Saab Q4'25 preview: Demand is there, but can they land the volumes?

In this preview, we update our view on Saab ahead of its Q4’25 results on February 5, 2026. Since the start of 2026, we see geopolitics and allied rhetoric pushing Europe toward a firmer, longer-term stance on defense and security. That makes defense spending paths clearer, capacity requirements more demanding, and supply chain execution more important, because budgets only matter if they can be translated into delivered capability. Against this backdrop, we see Saab well-positioned to benefit significantly from Europe’s firmer shift, and we raise our order intake, revenue, and profitability forecasts from 2026 onward. While our revised outlook reduces downside risk and supports a higher fair value, the expected return remains unattractive, albeit less so than before. Therefore, on our adjusted expectations, we raise our target price to SEK 550 (prev. SEK 310), and see an improved risk-reward profile, but reiterate our Sell recommendation.

A historic Q4 ahead and we see 2026 as make or break

Q4 looks set to be one of Saab’s most consequential quarters since listing, as it confirms underlying demand strength and, in our view, frames the growth moving forward. We expect order intake to land materially above our prior view, which will translate into meaningful support for the backlog. We also expect the seasonally strong Q4 to support full-year 2025 revenue and continued margin progression. Our understanding is that near-term earnings impact from the Q4 orders should be limited, given the long-cycle mix and the time it takes to convert orders into revenue. We see 2026 as an inflection point where demand is not the constraint. Execution is. How delivery capacity develops and how well and quickly the supply chain is synchronized will determine Saab’s growth pace and whether it can be sustained to meet market expectations.

More certainty on demand, more pressure on capacity

We believe the macro backdrop has shifted in a way that prolongs and de-risks the European demand runway versus our initiation assumptions. To us, the debate has moved from whether budgets will rise enough for Saab to grow into an elevated valuation to whether Saab can convert the increasingly certain funding (orders) into delivered capability. In our view, that conversion is the binding constraint. Sustaining the growth implied by expectations becomes progressively more demanding as each step up requires incremental billions of SEK in products to be produced, integrated, tested, and delivered on time. Against this backdrop, and with that caveat in mind, we raise our order intake, revenue, and profitability forecasts from 2026 onward, while keeping the margin path a gradual grind upward.

Much better runway but the market expects perfection

We see a more durable demand backdrop for European defense, but Saab is still priced for very strong execution. Our 2026-27 valuation multiples of ~55-45x P/E and ~43-36x EV/EBIT remain demanding even after we lift our long-term acceptable range to ~22-25x P/E and ~17-20x EV/EBIT on higher quality demand and greater confidence in backlog conversion. In our return framework, expected shareholder return is driven by earnings growth, dividend yield, and valuation changes. Our growth outlook would be sufficient if multiples stayed flat, but we assume avg. ~15% multiple contraction in 2026-28, which keeps expected returns negative, albeit less negative than before. Our DCF, using a 7.6% WACC, with growth tapering from ~19% in 2027 toward 3% terminal and a 12% terminal EBIT margin, implies ~SEK 550 per share. The valuation of such asset is dominated by long-term cash flows and is therefore sensitive to terminal assumptions. In this update, we see the long-term fundamentals as improved, supporting a more consistent growth and profitability trajectory, but still see a meaningful rerating risk and expect high day-to-day and week-to-week volatility in the shares.