TKMS: Israel Delivery Closes One Chapter as a €20bn Backlog Awaits Its Next Act

TKMS handed over the last Dolphin-class submarine to Israel as talks on future joint projects begin, with a EUR 20.1bn backlog and F127 work advancing.

TKMS handed over the INS DRAKON to the Israeli Navy this week — the third and final boat of the Dolphin class, and the closing note on a submarine programme that has run for years. The milestone itself is tidy. What matters more for investors is the signal buried inside it: talks are already underway between Israel and Germany on future joint resilience projects, suggesting the relationship outlives the hardware.

That pattern — a finished build programme followed by a successor order — is one TKMS has established with other naval customers, and the Israeli channel now appears to be following the same script. Anyone who still files the company under "supplier that completes a job and disappears" is reading the business wrong.

Two tracks running in parallel

While the Israeli programme wraps, the design work on the F127 air-defence frigate presses ahead in close coordination with the Federal Ministry of Defence, the German Navy and the BAAINBw procurement office. The project is described as well advanced, which keeps the domestic order pipeline on solid footing even as international work adds optionality on top.

The order book already reflects that momentum. At the end of the third quarter of fiscal 2025/26, TKMS carried a record backlog of EUR 20.1 billion. Revenue across the first nine months, to the 30 June cut-off, climbed 19% to EUR 1,890 million, while adjusted EBIT rose 13% to EUR 110 million. The book-to-bill ratio stood at roughly 2, with order intake of EUR 3,617 million — a company writing business faster than it can book it.

Guidance has been lifted twice, most recently about a month ago: revenue growth of 10% to 12%, up from a prior 2% to 5%, and an adjusted EBIT margin of as much as 6.5%. Mid-term targets point to roughly 10% annual top-line growth and a margin above 7%.

The share price tells a different story

None of that has translated into a rising stock. TKMS trades at EUR 83.40, down 5.8% over the past 30 days and 23% below its 52-week high of EUR 108.80 — a correction that set in over the summer as the defence sector as a whole came under valuation pressure. Since the second guidance upgrade, the shares have given back 12.9%.

The technical picture is just as ambivalent. At EUR 84.00 the stock sits barely beneath its 200-day moving average of EUR 84.08 — the line often treated as a referendum on the medium-term trend — and 4.4% under its 50-day average. An RSI of 42 puts it in neutral territory, neither overbought nor oversold, with no clear reversal signal in sight. Annualised 30-day volatility of 51% leaves plenty of room for sharp moves in either direction.

Execution is the whole ballgame

Operational substance is not in dispute. The question hanging over the coming months is how quickly a multi-billion-euro pipeline converts into signed contracts. Three large tenders are in play: a contract for four MEKO A-200 DEU frigates for the Bundeswehr with options on four more; preferred-bidder status for as many as twelve submarines under Canada's programme; and final negotiations with India over six boats in the "75-I" project.

Land the Bundeswehr frigate deal — expected to be signed after the quarter closes — and it would rank as the largest surface-vessel order in the company's history, a clear statement of continued European demand. Canada, targeted for conclusion by the end of 2027 with first deliveries from 2034, would stretch the backlog into the 2030s. A planned collaboration with Spanish yard Navantia, for which a joint framework is due by year-end, could add further capacity for international work.

Delay those awards, and the market's scepticism could linger. Capital spending is already climbing, from EUR 164 million to around EUR 200 million, a reminder that a flood of orders also tests operational limits.

What the analysts and the risks say

Bernstein Research upgraded the stock to "Outperform" on 13 August with a EUR 125 price target, up from "Market-Perform" and EUR 76. Analyst Adrien Rabier points to an expected 86% increase in the 2030 EBIT estimate. Deutsche Bank took the same day to reiterate "Buy" with a EUR 110 target, citing encouraging half-year results.

Not everything on the risk ledger is financial. A ransomware incident at TKMS/Atlas Elektronik in June, in which a group calling itself "TheGentlemen" listed data on the dark web via third-party access, has not been definitively tied to TKMS itself but highlights the IT-security exposure any defence contractor with sensitive programmes carries.

The strategic layer

Roughly a week ago, TKMS and Fincantieri signed a broad memorandum of understanding to deepen cooperation in submarines and underwater technology. A merger or takeover is explicitly off the table. Read it not as a near-term catalyst but as one more brick in a European consolidation story for undersea capability — a market where alliances are becoming the norm without capital changing hands immediately. The collaboration framework due by year-end will show how concrete it becomes.

Set against that, the gap between operational news and the share price looks less like a warning and more like a pause. A completed naval programme with an Israeli follow-on in the works, an advanced frigate project with the Bundeswehr, and a wide-ranging partnership with Fincantieri add up to a company methodically widening its position in Europe's defence architecture. For investors who treat defence as a structural theme, the current soft patch reads as a breather in an intact order story — one whose next hard test is the Bundeswehr frigate signature, with Canada's 2027 deadline sitting further out on the horizon.