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(Sharecast News) - Germany's largest defence contractor Rheinmetall reported strong revenue and profit growth for 2025 on Wednesday, and forecast a sharp acceleration in sales this year, as rising global military spending drives demand for weapons systems, ammunition and air-defence technology.
The Dsseldorf-based group said consolidated sales rose 29% to 9.94bn in 2025 from 7.72bn a year earlier, while operating profit increased 33% to 1.84bn, lifting its operating margin to 18.5%.
It said the gains were driven by heightened demand for defence equipment as European governments expand military capabilities amid geopolitical tensions, according to the company's results statement.
Despite the strong growth, the results came in below market expectations.
According to data cited by CNBC, analysts had expected revenue of around 10.5bn and operating profit of about 1.75bn.
Net profit attributable to shareholders slipped slightly to 696m from 717m the previous year, also below forecasts compiled by Visible Alpha.
The company's order backlog nevertheless surged 36% to a record 63.8bn, reflecting increased procurement by NATO countries and strong demand for ammunition, vehicles and air-defence systems.
Rheinmetall said the "tense security situation underpins the promising position of the group," with its products playing an increasingly important role in strengthening defence capabilities in Germany and allied countries.
Chief executive Armin Papperger said the company was well positioned to benefit from the rise in global defence spending.
"The world is changing rapidly, and Rheinmetall is well prepared," he said, adding that the group expected to play a significant role in supplying equipment for modern armed forces.
Growth was driven by its core defence divisions.
The Vehicle Systems unit, which produces military trucks and armoured vehicles such as the Boxer platform, reported sales of 4.99bn, up 32% year-on-year.
The Weapons and Ammunition division generated 3.53bn in revenue, a 27% increase, supported by demand from Germany, other NATO members and Ukraine.
Meanwhile, the Electronic Solutions segment, which includes air-defence systems and military digitalisation technologies, saw sales jump 45% to 2.5bn.
Rheinmetall said it was also reshaping its business to focus entirely on defence, with its civilian automotive activities being prepared for sale.
The company has expanded its capabilities across multiple domains, including naval systems following the acquisition of shipbuilder Naval Vessels Lrssen, as well as digital and space technologies.
Looking ahead, Rheinmetall forecast sales growth of 40% to 45% in 2026, implying revenue of 14bn to 14.5bn and an operating margin of about 19%.
Analysts cited by several media outlets said the guidance broadly aligned with market expectations and reflects continued strong demand for military equipment as conflicts in Ukraine and Iran drive higher defence spending.
The company also said it saw opportunities to support the replenishment of US missile stockpiles depleted during the war with Iran, noting in an investor presentation that "higher spend for missile restocking and air defence" was likely to be unavoidable.
Reflecting the improved earnings, Rheinmetall proposed raising its dividend to 11.50 per share from 8.10 a year earlier.
At 1229 CET (1129 GMT), shares in Rheinmetall were down 4.88% at 1,573.
Reporting by Josh White for Sharecast.com.