German defense contractor Rheinmetall has reduced its financial forecast for 2026 after the German government scrapped a delayed frigate project that the company had been considered a strong contender to win.
The company now projects sales of between €13.7 billion and €14.2 billion ($15.8 billion-$16.4 billion) for 2026, compared with its earlier estimate of €14 billion to €14.5 billion. The revision reflects an expected €300 million impact on its naval operations following the cancellation.
Rheinmetall also lowered its order backlog forecast to more than €100 billion, compared with its previous expectation of approximately €135 billion. At the same time, the defense manufacturer reduced its capital expenditure guidance to 8%-9% of revenue, down from 16%.
Despite the revisions, Rheinmetall maintained its targets for free cash flow conversion and profit margins. The company said it continues to be positioned for record levels of growth.
Analysts at JPMorgan noted that they had anticipated the canceled frigate program would have a more substantial effect on the company beyond 2026. They suggested the latest reductions in guidance could point to slower growth during 2027 and 2028.
Rheinmetall previously disclosed an almost 70% year-on-year increase in second-quarter revenue, reaching around €3.3 billion. The figures, released unexpectedly last month, showed growth across all of the company’s business divisions.
Investor sentiment weakened following the revised outlook. Rheinmetall shares dropped as much as 4% in early trading before recovering some ground, trading 1.2% lower at 0745 GMT.
Naval Expansion Faces a Setback
Rheinmetall has benefited significantly from Europe’s renewed focus on defense spending since Russia launched its invasion of Ukraine in February 2022. The continent’s biggest ammunition manufacturer has set an ambitious target of generating as much as €50 billion in annual revenue by 2030.
As part of its strategy to strengthen its position in the naval defense market, Rheinmetall completed the acquisition of the warship business of German shipbuilder Luerssen in March.
The company has also been evaluating a possible acquisition of German Naval Yards Kiel. Rheinmetall said it expected to reach a final decision within weeks after another prospective buyer exited the bidding process last month.
However, Berlin’s decision in June to abandon the delayed frigate program, where Rheinmetall had appeared well placed to secure the contract, has weakened some of the momentum behind its naval expansion plans.
Rheinmetall Chief Executive Armin Papperger said the company remains focused on expanding its maritime operations.
He emphasized that Rheinmetall is continuing to deliver its existing naval contracts while working to win additional international orders and strengthen its role as a dependable and highly capable maritime defense partner.
