Morning, ladies and gentlemen, and thank you for standing by. Welcome to Thales Q3 2026 order intake and sales conference call. The presentation will be held by Mr. Jérémie Papin, Thales CFO. It will be followed by a question- and- answer session. If you wish to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded. I would now like to hand the conference over to Mr. Louis Igonet, VP, Head of Investor Relations. Please go ahead, sir.
Thank you. Good morning. Welcome and thank you everyone for joining us for the presentation of Thales nine month 2026 order intake and sales. I'm Louis Igonet, Head of IR at Thales. With me today is Jérémie Papin, CFO of Thales. As usual, this presentation is audio broadcasted live on our website, thalesgroup.com, where the slides and the press release are also available for download. A replay will be available soon after the end of the event. With that, I'd like to turn over the call to Jérémie Papin.
Thank you, Louis, and good morning to everyone. Let me start with the Q3 2026 highlights on slide two. First, Thales recorded continued strong commercial momentum over the third quarter, which translated into a solid level of order intake over the first nine months of the year, driven by space and defence. Demand for our solutions remains high in a context of increased defence spending from many countries in Europe, but not only.
Sales also recorded a robust growth in the third quarter, driven notably by strong project execution across businesses, continued efforts in capacity ramp-up in defence, and confirmed growth trajectory in our cyber business. From a strategic standpoint, Thales keeps driving innovation in its markets with the launch of several premium high-tech solutions this quarter. In September, we unveiled HexaForce, our next-generation AI-powered multi-domain command and control system designed for NATO and allied nations.
It builds on the capabilities of cortAIx, our AI accelerator, where 800 engineers and data scientists collaborate. Our ambition on the next gen C2 market are strong and HexaForce, which is available from now, will be a key asset. In cybersecurity products, we launched Luna 8, our next-generation hardware security module designed to protect critical data and applications against ever-increasing cyber threats and prepare our customers for the post-quantum era. In space, during Q3, the IRIS² program took another important step forward.
Thales Alenia Space signed in September a letter of agreement with Eutelsat to provide the governmental payloads for the 330 IRIS² telecommunication satellites in low Earth orbit. This major contract confirms our role as a key industrial partner of this flagship European sovereign program, with a total of EUR 3 billion awarded to Thales Alenia Space, including some orders already booked over the last 12 months.
Moving on to the order intake year- to- date on page three. I would like you to remember three key highlights. Our order intake is growing, granular, and well spread geographically. First, in terms of growth, our strong commercial momentum has allowed us to book EUR 19.1 billion of new orders over the first nine months of the year. This is a 15% organic growth over the same period last year. Second, granularity. As you can see on the chart, our order intake remains highly granular, with orders below EUR 100 million representing over 60% of total intake.
On top of those orders, the momentum in large orders has been a key driver of the order intake growth in 2026. 29 large orders have been booked over the first nine months of the year, 11 of which in Q3 alone. This compares to a total of 28 larger orders booked over the same period in FY 2025. Out of those 11 orders booked in Q3, defence accounted for nine large orders with several contracts for air surveillance and defence, effectors, naval solutions, and a new contract related to the development of the Rafale for France.
Space contributed two large orders, including the contract related to IRIS² mentioned earlier, underscoring our strength in the strategic and sovereign domain. One data point to note, 80% of our order intake since the beginning of the year came from outside France, a further proof of the strength of our multi-local platform. French, which accounts for 20% of the order intake, grew by a strong 47% year-on-year, which includes, in particular, three contracts related to the development of the F5 standard for the Rafale.
Looking now at the 80% of order intake coming from outside of France over the first nine months of 2026, the momentum remains driven by Europe, but also by the Near and Middle East, where new orders grew more than 200% year-on-year. Moving on to slide four. Fueled by continued momentum in Q3, sales organic growth reached 8.1% over the first nine months of 2026. This performance was in particular driven by Defence, which delivered double-digit growth in Q3, supported by the continued ramp-up across the whole portfolio. Aerospace showed good momentum as well with solid growth in space.
