Düsseldorf-based defence giant says demand from NATO allies, Ukraine war and naval expansion positions company for accelerated growth.
Rheinmetall integrates Naval business.
Rheinmetall financial result for year 2025: German defence and technology group Rheinmetall AG has opened the 2026 financial year with higher revenues, stronger profitability and a record order backlog, underscoring the continued transformation of Europe’s defence sector amid mounting geopolitical tensions and rising military spending across NATO countries.
The Düsseldorf-headquartered company reported first-quarter consolidated sales of €1.9 billion, an 8% increase from the same period last year, while consolidated operating profit climbed 17% to €224 million. Rheinmetall’s operating margin improved to 11.6%, up from 10.6% a year earlier, reflecting growing scale and higher utilisation across its defence businesses.
The company also reaffirmed its full-year guidance, forecasting annual sales between €14 billion and €14.5 billion and an operating margin of around 19%, signalling confidence that the surge in European defence procurement will continue throughout 2026.
Rheinmetall’s order backlog — a closely watched measure of future business — reached a record €73 billion at the end of March, up sharply from €56 billion a year earlier. The figure now includes €5.5 billion from the newly consolidated Naval Systems division, following Rheinmetall’s acquisition of German shipbuilder NVL earlier this year.
Chief executive Armin Papperger said the company expects “stronger growth in sales and order intake” in the second quarter, driven by large-scale naval and military vehicle contracts.
“We are now a significant player in all key areas — on land, at sea, in the air, in the cyber sector and in space — and thus on our way to becoming a global defence champion,” Papperger said.
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Europe’s Rearmament Drives Defence Expansion
Rheinmetall’s performance reflects the broader acceleration in European defence spending since Russia’s invasion of Ukraine reshaped the continent’s security priorities. Germany, NATO allies and EU member states have sharply increased procurement budgets, with demand especially strong for artillery ammunition, armoured vehicles, air defence systems and digital battlefield technologies.
The company said Germany, Ukraine and partner nations within NATO and the European Union remain its core markets.
Although overall order intake — referred to by the company as “Rheinmetall Nomination” — fell to €4.9 billion from an exceptionally strong €10.7 billion in the prior-year quarter, executives stressed the comparison was distorted by several multi-billion-euro contracts booked in early 2025.
Analysts note that the more significant metric is the rapidly expanding long-term backlog, which now stretches across nearly every major domain of modern warfare.
The inclusion of Naval Systems marks one of Rheinmetall’s most consequential strategic expansions in years. Through the NVL acquisition, the company now positions itself as a full-spectrum military supplier capable of serving all branches of the armed forces.
The maritime business ranges from unmanned naval vehicles to corvettes and frigates, adding naval shipbuilding to Rheinmetall’s existing strengths in land systems, munitions, air defence and military digitalisation.
Papperger described the integration process as progressing smoothly.
“Workers at our shipyards have impressive shipbuilding expertise and are highly motivated,” he said. “We have big plans in this area.”
Rheinmetall MAN Military Vehicles.
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Vehicle and Ammunition Divisions Remain Core Growth Engines
Rheinmetall’s Vehicle Systems division, which manufactures tracked and wheeled military vehicles, remained the group’s largest business segment with quarterly sales of €985 million.
Growth in the division was supported by deliveries of infantry fighting vehicles to European and international customers, as well as the expansion of tactical vehicle programmes for Germany’s armed forces.
The unit’s backlog rose 25% year on year to €25.9 billion, bolstered by Germany’s additional order of 200 Puma infantry fighting vehicles placed late last year.
Meanwhile, the Weapon and Ammunition segment continued to benefit from Europe’s scramble to replenish depleted stockpiles after years of transfers to Ukraine.
Sales in the division held at a high level of approximately €601 million, driven in part by ammunition deliveries to Hungary and artillery rounds destined for Ukraine.
Order intake in the unit more than doubled to €1.8 billion, supported by contracts for tank ammunition from Poland and Lithuania, new framework agreements with the Netherlands and mobile medical facilities for Germany.
Rheinmetall has simultaneously accelerated investments in ammunition production capacity, including major expansion projects at Nitrochemie facilities in Germany and Switzerland and propellant manufacturing operations in Spain.
The company invested €71 million in the division during the quarter as governments across Europe seek to secure domestic defence supply chains after years of underinvestment.
Air Defence and Digital Warfare Gain Strategic Importance
One of Rheinmetall’s fastest-growing businesses during the quarter was Air Defence, where revenues jumped 43% to €192 million.
The growth was driven largely by demand for Skynex and Skyranger air defence systems, products increasingly viewed as critical as militaries adapt to the proliferation of drones and low-cost aerial threats.
The operating margin in the segment improved to 15.6%, reflecting higher volumes and growing demand for integrated air defence systems across Europe.
Digital Systems also posted strong gains, with sales rising 16% to €349 million as armed forces continue investing in battlefield digitalisation, simulation and networked warfare technologies.
Although order intake in the segment dropped sharply compared with the previous year — largely because 2025 included several unusually large contracts — the backlog still climbed to more than €17 billion.
The company highlighted progress in Germany’s TaWAN military digitalisation programme and increased activity in unmanned systems and reconnaissance technologies.
Papperger also pointed to Rheinmetall’s expanding position in drones and loitering munitions, saying the company had recently secured a strategically important contract in that sector.
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Rheinmetall CUAS System.
Cash Flow Pressured by Inventory Build-Up
Despite strong earnings growth, Rheinmetall reported a negative operating free cash flow of €285 million during the quarter, compared with positive free cash flow of €243 million a year earlier.
The company attributed the decline to lower advance customer payments and a substantial build-up in inventories intended to support anticipated revenue growth later in the year.
Executives suggested the increase in working capital reflects efforts to rapidly scale production capacity in response to sustained defence demand.
The first quarter also only partially reflected the contribution from Naval Systems because the business was consolidated at the end of February, meaning just one month of naval operations was included in the results.
Even so, the division generated €77 million in sales during March alone, supported by ongoing shipbuilding programmes including Germany’s fleet service vessel project and Bulgaria’s modular patrol vessel programme.
Outlook Signals Confidence in Continued Defence Boom
Rheinmetall’s reaffirmed guidance suggests management expects the current geopolitical environment — and the resulting surge in military procurement — to remain intact through the remainder of the year.
The company is forecasting a dramatic increase in annual revenue compared with 2025 levels, when group sales stood at just under €10 billion.
For investors and policymakers alike, Rheinmetall’s latest results illustrate how Europe’s defence industry is undergoing one of its most profound transformations since the Cold War.
As governments accelerate rearmament plans and seek greater strategic autonomy in military production, companies such as Rheinmetall are emerging not merely as industrial suppliers, but as central actors in Europe’s evolving security architecture.
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