Hensoldt's Record Backlog Hits €9.8 Billion as Profitability Improves, but Valuation Concerns Cap the Stock

Hensoldt delivered a strong set of first-quarter numbers on Wednesday, with revenue and earnings both beating analyst expectations. Yet the market response was muted — a sign that even impressive operational momentum may not be enough to overcome lingering doubts about valuation and cash flow.

The defence electronics group reported a 25% jump in revenue to €496 million for the three months ended March 2026, slightly ahead of the consensus estimate of €489 million. Adjusted EBITDA surged 47% to €44 million, pushing the margin from 7.6% to 8.9%, helped by a favourable project mix and scaling effects in the radar business. The net loss narrowed to €19 million from €30 million a year earlier, while EBIT improved to -€4 million.

Order book swells past €9.8 billion

The standout figure was the order backlog, which reached a record €9.80 billion at the end of March — up more than 41% from €6.93 billion a year earlier. Order intake nearly doubled to roughly €1.5 billion during the quarter, keeping the book-to-bill ratio in a healthy range of 1.5x to 2.0x.

The surge was driven by contract extensions for the Eurofighter radar Mk1, orders to equip Puma and Schakal armoured vehicles, and sustained demand for TRML-4D radar systems tied to European defence initiatives and support for Ukraine. The Optronics division was a particular bright spot, with its EBITDA margin leaping to 12.2% from just 1.3% a year ago, thanks to strong demand for thermal imaging cameras and periscopes.

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Long-term target raised to €6 billion

Management used the strong order visibility to lift the 2030 revenue target from €5 billion to €6 billion, betting that NATO defence spending will remain elevated and that Hensoldt will continue gaining share in electronic warfare. The integration of ESG Elektroniksystem- und Logistik-GmbH, acquired in April 2024, is increasingly contributing to the bottom line. A new logistics hub in Ulm with over 400 employees is designed to ease delivery bottlenecks and should begin accelerating shipments in the second half of the year.

For the full year 2026, the company confirmed its guidance for revenue of around €2.75 billion and an adjusted EBITDA margin between 18.5% and 19.0%. Order intake for the year is expected to land between €4.1 billion and €5.5 billion. Capital spending is focused on capacity constraints and building out supply chains for gallium-nitride semiconductors.

Analyst caution weighs on the share price

Despite the operational strength, Hensoldt shares closed at €80.66 on Wednesday, down 0.25% on the day after falling more than 3% intraday. The stock has gained roughly 5% over the past seven days and about 15% over the past twelve months, but remains nearly 30% below its 52-week high of €115.10.

The disconnect reflects analyst scepticism about the valuation. DZ Bank maintained its buy rating but cut its price target from €104 to €98, calling the company's outlook cautious. Barclays kept an "Equal Weight" rating with a €95 target, pointing to weak free cash flow despite the strong order book. JPMorgan, with a "Neutral" rating and €85 target, sees more upside at peers like Rheinmetall or Renk. MWB Research went further, recommending a sell with a €62 target, noting that the price-to-earnings ratio based on 2026 estimates stands at 45.

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Two additional developments

Alongside the quarterly results, Hensoldt announced that the planned acquisition of Dutch specialist Nedinsco is expected to close by mid-2026. The company also appointed Inka Tews, previously at Infineon, as its new chief human resources officer, effective May 1.

The central question for investors remains whether Hensoldt can convert its record order book into cash and earnings fast enough to justify the premium valuation. The new Ulm logistics hub will provide an early test of that delivery capability in the second half of the year.

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