Finally, Cyber and Digital was slightly up over the first nine months. As expected, Cyber showed a confirmation of the growth trajectory in Q3. Geographically, we maintained a balanced performance reflecting Thales' strong positions worldwide. Importantly, our mature market showed 8% organic growth over nine months, fueled notably by Europe. Emerging markets, which account for 40% of the organic growth over the first nine months, sales increased by 15.8%, including contribution from Near and Middle East, where sales are now growing by 49% year-on-year.
A quick comment on currency and scope. While scope impact is not material over nine months, Forex remained negative year-to-date despite a positive contribution in Q3. Now moving on to performance by segment, starting with Aerospace on slide five. Order intake in Aerospace reached EUR 5 billion, up 29% organically over the first nine months of 2026. This performance was driven by space, where strong institutional demand is fueling the business momentum.
Seven large orders were booked since the beginning of the year, including nearly EUR 500 million order for IRIS² and several contracts, notably in Qatar, Spain, or with the European Space Agency. Sales in the segment amounted to EUR 4.2 billion, up 4% organically. This includes a 7.8% organic sales increase in Q3, following an H1 that was impacted by one-off items in space. Excluding these H1 items, space has been delivering strong underlying organic sales growth over the first nine months and a particularly strong Q3.
Avionics were up over the nine-month period, showing ongoing growth on high comps. Importantly, the impact from lower air traffic, notably in the Middle East region, remained limited on our aftermarket business in Q3. Overall, Aerospace continues to demonstrate strong momentum with both order intake and sales showing good growth. Now moving to Defence on slide six. Order intake in Defence reached EUR 11.3 billion, up 14% in total and organic terms over the first nine months of 2026. This performance reflects sustained commercial momentum supported by increasing budgets for military equipment for our customers, both in mature and emerging markets. 22 large orders were booked over the period, of which nine in Q3 alone.
Demand remains strong, in particular in the naval domain, in effectors, and in air surveillance and defence. Thanks to a premium multi-domain, multi-layer offering and best-in-class products in air defence, Thales is ideally positioned to address customers' most critical needs. Defence recorded double-digit sales growth in the third quarter, leading sales over the first nine months to reach EUR 9.4 billion, up 13% organically. The main drivers behind this performance were the continued ramp-up in production capacity, helping Thales to meet increasing customer demand and strong project execution.
Overall, defence delivery momentum with both order intake and sales efficiency significantly up year-on-year. Moving on to cyber and digital on slide seven. Sales in the Cyber and Digital segment reached EUR 2.7 billion over the first nine months of 2026, slightly up organically. First, Cyber, where sales were up 2.5% over the first nine months. In Q3, sales were up 4.3% organically, confirming the growth that we published in Q2. In a growing market where the relevance of Thales products and solution is stronger quarter- after- quarter, the group is firmly committed to pursuing this growth path going forward.
Those growth perspectives are supported by our innovation capacity with the launch of new products such as the new HSM Luna 8 and the strengthening of our data security posture management offer to address ever-growing risks linked to widespread adoption of AI. In digital identity, where sales were slightly down in organic terms. Remember the comparison basis given last year one-off in secured connectivity. Digital solutions in both payment and secured connectivity recorded strong momentum over the first nine months of 2026.
However, not fully offsetting the current impact of lower volumes for physical products. I will conclude with our financial objectives on the current year on slide eight. The momentum in Q3 for both order intake and sales and strong perspectives make us fully confident to achieve the financial target set for the year. A book-to-bill ratio above 1.1x and sales that are now firmly expected at the upper end of the +6% to +7% guided range for organic growth and potentially beyond. The adjusted EBIT margin is expected between 12.6% and 12.8%. Many thanks for your attention. I will now be pleased to answer your questions.
Thank you. Ladies and gentlemen, we will now start the question- and- answer session. As a reminder, if you wish to ask a question, please press star one one on your telephone and wait for your name to be announced. First question comes from the line of Chloé Lemarié from Jefferies. Please go ahead.
Yes. Good morning. Thank you for taking my question. I'd have two, if I may. The first one is on the tweak in the guide and the comment that you could go above 7% organic growth. Could you maybe explain some of the moving parts and where you see each division for organic growth? Within that, if the 13.5% margin that you've indicated for defence for the year is still the right level given the strong performance in nine months.
