Germany’s largest arms company Rheinmetall has presented its business figures for 2025 – and strong growth reported again. Sales rose by 29 percent to around 9.94 billion euros last year. The operating result climbed by 33 percent to 1.84 billion euros, as the dpa reports.

The operating margin was 18.5 percent, slightly higher than the previous year. The bottom line is that the group earned 696 million euros, slightly less than a year earlier. The reason was, among other things, losses from business areas that Rheinmetall wants to sell in the future.

Shareholders should still have a significantly greater share in the company’s success. The board of directors proposes a dividend of 11.50 euros per share. Last year it was 8.10 euros. “We have achieved a new operational record and will continue to increase the group’s profitability,” explained CEO Armin Papperger.

The stock market initially reacts skeptically

Despite the strong numbers The stock market initially reacted cautiously. The Rheinmetall share temporarily lost several percent in early trading, making it one of the weakest stocks in the Dax.

Analysts point out that sales and operating results were slightly below expectations. The outlook for the operating margin was also slightly lower than some market observers had hoped.

In addition, the stock has already had an extraordinary rally in recent years. Since the start of the Ukraine war, the price has risen by more than 1,600 percent. The expectations of many investors are now correspondingly high.

What investors should consider now

For investors, Rheinmetall remains one of the most important beneficiaries of rising defense spending. However, the reaction of the stock market shows that part of the growth hopes are already included in the price.

Three points are currently particularly important for investors:

First: new major orders from the Bundeswehr and other NATO states. They drive the order backlog and thus future sales.

Second: the development of margins. Investors are watching closely to see whether Rheinmetall can further increase its profitability.

Third: geopolitical developments. Conflicts and rising defense budgets are currently providing additional tailwind for the entire industry.

And no matter how strong the defense industry’s growth prospects currently appear, if there are delays in major orders, conflicting political decisions or weaker quarterly figures, this can quickly put the share price under pressure. The fact that some orders from a NATO state are still a long time coming has already caused some disillusionment. “There are delays,” says Papperger.

Individual stocks such as Rheinmetall fundamentally offer benefits for investors higher risks. The price of an individual company can fluctuate significantly more than a broadly diversified stock fund or index. Financial experts therefore advise many private investors to diversify their money widely – for example through funds or ETFs – instead of relying heavily on individual stocks. In this way, the risks of individual companies can be better cushioned.

And even after the strong rally of recent years, there is no guarantee that this development will continue. Some of the expectations for increased defense spending may already be priced into the price.

Anyone who still relies specifically on individual stocks should be aware of the higher fluctuations and only invest a limited part of their assets.

Order books are fuller than ever

In the long term, however, many investors are apparently betting that Europe will continue to increase its defense spending – and Rheinmetall as one of the largest European suppliers benefits from it. And could be right about that: The arms company benefits greatly from increasing defense spending in Europe and among NATO countries. In view of the war in Ukraine and other geopolitical tensions, many countries are investing heavily in military equipment.

Rheinmetall can hardly save himself from orders. At the end of December, the order backlog – the so-called backlog – was 63.8 billion euros. This is a record value. This includes both firm orders and framework agreements.

The company also sees itself well positioned for new projects. Rheinmetall produces, among other things, tanks, artillery systems, anti-aircraft technology, military trucks, ammunition and drones. The group is also continuing to expand its activities – for example by taking over parts of the Bremen Lürssen shipyard in naval shipbuilding.

Iran war increases demand

Additional demand could currently arise from the Iran war. According to Rheinmetall boss Armin Papperger, interest in the group’s anti-aircraft systems is increasing. “The phones didn’t stand still over the weekend, people want our systems,” said Papperger in Düsseldorf. He did not provide details about possible orders.

According to him, Rheinmetall anti-aircraft guns are already being used in the current conflict. They have already shot down well over 100 drones there. The background: According to Papperger, Iran is using drones on a massive scale in the war with the USA to attack US bases, Israel and states in the region.

However, defending against such drones with missiles is extremely expensive. According to Papperger, the USA and its allies used around 2,000 so-called effectors – rockets and guided missiles – in the first 72 hours of the conflict. That cost around four billion dollars.

Such an interceptor missile costs on average around two million dollars, while the drones are often only worth 20,000 to 50,000 dollars.

Rheinmetall is therefore advertising anti-aircraft guns as a cheaper alternative. A shot costs around $1,000. “If we can defeat the drones with three, four or five shots, fighting these drones is possible with $5,000 – instead of one, two or three million dollars,” said Papperger.

Sales are expected to increase significantly in 2026

Management remains optimistic for the current year. Rheinmetall expects sales of 14 to 14.5 billion euros for 2026. That would correspond to growth of 40 to 45 percent.

The operating margin is expected to increase to around 19 percent. In the medium term, the group is aiming for even higher goals: Rheinmetall wants to increase its sales to around 50 billion euros by 2030.

At the same time, the group is strategically repositioning itself. Rheinmetall wants to concentrate entirely on the armaments business and sell the weakening automotive supply division. The division is considered to be less profitable and has recently had declining sales.

How to proceed

By 2030, Rheinmetall wants to increase its sales fivefold to 50 billion euros, and the number of employees should more than double from 33,000 to 70,000. Rheinmetall would like to soon divest itself of its weakening business as an automotive supplier; this area is no longer included in the group’s annual figures for 2025.

Papperger says they are close to deciding on one of the bidders. The sale is expected to be announced in the second quarter of 2026.

The motor vehicle facility in Neuss is being converted so that military equipment can be built there. Rheinmetall therefore becomes a pure arms manufacturer; Pistons or pumps for cars are a thing of the past.