Saab delivered a strong Q1, beating our expectations on revenue, margins, and cash flow. Every business area grew at a double-digit rate, while Surveillance and Dynamics stood out in profitability. The group is also converting its 274 BSEK backlog at a pace that leaves little doubt about its execution ability. The demand environment remains structurally intact, with European rearmament that is not sentiment-driven and does not pause because global attention shifts elsewhere. If anything, a US military with growing commitments in other theatres only strengthens the case for European nations to fund more of their own defense. We therefore see no deterioration in Saab’s demand outlook relative to our last update. Against that backdrop, we continue to find the operating and macro fundamentals compelling, while the current valuation makes the expected return more attractive than before. We raise our target price slightly to 622 SEK and raise our recommendation to Accumulate (prev. Reduce).

The quarter was better than the headline first suggested

Order intake disappointed relative to our estimates, but underlying demand remains intact, and revenue growth, profitability, and cash flow all point to solid operational execution. Surveillance and Dynamics drove much of the upside, and the quarter also carried an important strategic signal through Kockums in Poland. Overall, our readthrough is that Saab continues to execute well against a strong backlog, and that near-term performance is being shaped more by delivery and margin discipline than by any weakening in demand.

The near-term story is all about delivery

We lower our order intake assumptions for the full-year 2026 after the Q1 miss to reflect a more cautious view on a few campaign outcomes, but the broader demand backdrop remains intact. At the same time, our revenue estimates are largely unchanged because Saab’s growth over the next few years is supported more by backlog conversion and execution than by near term order timing, while slightly higher earnings estimates reflect the fact that more of that growth is now dropping through to EBIT. In our view, the more important readthrough from the quarter is that profitability is starting to scale better than expected, which supports modest upgrades to earnings and reinforces the view that execution is doing more of the work than the demand environment.

The same vessel in gentler seas

The valuation picture has improved, mainly because the share price has come down rather than because the business has deteriorated. Saab is still not cheap, but the valuation is now easier to justify against strong backlog visibility, improving margins, and a long demand runway tied to European rearmament. The key point is that expected returns now look somewhat better balanced, not because upside has become extraordinary, but because the downside from multiple compression has become less severe. In that sense, the stock looks less stretched than before, while the core investment case remains intact.

An intact thesis at a lower price

Saab still trades at demanding multiples. On our numbers, the stock is valued at P/E ~40-27x 2026-28e, while EV/EBIT stands at ~32-22x over the same period. That is more reasonable for a business with strong backlog visibility, high growth, and improving margins. Our DCF implies a fair value of 622 SEK per share, slightly up from our previous update. We therefore upgrade our recommendation from Reduce to Accumulate. The thesis remains intact, execution continues to support it, and the entry point now looks more reasonable.