Thales Boosts 2025 Sales Forecast to 7% Amid European Defense Surge

Thales, a leading French defense and aerospace conglomerate, has raised its sales growth forecast for 2025, projecting an increase of 6% to 7%. This adjustment corresponds to an annual revenue range of 218 billion to 220 billion euros. The company's decision to raise its forecast is driven by the surging defense demands across Europe. In the first half of the year, Thales reported an 8.1% year-on-year increase in sales, reaching 102.7 billion euros, and a 12.7% rise in adjusted operating profit to 12.5 billion euros.

Despite potential risks from Euro-American trade frictions, Thales has asserted that the impact on its operations will be minimal, as more than half of its defense contracts are secured outside the United States. The company's robust performance underscores the growing importance of defense spending in Europe, which has been a key driver of Thales' recent success. The increased military expenditure in the region has not only bolstered Thales' financial performance but also reinforced its position as a leading player in the defense sector.

The company's ability to navigate potential trade challenges while maintaining strong growth highlights its strategic resilience and adaptability in a dynamic global market. The company's chief financial officer emphasized that the impact of potential tariffs on the company's operations would be limited. If a 10% reciprocal tariff were to be implemented between the U.S. and Europe, the estimated impact for 2025 would be in the tens of millions of euros. This is because more than half of the company's defense revenue is exempt from tariffs.

Thales' strong performance is also supported by the French government's commitment to increasing defense spending. The French president recently pledged to double defense spending by 2027, three years ahead of the original 2030 target. This commitment is expected to further boost Thales' business growth and operational performance. The company's chief executive officer noted that the president's actions "clearly support the momentum of business growth," and the acceleration of France's defense budget investments will drive the group's operational performance.

In response to potential trade tensions, particularly those affecting civilian businesses, the company's chief financial officer stated that the company is relatively protected. The company's "diversified local" structure limits cross-border trade flows. The company's tariff exposure primarily involves aerospace maintenance services between Europe and the U.S., as well as the export of bank cards from Mexico to the U.S. The company can benefit from alternative import solutions, particularly temporary imports, which can significantly reduce U.S. import tariffs.

If tariffs on Mexico were to rise significantly, the company could transfer bank card production from Mexican facilities to other locations, such as Singapore, to serve the U.S. market. This flexible production layout provides a buffer for the company to cope with trade frictions.