Porsche SE, the holding company that controls Volkswagen, bore the brunt of a drop in 2025 earnings at the German auto group due to tariffs and missteps and it announced increased investments in defence.
Conflicts in Ukraine and the Middle East have increased investor interest in the defence and technology sector, at a time of weakness in Germany's automotive industry.
Porsche shares fell 2.7% in early trade on Thursday, underperforming the wider index.
Reduced share of profits
The holding company of Germany's Porsche-Piech auto dynasty is Volkswagen's largest investor with 31.9% of shares and 53.3% of voting rights. It also owns 12.5% of sports-car maker Porsche AG.
Its share of the profits was eroded by costs of billions of euros after Volkswagen subsidiary Porsche AG halted its electric vehicle rollout in September.
Porsche SE reported adjusted earnings after tax of 2.9 billion euros ($3.35 billion) for 2025, down by around 9% year on year.
The group's net debt fell slightly to 5.1 billion euros.
In contrast to the drop at Volkswagen, Porsche SE's smaller investments generated 193 million euros in profit last year, it said, driven largely by its stakes in drone maker Quantum Systems and semiconductor startup Celestial AI.
"Our unique network has become a key strategic asset that significantly contributes to the strong financial performance of our portfolio," board Chairman Hans Dieter Poetsch said in a statement.
The group also announced a 100 million euro investment in a newly launched defence fund of the investment company DTCP, focusing on European technology start-ups in areas including cyber defence and AI.
Poetsch, however, said the company remained committed to Volkswagen as an anchor investor after 1 billion euros in cost cuts across the group last year.
"We expect the management of both Volkswagen AG and Porsche AG to view the challenging situation as an opportunity to implement the strategic adjustments," Poetsch said.
($1 = 0.8647 euros)
(Reporting by Rachel More and Amir Orusov, Editing by Kirsti Knolle and Barbara Lewis)
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