Thales HO posted 11% organic growth in the third quarter and 9% year to date, driven by strong defense and aerospace performance offsetting a weak quarter for cyber.
Why it matters: Thales is leaning into defense momentum, with mix shifting toward higher-quality defense and avionics cash flows, while fixing underperforming cyber and preparing a structural reset in space.
Defense and aerospace are driving Thales’ earnings mix toward higher-quality cash flows as European rearmament and air defense modernization accelerate contracts. Avionics is benefiting from civil and military fleet renewal and healthy aftermarket demand.Cyber and space are undergoing a strategic rebuild. Cyber’s Imperva integration and weak Australia sales are being resolved through salesforce realignment and portfolio premiumization. Space is pivoting to the Airbus-Leonardo joint venture, pooling research and development, and cutting duplication to restore profitability after 2026.
The bottom line: Wide-moat Thales is executing well through integration challenges and maintains a balanced growth profile. We maintain our EUR 308 fair value estimate, supported by defense visibility, aerospace strength, gradual cyber recovery in 2026, and long-term upside from the space JV consolidation.
Avionics growth remains strong as connectivity content expands and supply bottlenecks ease. Defence momentum is anchored in European rearmament, with capacity ramp-ups in sensors, underwater, and command and control expected to turn the backlog into margin through mix and learning curve gains.In cyber, product sales recover as the new go-to-market strategy gains traction, while services contract as it exits low-margin work. A normal run rate is expected next year, driven by identity and eSIM. In space, consolidation is key to scale, with the JV redefining cost and cadence.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article. Find out about
Morningstar’s editorial policies.