Rheinmetall's €100 Billion Ambition Collides With a 43% Share Price Retreat

Rheinmetall's CEO targets €100B backlog by 2026, but shares are down 43% from peak, trading at €1,152.40 amid investor skepticism.

The gap between what Rheinmetall's management promises and what its share price delivers has rarely been wider. Armin Papperger, the company's chief executive, used a weekend appearance to frame the defence group as the industry's dominant player, dismissing smaller rivals as "Mickey Mouse companies" while touting second-quarter growth of 70 percent. Yet the market's verdict on Friday was less flattering: the stock closed at €1,152.40, down 2.1 percent on the day and roughly 43 percent below its 52-week high of €2,007.00 reached in early October.

That disconnect is becoming the defining narrative for Europe's largest defence contractor. The company is simultaneously expanding its physical footprint, scaling ammunition production, and projecting an order backlog that would dwarf its current scale — all while investors remain unconvinced about the sustainability of its valuation.

A Backlog Target That Would Reshape the Industry

Papperger's central promise is a group-wide order backlog exceeding €100 billion by 2026. That figure would mark a significant leap from the current €63.8 billion and would extend revenue visibility well into the next decade. The scale of that ambition is difficult to overstate: Rheinmetall employs 34,000 people in its defence division and draws on a network of 11,500 suppliers, meaning a backlog of that size would ripple through the entire European defence supply chain.

The CEO's timing is deliberate. His comments land at a moment when investors are scrutinising defence valuations more critically than at any point since the sector's post-2022 rally began. The stock has fallen roughly 26 percent since the start of the year, erasing a substantial portion of the gains accumulated during the previous bull run.

Building the Infrastructure for Future Growth

Beyond the headline numbers, Rheinmetall is laying concrete foundations for its expansion. The company is constructing a new logistics centre at Kassel Airport as part of a planned defence hub in northern Hesse, with the state government providing financial support for the project. In a separate development, Rheinmetall has secured a Bundeswehr contract to deliver a modular camp for the stationary accommodation of troops in Lithuania — the first order of its kind under the "German Armed Forces Contractor Augmentation Program II."

The ammunition pipeline is equally ambitious. Media reports indicate the company plans to scale 155mm artillery shell production to 1.1 million units annually by 2027 and 1.5 million by 2030, responding to sustained European demand driven by the ongoing geopolitical situation. These investments in Kassel, Lithuania, and munitions manufacturing form a coherent pattern: Rheinmetall is not merely winning contracts but building the physical capacity required to execute them.

The Market's Muted Response

The stock's technical position tells a story of short-term stabilisation within a longer-term decline. At €1,152.40, the shares trade 5.5 percent above their 50-day moving average but remain roughly 19 percent below the 200-day average of €1,414.96 — a configuration that suggests the selling pressure has eased without reversing.

The catalyst for the recent scepticism was a management outlook that market participants perceived as weaker than expected, particularly when measured against the exceptional growth rates of prior periods. That disappointment appears to be weighing on the stock more persistently than positive announcements about new contracts or capacity plans can offset. Despite the pullback, Rheinmetall retains a market capitalisation of nearly €53.7 billion, keeping it among the heavyweight names in European defence.

A Diverging Sector

The contrast between Rheinmetall's trajectory and that of its smaller peers is becoming more pronounced. While the group and submarine builder TKMS benefit from well-stocked order books — TKMS reported a backlog of €20.1 billion after nine months of the current fiscal year, plus €6.3 billion for four frigates — the second tier of suppliers is struggling to keep pace. Papperger's dismissive characterisation of smaller competitors reflects this widening gap within the industry.

Papperger also used his platform to criticise Chancellor Friedrich Merz's European policy and warned that Russia is preparing for 2029 — a date that has become a reference point for the entire defence sector's capacity planning, including Rheinmetall's own.

What Comes Next

The coming weeks offer the management team opportunities to reset the narrative. Rheinmetall is scheduled to participate in the Berenberg Stockholm Seminar on September 1, followed by the Morgan Stanley conference "Industrial CEOs unplugged" on September 8. Both events provide platforms for executives to present the long-term growth story — ammunition expansion, new facilities, and the swelling order backlog — to institutional investors who have so far remained unimpressed.

Whether those presentations can bridge the gap between Papperger's €100 billion ambition and a share price that has shed nearly half its value from its peak remains an open question. For now, the market appears to be waiting for evidence that the operational momentum will translate into sustained financial performance, rather than taking the CEO's projections at face value.