Bullish indicating open at $55-$60, IPO prices at $37
Introduction & Market Context
Leonardo, the Italian aerospace and defense giant, presented its first quarter 2025 results on May 8, 2025, in Rome, showcasing strong performance across most business segments. The company is operating in a favorable defense spending environment, with the Italian Integrated Defence spending addressable budget estimated at 39% (€36 billion) for 2025, and the ReArm Europe Plan/Readiness 2030 expected to boost defense funding by approximately €800 billion.
The company reported significant improvements in its financial metrics, benefiting from increased defense spending across Europe and strategic partnerships that have strengthened its market position. These results come amid a credit rating upgrade from S&P and a positive outlook from Moody’s, reflecting the company’s improved financial health and strategic direction.
Quarterly Performance Highlights
Leonardo delivered impressive financial results for Q1 2025, with double-digit growth across key metrics. New orders reached €6.9 billion, representing a 20.6% increase compared to Q1 2024 (excluding UAS). Revenue grew by 14.9% to €4.2 billion, while EBITA increased by 17.9% to €211 million. The company’s Return on Sales (ROS) improved by 0.2 percentage points to 5.1%.
As shown in the following comprehensive overview of Leonardo’s Q1 2025 performance:
The company also made significant progress in strengthening its balance sheet, with net debt reduced by 27.7% to €2.1 billion compared to Q1 2024. Free Operating Cash Flow (FOCF) improved by 7.6% to -€580 million, which is typical for the first quarter due to seasonality in the defense industry.
Based on these strong results, Leonardo has confirmed its full-year 2025 guidance:
Segment Performance
Leonardo’s performance was strong across most business segments, with particularly impressive results in Helicopters, Defence Electronics, and Cyber & Security Solutions.
The Helicopters division reported solid growth with orders of €2,362 million (+15.6%), revenues of €1,259 million (+16.0%), and EBITA of €70 million (+29.6%). The division’s ROS improved by 0.6 percentage points to 5.6%, demonstrating enhanced operational efficiency.
Defence Electronics showed growth across both its European and DRS (US) operations. Electronics Europe recorded orders of €2,121 million (+5.6%), revenues of €1,085 million (+10.6%), and EBITA of €125 million (+11.6%). Meanwhile, DRS posted orders of $991 million (+21.6%), revenues of $799 million (+16.1%), and EBITA of $66 million (+20.0%).
The Cyber & Security Solutions segment continued its growth momentum with orders of €220 million (+7.8%), revenues of €168 million (+20.9%), and EBITA of €11 million (+37.5%), highlighting the increasing importance of cybersecurity in Leonardo’s portfolio.
The Aircraft division maintained strong margins with orders of €839 million (+47.7%), revenues of €613 million (+7.5%), and EBITA of €63 million (+14.5%).
The Space business also delivered solid results, with orders of €193 million (+89.2%), revenues of €200 million (+25.0%), and EBITA of €11 million (+22.2%).
However, the Aerostructures segment remains challenging, with mixed results showing orders up 96.4% to €497 million, but revenues down 14.3% to €150 million and EBITA at -€70 million (worsened by 62.8% compared to Q1 2024).
The following chart illustrates the progression from EBITA to Net Result, showing a 23.7% year-over-year improvement in Net Results before extraordinary transactions:
Strategic Initiatives
Leonardo is advancing several strategic initiatives to strengthen its market position and drive future growth. A key focus is the joint venture with Turkish defense company Baykar for advanced UAV solutions, which reached a significant milestone with the signing of Heads of Terms on April 29. The partnership includes technical, industrial, and marketing working groups, with Italian production sites already identified and the first public disclosure planned for the 55th International Paris Airshow.
The company is also progressing with its joint venture with Rheinmetall (ETR:RHMG) for military vehicles. Key milestones include the delivery of two Lynx vehicles by May 2025, with four additional Lynx vehicles featuring new Italian turrets to be delivered by year-end. More than ten platforms are under construction for delivery by 2026, and the joint venture is working on requirements for a Main Battle Tank with the Army Chief Commander Officer.
For the struggling Aerostructures business, Leonardo is implementing a stand-alone industrial plan focusing on industrial set-up optimization, supply chain restructuring, operations performance improvement, and revenue diversification. The company is in ongoing discussions with a potential strategic partner, with a timeline extending from September 2024 to year-end.
On the M&A front, Leonardo has addressed 22 targets in the last 12 months, focusing on the Cyber & AI/Space domains. The company has entered exclusive negotiations in the Cyber sector and is in the due diligence phase for a defense software technology company specializing in data/sensor fusion. Additionally, Leonardo has initiated due diligence for a Space company and is analyzing possible divestments of minor businesses.
Efficiency Plan and Financial Outlook
Leonardo’s efficiency plan is targeting approximately €1.8 billion in savings across the 2024-2028 period. In Q1 2025, the company achieved €71 million in savings, representing about 25% of the total savings expected for 2025. The savings breakdown shows procurement as the key driver at 68% (€48 million), followed by business disposal at 15% (€11 million), corporate at 11% (€8 million), and travel at 6% (€4 million).
The company maintains a solid liquidity position of approximately €6.2 billion, including €1.9 billion in cash, a €1.8 billion ESG-linked revolving credit facility, a €1.0 billion commercial paper program, and various other credit lines.
Leonardo is also implementing a "Capacity Boost" program aimed at enhancing its capture rate and improving profitability. The initiative focuses on addressing losses from non-core products, incomplete product portfolio, production inefficiencies, lack of production capacity, supply chain discontinuity, and lack of skilled human resources.
Forward-Looking Statements
Looking ahead, Leonardo expects minimal impact from potential tariffs, estimating a limited effect of maximum $10-20 million in both 2025 and 2026, excluding mitigation actions. The company noted that defense/governmental sales are exempt from these tariffs, and its international footprint is primarily local.
The company’s confirmed full-year 2025 guidance reflects confidence in its strategic direction and operational execution. With orders expected to reach approximately €21 billion, revenues of around €18.6 billion, EBITA of approximately €1,660 million, FOCF of about €870 million, and net debt reduced to approximately €1.6 billion, Leonardo is positioned for continued growth and improved financial performance.
The positive outlook from credit rating agencies, combined with the company’s strategic initiatives and efficiency measures, suggests Leonardo is well-positioned to capitalize on increased defense spending across Europe and maintain its competitive position in the aerospace and defense industry.
Full presentation:
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