MilDef: Defence Mode: On

MilDef plays in a structurally growing market. Defense budgets are rising across NATO (NATO aims to spend 5% of GDP on security, with 3.5% on defense) and the EU in response to geopolitical instability. Countries are racing to modernize forces and enhance digital capability. MilDef's ruggedized tactical IT sits at the intersection of this build-up. It has a niche but critical role, with demand increasingly underpinned by national security priorities. Q3 2025 saw record order intake of SEK 907 million (up 119% YoY), demonstrating strong market momentum. Its deep relationships and reputation for delivery position it as a long-term partner in a multi-decade defense cycle.

The company has evolved from a rugged hardware player into a one-stop system integrator offering hardware, software and services. It's embedded in defense ecosystems from product to platform, enabling systems certified to operate in the harshest environments, and new facilities in Sweden and the UK give it serious operational scale. The recent opening of a quadruple-capacity integration facility in Rosersberg in October 2025 marks a step-change in its capacity to execute and deliver, positioning MilDef to handle the historically high order backlog of SEK 3.5 billion.

MilDef's financial profile combines high-growth ambition with margin expansion. Sales grew by a 29% CAGR from 2019–2024, and Q3 2025 showed continued momentum with net sales up 116% YoY to SEK 540 million (36% organic growth). The Roda acquisition significantly boosts scale, contributing SEK 477 million in Q3 order intake alone. With deeper integration and better cross-selling opportunities in Central Europe, MilDef is executing well on its three-pillar growth strategy: home markets, partnerships and acquisitions. The adjusted EBITA margin reached 15.7% in Q3 2025, creating a high-leverage setup for both revenue and EBITA expansion toward the 15%+ target.

• Q4 2025 delivery execution against record backlog: Watch for MilDef's ability to convert its SEK 3.5 billion backlog into revenue during Q4, historically its strongest quarter. The company flagged an "intense delivery-intensive fourth quarter" with inventory build-up already underway in Q3. Meeting or beating guidance will validate operational readiness and could trigger upward earnings revisions heading into 2026.

Early roda cross-sell wins and integration milestones: Keep an eye on concrete evidence of Roda synergies materializing, joint contract wins, bundled product offerings, or margin improvements from operational alignment. Roda delivered a record SEK 212 million Bundeswehr order in Q3. Further large German or European defense contracts that leverage combined capabilities would affirm the acquisition thesis and could re-rate the stock on synergy confidence.

Rosersberg facility ramp-up and NATO framework contract momentum: Track the performance of MilDef's newly opened quadruple-capacity integration facility in Rosersberg, which opened in October 2025. Visible delivery milestones from this site, especially tied to the SEK 320 million NATO country suborder or the SEK 139 million Swedish Defence OneCIS contract, will signal readiness for scaled operations and large multi-year defense programs.

Geographic expansion and UK/European market penetration post-Roda: Look out for follow-on contract wins in the UK, Nordics, or new European NATO markets that validate MilDef's post-acquisition expansion strategy. The company's first NATO Support and Procurement Agency order and L3Harris contract (SEK 52 million for 19" hardware to a NATO country) are early proof points. Sustained wins in these channels would de-risk geographic diversification and support multi-year revenue visibility.

Structural NATO defense spending at 5% GDP sustaining demand visibility: Watch whether NATO countries follow through on the new 5% of GDP defense commitment (up from 2%). This represents a generational shift in European defense budgets and would underpin multi-decade procurement cycles. MilDef sits at the intersection of tactical IT and digitalization priorities, sustained budget growth locks in long-term demand for ruggedized mission-critical systems across land, air, and sea domains.

Margin expansion trajectory toward 20% EBITA as scale compounds: Track MilDef's ability to push adjusted EBITA margins from the current ~12% range (11.7% LTM) toward management's long-term 15%+ target and ultimately 20% by 2027. As integration services scale, software revenues grow, and roda synergies materialize, operational leverage should kick in. Achieving sustained 20%+ margins would fundamentally re-rate the company's value creation profile and compound shareholder returns through the decade.

MilDef's rapidly growing backlog (up 116% YoY to SEK 3.5 billion as of Q3 2025) requires timely and efficient delivery on increasingly complex defense contracts. These projects often come with strict compliance standards, multi-layered stakeholders, and performance penalties. A failure to execute or delays meeting obligations could impact both near-term earnings and long-term customer trust, particularly as MilDef scales its role in large, integrated systems.

The acquisition of German-based Roda is transformative, adding significant revenue and geographic diversification. The integration is progressing well, roda contributed a record order of SEK 212 million from the Bundeswehr in Q3 for the D-LBO digitalization project, and the combined order backlog now stands at SEK 3.5 billion. However, integration risk remains. Harmonizing operations, aligning product strategies, and merging company cultures across borders requires focused execution. If synergies take longer to materialize or disrupt core operations, it could weigh on margins and distract management from organic growth opportunities.

MilDef’s core markets, Nordics, broader Europe, and NATO-aligned countries—are currently benefitting from increased defence spending. However, this concentration also means the company is vulnerable to political or fiscal shifts. Any moderation in defence budgets, especially if geopolitical tensions de-escalate, could affect demand visibility. The lack of diversification into less cyclical or non-defence sectors amplifies this exposure.