Rheinmetall's Record Backlog and 45% Growth Forecast Reflect Europe's Rearmament Surge

Rheinmetall AG posted a record operating result and unveiled one of the most aggressive growth forecasts in European corporate history Wednesday, as the German defence group positioned itself at the center of a continent-wide rearmament drive fueled by the wars in Ukraine and the Middle East.

The company reported consolidated sales of €9.935 billion for fiscal 2025, a 29% increase from €7.715 billion the previous year. Its Group operating result rose 33% to €1.841 billion, lifting the operating margin to 18.5% from 18.0%. The order backlog surged 36% to a record €63.8 billion, up from €46.9 billion at the end of 2024.

For 2026, Rheinmetall guided for sales of €14.0 billion to €14.5 billion, representing growth of 40% to 45%, with the operating result margin expected to rise further to around 19%. "The world is changing rapidly, and Rheinmetall is well prepared," said Chief Executive Armin Papperger. The company said "the tense security situation underpins the promising position of the Group."

The scale of the guidance reflects a structural shift in European defence spending rather than a cyclical uptick. Vehicle Systems grew 32% to €4.99 billion and Weapon and Ammunition expanded 27% to €3.53 billion, but the fastest-growing unit was Electronic Solutions, which rose 45% to €2.504 billion. Growth there was driven by a major contract for Germany's TaWAN battlefield digitisation programme, deliveries of speech sets with hearing protection for the German Armed Forces, and shipments of Skyranger and Skynex air defence systems to European customers.

The company is also completing a strategic transformation: it has placed its civilian automotive activities up for sale to concentrate solely on defence across land, air, space and sea. Effective January 1, 2026, Rheinmetall reorganised its group structure to add three new reporting segments, Air Defence, Digital Systems and Naval Systems, alongside its existing Vehicle Systems and Weapon and Ammunition divisions. The company said it considers it inevitable that nations will increase spending on missile restocking and air defence as a result of the conflict involving Iran, and that it is well positioned to assist in restocking U.S. missile inventories.

Shareholders will share in the windfall. Rheinmetall proposed a dividend of €11.50 per share for fiscal 2025, up from €8.10 the prior year, to be voted on at its Annual General Meeting on May 12.

The results were not without nuance. Sales fell short of analyst expectations: LSEG consensus had forecast €10.53 billion for 2025. Separately, Reuters reported that a pre-close sales outlook of around €13.6 billion, communicated to analysts at Berenberg ahead of publication, had sent shares lower; Wednesday's official guidance of €14.0 to €14.5 billion came in above that figure. One analyst commentary from Home Saxo noted that while the results were strong, the outlook "looked a touch light versus what the market had hoped for," pointing to a persistent tension between geopolitical urgency and industrial reality. Factories, the commentary noted, cannot scale overnight regardless of how rapidly backlogs grow.

That caveat is one investors will need to weigh carefully. With a record backlog of €63.8 billion to convert into deliveries and a reorganised structure built for pure-play defence, Rheinmetall's capacity to execute will matter as much as demand.