Saab's Q2 2026: A Quarter of Breakthroughs as European Defense Spending Accelerates

Record order intake of SEK 68 billion, landmark submarine and fighter contracts, and a decisive ramp-up in production capacity define a transformative quarter.

SAAB-B.ST · Earnings Call · 2026-07-17

A Quarter of Breakthroughs

Saab's second quarter 2026 was defined by a wave of historic contract wins that put the company at the center of Europe's defense build-up. The headline was the SEK 47 billion order for three submarines to Poland, a deal that CEO Micael Johansson called a submarines for Poland contract and a Big breakthrough for the company's underwater capability. "It shows, of course, that this conventional submarine capability is the state-of-the-art capability," he added, underlining the strategic importance for the Baltic Sea. The contract not only secures years of production activity at the Karlskrona and Landskrona shipyards but also establishes an industrial partnership with Poland, creating redundancy on both sides of the Baltic. Beyond the submarines, Saab secured the first contracted batch of Gripen E fighters for Ukraine — 16 aircraft, with an option for up to 150. "This is now the first batch actually being contracted by Ukraine," Micael noted, though the order will be booked in the next quarter due to administrative steps. The Gripen E program, alongside the two-seater Gripen F rollout for Brazil, positions Saab's Aeronautics division for a step-change in production rates. The company is also ramping up GlobalEye production after selections by Canada and NATO, with capacity plans doubling from two to six aircraft per year by 2030. These wins reflect a broader European push for defense independence and capability targets set by NATO, a theme echoed across the sector. Saab's order intake for the quarter reached SEK 68 billion, lifting the total order backlog to a record SEK 318 billion. The company's production capacity is now the central constraint, and management is investing roughly SEK 10 billion annually in new facilities, automation, and talent.

Operational Execution and the Supply Chain Challenge

Operationally, Saab delivered another strong quarter. Organic sales grew nearly 30%, gross margin expanded by more than a percentage point, and EBIT margin improved to 11%, up 41% year-on-year. The ramp-up in Dynamics and Surveillance, where automated weapons factories and high-volume sensor production are coming online, drove the margin expansion. However, the Naval side was hit by a one-off write-down of roughly SEK 200 million after Sweden selected a rival for the frigate program, a disappointment Micael acknowledged: "It was roughly SEK 200 million that we took on the Naval side." Without this charge, Naval profitability would have improved. The T-7 trainer program remains a drag on Aeronautics, with negative contribution expected to persist for a couple of years until the U.S. Air Force ramps up production. But the broader story is one of scaling. As CFO Anna Wijkander emphasized, the company is leveraging administration and sales costs while investing heavily in R&D — over SEK 4.4 billion on a rolling 12-month basis, more than doubled from three years ago. The biggest risk to this growth trajectory is not demand but execution. When asked about bottlenecks, Micael pointed directly to the supply chain: "The biggest effort, we put a lot of effort into increasing our own capacity, spending like SEK 10 billion a year on it, roughly. That is important, but that is not enough. We have to work with our supply chain to make sure that that becomes more resilient." He cited inventory builds in critical materials and certifying alternative suppliers as key actions.

The biggest effort, we put a lot of effort into increasing our own capacity... We have to work with our supply chain to make sure that that becomes more resilient.
Micael Johansson, Chief Executive Officer (CEO) · 2026-07-17

This is a recurring theme: in the prior Q4 call, Micael had already flagged supply chain as the primary constraint, stating "the material supply, the supply chain that we work diligently" as the main focus. Cash flow is improving despite heavy investment. The first half delivered SEK 1 billion positive cash flow versus SEK -1.1 billion a year earlier, with a second half typically much stronger. Management remains confident on the 60% cash conversion target, supported by advance payments from the Poland contract expected in the coming quarters.

Looking Ahead: Guidance and Capacity

With the record backlog and strong demand, Saab reiterated its medium-term targets of around 22% organic sales CAGR for 2023-2027 and EBIT growth above sales growth. When pressed on whether this could be upgraded, Micael was measured: "We will come back towards the year-end on how we will look at the future guidance." He noted that six quarters remain in the guidance period and that the short-term delivery backlog is actually growing, with 60% of the backlog now deliverable within two and a half years. Capacity expansion is the key to unlocking this potential. In Dynamics, a fully automated weapons factory in Linköping is operational, with additional automation in Karlskoga and new facilities in Grayling, Michigan and India coming online. GlobalEye capacity is being raised to four-to-six aircraft per year, while Gripen production is targeting 25-30 aircraft annually. These investments are already translating into higher delivery volumes: Giraffe 1X radar deliveries are set to exceed 300 systems per year, up from 100 in the first half. The combination of a €300 billion-plus backlog, a strong balance sheet, and a clear strategy makes Saab one of the purest plays on European defense rearmament. As Micael put it, "It's been a fantastic quarter from a big contract, big selection point of view." The challenge now is not finding demand but delivering on it — and that, ultimately, is the opportunity.