Rheinmetall shares fell more than 17% in early trading on Thursday after the German defense giant cut its full-year guidance for the second time since August, citing delays to a major military procurement program for Boxer armored vehicles and setbacks in artillery ammunition acceptance testing.
The company now expects 2026 sales of around 13.2 billion euros ($14.9 billion), down from a prior range of 13.7 billion to 14.2 billion euros, and an operating margin of about 18.5%, compared with the previously expected 19%. Rheinmetall said the revision was due to delays in the German military's Arminius project, a major procurement program for Boxer armored vehicles, and setbacks in artillery ammunition acceptance testing. The Arminius contract, now expected to be commissioned next year, involves vehicles manufactured by ARTEC, a joint venture between Rheinmetall and the Franco-German defense group KNDS.
The guidance cut comes after Rheinmetall shares posted average annual gains of 119% over the prior four years, as the company became one of the main beneficiaries of ramped-up military spending by European governments amid Russia's full-scale invasion of Ukraine in 2022. The stock has year-to-date losses of about 46%.
RBC analysts called the announcement "clearly negative" and warned it could fuel broader investor concerns about traditional defense technology. "We suspect bears will see this negatively as part of the ongoing 'new-tech vs old-tech' sector debate," they said. Rheinmetall said delays to the Boxer contract would also push expected advance payments into 2027, affecting its previous cash conversion target of over 40%, although it still expects positive operating free cash flow this year. The company also flagged delays in expected fourth-quarter revenue from new business activities, particularly its partnership with Dutch defense technology firm Destinus.
Despite the outlook cut, Rheinmetall posted improving third-quarter results: sales rose 32% year on year to 3.15 billion euros and operating profit jumped 62% to 553 million euros. New order intake was 2.89 billion euros, bringing its backlog to 78 billion euros by the end of the third quarter. Citi analysts called the quarterly results “a strong set of Q3 results.”
Analysis
Why This Matters
- The guidance cut signals a potential slowdown in the pace of European defense spending, which had been a key driver for Rheinmetall and other contractors.
- The delays to the Boxer armored vehicle program highlight risks in procurement timelines that could affect military readiness in Germany and allied nations.
- The stock's 46% year-to-date decline may test investor confidence in the traditional defense sector, especially as debate over new vs old technology intensifies.
Background
Rheinmetall became one of the main beneficiaries of the surge in European military budgets after Russia invaded Ukraine in 2022. Its shares rose dramatically, but the company has now cut guidance twice in 2026: once in August when Germany scrapped plans to build warships in what would have been Rheinmetall's biggest order since World War II, and again this week.
Key Perspectives
Rheinmetall: said the revised guidance is due to delays in the Arminius project and artillery ammunition testing, and that the Boxer contract delays will push advance payments into 2027.
RBC analysts: called the announcement "clearly negative" and said it could fuel broader investor concerns about traditional defense technology.
Citi analysts: described the third-quarter results as "a strong set of Q3 results."
What to Watch
- Whether the Arminius contract is commissioned next year as currently expected, and any further changes to its scope or timing.
- The impact on Rheinmetall's cash conversion target and free cash flow, especially if advance payments slip further.
- How the "new-tech vs old-tech" debate in defense investing evolves amid guidance cuts at traditional contractors.