My second question is, we've just heard that there's an agreement that's been signed between France and the U.A.E. on Rafale F5. I wanted to know if you had any thought to share on what this could mean for you in terms of potential development work, or if this would actually be more a question of further order down the line. Thank you.
Thank you. Good morning, Chloé. On the growth outlook, I'm just reacting to the momentum we've had in Q3, and pointing to the fact with sales up 8.1% year- to- date. The guidance is at between 6% and 7%. Obviously, now we're saying we will be at the top end of that range, maybe a little bit above. I just want to indicate that we enjoyed a strong momentum, and we have no reason to be worried about Q4.
On margins, I will confirm what I've said in the past, which is that defence margins were at 13.8% in H1. We think the full year will remain above 13%, possibly around 13.5%. That remains unchanged. On the U.A.E. comment about an agreement with France, I will let Dassault Aviation comment on what that indicates or what that means.
Understood. Thank you so much.
Thank you. We will now take the next question from the line of Alessandro Pozzi from Mediobanca. Please go ahead.
Good morning. Thank you for taking my questions. I have two on the guidance. As we are trying to, of course, quantify the beyond the 7%. And I guess it depends on very much also on the Cyber and Digital, which probably is the weakest performance in terms of divisional performance. Of course, Cyber has been recovering, but digital not as much. But also we have the one-off of last year. So can you give us a bit more color on what is the underlying trends in Cyber and Digital ex one-off, compared to Q3 of last year?
The second question on Defence, of course, this is very strong, has been very strong for the last few quarters, double-digit growth. As we look forward the next few quarters, is there any reason for not assuming, again, a double-digit growth in revenues given the strong order intake that you're experiencing? Thank you.
Good morning, Alessandro. On the growth, again, we're confirming the top end of the guidance. For Cyber and Digital, I will stick to the fact that it will be a low single digit growth that we should see in the full year with this ongoing recovery in cyber confirmed in Q3 after Q2. A digital that could be more flattish year-on-year and obviously, some aspect of acceleration between H1 and H2 or an acceleration in H2 for this segment compared to what it was in H1. On Defence, we confirm a low double-digit growth. We think that it will help support the top end of the range for group growth that I mentioned.
Thank you. For Defence, of course, without giving guidance for next year, but it is probably fair to assume a similar rate of growth for the next few quarters?
Well, I do not want to speak now beyond Q4. We are continuously investing in ramping up our capacity, our own, but also securing quality, timing of the ramp-up of the supply base. So this is, I would say, ongoing effort, and there is still growth and capacity expected to be delivered into next year.
Okay. Thank you. Going back on digital, when do you think we could see a growth in the digital part of the business as well?
Well, I will stick to the comment. Again, altogether, we will be seeing low single digit at the segment, cyber and digital level. The ongoing recovery in cyber and then in digital, I say flattish for the full year. Excluding the one-off that I mentioned that we had in 2025, we are actually year- to- date positive. As that impact does not exist in Q4, we will see.
Okay. Thank you very much.
We will now take the next question from the line of Christophe Ménard from Deutsche Bank. Please go ahead.
Yes. Good morning. Thank you for taking my question. I had two, bouncing on the guidance question. The question was more on the midterm guidance. When would you think it is appropriate to take a second look at this midterm guidance? I am aware you have just joined, but when you think it would be a good time? The second question is, you mentioned in your presentation the very strong growth in the Near and Middle East defence sales. Can you describe the order intake momentum in that region, and more broadly, how do you see this continuing in the coming quarters, actually? Thank you.
Thank you, Christophe. So, on the first question, which is about—
When you will revisit the guidance—
—the guidance. I think, obviously, when we publish our FY 2026 results in early March, we will definitely be talking about 2027. We also obviously have yardsticks into 2028. So that is when we need to talk again. We will be, as I said, halfway through the midterm plan. So that's when we meet next. Regarding Middle East growth potential, I would point towards page seven of the press release, which has the usual order intake and sales by destination. Here you will see that for order intake, the order intake is now standing over nine months at EUR 1.9 billion, which is times three, roughly, what we did record last year over the first nine months of the year.
