Source: Inderes & Infront consensus (24.04.26, 7 estimates)

For Saab’s upcoming Q2 report, due on Friday, July 17, at 07:30 CEST, we do not see demand as the key question. Two major orders confirmed in June keep the backlog building, and the order momentum for 2026 is secured. As in recent quarters, the focus shifts to execution. We expect Saab to sustain its recent delivery pace, supporting broad growth across divisions and keeping the 2027 targets within reach. Profitability should improve year-on-year, though individual project drags may weigh on margins. In our view, the main margin risk lies in delivery timing, not demand. In the report, we look for confirmation that the delivery pace of recent quarters can be sustained as the backlog continues to scale.

The backlog continues to build-up

Our assessment is that the underlying sector demand remains structurally intact and, if anything, is still strengthening. Sector backlogs are at record levels, many countries are tracking well toward the 5% NATO target, and the US’s increasing detachment from the alliance continues to push Europe into heavy capital commitments for the modernization and expansion of its defense industrial base. Against this backdrop and recent order activity, we expect Saab’s Q2’26 order intake to land at ~77 BSEK, compared with our previous estimate of ~34 BSEK, and up ~3x year-on-year. This is well above consensus, which is based on April estimates and therefore does not yet reflect the full extent of major orders announced in June. As a result, our expected 2026 order intake rises to ~178 BSEK, including the 24.6 BSEK Ukraine contract, which the company expects to be booked in Q3. In our view, the question for Saab is still not whether the procurement money will come, but how fast it can be contracted, produced, and delivered.

Strong backlog conversion to drive robust top-line growth

We expect Q2 revenue of 24,421 MSEK, above consensus forecast, and up ~23% year-on-year from 19,786 MSEK in Q2'25. We also expect Aeronautics to grow in the mid-teens and Naval in the low teens, and the implied growth drivers continue to be Surveillance and Dynamics. We estimate that the two business areas will grow ~30% combined, led by short cycle deliveries. It is from these two divisions where any topline surprise is most likely to come. In Aeronautics, we think the Gripen E/F ramp-up and final Hungary deliveries will support mid-teens growth in the quarter, while the Ukraine contract should only start to affect the P&L from Q3 onward. Naval Combat Systems and engineering services previously booked under Surveillance are now reported within Naval, so the focus should be on underlying organic growth rather than headline results, in our view. We believe these transferred service lines grew well within Surveillance and should continue to support Naval.

Operating leverage and favourable mix to boost margins

We forecast adjusted EBIT of 2,601 MSEK, ahead of consensus, and up from 1,977 MSEK in Q2'25. This corresponds to an adjusted EBIT margin of 10.6%, compared with 10.0% in Q2'25. The 60-bps margin expansion year-on-year implies an incremental margin of only ~13% on ~23% revenue growth, which we view as deliberately conservative. T-7A start-up costs in Aeronautics are still expected to dilute some of the operating leverage generated by Surveillance and Dynamics. High utilization and, in our view, more favorable contract structures in these segments should support profitability. If the T-7A drag proves smaller than expected, we think the group margin could move closer to 11%. The main downside risk here is Dynamics’ delivery timing slipping into H2.

Focus less on order intake and more on operational momentum

With 2026 order intake already underpinned by signed large contracts, the intake print itself matters less. Our focus in the Q2 report is, therefore, on how revenue and profitability are tracking against Saab’s 2023-27 targets, which remains our main anchor.

We want management to clarify three things. First, capacity, including how the ramp-up is progressing and whether the bottlenecks remain the same. Second, margin quality, including how much industrial participation and technology transfer may, if at all, dilute the economics of the recent large orders in the medium to long term. Third, cash flow, including whether advance payments temporarily support conversion before the working capital build resumes. In our view, these answers matter less for 2026 and more for 2027 and onward estimates than the quarter’s own numbers. With the backlog now extending well beyond the 2027 target horizon, we see limited reason to question the demand near-term. In our view, the targets now rest more on execution and delivery timing than on market demand.