Saab Q3'25 preview: Order intake tone in focus

Source: Inderes & Modular Finance (20.10.25, 6-11 analysts, consensus)

Saab will release its Q3 report on Friday, October 24 at approximately 07:30 CEST. We expect revenue to remain on track with 2025 guidance, driven by solid project execution and backlog conversion, with solid order intake sustaining the order backlog. We anticipate that profitability will remain strong in relative terms. Ahead of the report, we see no fundamental changes to the investment case nor the underlying demand dynamics.

We expect revenue to continue unfolding well

We expect Saab to grow revenues at ~15% year-over-year in Q3 to ~16 BNSEK, somewhat below the comparison period and broadly in line with consensus, driven by continued good project execution across all divisions. With the geopolitical backdrop driving the European defense sector demand largely unchanged, we expect the order intake to remain strong this quarter, fairly in line with the comparison period, and through the remainder of the year. Not surprisingly, as Saab’s main beneficiary of the current defense upcycle, Dynamics (25% of total sales as of Q2’25) should continue seeing robust backlog conversion, supported by the favorable capacity situation for the division, and driving the group’s growth with ~25% year-over-year to 3.8 BNSEK, above consensus 19% (~3.6 BNSEK). The strong Q2 outcome in Dynamics (i.e., 73% revenue growth) reflected a delivery rate that neither we nor management expect to repeat near term. Meanwhile, across the other business areas, we expect continued healthy revenue growth, with Aeronautics, Surveillance, Kockums and Combitech growing between 10% and 15%.

In our view, management’s comments on the demand situation and order intake will be the most interesting aspect of the report, as it is our main indicator of demand. We are especially interested in the tone on Dynamics, which has driven growth and profitability for some time. A shift in demand there could signal a turn in the business fundamentals for the coming years and potentially change the medium-term guidance.

We estimate margins declining relative to the comparison period

Regarding profitability, we expect group EBIT of ~1.3 BNSEK, corresponding to a margin of 8.2%, in line with consensus, and below the margin in the comparison period of 8.8%. We are less optimistic on the operating margin this quarter than the comparison period, as we factor a larger drag from corporate and eliminations as internal inventory and work-in-progress rise with the ramp-up. We are also below consensus on the full year for the same reason. This defers margin until external delivery takes place and lowers near-term reported EBIT. Dynamics should continue to lead group EBIT on solid execution, with higher volumes and utilization driving operating leverage. We expect the division to report an EBIT margin of ~18%, above the comparison period at ~14% yet below the unusually strong previous quarter at ~21%. Aeronautics ~6%, similar to the comparison period; Surveillance ~9%, slightly lower year over year; Kockums ~5%; Combitech ~10%. Relative to consensus, we are more optimistic on Dynamics (cons. 14%) and Combitech (cons. 9%). Below EBIT, we assume a small net financial expense and an effective tax rate of ~21%, which leaves net profit and EPS below the comparison period and below consensus.

On track to reach its 2025 guidance

Saab guides for 2025 sales growth of 16-20%, EBIT growth above sales, and positive operational cash flow. By Q2’25, rolling twelve-month sales growth was 10%, leaving ~6 pp to reach the lower end of the range. We expect growth near the midpoint of the guidance at ~18%, with Q3 supported by continued solid backlog conversion and Q4 typically strong for sales. EBIT grew faster than sales in the first two quarters of the year. We expect it to grow more slowly in Q3, then outgrow sales again in Q4. The operational cash flow was negative in the first two quarters, but management reiterated on the Q2 post-results call that it expects a positive full-year outcome. There is no consensus on operational cash flow. Given Q4 seasonality, we expect a positive full-year operational cash flow in 2025, dependent on Q3 performance.