It's also 10% of the year- to- date order intake, while in sales, we are coming close to EUR 1.3 billion, up 49% organically. It is still only 8% of the revenue. I would say it should continue to pull and to outperform in sales. In the order intake, we obviously have defence and the space that our orders that are contributing from that region today.
Thank you. Thank you very much, Jérémie Papin.
Thank you. We will now take the next question from the line of Hervé Drouet from CIC CIB. Please go ahead.
Yes. Good morning, all. Thank you for taking my questions, too, as well on my side. The first one, if we can come back to digital and volume in digital. You have pointed that the mix is okay, but the volume side of digital is still under pressure. I was wondering, is there a particular segment within digital which are more under pressure in term of volume? And how do you see that trend evolving in the near term over time?
The second question is on avionics. It looks like there is some resilience despite lower passenger air traffic. I was wondering, are you starting to experience a slowdown in after-sales services on your side? I try to get a bit of if the current situation is holding up, should we expect a bit of a slowdown of avionics looking forward? Thank you.
Thank you for the questions, Hervé. On digital, I would point again to the fact that excluding the one-offs, we are up nearly 1% year- to- date. However, indeed, the volume has been negative year- to- date. It is partly offset by the growth in our digital solutions for each of the market. Dematerialization, obviously, moving to e-SIMs and e-wallets, digital cards, as well as an effort on products in pay, for example, to really gain share in premium cards. But yes, there is some pressure on the volume side. I would qualify it for this year, looking at quarters as being kind of a very current situation.
On after sales in aeronautics, I would point to the fact that we absolutely believe and remain very confident about the long-term prospect of air traffic growth, both the fleet and the number of passengers. Regarding the very near-term outlook, I would say that we have not really seen an impact yet.
But we see the level of the fuel price as everyone does. We also see that the underlying traffic from airlines is bouncing around 0.1% or 2% every month over last year. We think we just need to take that into account when setting an outlook for the near term. There may be some cutoff effects or a very momentarily slowdown in the business, but so far it's been proven to be resilient compared to what we could have imagined.
Thank you very much.
Thank you. We will now take the next question from the line of Ian Douglas-Pennant from UBS. Please go ahead.
Thanks very much for taking my question. Sorry to go back on the short-term situation in defence. Are you still getting strong indicators of demand into Q4 as well at this moment? Maybe you can just talk about, in the very short term, whether that demand continues. Secondly, again, going back to the medium-term guidance specifically for cyber and digital, your guidance is for 6%-7% to 2028. Given what you've seen this year and the run rate where you're tracking at the moment, is that realistic that we would achieve that run rate, or you would achieve that run rate by 2028? Thank you very much.
So, on the short-term momentum in defence, it remains as strong as we just published. I would urge you always to be careful, especially in defence of looking at one single quarter performance, because these contracts often take a long time to be discussed. But there are ongoing discussions, obviously, with numerous partners throughout the business lines of the group. So the momentum in terms of order intake is very solid.
Then we need to obviously be strong at execution and continue to ramp up in the production capacity. On digital, you are right to point out to the long-term guidance that we had provided. So obviously we are seeing cyber, I would say, turn back to growth and recover and in confirming this trend. The digital side, again, less growth year- to- date, I would say normalized. But clearly digital trends in those segments that should support further growth acceleration into the midterm.
Thank you. We will now take the next question from the line of David Perry from JPMorgan. Please go ahead.
Yeah. Hi, Jérémie, Louis. Hope you are both well. Just two questions. Just on cyber, I was expecting an acceleration in growth. Q3 was the same as Q2, but you launched a new HSM module. Can you just talk about Were other bits of the business going back, or was HSM not making a big contribution? Then secondly, a difficult question for you to ask, but just high level, given the political and economic situation in France, do you think there is any risk at all to the defence spending in France in the next year? Thank you.
Thank you, David. Good morning. On cyber, there is an acceleration in H2 compared to H1, and that is what we have pointed to. We are delivering on our expectation and, specifically on the HSM product and the launch of the Luna 8, I think we had mentioned that we are launching now and there's a ramp-up and we're getting it tested through, I would say, our closest customers in the banking industry. We are just on that ramp-up curve and it was always expected to have an impact after one or two quarters, not the quarter of the launch.
