Company Reports

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

Saab’s second-quarter sales rose 29% year on year to SEK 25.5 billion, while EBIT increased 41% to SEK 2.79 billion and margin expanded to 11.0% from 10.0%. Orders rose 141% to SEK 68.4 billion, including SEK 47 billion for Polish submarines.

Saab reported organic sales growth of 23.6% and EBIT growth of 32%, with margins reaching 10% and strong operating cash flow supported by deliveries. Backlog remains high at SEK 274 billion with improved near-term visibility.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

Saab reported full-year 2025 sales of SEK 79.1 billion and EBIT growth of 37%, broadly in line with consensus, while order intake of SEK 169 billion and a backlog of SEK 275 billion materially exceeded expectations, improving medium-term revenue visibility.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

European defense stocks rose on Jan. 8 after President Donald Trump called for a roughly 66% increase in the 2027 US defense budget, alongside renewed geopolitical risk from Washington’s rhetoric on Greenland.

Reports of the US-driven Russia-Ukraine peace deal triggered a downturn in European defense stocks, with names under our coverage down between 10%-20% since October highs.

Saab delivered another strong quarter and reaffirmed its 2025 guidance while expanding its midterm outlook through 2027–30. The company posted 21% organic growth over the first nine months and holds a robust SEK 202 billion backlog, fueled by strong demand in Dynamics and Surveillance.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

European defense stocks fell sharply after US President Donald Trump met with Russian President Vladimir Putin in Alaska and with Ukrainian President Volodymyr Zelenskyy in Washington. Markets linked the selloff to media reports of a potential ceasefire and US-led deals.

Saab raised 2025 guidance after delivering 30% sales growth and margin uplift in the second quarter. Shares rose 13.6% on July 18 as investors priced in record deliveries for the dynamics division, strong growth for the surveillance division, and increasing visibility on European rearmament.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European core defense budgets to 3.5% of gross domestic product. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

NATO set a new defense spending target of 5% of GDP, with 3.5% allocated to core defense and implementation shifted from 2032 to 2035. The agreement places renewed emphasis on European joint procurement as part of a broader push for defense integration.

On June 13, Israel launched a series of strikes against Iranian facilities and personnel targeting its nuclear enrichment and armament programs. Shares of global defense contractors appreciated as much as 4% in early trading in reaction to the news.

Wide-moat Saab delivered a strong start to 2025, with sales up 11.3% year on year to SEK 15.8 billion and EBIT rising 22% to SEK 1.45 billion, lifting the margin to 9.2%. The order backlog grew 19% to SEK 189 billion, equivalent to 2.9 times trailing revenue, with a book/bill ratio of 1.2 times. Export markets now account for 74% of the backlog, underscoring Saab’s growing international footprint and alignment with rising European defense demand.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European defense budgets to at least 2% of GDP due to the Russia-Ukraine conflict. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.

While it is still too early to fully assess the implications of the proposed tariffs on the defense sector, it's important to consider the US' role in the global defense trade. The US remains a net exporter of military equipment, accounting for roughly 43% of global arms exports between 2021 and 2023 (based on SIPRI TIV data), while representing just 3% of global arms imports over the same period. Although the US defense industry is largely self-sufficient in end-product manufacturing, it remains exposed to risks tied to critical raw material imports—such as gallium, yttrium, and tantalum—which are vital for systems like fighter jets, helicopters, armored vehicles, and precision munitions.

After recently raising our fair value estimate in anticipation of European defense spending exceeding NATO’s 2% target, we are revising our projections upward. Given recent developments, including escalating discussions about a potential US pullback and increasing pressure from Washington, D.C., for Europe to boost its defense budgets, we now expect European defense spending to reach 3.1% of GDP by 2029, up from 2.4%, and 3.5% by 2032 (previously 2.8%). As a result, we are raising wide-moat SAAB’s fair value estimate to SEK 371. SAAB is well positioned to capitalize on growing European defense budgets, strengthening its role in Nordic and Baltic Sea defense. Germany, where SAAB has a strong presence in electronic systems, presents another key opportunity, especially as it is expected to take on a larger defense role if US support declines.

With approximately 95% of its revenue from the defense sector, Saab is well positioned to capitalize on the expected increase in European defense budgets to at least 2% of GDP due to the Russia-Ukraine conflict. This increase, coupled with EU initiatives to enhance defense capabilities through resource pooling and procurement coordination, presents significant growth opportunities for the company. Saab should realize increased demand for its support weapons, sensor systems, airborne early warning, and surface radar systems, with expectations for further growth as European nations replenish their military inventories.