Steady growth across Defence divisions amid strong global demand for Rheinmetall in Q2 2025

Overview

Rheinmetall delivered solid year-over-year growth in Q2 2025, driven by sustained demand in its defence business and stable performance across its divisions. Revenue, operating profit, and margins remained healthy, supported by both international sales and operational efficiencies, although the quarter also reflected certain pressures in cash flow and order intake compared to the prior year.

Armin Papperger, CEO of Rheinmetall AG, on the company’s development: “Rheinmetall is successfully on its way to becoming a global defence champion. We are now also a serious partner for US companies. Our order books are full and will continue to grow in the future. We stand by our responsibility for our democracy and the independence of Europe, where we are contacted by many countries regarding new projects. We will take advantage of these opportunities. We are in the process of significantly strengthening our foothold in Central and Eastern Europe. We are working hard to further increase sales significantly and are investing in many European countries to create new capacity. We are constructing new plants, expanding existing ones and have also converted facilities from civil to defence production. We will soon be inaugurating Europe’s largest ammunition factory in Lower Saxony.”

Q2 2025 vs. Q2 2024:

Sales rose to €2.43bn (+9% YoY), with 71.5% of revenues generated abroad, indicating robust global demand.
- Vehicle Systems sales increased to €945m (+17% YoY), driven by strong deliveries in military vehicle programs. Operating result rose to €97m from €82m, with an improved margin of 10.3% (vs. 10.1%). Operating free cash flow deteriorated to -€282m from €185m, primarily reflecting higher capital expenditure (€37m vs. €23m) and increased inventory buildup for upcoming deliveries.
- Weapon and Ammunition sales grew to €724m (+5% YoY), benefiting from sustained demand in both domestic and export markets. Operating profit rose to €164m from €152m, improving the margin to 22.7% (vs. 22.0%). Cash flow slipped into negative territory at -€132m compared to €18m in Q2 2024, mainly due to working capital movements and investment in capacity expansion.
- Electronic Solutions revenue surged to €517m (+44% YoY), reflecting strong orders in sensor systems and air defence solutions. Operating profit increased to €44m from €36m, though margin narrowed to 8.6% (vs. 10.0%) due to an unfavourable mix and ramp-up costs for new projects. Operating free cash flow turned negative at -€431m from €24m, driven by capital expenditure (€118m vs. €45m) and order-related working capital needs.
- Power Systems sales declined to €482m (-6% YoY), impacted by softer demand in certain civilian engine markets. Operating profit dropped to €14m from €25m, with margin compressing to 3.0% from 4.9%. Operating free cash flow improved slightly to -€7m from -€31m last year, with capital expenditure stable at €20m.
Operating result improved slightly to €276m (+2% YoY), leading to a stable EBIT margin of 9.7% versus 10.5% a year earlier.
Earnings from continuing operations increased to €167m from €151m, while earnings after taxes rose to €159m from €79m.
Order intake fell sharply to €1.8bn from €5.2bn, reflecting the timing of large contract awards in the prior year.
Booked business stood at €664m versus €737m in Q2 2024.
Operating free cash flow deteriorated to -€911m from €170m, mainly due to higher investments (€199m vs. €127m) and a significant increase in working capital needs.
Cash conversion rate dropped to -330.5% from 62.4% in Q2 2024.
Basic earnings per share from continuing operations were €3.10, slightly higher than €3.08 in the prior year.

Rheinmetall reaffirmed its full-year 2025 guidance, expecting Group sales to grow by 25%-30% year-over-year, driven by strong momentum across all divisions. Vehicle Systems sales are projected to rise by 30%-35%, Weapon and Ammunition by 30%-35%, and Electronic Solutions by 35%-40%, while Power Systems is anticipated to remain at prior-year levels. The Group’s operating result margin is forecast at around 15.5%, with divisional margins ranging from 4%-5% in Power Systems to 27%-29% in Weapon and Ammunition. The cash conversion rate is expected to be approximately 40% for the year.

Rheinmetall shares dropped -8% on the day of their earnings release after results came in notably below Wall Street expectations, and they ended the week with a further slight decline. Despite this short-term weakness, the stock has surged an impressive +168% year-to-date, reflecting its strong long-term momentum. However, the price has now slipped just below the 50-day SMA (€1,768.27), which could signal potential near-term corrections if it fails to reclaim that level. The RSI currently sits at 37, above oversold territory, suggesting there may still be room for further downside pressure before buyers step back in.