Here is the company report from Renato after Q1 as well
Saab delivered a strong Q1 result, exceeding our expectations regarding revenue, margins, and cash flow. Every business area grew at a double-digit pace, while Surveillance and Dynamics stood out with their profitability. The group is also converting its 274 BSEK order backlog at a pace that leaves little doubt about its execution capability. The demand environment remains structurally unchanged, and Europe’s rearmament is not based on emotion, nor will it stop because global attention shifts elsewhere. Rather, the U.S. military’s growing commitments in other theaters only strengthen European nations’ case for funding more of their own defense. Therefore, we see no weakening in Saab’s demand outlook compared to our previous update. Against this backdrop, we still find the operational and macro fundamentals compelling, while the current valuation makes the expected return more attractive than before. We are slightly raising our target price to 622 SEK and upgrading our recommendation to Accumulate (prev. Reduce).
Three Dynamics press releases in five days are not random product updates
Taken together, the HEAT 758 anti tank round, the Bolide 2 missile, and the Barracuda Poncho form, in our view, a coherent response to the specific lessons emerging from modern warfare. Explosive reactive armor has materially reduced the effectiveness of legacy anti-tank munitions. Persistent drone surveillance has made individual soldier concealment a tactical necessity rather than a niche capability. At the same time, the proliferation of aerial threats, ranging from cruise missiles to low cost commercial drones, has raised the performance threshold for short-range air defense. Each product directly addresses one of those shifts.
What matters strategically is that Saab is not building entirely new ecosystems from scratch. All three products leverage existing platforms and installed customer bases, which shortens the commercialization path materially relative to a clean sheet program. That matters in a market where customers increasingly prioritize deployable upgrades over decade long development cycles.
We think that the financial read through is relatively straightforward. All three products sit within Dynamics, which delivered a 17.5% EBIT margin in Q1 alongside a 1.2x book to bill ratio. Ammunition and short-cycle consumables such as HEAT 758 and Bolide 2 currently represent some of the highest velocity revenue categories in the defense sector, supported both by European stockpiling and active battlefield consumption. Bolide 2 is particularly important because deliveries begin in 2027 and the missile becomes the standard ammunition for the RBS 70 NG system. In practice, that makes it less of an optional add-on and more of a mandatory replenishment and upgrade cycle tied directly to the installed base.
The Barracuda Poncho is arguably the most interesting of the three from a product-evolution perspective. Saab is extending its camouflage franchise from vehicles and platforms down to the individual soldier, reflecting how drone saturation has altered battlefield exposure. A lightweight concealment product suited for woodland, desert, and arctic environments is operationally simple, scalable, and inherently consumable. That creates a very different economic profile from a traditional defense platform program.
None of these releases individually changes our estimates. Collectively, however, they reinforce the view that Dynamics has one of the better aligned product portfolios for the current demand environment. More importantly, Saab appears to be adapting that portfolio in line with how warfare itself is evolving.
So, Saab will deliver 17 Giraffe 1X radars to the French Armed Forces, mounted on Scania V3P tactical vehicles, with deliveries in 2026 and 2027. The company did not disclose the contract value, but comparables help us triangulate a reasonable range. The UK MoD paid 264 MSEK for 11 units in May 2023, which implies ~18-20 MSEK per radar for hardware and support. The French contract appears broader. It includes a joint development component for the integrated vehicle solution, along with spares, training, and support. On that basis, a total value of ~550-800 MSEK (~32-47 MSEK per unit) looks reasonable to me, with ~650-700 MSEK (~38-41 MSEK per unit) as a fair midpoint. A small order. It is not large enough to move estimates, but to me it is not completely trivial either.
I also think that the margin profile on this product series is attractive. Giraffe 1X is a mature AESA platform with an established supply chain, which should support solid incremental economics. The radar hardware likely carries margins above Surveillance’s 9.6% EBIT average, potentially in the ~13-17% range, helped by proprietary IP and relatively low marginal production cost. The vehicle integration work likely dilutes that somewhat, as integration tends to look more like services than product economics. Even so, the aftermarket is where the case becomes more interesting. Software upgrades, capability enhancements, spares, and long-tail support on a platform designed to adapt to the evolving threat landscape can carry strong margins and recurring value that do not show up in the headline order number.
I believe that the strategic value may matter just as much as or more than the financial value. France is a credible NATO reference customer, and that strengthens Saab’s position in future campaigns. So while this is not a thesis changing order, it is the kind of win that reinforces the broader case. It adds revenue, likely supports margins, and improves Saab’s standing in a part of the market where credibility compounds.
