Rheinmetall earnings: soft print, strong order book. What matters next

Key takeaways

• Disappointing results, but strong outlook. Q3 sales were EUR 2.78 billion, below consensus, and profit margin before interests and tax was 11.3% versus 13.2% expected.

• Weapons and Ammunition outperformed, while Vehicle Systems, Electronic Solutions and Power Systems were softer.

• Backlog rose to about EUR 63.8 billion. Order intake slowed on delayed German budget approvals, but full-year guidance stayed intact.

The context is favourable. European North Atlantic Treaty Organisation (NATO) members are lifting defence outlays and Germany has opened the taps after its late-passed budget. Rheinmetall sits in the middle of this rearmament, from tanks to shells to digital kit.

Results inside a rearmament boom

Now to the numbers. Third-quarter sales came in at EUR 2.78 billion versus Bloomberg consensus of EUR 2.89 billion, a miss of 3.7%. Earnings per share (EPS) were EUR 3.30 versus EUR 4.48 expected. EBIT margin was also below Bloomberg consensus, with an 11.3% margin versus 13.2% expected.

Segments told the tale. Vehicle Systems delivered EUR 1.34 billion (below the EUR 1.49 billion consensus), as programme timing clipped deliveries. Weapons and Ammunition delivered EUR 0.69 billion, a touch ahead of the Street and still the profit anchor. Electronic Solutions posted EUR 0.52 billion vs EUR 0.55 billion expected, while Power Systems contributed EUR 0.47 billion against EUR 0.48 billion.

Management confirmed its full-year 2025 outlook for 25%–30% sales growth and a group operating-result margin around 15.5%. The order book stood near EUR 63.8 billion at quarter-end, underscoring multi-year demand.

Why this matters for investors

Defence is a secular spend story, but share prices still move on quarterly execution. Today’s print says demand is intact yet delivery and mix can shift margins quarter to quarter.

A deep order book across Europe and allies gives multi-year revenue cover. Near term, the share price reacts to margin cadence, cash conversion, and the speed at which orders turn into deliveries. Today’s update says demand is not the issue. Converting that demand into profitable, cash-generating sales is the task.

What is driving the engine

Backlog is the buffer. With roughly EUR 63.8 billion of orders, Rheinmetall has revenue cover stretching into 2026 and 2027. Framework deals for digital soldier systems and the Tactical Wide Area Network should begin feeding deliveries from late 2026, while ammunition replenishment stays brisk as Europe rebuilds stocks.

Budget timing still matters. Germany’s late budget slowed order intake and call-offs through the year. As approvals clear, intake should re-accelerate into late 2025 and 2026. That is a timing issue rather than a demand problem, but it can make quarterly optics lumpy.

Capacity is ramping. New ammunition lines in Lower Saxony are live, and powder and shell joint ventures in Romania and Bulgaria target bottlenecks in propellants and casings. If ramps hold schedule, volumes should rise from 2026.

Cash conversion is the swing factor. Operating free cash flow was negative EUR 813 million over nine months as inventories built and capex rose to fund expansion. The inflection to watch is working capital release and capex peaking, which would turn growth into cash.

Risks and early warning signs

Budgets and approvals can slip. Coalition bargaining or fiscal rules may delay German programmes and allied orders, slowing call-offs and pushing revenue recognition to later quarters.

Execution and input costs are a second risk. Vehicle programmes and new plants can run late or over budget, which would show up as repeated schedule push-outs, higher start-up costs, or persistent margin pressure in Vehicle Systems and Electronic Solutions.

Valuation is the third risk. After a strong multi-year run, expectations are high, so margin misses or weak cash conversion can trigger quick de-ratings. Use guidance changes and free-cash-flow prints as tells.

Investor playbook

• Follow conversion, not only backlog. Track quarterly order intake, call-offs on German digitalisation programmes, and delivery milestones. A rising ratio of revenue to backlog is a clean signal.

• Watch margins by segment. Weapons and Ammunition carries outsized profitability. Sustained 20 percent plus margins there can offset softer Vehicle Systems mix. Trigger: segment margin stability alongside volume growth.

• Monitor cash turning. The story broadens if operating free cash flow flips positive as inventories normalise and capex peaks. Trigger: sequential improvement in cash conversion rate and working-capital release.

• Capacity ramp checkpoints. New ammunition and powder lines need on-time, on-budget execution. Trigger: disclosed throughput metrics and first-article acceptances at new sites in Germany and Eastern Europe.

The story from here

Rheinmetall sits in the right place at the right time. Europe is rearming and the company’s order book proves it. This quarter, the tension is simple: demand is strong, delivery and mix dented margins. The investment case now hinges on conversion and cash.

If management turns backlog into shipments at pace, holds Weapons and Ammunition margins, and releases working capital as new capacity beds in, guidance can stand and cash generation can step up. That would allow the share to lean on fundamentals rather than headlines. If budget timing slips again or ramps drag, the premium will feel heavy.

The opening point returns as the closing one. In a rearmament boom, the winning stocks are the ones that turn orders into profitable cash flow. Rheinmetall’s backlog already does the heavy lifting on demand. From here, execution decides how much of that strength reaches the bottom line and, in time, the share price.