Swedish defense group Saab reported stronger-than-expected second-quarter earnings and raised its 2025 sales guidance, as rising global defense budgets continue to fuel demand for its combat systems and aircraft.
Shares rose over 12% after the company posted operating income of 1.98 billion Swedish kronor ($204 million), comfortably ahead of analyst expectations of 1.71 billion kronor.
Revenue for the quarter surged 30% year-on-year to 19.79 billion kronor, driven largely by its high-margin Dynamics business, which includes ground combat weapons and missile systems.
The unit delivered a 73% rise in sales and an operating margin of 20.9%. Net profit rose to 1.53 billion kronor, beating forecasts and up from 1 billion kronor a year earlier.
Saab now expects organic sales growth in 2025 to reach between 16% and 20%, up from its earlier forecast of 12% to 16%.
The company also reaffirmed expectations that operating income will grow faster than sales.
Russian invasion of Ukraine, middle east conflict drive industry boom
Saab’s upbeat outlook reflects a broader surge in global military spending since Russia’s invasion of Ukraine.
NATO allies have pledged to boost defense spending to 5% of GDP, while individual countries are restocking arsenals depleted by aid to Ukraine.
In Sweden, the government has committed to invest an additional 300 billion kronor in defense to meet NATO requirements.
CEO Micael Johansson noted that while demand is high, transitioning from planning to procurement takes time.
“We are continuing to invest in capacity increases and are proactively working in close cooperation with our suppliers to secure future deliveries,” he said.
Johansson also pointed to heightened conflict in the Middle East and Eastern Europe as further justification for long-term defense investments, emphasizing that unity and deterrence remain key goals for Europe.
AI and digital transformation central to future strategy
Saab is also expanding its investments in artificial intelligence and digital technologies.
It recently completed a test mission of its Gripen fighter jet with integrated AI and announced plans to deepen its participation in Sweden’s AI Factory consortium.
The project, involving firms such as AstraZeneca, Ericsson, and SEB, and using Nvidia technology, aims to build the infrastructure for advanced AI innovation in defense and other sectors.
The Gripen continues to attract interest globally, with Peru and the Philippines assessing the aircraft following sales to Thailand and Colombia.
Saab said demand remains strong across its portfolio, particularly for its surveillance systems and training and simulation solutions.
In the second quarter, new orders totaled 28.4 billion kronor, above analyst expectations and bringing the company’s total backlog to nearly 198 billion kronor, up from 183 billion a year earlier.
Analyst confidence rises after earnings beat
Analysts responded positively to the results.
SEB noted that adjusted EBIT came in 11% above expectations and estimated consensus earnings revisions of 2% to 4% for the full year.
Kepler Cheuvreux said Saab’s dynamics division was once again the standout performer and expects earnings adjustments in the low to mid-single digits.
Despite a year-on-year decline in order intake, the figure still landed 5% above analyst consensus.
Saab reaffirmed its forecast of positive operational cash flow for the year.
The company emphasized it would continue prioritizing R&D and digital transformation to sustain its competitive edge amid rapidly changing defense needs.
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