Saab's Surging Momentum in a European Defense Boom

The European defense sector is undergoing a seismic shift, driven by a confluence of geopolitical tensions, NATO expansion, and a reinvigorated push for strategic autonomy. At the center of this transformation is Saab AB (publ), a Swedish defense and security technology company whose strategic positioning, product innovation, and alignment with global security trends make it a compelling long-term investment. With defense spending across the continent surging to meet new threats—from Russia's war in Ukraine to China's assertive posturing in the Arctic—Saab is capitalizing on a perfect storm of demand, policy tailwinds, and technological leadership.

Geopolitical Catalysts: From Sweden's NATO Membership to EU-Wide Defense Reforms

Sweden's accession to NATO in 2024 marked a watershed moment for the country and the broader European defense landscape. For decades, Sweden's neutrality insulated it from direct transatlantic security commitments, but the invasion of Ukraine and Russia's Arctic ambitions forced a strategic recalibration. By joining NATO, Sweden not only gained Article 5 protections but also unlocked access to collaborative R&D, joint procurement, and shared infrastructure with allies. This shift has directly fueled Saab's growth, as the company now operates within a framework of guaranteed defense spending and cross-border collaboration.

Sweden's commitment to meeting the NATO 2% of GDP defense spending target is a critical tailwind. In 2024, the country's defense budget hit €12 billion, with further increases expected. This fiscal discipline ensures a steady pipeline of contracts for Saab, which already holds a SEK 187 billion order backlog as of 2024, 74% of which comes from international markets. The company's recurring revenue model—exemplified by the $2.9 billion Gripen E support agreement with Sweden and the Denmark Combat Training Centre framework—provides insulation from the volatility of one-off contracts, creating a durable cash flow engine.

The European Union's Readiness 2030 package, launched in March 2025, further amplifies Saab's opportunities. This initiative, which includes a €150 billion loan instrument (Security Action for Europe, or SAFE) and fiscal flexibility for defense spending, is designed to reduce EU reliance on U.S. imports and boost domestic defense capacity. Saab, with its modular, interoperable systems, is well-positioned to benefit from joint procurement trends. For instance, its CB90 Next Generation combat boats—recently contracted for 22 units at SEK 900 million—are tailored for littoral warfare in the Baltic Sea and could be replicated in other NATO and EU member states.

Technological Edge and Global Demand

Saab's success lies not only in its geopolitical alignment but also in its technological differentiation. The company's CB90 NG and RBS 70 NG air defense systems are prime examples of its ability to innovate in high-demand niches. The CB90 NG, with its CBRN protection and anti-submarine capabilities, addresses the unique challenges of Arctic and Baltic operations. Meanwhile, the RBS 70 NG, part of Sweden's Mobile Short-Range Air Defense (MSHORAD) program, is a critical tool for countering drones and low-flying threats—a growing priority as hybrid warfare evolves.

Saab's global market reach is another strength. While its core markets remain in Europe, the company has expanded into regions like South Asia and Southeast Asia. The Thai Air Force's decision to purchase Saab's Gripen E jets over U.S. alternatives, for instance, highlights the growing confidence in European defense technology. This diversification mitigates risks tied to over-reliance on any single market and positions Saab to capture emerging demand in regions with rising security concerns.

Financial Resilience and Strategic Innovation

Saab's financials underscore its resilience and growth potential. In Q2 2025, the company reported an EBITDA margin of 14.3%, outperforming expectations by 15.8%, a testament to its cost discipline and operational efficiency. The company is also investing heavily in automation and digital transformation to reduce lead times and enhance scalability—a critical edge in an industry where delays can erode margins.

Moreover, Saab's CEO, Micael Johansson, has emphasized the need for European countries to align defense requirements to create scale and interoperability. This vision aligns with broader EU and NATO goals, ensuring Saab's systems are not just competitive but also integral to the continent's modernization agenda. The company's focus on attrition-based strategies—such as unmanned systems and advanced air defense—positions it to lead in a new era of warfare where agility and technological parity are paramount.

Investment Implications: A Long-Term Play on Geopolitical Stability

For investors, Saab represents a rare combination of secular growth and cyclical tailwinds. The European defense sector is entering a golden age, driven by a once-in-a-generation shift in security priorities. With defense spending across the EU projected to reach 2.04% of GDP by 2025 and Sweden's NATO membership ensuring a stable order backlog, Saab's revenue visibility is robust.

However, the company's value extends beyond short-term contracts. Its recurring revenue model, technological leadership, and global diversification create a durable competitive moat. Unlike many defense firms that rely on volatile procurement cycles, Saab's support agreements and training frameworks generate steady cash flows. Additionally, its focus on innovation—such as unmanned systems and attrition-resistant platforms—ensures relevance in an evolving threat landscape.

Risks and Considerations

No investment is without risk. Saab's reliance on defense contracts exposes it to geopolitical shifts, such as a potential easing of tensions in Europe or changes in NATO priorities. However, the current trajectory—marked by heightened threats and EU fiscal reforms—suggests these risks are distant. Additionally, Saab's international diversification and recurring revenue model mitigate volatility.

Another concern is the competitive landscape. U.S. defense giants like Lockheed Martin and Raytheon remain dominant in global markets, but Saab's niche focus on modular, interoperable systems allows it to carve out a unique position. Its ability to collaborate with European partners, rather than compete with them, further strengthens its strategic positioning.

Conclusion: A Strategic Bet on a Securitized Europe

Saab's surging momentum is a microcosm of the European defense boom. As NATO and the EU realign their security strategies in response to a multipolar world, companies like Saab that combine geopolitical foresight, technological innovation, and financial discipline will thrive. For investors seeking exposure to a sector defined by long-term, demand-driven growth, Saab offers an attractive and resilient opportunity. In a world where security is the new currency, Saab is not just a beneficiary—it's a key architect of the future.