The German government plans to reduce funding for ammunition procurement in 2027, despite an overall increase in defence spending. The changes could add pressure on Europe’s largest producer of artillery ammunition, Rheinmetall, whose shares have already fallen by more than 30% since the start of the year, Bloomberg reports.
According to the draft federal budget, around €9.6 billion is planned for ammunition procurement in 2027, compared with €11 billion earmarked for these needs in 2026.
Of that amount, €7.7 billion will be financed from the main state budget, with another €1.9 billion coming from a special defence fund. At the same time, spending will remain significantly higher than in 2025, when less than €4 billion was allocated for ammunition procurement.
Against the backdrop of these plans, investors are increasingly questioning the prospects of companies that specialise in producing traditional weaponry.
According to Bloomberg, Rheinmetall’s market value currently stands at about €49 billion, but the company is increasingly losing ground to makers of unmanned systems, demand for which has risen sharply after the war in Ukraine and conflicts in the Middle East.
Analysts at Mediobanca believe the budget changes may signal a shift in Germany’s defence-policy priorities—from buying tanks and ammunition to more active development of unmanned technologies.
An additional factor weighing on Rheinmetall was the cancellation in June of a contract to build F126 frigates. After that, the company’s shares lost 19% of their value in a single day. In addition, last week China imposed export restrictions on 14 European companies, including Rheinmetall, in response to EU sanctions.
Rheinmetall said it will assess the impact of the contract cancellation on its financial forecasts when it publishes quarterly results scheduled for 6 August.
Despite the current risks, most analysts maintain positive assessments of the company. According to Bloomberg, Rheinmetall has 23 “buy” recommendations, four “hold” recommendations, and no “sell” recommendations.
Germany’s Defense Ministry declined to comment on individual items in the draft budget, stressing only that ammunition procurement “has been and will remain a priority.”