Nothing to report or nothing that would be a disappointment or a difference to the plan in here so far. Again, the HSM product is more of a story of within 2027 than immediate. On the French defence budget, thank you for the question, because really it's going to be down to anyone's opinion. What I can just point to maybe two points, and again, those reflect my personal opinion, that again, there's a political consensus that was reiterated before the summer towards increasing the spend in [inaudible] that historically over the past 10 years, roughly, there's always been a situation where the country met its commitments in terms of defence spending.
Ultimately, with the elections, it should be easier to amend a budget that exists rather than having to build a budget after the election. All of this points, again, this is my personal opinion, towards a situation where we should have a budget and we should see, and clearly for 2026, the spend being at the level that was expected. Thank you.
Okay. Appreciate the color. Thank you.
Thank you. We will now take the next question from the line of Olivier Brochet from Rothschild & Co. Please go ahead.
Yes. Thank you very much, and good morning, Jérémie and Louis. I would have two on space, please. One very simple one. You mentioned at the beginning of the call that IRIS² is about EUR 3 billion of potential orders for Thales. How much of that EUR 3 billion is still to come for you in aggregate? The second question is, also on space. The European Space Agency has an interim ministerial council in December. Is there anything in there that you can already point to for us to pay attention to, please?
On the IRIS² question, good morning, Olivier. The total contract has a value of roughly EUR 3 billion. For now, we've booked about EUR 1 billion, some of it in 2025 and some of it year- to- date. There are still EUR 2 billion that should come, I would say spread over the next few quarters. The exact timeline of this, especially because there's a year end is, I wouldn't go to tell you when, but obviously, we will have further news on this coming through.
Regarding the European Space Agency, obviously, I don't want to comment on announcements that they will make, but there is a clear strength in institutional demand and for sovereign solutions and technology. We think any announcement by the European Space Agency will be reflective of those priorities.
There is no particular program in there that you are very much counting on at this stage?
I don't think we should speculate on contracts before anything. Again, the most important is confirmation of the future growth in their multi-year budgets.
Okay. Thank you.
Thank you. We will now take the next question from the line of Benjamin Heelan from Bank of America. Please go ahead.
Yeah. Morning guys. Thank you for the question. The first was on defence. Could you give us a little bit of color in terms of where you are, more broadly in your capacity plans and you've typically kind of broken the business down into different parts such as sensors and mission systems and effectors. Can you give a bit of color in terms of where you're seeing the strongest growth, at a kind of subdivision level within defence? Secondly, on space, is there any update that you can provide on Project Bromo and where you are in that process?
That would be great. Then finally, just to come back on David's question on cyber, I similarly was expecting a bit of an acceleration. When you look at peers in the U.S., in the cyber space, they are clearly seeing an inflection in demand and it just feels that you're seeing an improvement in growth, but on easy comps and not necessarily the same sort of inflection. So just question, is there any particular reason that you may not be, and are you still having issues around things like sales and integration and how should we see that trending into 2027? Thank you.
Good morning, Benjamin. Your second question is about what topic?
Space, Project Bromo. It was just—
Okay.
—is there an update on the process there?
Thank you. Sorry. I just wanted to confirm. Regarding the first question on production capacity, look, what I can share is we've multiplied our capacity for radar production in France by roughly four since 2021. We are in the process of multiplying the radar production in Germany by five, and we will have reached that times five level by the end of 2026. In effectors, there had been growth by five times between 2024 and 2026. And we are investing to further grow by three times between 2026 and 2028. That is for a 70 mm laser-guided rocket. In our ammunition production capacity, we have timed four by the end of this year.
And this is material I would say in terms of obviously, production capacity by the end of the year. In LMM missiles production in the U.K., we've multiplied by four at the end of 2025. Overall, within four years from, I would say end of 2022 or 2023, into four years later, we should enjoy a multiplied production capacity of seven. There is a lot. There is growth again, over two times, nearly three times growth in sonars, since 2024. In some of our military communication and jamming equipment, we have multiplied by four.
