What Rheinmetall (RHM) Said on Its Q3 Earnings Call

Key Points

• Q3 sales rose 36% to more than €3.1 billion, and operating profit climbed 62%, lifting the operating margin to 17.5%.
• Rheinmetall cut its 2026 sales outlook to around €13.2 billion and its operating-margin forecast to 18.5%, citing delays to the Arminius Boxer contract and artillery-ammunition acceptance tests.
• The backlog reached €78 billion, up 38% year over year, but Q3 operating free cash flow was negative €82 million. The company does not expect to reach its €100 billion year-end backlog target without signing the Arminius contract in 2026.

Rheinmetall ETR: RHM reported third-quarter sales growth of 36% but lowered its full-year outlook as a major German vehicle contract and acceptance tests for artillery ammunition are expected to slip into 2027.

Sales rose to more than €3.1 billion in the quarter, while operating profit increased 62%, Chief Financial Officer Klaus Neumann said on the earnings call. The operating margin reached 17.5%, up 270 basis points from a year earlier.

The company now expects 2026 sales of around €13.2 billion, down from its previous range of €13.7 billion to €14.2 billion. It also lowered its operating margin forecast by 50 basis points to 18.5% and said it expects positive operating free cash flow, replacing an earlier target for a cash conversion rate of at least 40%.

Contract and ammunition delays weigh on outlook

Neumann said Rheinmetall expects the signing of the Arminius Boxer contract to move into the first quarter of 2027. The customer is conducting price audits, a process he said is likely to take too long for approval by Germany’s parliament before year-end.

The company has already ordered some components and begun preparatory work to meet the customer’s desired timetable, Neumann said. However, it cannot recognize the related revenue until a contract is signed. He added that Rheinmetall would limit how much further work it undertakes without an agreement.

Separately, customer acceptance tests for already-produced artillery ammunition are taking longer than anticipated. Neumann said the delays involve existing contracts, not delayed orders under framework agreements, and affect a three-digit million-euro amount of ammunition revenue.

Testing has become more demanding as Rheinmetall opens production sites and uses materials from a broader supply chain, he said. The delayed lots primarily involve one customer, but each requires separate testing, with timing dependent on the availability of ranges and customer personnel.

Neumann said the company had anticipated potential 2026 revenue in the low hundreds of millions of euros from Destinus, but discussions have not reached a stage where orders can be taken and executed. Those discussions continue, although he said an agreement is less certain after Destinus formed arrangements with Helsing.

Backlog rises as cash flow remains negative

Rheinmetall’s backlog stood at €78 billion at the end of September, up 38% from a year earlier and broadly unchanged from the end of the second quarter. Fixed orders represented 70% of the backlog, compared with 58% a year earlier.

Neumann said the company does not expect to reach its €100 billion year-end backlog target unless the Arminius contract is signed in 2026 against its current assumptions. He confirmed an analyst’s suggestion of a range of €80 billion to €85 billion without that contract, though he also said the company was not providing more specific backlog guidance because of uncertainty over the timing of approvals.

Third-quarter operating free cash flow was negative €82 million. Neumann said some advance payments for a Romanian package arrived in early October rather than during the quarter; receiving them earlier would have made quarterly cash flow positive. He put the significant October prepayment at around €150 million.

The revised cash flow forecast excludes any Arminius prepayment. Neumann said it relies substantially on payments from contracts already in execution, alongside anticipated payments from contracts expected to be signed in the fourth quarter. Full-year capital expenditure is still expected to exceed €1 billion.

Segment performance and production expansion

Vehicle systems sales increased 9.6% to nearly €1.5 billion, driven mainly by logistical vehicles for Germany. The segment’s operating margin improved to 13% as the product mix became more favorable.

Weapons and ammunition sales grew 37%, with an operating margin of 22.9%. Digital systems sales rose 39% to €509 million, supported by the TaWAN program and F-35 fuselage production. Naval systems sales were €345 million, with an operating margin of 11.1%.

Air defense sales rose by around €100 million, helped by demand from the Middle East and North Africa and Western Europe. Neumann said Italian government research and development programs contributed roughly €10 million to profitability in the quarter, though the same benefit was not certain to recur in the fourth quarter.

Rheinmetall also began handing over the first of eight XM30 infantry fighting vehicle prototypes to the U.S. Army. Neumann said a formal decision or clear indication on the roughly $45 billion program is expected in 2027.

In Spain, the company commissioned a medium-caliber ammunition facility in Albacete with a targeted annual capacity of roughly 3 million components. Rheinmetall and partner MSC also secured the bid to acquire Romania’s Mangalia shipyard for a joint purchase price of €138 million. Neumann acknowledged legal challenges to the sale and said Romanian institutions would decide their merits.

Neumann declined to provide detailed guidance for 2027 or comment on the company’s longer-term growth framework, saying Rheinmetall would address its outlook at its Capital Markets Day later in the month.

About Rheinmetall (ETR:RHM)

Rheinmetall AG provides mobility and security technologies worldwide. The company operates in five segments: Vehicle Systems, Weapon and Ammunition, Electronic Solutions, Sensors and Actuators, and Materials and Trade. The Vehicle Systems segment offers combat, logistics, support, and special vehicles, including armored tracked vehicles, CBRN protection systems, artillery, turret systems, and wheeled logistics and tactical vehicles. The Weapon and Ammunition segment provides firepower and protection solutions, such as weapons and munition, protection systems, propellants and international projects and services.

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