conditions without yet pointing to a reversal.

Investors are left weighing two competing narratives. On one side, geopolitical and operational signals suggest Rheinmetall stands to benefit from transatlantic rearmament and European ammunition production. On the other, a record quarter, a growing backlog and a steady flow of smaller contracts coexist with a downgraded annual forecast. Whether the company can deliver within its revised guidance range of EUR 13.7–14.2 billion may only become clear when the next quarterly figures land.