3 European Defence Stocks With Long Term Revenue Tailwinds

Defence is back in the political spotlight, and this time the story is about money, not military parades. Potential UK backing for Canada’s new Defence, Security and Resilience Bank and an £870m capital pledge hint at fresh funding channels that could influence European defence and aerospace stocks. This piece unpacks the news and profiles 3 companies exposed to these catalysts so you can judge whether they belong on your watchlist.

The stocks covered next are just a small sample, and the full screen surfaced 53 more European defence and aerospace companies with equally compelling narratives that are not included here. To identify your own highest conviction ideas, head straight to the European Defence and Aerospace Stocks screener.

Rheinmetall (XTRA:RHM)

Overview: Rheinmetall is a German defence group supplying armoured vehicles, munitions, air defence and digital combat systems to NATO-aligned customers worldwide.

Operations: Vehicle Systems generates about €5.5b of revenue and Weapon and Ammunition about €4.0b, with demand anchored in Germany and wider Europe.

Market Cap: €47.9b

Rheinmetall matters for this European Defence and Aerospace screen because it links heavy land systems, ammunition supply and advanced electronics directly to NATO rearmament, which is exactly where new funding mechanisms and cross border initiatives are being pointed.

"The substantial increase in European and NATO defense budgets, particularly Germany's multiyear boost in core defense spend to 3.5% of GDP, combined with Rheinmetall's strong positioning and minimal competition in critical vehicle and ammunition programs, indicates a large, sustainable order intake pipeline (expected €80-120 billion backlog by mid-2025/2026), directly supporting robust top-line revenue growth for years to come."

What really matters for investors is how one unresolved pressure on Rheinmetall's cost base shapes the eventual payoff from that order pipeline.

That cost question sits at the heart of the full narrative for Rheinmetall, which examines how contract structures, pricing power and execution risk could influence Rheinmetall's long term payoff profile.

Kongsberg Gruppen (OB:KOG)

Overview: Kongsberg Gruppen is a Norwegian defence and high-tech supplier focused on naval, missile and command-and-control systems for NATO-aligned customers.

Operations: Reported segments include Other revenue of NOK 2,126 million, eliminations of NOK 1,179 million and a segment adjustment of NOK 34,778 million.

Market Cap: NOK 270.5b

For a screen built around European defence and aerospace, Kongsberg Gruppen matters because its missiles, naval systems and command networks are directly tied into NATO rearmament and higher maritime spending, which is exactly where new multilateral financing initiatives are pointing capital.

"There may be an overestimation of the company’s ability to consistently convert its swelling multi-year order backlog into high-margin, timely revenues, given management’s comments about project mix (e.g., low-margin development contracts versus more profitable export deals) and the structural volatility inherent to large government defense programs."

What happens to Kongsberg Gruppen's future earnings profile depends heavily on how one quiet shift in that backlog mix ultimately plays out.

That backlog mix is the real swing factor, and the full narrative for Kongsberg Gruppen explains how Kongsberg Gruppen could turn contract volatility into accelerating, higher quality earnings power.

Leonardo (BIT:LDO)

Overview: Leonardo is a major European defence and aerospace group supplying helicopters, aircraft, electronics, cyber and space solutions to NATO and allied customers worldwide.

Operations: Leonardo generates most of its revenue from Defence Electronics & Security at €9.1b, Helicopters at €5.9b and Aeronautics at €4.3b, with additional contributions from Space and Cyber & Security Solutions.

Market Cap: €28.8b

For an investor focused on European defence and aerospace, Leonardo matters because it blends traditional hardware like helicopters and jets with software heavy electronics, cyber and space systems that sit right in the path of multi year NATO procurement and fresh multilateral financing such as the proposed Defence, Security and Resilience Bank.

"The company is positioned to participate in accelerating global defense spending and heightened geopolitical instability, particularly in Europe and among NATO countries, as reflected in reported order growth of 9.7% year on year and increased guidance for future order intake and revenues. Ongoing operational optimization, digitalization of manufacturing processes, and a company-wide capacity boost program are contributing to reported gains in profitability and efficiency, with EBITA and free cash flow growing faster than revenues over the period referenced."

What really shapes Leonardo's payoff from this cycle is how one pressure inside its portfolio mix feeds through to long term margin power.

That margin question is exactly what the full narrative for Leonardo unpacks, showing where accelerating electronics and space exposure could be masking both risk and upside.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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