Hensoldt and the sensors behind Europe’s re-armament

The events of the past few years have reshaped Europe's security priorities. Russia's invasion of Ukraine, continued instability across the Middle East, concerns around NATO burden sharing and rising geopolitical competition have all prompted European governments to reassess their defence capabilities. What was once treated as discretionary spending has increasingly become a strategic necessity.

The result has been a significant increase in defence budgets across Europe. Germany has embarked on the largest military modernisation programme in its post-war history, while the European Union has announced initiatives designed to increase defence investment and strengthen the continent's industrial base. Defence procurement is also becoming more visible, with governments committing funding over longer time horizons and prioritising domestic and European suppliers.

These developments matter because they are not simply increasing defence spending; they are changing what militaries are spending money on.

Recent conflicts have highlighted the importance of air defence, electronic warfare, surveillance, drones and battlefield awareness. The ability to detect, track and process information has become just as important as traditional military hardware. Modern warfare increasingly depends on networks of sensors collecting and sharing data in real time.

A different kind of defence company

This is where Hensoldt comes in.

Rather than manufacturing tanks, aircraft or missiles, this German defence and security company specialises in the radar, electronic warfare and sensor technologies that sit behind them. Its products help armed forces identify threats, understand their operating environment and make decisions more quickly. Increasingly, these capabilities are being connected through software-defined defence systems that allow information to be shared across multiple platforms and domains.

Importantly, Hensoldt is largely platform agnostic. Its systems can be integrated across a wide range of military programmes rather than being tied to a single aircraft or vehicle. As defence budgets expand, this provides exposure to multiple areas of spending rather than a single procurement programme [1].

The acceleration

Within the Corporate Life Cycle framework, Hensoldt exhibits many of the characteristics we would expect from an Accelerator.

Demand for its products has strengthened considerably as European governments have increased investment in defence capabilities. Order intake and backlog have both grown significantly, providing greater revenue visibility than is typically associated with a business at this stage of the Life Cycle. The company's exposure to radar, electronic warfare and software-enabled defence systems places it at the centre of several long-term defence priorities [2].

In many ways, Hensoldt's acceleration reflects a broader change in its end market. Historically, defence electronics was a relatively steady industry driven by incremental upgrades and replacement cycles. Today, the emphasis is increasingly on connected, multi-domain systems capable of operating in rapidly evolving threat environments. This shift is creating new demand for technologies such as sensor fusion, data networking and electronic warfare — areas where Hensoldt has established expertise.

Accelerators rarely enjoy a smooth path.

For Hensoldt, the principal risk is less about demand and more about execution. The company must continue expanding manufacturing capacity, developing its supply chain and delivering increasingly complex programmes while maintaining quality and reliability. Growth requires investment, and periods of operational disruption are not uncommon when businesses scale rapidly.

There are also broader risks. Defence budgets remain linked to political priorities, even if current trends appear supportive. Individual programmes can be delayed or cancelled, and changing geopolitical conditions could alter procurement patterns over time. Finally, following the strong performance of many European defence shares, expectations for the sector are significantly higher than they were only a few years ago [3].

Portfolio playbook: why it matters

So how does this fit into our investment process?

Accelerating companies are often found where structural change is creating new opportunities faster than the market had anticipated. They typically display strong sales momentum, expanding end markets and the potential for improving economics as they scale. However, they also require careful analysis because success ultimately depends on execution.

Within our Global Equity portfolios, Accelerators provide exposure to changing industry structures and emerging growth opportunities. We blend these businesses with companies at other stages of the Corporate Life Cycle to create balance. Hensoldt's story is therefore not simply about defence spending. It is an example of how major geopolitical and technological shifts can move a company into an Accelerating phase, creating the potential for sustained sales momentum and wealth creation over time.

References:

1. Airborne ESM and SIGINT | HENSOLDT
2. Financial year 2025: HENSOLDT achieves record order intake and confirms structural growth path | HENSOLDT
3. What’s Next in the European Defense Stock Rally? | Morningstar UK

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