A year ago, Donald Trump was appointed President of the United States and a new policy is being implemented regarding Europe and its defense. Since then, the European defense industry has been high on the agenda in the EU and the industry is experiencing a stormy development. Back in June 2025, we wrote an article about the defense industry following the NATO summit in The Hague.
You can read this article "Defense stocks: promising but first rest in place" HERE.

One notable player in the vigorous development of the European defense industry is Rheinmetall AG. This German company has emerged in recent years as one of the key players in the European defense sector, benefiting from rising defense budgets and increasing demand for military equipment. In September 2025, we dedicated an article to Rheinmetall. We recommend that you also read this article so that you are fully informed. You can find the article "Rheinmetall AG: ready for next share price explosion!" dated September 11, 2025 HERE.

Developments at the geo-political level and within the sector are very dynamic. Within the sector, Rheinmetall ranks as Europe's most dynamic growth company. Today we look at developments in recent months within the European defense industry and Rheinmetall's in particular. Thus, we determine the vision and strategy for the coming period and what opportunities there are for you as an investor.

What are the developments in the European defense industry since September 2025?

The EU Council gave the final green light in December 2025 to the European Defense Industry Program (EDIP) with €1.5 billion in grants for 2025-2027, designed to strengthen the European defense technological and industrial base and promote cooperation. Part of it also supports Ukraine.

The EU is working to simplify defense investment and coordination so that member states can cooperate more quickly and efficiently on joint procurement and production projects.

The EU SAFE ("loans-for-arms") initiative is about to launch with the first tranches of €22.5 billion in early 2026, targeting joint arms programs such as air and missile defense, ground combat systems and munitions.

In summary, the European defense industry has reached an acceleration phase since September 2025. This phase is driven by increased spending, joint EU programs, strong demand for technology and production, and international uncertainties. The industry is seeing growth in jobs, capital markets (e.g., IPOs), cooperation within Europe and an increased role of joint financing instruments.

How is the German defense industry developing in recent months?

Germany is a major player and the home of Rheinmetall.

Since September 2025, the German government has accelerated ambitious defense plans. The Bundeswehr plans to place approximately €83 billion in equipment orders between September 2025 and the end of 2026, which is four times higher than previous years and significantly boosts domestic industry. Much of these contracts are aimed at German and European companies rather than U.S. suppliers. In addition, there are broad plans to further increase the defense budget in the longer term to support this intensive wave of modernization. Germany aims to grow defense spending toward a higher percentage of GDP in the coming years, consistent with its role within NATO goals.

This growth is coupled with policy changes that give Germany more flexibility to increase defense spending through dedicated funds and relaxed restrictions on debt rules. This allows Berlin to invest more without being strictly bound by traditional budget norms.

The defense industry itself is growing rapidly. Employment at German arms manufacturers and defense-related startups is up nearly 30%, with 83,000 employees, showing the broad impact of defense spending on the labor market. Major players such as Airbus and Rheinmetall are expanding their workforce, and new companies are focusing on technologies such as drones and autonomous systems.

A notable trend is Germany's shift from traditional reliance on foreign (especially U.S.) weapons systems to more "Buy European" procurements. According to recent plans, only a small portion of Germany's planned military orders for 2025-2026 will receive supplies from non-European suppliers, providing stronger support for the European defense industrial base.

In addition to mass orders, Germany is also investing in modern capabilities such as space defense and advanced surveillance systems. For example, the German defense minister announced programs for a military space architecture and improved monitoring systems to protect satellites and counter hostile activities in space. This underscores that investments are not only quantitative but also technologically focused.


What are the developments at Rheinmetall since September 2025?

Rheinmetall and the joint venture KNDS/Projekt System & Management have signed a contract to supply simulators for Puma infantry combat vehicles to Germany. The first systems will be delivered in mid-2027. The company is expected to deliver Lynx KF41 infantry armored vehicles to Ukraine, with the first deliveries scheduled in early 2026. In late September 2025, Rheinmetall reported a rising order book, indicating strong demand for defense-related products and services.

Since September 2025, Rheinmetall has focused on large contracts (such as simulators), deliveries to Ukraine, defense systems innovation, a solid order book, and strategic expansions of production capacity and activities (including munitions plants and naval systems). Its position as a leading European defense contractor continues to strengthen.


What is analysts' view of Rheinmetall?

Analysts remain generally positive on Rheinmetall, mainly because of strong demand for defense-related products, high defense budgets in Europe and a robust order book. Average price targets for the next 12 months are around €2,200. Morgan Stanley is the positive outlier with a price target at €2,500. The current share price hovers around €1,875.


What is Yelza.com's view on Rheinmetall?

In the article from September 11, 2025: Rheinmetall AG: ready for next share price explosion! we presented two scenarios. Both with price target €2,500. At that time we gave you the consideration to build up the position in parts. Due to the course of the price since September, we can assume that the position was bought in at an average of around €1,850. The price has clearly followed the second scenario since September 2025. With the lowest price at €1,410, the possibility of buying in at €1,350 has just fallen short.

Our most likely scenario is indicated by the arrows in the chart below:

The 12-month price target is unchanged at €2,500. The algorithm expects a short test of the top around €2,000 to then correct about 15%. This is the setup for the next upward move in which the price sets a new top. After the correction, the trend finishes at €2,500.

Yelza.com's system thus places itself among the most positive analyst expectations and there are still plenty of opportunities to make the buy consideration in the ride to our price target.


Conclusion

Rheinmetall continues to develop strongly and soundly in a sector with momentum and a future with perspective. After the initial enormously strong upward movement, the price has undergone a long correction. This correction fits within the outlined second scenario as published, towards the €2,500 price target.

If you already have a position you can consider holding it on the way to the price target.
If you do not have a position yet, you might consider building it in a possible decline around €1,700 and at the breakout above €2,000. Target price €2,500.

Annual earnings 2025 are expected on March 10, 2026.

Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. They are therefore for educational purposes only.