Hensoldt's Delayed Growth Trajectory: Is 2027 the Tipping Point for Defense Investors?

The global defense sector is undergoing a seismic shift, driven by geopolitical tensions and surging military modernization efforts. For investors, the question is no longer whether defense stocks will outperform but when to act. Hensoldt AG, a German sensor and optronics systems leader, has positioned itself at the intersection of these trends, yet its growth trajectory remains shrouded in uncertainty. With 2027 looming as a critical inflection point, this analysis examines Hensoldt's strategic valuation, its competitive positioning, and the broader sector dynamics to determine whether the company is poised for a breakout-or if patience is still required.

A Surge in Order Intake and Revenue

Hensoldt's first nine months of 2025 delivered a stark contrast to its 2024 performance. Order intake rose to EUR 2,017 million, a 8.7% increase year-on-year, while revenue hit EUR 1,536 million, up 11.6% according to a XTB analysis. The Sensors segment, which supplies radar systems for Eurofighter jets and naval platforms, grew by 9.3%, while the Optronics division-responsible for submarine and ground-based systems-surged 27.5% as noted in a Q3 2025 earnings call transcript. This divergence highlights Hensoldt's ability to capitalize on niche markets, particularly in retrofitting legacy systems, a trend accelerated by European defense budgets expanding at an average of 4% annually as noted in a 2023–2027 SWOT report.

Adjusted EBITDA for the period reached EUR 211 million, with a margin of 13.7%, signaling improved operational efficiency according to the XTB analysis. The company has raised its 2025 revenue guidance to EUR 2,500 million and confirmed its long-term 2030 target, though the exact figure remains undisclosed. Analysts at XTB note that Hensoldt's book-to-bill ratio of 1.6x–1.9x suggests robust future order flow, a critical metric for capital-intensive defense firms, as reported in the XTB analysis.

Sector-Wide Momentum and Strategic Valuation

The defense sector's growth is underpinned by a confluence of factors. According to a 2023–2027 industry report, global defense spending is projected to reach $2.5 trillion by 2027, driven by conflicts in Europe and Asia-Pacific, as well as U.S. procurement of next-generation aircraft and unmanned systems, as reported in a Mordor Intelligence report. For European firms like Hensoldt, the Russia-Ukraine war has been a catalyst, with Germany's defense budget increasing from 1.3% to 2.5% of GDP since 2022, as noted in the Mordor Intelligence report.

Strategic valuation in the sector hinges on order backlogs and R&D pipelines. Hensoldt's EUR 4.2 billion backlog as of Q3 2025-up from EUR 3.8 billion in 2024-provides a buffer against cyclical volatility, as noted in a Euro-SD report. Competitors such as Leonardo (LDOF.MI) and Rheinmetall (RHMG.DE) are also leveraging partnerships to secure market share. Their 50:50 joint venture, Leonardo Rheinmetall Military Vehicles, recently secured a EUR 200 million contract to supply 21 armored combat vehicles to the Italian Army under the A2CS program, as reported in a Australian Defence report. This collaboration underscores the importance of European strategic sovereignty, a theme likely to dominate 2027 valuations, as reported in the Euro-SD report.

The 2027 Tipping Point: Risks and Opportunities

While Hensoldt's fundamentals are strong, 2027 presents both risks and opportunities. On the upside, the company's focus on retrofitting-such as upgrading U212A-class submarines with optronic systems-aligns with the sector's shift toward modernizing existing fleets rather than building new platforms, as noted in the Euro-SD report. This approach reduces capital intensity and accelerates revenue recognition, a boon for investors seeking near-term returns.

However, the company's reliance on European markets exposes it to policy shifts. For instance, if Germany's defense budget plateaus post-2027, Hensoldt may face margin compression, as noted in the Mordor Intelligence report. Competitors like Leonardo and Rheinmetall, with diversified portfolios spanning NATO and non-NATO markets, could outpace Hensoldt in such scenarios, as reported in the Australian Defence report.

The 2030 revenue target, though undisclosed, is a critical unknown. If Hensoldt aims to double its 2025 revenue to EUR 5 billion by 2030, its current growth rate would require a CAGR of 14.7%, a challenging but achievable target given its order backlog and sector tailwinds, as noted in the Euro-SD report.

Conclusion: Timing the Entry

For investors, 2027 represents a pivotal moment. Hensoldt's strong 2025 performance and long-term guidance suggest it is on the cusp of a growth phase, but the company's valuation-trading at a price-to-EBITDA multiple of 12x as of November 2025-remains in line with sector averages, as noted in the Mordor Intelligence report. Given the sector's projected CAGR of 3.58% in the U.S. and 4% in Europe, 2027 could see Hensoldt's margins expand further if it maintains its R&D edge and secures additional retrofit contracts, as reported in the Euro-SD report.

However, patience may still be warranted. The company's 2030 target and 2027 financials will provide clearer signals. Until then, Hensoldt remains a compelling but cautious bet for defense investors seeking exposure to Europe's rearmament cycle.