French defence and aerospace group Thales reported on Thursday a 21 per cent jump in order intake in the first half of 2026 and stronger-than-expected profit margins, as escalating conflicts around the world lifted military spending, boosting demand for its surveillance and defence systems.
The group said it received orders worth €12.47 billion ($14.2 billion) in the first six months, up 21 per cent and far exceeding analysts' forecast for a one per cent rise. They included 18 orders worth more than €100 million each, it said in a statement, beating last year's intake.
"The European defence rearming is real and coming," Citi analysts said, noting the strong order intake likely contributed to the free cashflow of €1.87 billion, far ahead of an expected €0.47 billion in an analysts' consensus published by Thales.
Adjusted earnings before interest and tax (EBIT) increased by 11.4 per cent on an organic basis to €1.37 billion, also ahead of analyst expectations, and driven by higher defence and aerospace margins, offsetting weaker performance in the cyber and digital divisions.
"We note for the first time defence margins stand meaningfully above 13 per cent at 13.9 per cent in H1," Jefferies analysts said in a note.
Thales' shares were up 2.7 per cent by 07:30 GMT.
Sales at Europe's largest defence electronics group rose 7.8 per cent organically to €10.95 billion in the period compared with the first six months of 2025, in line with a company-provided consensus of analysts.
Defence, which generates more than half of group sales, grew 13.1 per cent. Consolidated results include a previously announced exceptional charge of about €450 million linked to Germany's cancellation of a programme for six F126 frigates.
Earlier this month, Thales raised its 2026 order-intake and cash-generation targets, lifting its book-to-bill ratio - order intake versus revenue - to 1.1 from one. It also maintained guidance for organic sales growth between six per cent and seven per cent and its adjusted EBIT margin between 12.6 per cent and 12.8 per cent.
Caine said Thales was making progress on its planned satellite venture with Airbus and Leonardo and still expects to finalise it in 2027, subject to European Union antitrust approval.
The deal aims to create a European space champion, but faces opposition from German satellite maker OHB.
Thales also announced this month plans to acquire naval drone company Exail for about €3.9 billion to strengthen its position in underwater warfare. Finance chief Jeremie Papin said the transaction should be concluded by the second half of 2027.
(Reporting by Florence Loève; Editing by David Gaffen and Emelia Sithole-Matarise)
