Proximus and Thales: Cybersecurity Pioneers Leading NATO's Digital Transformation

The cybersecurity landscape is evolving rapidly, driven by escalating geopolitical tensions and the need for military and civilian infrastructure to withstand modern cyber threats. In this context, Proximus (BRussels: PROXIMUS) and Thales (PARIS: HO) have secured a landmark contract to modernize NATO's IT infrastructure, positioning them as pioneers in secure cloud and network solutions. This win underscores their strategic partnership's value and opens doors to a booming defense tech sector. Investors seeking exposure to geopolitical tech demand should take note.

A Strategic Win with Far-Reaching Implications

The €100+ million contract awarded to Proximus and Thales by NATO's Communications and Information Agency (NCIA) marks a pivotal milestone. The partnership will modernize five NATO sites, delivering secure cloud infrastructure (via Thales), upgraded Wi-Fi networks (via Proximus), and 5,000 end-user devices. This collaboration aligns with NATO's 2022 Digital Transformation Strategy, which prioritizes resilience against cyberattacks and interoperability among allies.

The contract's scope highlights two critical strengths:
1. Thales' Cybersecurity Expertise: Solutions like CipherTrust encryption and TiberTrust security ensure data sovereignty and compliance with EU regulations (NIS 2, DORA).
2. Proximus' Network Leadership: Its sovereign cloud services and fiber infrastructure (43% coverage in Belgium by early 2025) enable scalable, high-speed connectivity for 5,000 users.

Together, they address NATO's core challenges: data sharing security and future-proofing IT systems.

Why Defense Tech Stocks Are Poised for Growth

The NATO contract exemplifies a broader trend: defense tech spending is surging. Governments are prioritizing cybersecurity, cloud modernization, and AI-driven defense systems. According to MarketsandMarkets, the global defense cybersecurity market is projected to grow at a CAGR of 10.4% to $23.5 billion by 2030.

Proximus and Thales are well-positioned to capitalize on this:
- Proximus: Its Q1 2025 results showed 15.3% EBITDA growth in its Global segment, driven by cybersecurity and cloud services. The Belgian operator's SECaaS2 contract (€100M over seven years with Belgian federal agencies) further validates its leadership in managed security.
- Thales: Despite a 27% organic drop in Q1 order intake, it secured key contracts like the €707M portfolio (including lunar landers and Dutch defense upgrades). Its Cyber & Digital segment, though mixed, benefits from high-margin cybersecurity services.

Risks and Considerations

• Execution Risk: Delivering NATO's infrastructure by 2029 requires flawless execution, given the project's scale and security demands.
• Regulatory Hurdles: Compliance with EU and NATO standards could strain margins if costs escalate.
• Market Competition: Rivals like Microsoft and Cisco (via Proximus' partnerships) may pose threats in future bids.

Investment Thesis: Buy Both for Long-Term Defense Tech Exposure

• Proximus: At a P/E of 12.5x, it trades at a discount to peers. Its robust free cash flow (68.2% net debt reduction in 2025) and exposure to NATO's €800M cloud initiative (announced separately) suggest upside potential.
• Thales: Despite near-term order volatility, its book-to-bill ratio >1 and 5-6% sales growth targets signal sustained demand. Investors should view dips as buying opportunities.

Final Recommendation

Investors seeking exposure to geopolitical tech demand should consider both stocks:
- Proximus: For its sovereign cloud capabilities and European regulatory alignment.
- Thales: For its cybersecurity and defense systems dominance.

Both companies are foundational to NATO's digital resilience—a priority that will only intensify as cyber threats grow. This is a long-term play, with multiyear contracts providing stability and scalability.

Stay ahead of the curve: Secure your position in defense tech's next wave.