The description is just that across many, many business lines, obviously we have made investments for our production capacity and we have been pooling our supply base to support that with on-time delivery and quality and obviously the cost that come with production increases. As regards Bromo, I would just say that the project is ongoing, and I would say fully as expected. Again, the closing is expected to come during the course of 2027 or the end of 2027.
We are having the discussion with the DG COMP as an ongoing basis. I will not comment beyond that. Regarding acceleration that you mentioned for cyber, again, in cyber, we are confirming what we had said and H2 will be stronger than H1. Q3 confirms Q2. Again, the profitability in our business is good. From an organization point of view, we are now done in terms of sales force integration. There have been a few other management changes, and we are launching the new products or software solutions. Again, we are building up our capacity to continue the growth.
Very clear. Thank you very much.
Thank you. We will now take the next question from the line of Aymeric Poulain from Kepler Cheuvreux. Please go ahead.
Yeah. Thank you for taking my question. I'd like to continue on cyber. Maybe you could give us a split between the product and the services. I understand service you are discontinuing or you're reducing some of the activity there. Just understanding the drag that comes from that segment. In terms of the launches, HSM, quantum computing proof encryption technology, I wondered, are you the only players offering this and do you expect an additional stimulus from the regulator?
Because I suppose this is something that is moving quite fast and some banks will be forced at some point to have these technologies. I was wondering how big the opportunity was for this. Similarly, on the AI agentic deal that you signed with Gemini, just wondered how significant this deal might be, and what would be the size of the opportunity for you in this segment. Thank you.
Hi. Good morning, Aymeric. I will not dive into further details on cyber. Again, I will stick to what I said and what you heard in terms of the growth that obviously was resumed and clearly will continue. On the HSM, what I would say is that what we launched in terms of technology with Luna 8 and functionalities, capabilities is leading in the market, is being fully certified by the most stringent regulators and certification companies in the segment. Therefore, this should give Thales a technology-led functional advantage.
We're going to build on that to build up the sales. I don't want to speak to the TAM and any other thing, nor what the regulator may do or not. Obviously it's good to have a capability that answers the growing needs that everyone has to face today in terms of cyber threat. The solutions that Thales provides are strong.
On the AI deal with Gemini, what I will say is it just reinforces the capability of the company alongside the cortAIx expertise in AI that we have built and the hundreds of very highly competent and agile team members that we have. It illustrates the capability for Thales to collaborate with best-in-class players in the segment and to show that we're capable of continuously innovating as required. That's the main message with this agreement. No need to, again, go into what potential figures could be for the moment.
Sure.
Thank you. We will now take the next question from the line of Gabriele Gambarova from Intesa Sanpaolo. Please go ahead.
Yes, good morning. Thanks for taking my question, Jérémie and Louis. The first one was on the contract that Naval Group got with Sweden for FDI frigates. I did not see any mention in your documents. So I was wondering if this could be something we could expect for Q4, and if it is something meaningful in some way, something to monitor. The second question regards the SAMP/T. If you could elaborate a little bit on this topic, on the perspectives on what you see on these systems. Thank you.
Good morning, Gabriele. On the frigates for Sweden, I do not want to comment on contracts. So obviously, it will be down to Naval Group and the customer to decide when to communicate, if they want to communicate. On the SAMP/T, we are having, obviously, a lot of discussions with many interested customers. France last night confirmed orders that we had booked in Q3. So there is ongoing momentum, export momentum discussions. Again, we will be reporting those if customers agree or want to communicate. We all need to be conscious about the fact decisions on these systems are a long process in any country. Therefore, I would say we are fully in line with the discussion momentum that we expected so far.
Okay. Thank you so much.
Thank you. There are no further questions at this time. I would like to hand back over to Jérémie Papin for closing remarks.
Yes, maybe one just point of clarification, in terms of large orders. We had achieved 28 in FY 2025 and 14 at the end of 2025, nine months and 14 in Q4. So far in 2026, after nine months, we have recorded 29 large orders at group level. Obviously, this is a very strong momentum and at least on a nine-month basis, we are times two last year level in that category of orders. Beyond that, I obviously thank you for participating in the call, your questions and your interest in Thales, and I wish you a good day.
Thank you, ladies and gentlemen. If you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group investor relations at ir@thalesgroup.com and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect.