SQUAREVEST Analyzes Rheinmetall: Record Orders Meet Rising Valuation Pressure

Rheinmetall is growing at an extraordinary pace in 2026. However, a recent analysis by SQUAREVEST shows that a full order backlog alone is no longer sufficient for the stock's continued performance. The decisive factor will be how successfully the group converts growth into profits and sustainable cash flows.

Rheinmetall is one of those companies whose economic significance has fundamentally changed within just a few years. From a German industrial and defense conglomerate, it is increasingly evolving into a European systems provider that today covers not only ammunition and military vehicles but also air defense, digitalization, drone technology, and naval shipbuilding.

Operational performance is correspondingly dynamic. In the first half of 2026, revenue rose by 39 percent year-over-year to 5.23 billion euros. Operating profit even increased by 74 percent to 786 million euros. At the same time, the order backlog reached a new record high of 80.5 billion euros.

A recent analysis by the information platform SQUAREVEST therefore concludes that the key question surrounding Rheinmetall has shifted. While investors have long focused on whether rising European defense spending would actually lead to new orders, the focus today is increasingly on industrial execution.

From an Order Boom to the Execution Phase

Rheinmetall must produce and deliver the exceptionally high order volumes while simultaneously executing them profitably. At the end of 2025, the order backlog from orders and framework agreements still stood at 63.8 billion euros. Just six months later, that figure had already risen to 80.5 billion euros.

This gives the company a high degree of visibility for the coming years. However, a large order backlog does not automatically translate into immediate revenue or profit. Many large-scale military programs span several years, while framework agreements sometimes only turn into actual business through subsequent call-offs.

This is precisely why a key metric that has often received less attention during Rheinmetall's recent rally is now coming more into focus: free cash flow.

In the first half of 2026, operating free cash flow stood at minus 1.62 billion euros. Factors contributing to this include high investments in new production capacity, the build-up of inventories, higher accounts receivable, and delayed customer prepayments. For a group in an exceptionally strong phase of expansion, this development is understandable. At the same time, it shows that growth ties up significant capital.

From SQUAREVEST's perspective, investors are therefore likely to pay closer attention in the future to how efficiently Rheinmetall can convert its record order backlog into revenue, earnings, and ultimately free cash flow.

New Business Areas Are Transforming Rheinmetall

In parallel with organic growth, Rheinmetall is broadening its business model. With the acquisition of the Luerssen Group's military shipbuilding division and NVL effective March 1, 2026, the group has entered the naval shipbuilding sector on a large scale for the first time. According to current plans, this division is expected to generate revenue of up to five billion euros by 2030.

This is changing the structure of the company. Rheinmetall is increasingly moving beyond being merely a supplier of individual weapon systems to combining different technologies for land, air, sea, and digital defense.

Romania illustrates just how large the resulting projects can be. There, in May 2026, Rheinmetall received orders with a total value of approximately 5.7 billion euros. The package includes, among other things, Lynx vehicles, Skyranger air defense systems, ammunition, and naval vessels. Deliveries are scheduled to take place between 2028 and 2030.

Italy could also become an important growth driver. Together with Leonardo, Rheinmetall is working on extensive modernization programs for the Italian Army. The potential volume of the programs for new main battle tanks and infantry fighting vehicles amounts to more than 23 billion euros.

Germany and Europe Drive Long-Term Demand

This expansion coincides with significantly rising government defense budgets. Germany plans a regular defense budget of approximately 82.7 billion euros for 2026. In the government's draft budget for 2027, this figure already rises to 109.7 billion euros. Added to this are funds from the Bundeswehr Special Fund.

By 2029, German defense spending is set to rise to 3.5 percent of gross domestic product. At the NATO level, the long-term framework now extends even further: Member states have agreed to allocate a total of 5 percent of their economic output to defense and security-related areas by 2035.

Additional financing opportunities are emerging through the European SAFE program, which can provide loans totaling up to 150 billion euros for joint defense procurements.

For Rheinmetall, this creates a market environment that differs structurally from the decades prior to 2022. Many of the new programs are long-term in nature and are expected to keep the European defense industry busy for years to come.

50 billion euros in revenue becomes the new benchmark

Rheinmetall's outlook for the 2030 fiscal year is particularly ambitious. At the Capital Markets Day in November 2025, management projected potential annual revenue of around 50 billion euros with an operating margin of more than 20 percent.

By way of comparison: In 2025, Rheinmetall generated approximately 9.94 billion euros in revenue. For 2026, the company currently expects revenue of between 13.7 and 14.2 billion euros. Analyst estimates range from around 18.7 billion euros for 2027 to approximately 24.7 billion euros for 2028.

This means the path to 50 billion euros remains challenging. It requires not only further major orders but also additional production capacity, successful acquisitions, and the smooth integration of new business segments.

The stock market is now taking a more critical view of Rheinmetall

What is interesting here is the contrast between operational growth and the stock price. While revenue, earnings, and the order backlog continue to rise, Rheinmetall's stock has given back a significant portion of its earlier gains.

Current analyst targets range from 1,350 to 2,300 euros. The average of ten analyzed price targets is approximately 1,700 euros. This wide range makes it clear that the decisive issue has become not so much the growth itself as its appropriate valuation.

From SQUAREVEST's perspective, this marks the beginning of a new phase. While between 2022 and 2025 the mere prospect of higher defense spending often fueled new price momentum, Rheinmetall must now demonstrate that strong demand can be sustainably translated into profitable growth.

The key question, therefore, is no longer whether Rheinmetall will grow. What matters is how profitable this growth will be and how much of it ultimately remains with the company as sustainable cash flow.

SQUAREVEST: Growth Alone Does Not Determine Valuation

SQUAREVEST's analysis shows that Rheinmetall can continue to benefit from significant structural growth drivers in the long term. The record order backlog, higher European defense spending, and the expansion of the product portfolio create a strong foundation for this.

At the same time, as the group grows, so do the challenges. New production sites must be ramped up, acquisitions integrated, and numerous major international programs implemented simultaneously. Added to this are the political and regulatory risks associated with government procurement programs.

For investors, this means that Rheinmetall remains one of the most interesting European industrial companies for the coming years, but at the same time, it is by no means a straightforward stock to trade. The higher expectations become, the more the valuation is likely to depend on whether revenue growth, margins, and cash flow actually keep pace.

The complete analysis, featuring current key metrics, analyst targets, and scenarios through 2030, has been published on SQUAREVEST under the title "Rheinmetall Stock Forecast 2026-2030: Between Record Orders and Valuation Pressure."

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On its information platform, SQUAREVEST focuses on companies, capital markets, financing issues, and economic developments. Editorial analyses classify business models, market trends, and corporate developments, placing both opportunities and economic risks in their respective contexts.

This release was published on openPR.