Rheinmetall Struggles With Earnings Shock Even as It Forges a Civilian Future in Drone Defense

When Rheinmetall unveiled a joint venture with Deutsche Telekom last week to combat drone threats over Germany’s civilian infrastructure, the company framed it as a strategic leap beyond traditional battlefield sales. Yet for investors, that long-term vision is being drowned out by an immediate headache: the first-quarter numbers that landed well below expectations.

Between January and March, the Düsseldorf-based defense group generated €1.94 billion in revenue, missing the roughly €2.3 billion analysts had penciled in. Operating profit came in at €224 million, also trailing the consensus. The market reaction was swift. Shares ended the session at €1,123.80, leaving them roughly 45% below their all-time high and 43% off the 52-week peak. Over the past 30 days, the stock has shed nearly 26% of its value.

The Telekom deal, announced separately, marks a distinct shift in Rheinmetall’s growth playbook. Under the partnership, Rheinmetall will supply passive RF sensors and effectors while Telekom contributes its existing mobile?tower network and digital tools. The sensors detect radio frequencies used to pilot drones — still the most common control method in Germany — and can jam them or dispatch interception drones. The Federal Criminal Police Office logged more than 1,000 suspicious drone flights over German territory last year. By targeting civilian infrastructure protection, Rheinmetall gains access to shorter procurement cycles and expanding state budgets for critical?asset security, a market that bypasses the long?winded military acquisition pipeline.

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

The immediate earnings disappointment has forced several investment banks to recalibrate. JPMorgan downgraded Rheinmetall to Neutral and slashed its price target from €2,130 to €1,500. Berenberg followed suit, trimming its fair value to €1,750. On the other side, Warburg Research upgraded the stock to Buy, arguing that the recent sell?off has created an attractive entry point, while Barclays maintains a positive view, calling Rheinmetall a long?term beneficiary of Europe’s rearmament drive.

Broader operational momentum remains visible beneath the Q1 blip. Rheinmetall is expanding its cruise?missile capacity through a joint venture with Dutch firm Destinus and has pushed into the civilian?security arena with the Telekom partnership. Meanwhile, the German Red Cross has called for €2 billion in civil?defence investments by 2027, a tailwind that could indirectly boost demand for security infrastructure. Yet the core investor question persists: can the company convert its record order backlog into higher margins and cash flow?

For now, the market is demanding proof — not just press releases. Analysts project a forward price?to?earnings ratio of roughly 20 for 2027 and earnings?per?share growth of about 31%, figures that underscore the bull case. Whether Rheinmetall can close the gap between lofty contract announcements and tangible quarterly results will determine whether the stock can claw its way back from the lows. The Telekom venture offers a novel path, but it will take time to show up in the profit?and?loss statement — time that the current shareholder base may be running short on patience.

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