Thales Eyes Further Growth as Europe Primes Fresh Cash for Defense

By Joshua Kirby

Thales said more generous European defense budgets would boost sales this year and beyond, as fresh Middle East turmoil adds new impetus to a booming European defense sector.

The French aerospace-and-defense group booked further growth in sales last year, it said Tuesday, with its top line rising to 22.14 billion euros ($26.16 billion), up 8% from 20.58 billion euros a year earlier as orders for the group's defense division hit record heights. The company made adjusted earnings before interest and taxes of 2.74 billion euros, with an operating margin of 12.4%, rising from 11.8% a year earlier.

Despite the boost to earnings, the company is prioritizing reducing its debt ahead of chasing after new acquisitions to add to the group, Chief Executive Patrice Caine told reporters in a call. The group has in recent years acquired the likes of cybersecurity firm Imperva and British cockpit-systems maker Cobham Aerospace, the latter for some $1.1 billion.

Shares in Thales soared in the week's opening trading Monday, alongside those of many of its peers in the European defense sector. Renewed conflict between Iran and the U.S. and Israel has sharpened interest in air-defense systems such as the Eurosam joint venture between Thales and MBDA.

"We're entering into a period of strong re-investment in defense," Caine said. "The geopolitical situation leads us to think we are entering into a long-term cycle of investment."

Greater spending on defense, especially in Europe, should keep up momentum in demand for Thales's defense systems, the company said, adding that it would invest to expand its production capacity. For 2026, the company expects to book organic sales growth of between 6% and 7%, and a rise in its operating margin to 12.6%-12.8%. The company said it is hopeful of netting a margin of 13%-14% by 2028 as revenue gains further impetus.

Shares in Thales have more than doubled in little over a year, in line with surging investor interest in a defense sector primed for a big influx of cash from European governments. Many of the continent's countries have pledged to put more of their budgets into arms and defense, partly in line with demands from Washington for greater contributions to the North Atlantic Treaty Organization, but also with the aim of reviving a European industrial sector left moribund by high energy prices and stiff competition from Chinese exports, as well as by uncertainty from President Trump's trade tariffs.

Strong order momentum should continue to boost Thales's defense division over the medium term, analysts at Bank of America wrote in a recent note to investors.

"Air defence remains a key investment priority for NATO countries," they said. "We see Thales ideally placed to play this theme."

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

March 03, 2026 01:33 ET (06:33 GMT)