Two press releases by Saab in two days, two structural insights:
This is not really just a weapon sale. In my view, it is Saab deepening the lock-in. The 10-year framework, training adapters, Carl Gustaf Outdoor Trainers, and local industry cooperation all make Lithuania more tied to the system. Once a military trains on Carl Gustaf, builds doctrine around it, and connects local industry to it, switching becomes very costly.
The Carl-Gustaf value chain: Weapon first, then training, then adapters and ammunition, then upgrades over time. So, to me the 640 MSEK ceiling is almost beside the point. What matters is that Lithuania just became a Carl-Gustaf recurring revenue customer for the next decade or more. Saab continues to deepen its European ties. Good for the long term of the business.
To me, this is less about the first flight and more about distribution. GlobalEye is too expensive for most countries. LoyalEye on MQ-9B gives Saab a way into that second tier. GA-ASI sells the aircraft. Saab sells the sensor, software, and intelligence layer on top. That means access to a big installed base without needing to sell a new platform. In other words, one product stack for the premium end, another for the broader market. Also, good for the long term of the business.
Canada is moving forward with Saab regarding the procurement of surveillance aircraft. No actual orders yet, though.
The announcement was made by Canadian Prime Minister Mark Carney at CANSEC, Canada’s largest defence and security trade show. Saab has offered to build, maintain and upgrade the Canadian GlobalEyes with a team of Canadian partners. The goal is to transfer knowledge and technology to Canada that will grow the domestic defence industry. Saab also plans to invest in research and development work in Canada, as part of the future programme.
The local partner for the GlobalEye procurement is CAE (formerly Canadian Aviation Electronics):
Informative news clip on the subject (CBC News, 3 min):
Apparently, this has been discussed for a long time (the quoted message is from September 2023).
The matter is progressing, both regarding the donation of older aircraft (Gripen C/D) and the purchase of new aircraft (Gripen E/F). According to the press release, Saab has not yet signed a contract or received an order related to this, but in any case, it sounds good from the company’s perspective.
The Gripens and Meteor missiles are tough on paper. It is worth noting that neither has likely been tested in actual aerial combat. Saab’s engineers will undoubtedly collect a wealth of data and feedback from Ukraine.
Sales of the aircraft could also receive a boost once they can be labeled with a “combat proven” sticker.
Combat experience is one of the most valuable sales assets a fighter manufacturer can have. It can be simulated but highly inaccurately at best. A Gripen that has operated in contested airspace, handled electronic warfare pressure, and maintained availability under real combat stress becomes a different product in later export campaigns. Saab has not had that proof point before. Ukraine could change that.
The Gripen E/F would give Saab real performance data across modern air combat, from drone interception to air defense suppression, which its engineering teams could turn into software updates, tactical improvements and documented capability claims. The C/D variants also matter, since they should reach Ukraine earlier and provide battlefield feedback before the E/F fleet is fully delivered. Every Gripen flight hour in Ukraine would strengthen the empirical case Saab can bring to future campaigns, whether in the Philippines, Argentina or the next open competition. In that sense, the Ukrainian program is not just a customer relationship. It is a live operational lab of significant value for future Gripen sales.
Renato has shared his comments as Ukraine is potentially acquiring up to 20 Gripen E/F fighters, and additionally, Sweden is donating 16 Gripen C/D fighters, which could provide a tailwind for Saab’s Aeronautics business.
Sweden and Ukraine jointly announced that Ukraine initially intends to acquire up to 20 Gripen E/F fighters, while Sweden donates 16 Gripen C/D fighters and replaces them with new aircraft. Although the agreement has not yet been signed, we believe that the joint announcement by the two heads of government following the October 2025 Letter of Intent makes this outcome highly likely. If negotiations are successfully concluded and financing is secured, this will shift from a bull scenario to a base case scenario, forcing us to make upward forecast revisions to our medium- and long-term revenue and margin expectations for Aeronautics.
Sweden is ordering sensors and command-and-control systems for Ground-Based Air Defense, including Saab’s Giraffe AMB radar and C2 capabilities. The main conclusion that I draw from the press release is that the company continues to strengthen a revenue vertical where it already has an stable and improving position, so the order does not materially change the investment case on its own.
