Rheinmetall's Q1 Miss Casts a Shadow Over a Record Order Book and a High-Profile Berlin Showcase

The juxtaposition of a record €73bn backlog and a share price down 40% from its high captures the paradox gripping Rheinmetall. The defence group has executed a radical strategic pivot, shedding its automotive arm to become a pure-play military supplier, yet the market is demanding clearer evidence that orders are translating into revenues.

That tension will be on full display next week when Rheinmetall takes an 840-square-metre stand at the ILA Berlin airshow, Europe's premier aviation event. The company plans to showcase everything from autonomous combat aircraft to satellite reconnaissance capabilities, underscoring its transformation from a land-systems specialist into a multi-domain defence heavyweight. But the stock, which closed Friday at €1,190, has lost over a quarter of its value since the start of the year.

The trigger for the sell-off was a disappointing first-quarter performance. Revenue of €1.94bn represented 8% growth year-on-year but fell well short of analyst forecasts. Rheinmetall blamed the miss on timing issues — delayed truck handovers in Germany and the restart of production at a Spanish munitions plant — and stuck by its full-year guidance of €14.0bn to €14.5bn in sales and an operating margin of around 19%. The order backlog, at €73bn as of 31 March, covers roughly 97% of that target.

Yet for a stock that once traded at a premium reflecting years of European rearmament, the margin for error has shrunk. The shares now sit 40.4% below their 52-week peak of €1,995 and just 8.2% above the year's trough. Technically, they are well below both the 50-day moving average of €1,344 and the 200-day line of €1,620, with a relative strength index of 39.6 suggesting no imminent reversal.

Should investors sell immediately? Or is it worth buying Rheinmetall?

The strategic logic behind the makeover remains compelling. Rheinmetall's disposal of its automotive division for €350m, pending antitrust clearance, will leave it as a pure defence contractor. The Bundeswehr has awarded fresh contracts, including a multi-hundred-million-euro order for laser light modules and a billion-euro satellite reconnaissance deal through the Rheinmetall ICEYE joint venture. European military spending hit a record $864bn last year, and Germany plans to allocate over €108bn to defence in 2026.

The geopolitical backdrop, however, adds a layer of uncertainty. Recent signals from Washington and Kyiv that a Ukraine peace deal may be closer have weighed on defence stocks. For Rheinmetall, whose valuation has benefited from an escalating threat perception, any reduction in that premium could test investor confidence further.

Near-term catalysts are mixed. The ILA conference — which runs from 10 to 14 June and is accompanied by the "Zukunft.DEFENCE" event in Düsseldorf — could generate positive headlines, particularly around new partnerships or contracts. On the macro side, the ECB's interest rate decision on Thursday and US CPI data on Tuesday will influence the broader market tone. But the annualised volatility of 52% means moves of 3-4% in either direction are routine.

Rheinmetall at a turning point? This analysis reveals what investors need to know now.

The real proving ground comes on 6 August, when Rheinmetall reports half-year results. By then, the market will want to see that the Q1 shift in revenues has been recovered and that supply-chain bottlenecks are easing. Until that hard data arrives, the narrative — however polished on the exhibition floor — will struggle to lift a stock that remains in a downtrend.

For now, Rheinmetall finds itself in an uncomfortable spot: its fundamental story is stronger than ever, but its share price reflects mounting impatience with execution. The ILA provides a stage to tell that story, but the numbers will have to do the heavy lifting later.

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