A lot of issues so far have given the spotlight to the new-ish, up-and-coming defense companies on the block.
That’s a focus of Defense Profile for a reason. Since we’re witnessing something of a paradigm shift in how wars are fought, and how security is secured, assured, and even defined.
But I don’t want to neglect the whole scope of the defense industrial base. The manufacturing, the infrastructure, the old school.
So that means paying attention to the players out there who still dominate the scene. The primes.
Inside a Rheinmetall ammunition line — the production capacity Europe is racing to rebuild. (Rheinmetall)
The way in which huge and long-established firms, like today’s subject, adapt to, and interact with the new players and the new horizons of warfare is going to be part of how I develop a full understanding of the domain.
So, with that being said…
At a Rheinmetall plant in Bavaria, gunpowder is the center of attention.
Armin Papperger, the company's chief executive, put it plainly to CNBC this summer:
Without gunpowder, it's impossible to protect our people. You need gunpowder for ammunition. Without gunpowder, no warhead goes out of the barrel.
Europe has decided, after a few years of rising alarm, that it may one day end up fighting a war it's not built to supply.
Rheinmetall is one of the companies counted on to fix that.
The Arsenal of Europe
Rheinmetall's KF51 Panther, the next-generation main battle tank at the heart of its land-systems push. (Rheinmetall)
Three years ago, Rheinmetall was a mid-sized German maker of tank components, artillery shells, and automotive parts. Today it's the closest thing Europe has to a national arsenal.
The numbers show why.
In the first half of 2026, sales rose 39% to €5.2 billion and operating profit jumped 74%, according to the company's half-year report. The order backlog hit a record €80.5 billion. Papperger expects it to pass €100 billion by year-end.
This demand spike didn't come from nowhere. It's the result of policy.
At a 2025 summit in The Hague, NATO members agreed to lift defense spending toward 5% of GDP by 2035. The EU's Readiness 2030 plan aims to mobilize up to €800 billion.
Germany has exempted defense from its constitutional debt brake and charted a path from roughly €108 billion in spending this year to €150 billion by 2035.
Rheinmetall stands to win big from this. Every artillery contract, every ammunition framework, every tank order flows toward a company that already knows how to build them.
But a booming order book is only a promise until the goods are made, delivered, and paid for. And, when it comes to defense, promises are what Europe has often struggled to keep.
Can Europe Actually Build It?
The uncomfortable truth beneath the rearmament plan?
Money isn't the bottleneck. Building is.
More than half of major European defense programs run 20% to 40% over budget and slip their deadlines, according to McKinsey; a contract alone can take two to four years.
Europe has voted the funds. It hasn't proven it can turn them into weapons at scale.
There's also an unglamorous, but binding, material constraint: propellant.
Ammunition depends on the chemistry of gunpowder, and the West let production capacity wither.
Papperger says American stockpiles sit at "20 to 30%," so Europe has to be self-sufficient and produce more of its own.
To deal with these challenges, Rheinmetall's answer is speed, and its edge is heritage. It remains a tier-one automotive supplier; it understands mass production in a way most defense firms do not.
We're building lots of ammunition plants right now. Within 12 months — from the groundbreaking to the first ammunition coming out of the facility.
Twelve months from a featureless field to a production line churning out finished shells is fast for an industry that thinks in decades.
Whether Rheinmetall can keep this pace across a dozen or more sites (and hold quality while it does) is the real question.
Primes, Neo-Primes and the Fight to Integrate
A loitering munition in flight — the software-defined layer Rheinmetall is buying into. (Rheinmetall)
European rearmament is also dealing with the shift in who builds the continent's weapons.
A wave of software-first "neo-primes" has arrived. These have the potential to challenge the old guard.
Helsing raised $1.8 billion in July 2026 at an $18 billion valuation, Europe's largest defense-startup round.
Finland's ICEYE is turning cheap radar satellites into front-line intelligence. Their bet is that autonomy, software, and speed matter as much as steel.
The lazy framing is primes versus startups. The reality seems to be primes with startups. Across Europe the old guard is already courting the debutants.
Saab took a stake in Helsing and, in June 2025, flew a Gripen E with the startup's AI in control.
Leonardo built a drone joint venture, LBA Systems, with Turkey's Baykar.
BAE Systems has committed €50 million to European defense-tech venture funds.
Rheinmetall is going furthest. It has taken a stake in the drone-software firm Auterion, formed joint ventures with ICEYE (reconnaissance satellites) and the missile startup Destinus, and bought the shipbuilder NVL.
It supplies the manufacturing mass and the market access; the newcomers bring new talent and tech.
These collaborations promise a seamless (or at least standardized) operating system across hardware and software, from gunpowder production to AI-assisted targeting.
Lorenz Meier, Auterion's chief executive, made the case for that kind of interoperability at a Munich panel:
Imagine NATO having to fight together without English, without a common language. That's impossible. There's a NATO language school — we need the same thing for autonomous systems.
What drew a fast-moving software firm into partnership with a legacy prime, Meier said, was nerve.
"Rheinmetall took a risk and leaned forward — without contracts, without anything… and that courage I've not seen another time, not in the US, not in Europe, no other company."
This seems to sum up the bold strategy: own the hardware mass, and buy into the software.
Ultimately, this puts you in a position to become the layer everyone else plugs into.
So why is the stock down about 47% from its high (roughly €1,050 against a €2,007 peak)? (share data)
Not because the market doubts demand, but because it's pricing in the hard stuff: delivery and duration.
The 2022–2025 run-up assumed a straight line that defense procurement never delivers. The correction is the market normalizing.
Two risks present themselves.
The first is German procurement itself, still slow and fragmented: the cancelled F126 frigate program alone cost Rheinmetall €300 million of 2026 sales, and served as a reminder that its biggest customer is also its biggest liability.
The second is peace: a durable settlement in Ukraine would soften the urgency that built the backlog.
On balance, the bet is sound. Rheinmetall is not so much overhyped as early. The order book is real. The open question, for the company, and for the continent it now arms, is patience.
Further Reading
Context: Europe's Rearmament
Joint White Paper for European Defence Readiness 2030 — European Commission, March 2025
The Hague Summit and NATO's 5% Commitment — NATO, 2025
Europe's €1 Trillion Challenge for Flexibility and Scale — McKinsey & Company
Germany Rearms: Can It Lead Europe's Hesitant Superpower? — Chatham House, May 2026
Rheinmetall: Company Sources
Half-Yearly Financial Report, H1 2026 — Rheinmetall, August 2026
Factory Opening in Unterlüß — Rheinmetall, September 2025
News & Reporting
Rheinmetall Operating Result Jumps 74% on European Defence Demand; F126 Cancellation Cuts Outlook by €300m — Defence Industry Europe, August 2026
Helsing Raises $1.8 Billion in Europe's Biggest Defense Startup Round — Defense News, July 2026
Saab and Helsing Let Gripen Fighter Fly With AI in Charge — Defense News, June 2025
Leonardo and Baykar's LBA Systems JV Achieves Full Operational Readiness — Leonardo, July 2026
BAE Systems to Invest €50 Million in European Defence-Tech Venture Funds — Defence Industry Europe
Rheinmetall's Two-Speed Reality: Record Operations, Falling Stock — ad-hoc-news, September 2026
Analysis & Commentary
Rheinmetall and Auterion Announce New NATO-Wide Hardware-Software Partnership — Resilience Media, February 2025
ICEYE: Company Profile — Defense Profile, 2026
Videos
Rheinmetall CEO Armin Papperger on Defense Demand and Ammunition — CNBC / DWS News, July 2026