Anything linked to air defense remains strategically attractive, in my view. Modern conflicts are increasingly shaped by who can see, track, and intercept threats across the air domain, from aircraft and missiles to drones and loitering munitions. Air defense is one of the core layers of national resilience, now and in the future. In practical terms, for the Swedish Armed Forces, this means improved situational awareness and reaction times, and higher survivability for ground forces and critical infrastructure. So, good news.
The 22.4 MUSD order headline understates the strategic rationale. What matters is the vehicle behind it. BEST MAC is explicitly structured as a bridge to the US Army’s next generation Synthetic Training Environment, or STE, which is the Army’s multi-billion dollar program to modernize its training infrastructure over the coming decade. By winning Lot 2 under BEST MAC, Saab is not just selling laser detectors to the US Army. In my view, it is embedding itself into the Army’s training modernization vertical at a point where the architecture is being set.
As I understand things, but don’t quote me on this, the systems delivered today are designed to integrate with legacy TESS equipment while remaining compatible with the STE transition. That matters because Saab’s tech can become part of the interoperability layer the Army builds forward from. In training simulation, as in radar and command and control, the vendor that helps define the integration layer is usually well-positioned for the upgrade cycle.
There is no debate about the US Army being the world’s most important reference customer in defense procurement. Even modest contract values can carry a disproportionate signal when they sit inside a larger modernization program. Medium-term, I think the relevant question is not the 60.8 MUSD under BEST MAC, but whether Saab is positioned for direct award opportunities as STE scales. That is where the order size can become material; the estimate-changing kind.
For now, the order is too small. So, we’ll just keep an eye on how things unfold.
So, a few days ago there was this joint statement between Sweden and Brazil. Both countries want to expand the industrial cooperation by an additional 20 Gripen aircraft
Brazil’s first locally produced Gripen E, rolled out in Gavião Peixoto in March 2026. This matters because domestic production changes the politics of the program. Once jobs, engineering capacity, industrial know-how, and national pride are tied to a defense platform, replacing it becomes very hard.
So, the additional 20 aircraft now being discussed are not to be seen as a separate sales campaign. They are more like the natural continuation of a program Brazil has already integrated. Saab is simply expanding inside a system where Brazil already has developed the industrial base for manufacturing. These are very long term assets.
The planned innovation center adds another positive layer as a permanent R&D presence focused on Gripen development, maintenance, and upgrades is outstanding. According to how long these programs typically run, we are talking about a 30-to-40-year institutional commitment. Brazilian engineers will build knowledge around the platform, future upgrades will have a local technical base, and the program will become increasingly harder to unwind over time. In my eyes, for the type of business that Saab is, this is the deepest and strongest form of customer lock in as the customer helps shape the product.
The C-390 angle makes the structure even more interesting. Sweden is buying Brazilian transport aircraft while Brazil is expanding its Gripen fleet. That turns the relationship into a genuine bilateral defense industrial and political pact between two countries. It creates some sort of mutual dependency. Mutual industrial and political dependency is more durable than a pure export sale because both sides have something to defend. Sweden has an interest in Embraer’s C-390 success. Brazil has an interest in Gripen’s long term development. The program is therefore anchored above a “normal” procurement cycle.
Let’s suppose roughly 150 MUSD per aircraft on an all-in basis, 20 additional Gripen E/F aircraft would imply ~3 BUSD in potential program value. The Brazilian production base also helps reduce Saab’s capacity constraint over time, because part of the future volume growth sits outside Sweden.
The company is divesting its Public Safety Solutions unit, a 75-person software unit serving police, fire, airport and transport operators, to Norwegian Omda AS. Closing is expected in Q4’26.
The financial impact is negligible in the context of Saab’s ~79 BSEK revenue base. In my view, the relevant point is portfolio focus. Saab is removing a civilian facing software business from Surveillance and concentrating the portfolio further around defense demand, where growth visibility, margins, and strategic value are structurally stronger.
This matters because Saab is already executing several large programs at once. Gripen production is ramping, A26 remains a major submarine program, LoyalEye is moving forward in development, and Canada remains an important GlobalEye (and potentially Gripen) opportunity. Against that backdrop, I think that even small divestments can have value if they reduce complexity and free management capacity.
This is not a thesis changing transaction. However, it fits a clear pattern. Saab appears to be trimming its non-core assets and freeing managerial capacity to support areas where it clearly has stronger competitive advantages. I believe that, over time, that should support better growth quality, cleaner margins, and stronger ROIC.
