Swedish defense contractor Saab AB has delivered second-quarter results that surpassed market expectations, driven by unprecedented global demand for military equipment.
The company's total order backlog has soared to 317.7 billion Swedish kronor, a significant increase from 197.6 billion kronor a year ago, marking the fifth consecutive quarter of growth in order reserves.
Chief Executive Micael Johansson stated that the firm's current core priorities are expanding production capacity, ensuring timely deliveries to customers, and developing new defense equipment.
Saab AB reported quarterly earnings that exceeded forecasts, with surging demand for military hardware leading the fighter jet manufacturer to post another record-high quarterly order backlog.
In early trading on the Stockholm exchange, Saab's shares rose as much as 4.5%, while shares of other major European defense companies were trading lower across the board.
For the quarter ending in June, Saab secured new orders worth 68.4 billion Swedish kronor (equivalent to $7.1 billion), exceeding the 57.1 billion kronor forecast by data provider FactSet. This figure includes a major order valued at 47 billion kronor for submarines from Poland.
The company's total order backlog now stands at 317.7 billion kronor, compared to just 197.6 billion kronor in the same period last year, continuing a five-quarter streak of expanding order reserves.
The outbreak of the Russia-Ukraine conflict and the heightened security threat from Russia have prompted European governments to significantly increase defense budgets, leading to a parallel surge in orders for regional defense contractors.
Former U.S. President Donald Trump's previous pressure on European nations to assume greater responsibility for their own defense, including threats to withdraw U.S. troops from Europe, has further accelerated the pace of military expansion and spending increases across the continent.
Saab CEO Micael Johansson said in a statement, "We are in an industry with a long-term structural increase in demand. The company's current focus is on scaling up capacity, securing deliveries to customers, and developing new generations of defense equipment."
Investors are increasingly focusing on two key metrics for defense companies: the size of the order backlog and the ability to execute and deliver on those orders.
This quarter, Saab reported revenue of 25.5 billion Swedish kronor, better than the 23.9 billion kronor predicted by FactSet. Earnings before interest and tax (EBIT) were 2.8 billion kronor, surpassing the market expectation of 2.4 billion kronor.
Saab AB's product portfolio includes the Gripen fighter jet, conventional submarines, missiles, and high-end electronic defense systems. Since Russia's invasion of Ukraine in early 2022, the company's order intake has grown exponentially.
Earlier this month, NATO Secretary General Mark Rutte revealed that the alliance would purchase up to 10 reconnaissance aircraft from Saab. Based on the unit price of the GlobalEye airborne early warning and control aircraft, this contract could be worth nearly $5 billion.
Despite the rising order backlog and concurrent improvements in revenue and profitability, Saab's share price, like that of many peers, has faced downward pressure in recent months. Investors are concerned that industry valuations may have outpaced the actual delivery capacity of these companies.
The European defense sector has generally seen weaker share performance this year.
While defense spending levels among European NATO members vary, most countries have been steadily increasing their military expenditure.
Sweden officially joined NATO in 2024, citing Russia's military expansion and the dramatic shift in the global geopolitical landscape as key reasons. Data from the Stockholm International Peace Research Institute (SIPRI) shows that Sweden's military spending as a percentage of GDP has risen from 1.2% in 2021 to 2.5%.
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