Rising Defense Budgets And Business Jet Demand Will Drive Growth

Key Takeaways

• Robust defense and business aviation demand, new export wins, and local partnerships are driving strong revenue momentum and diversification prospects for Dassault Aviation.
  
• Investments in sustainable tech, digitalization, and aftermarket services are set to lift recurring revenues and margins beyond current market expectations.
  
• Persistent supply chain issues, environmental pressures, regulatory risks, and reliance on volatile defense contracts threaten profitability and stability in both military and business jet segments.

Catalysts

Designs and manufactures military aircraft, business jets, and space systems in France, the United States, and internationally.

• Analysts broadly agree that persistent geopolitical instability and heightened global defense spending are tailwinds, but the record Rafale backlog and rapid multiyear cadence increases, plus new export customers like Serbia and Indonesia, point to Dassault Aviation capturing a much larger share of global defense budgets than expected, likely driving sustained revenue outperformance and visibility for years ahead.
  
• Analyst consensus views the business jet recovery and Falcon new product cycle positively, yet grossly understates the pace at which Falcon 6X and Falcon 10X are penetrating ultra-premium and emerging markets; with manufacturing ramp-ups and highly favorable customer feedback already translating into accelerating order momentum, Dassault could see sharply higher civil aviation revenues and margin expansion as supply chain constraints ease.
  
• The accelerating demand for defense technological sovereignty in Europe signals an imminent inflection in European procurement preferences, positioning Dassault to capture an oversized proportion of future continental defense outlays and collaborative programs, which will bolster long-term order book and drive higher recurring earnings stability.
  
• Dassault's strategic Make in India partnerships and local assembly initiatives are laying the groundwork to tap into multi-billion dollar Indian defense and business aviation markets, enabling both margin-accretive growth and significant diversification of earnings away from cyclical Western demand.
  
• Long-term investments in sustainable aviation, digitalization, and high-margin support and aftermarket services-combined with operational modernization-are set to drive meaningful recurring revenue uplift and structurally higher net margins, well ahead of market forecasts.

Dassault Aviation société anonyme Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Dassault Aviation société anonyme compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Dassault Aviation société anonyme's revenue will grow by 21.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 14.4% today to 14.6% in 3 years time.
• The bullish analysts expect earnings to reach €1.7 billion (and earnings per share of €19.88) by about July 2028, up from €923.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.3x on those 2028 earnings, down from 22.2x today. This future PE is lower than the current PE for the GB Aerospace & Defense industry at 40.7x.
• Analysts expect the number of shares outstanding to decline by 0.25% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.67%, as per the Simply Wall St company report.

Dassault Aviation société anonyme Future Earnings Per Share Growth

Risks

• Ongoing and worsening supply chain disruptions are causing persistent delivery challenges for both Rafale and Falcon aircraft, with the CEO warning these issues could extend into 2026; this could negatively affect revenues and customer relationships, threatening future order intake.
  
• Intensifying global decarbonization pressures, stricter environmental standards, and negative public sentiment towards aviation ("aviation bashing"), especially in Europe, risk imposing higher compliance costs and hindering demand for business jets, likely eroding both net margins and long-term sales growth.
  
• Heightened political and regulatory risks, such as potential new US tariffs of up to 25% on Falcon aircraft exported to the key US market and retaliatory measures by the EU, may diminish competitiveness, force price increases, and harm revenues and earnings from the business jet segment.
  
• Heavy reliance on large, politically sensitive defense contracts creates a volatile revenue base, as evidenced by dependence on unpredictable export markets and complex geopolitical dynamics-any delays or cancellations in Rafale orders from countries like India, UAE, or new prospects like Saudi Arabia could result in significant revenue and earnings volatility.
  
• High capital expenditure and R&D requirements for next-generation aircraft-including the Rafale F5, FCAS/NGF demonstrators, and sustainable aviation initiatives-raise the risk that rising costs may outpace revenue growth, compressing net margins if international sales and business jet demand fail to keep up.

Valuation

• The assumed bullish price target for Dassault Aviation société anonyme is €383.81, which represents two standard deviations above the consensus price target of €326.23. This valuation is based on what can be assumed as the expectations of Dassault Aviation société anonyme's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €390.0, and the most bearish reporting a price target of just €280.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €11.5 billion, earnings will come to €1.7 billion, and it would be trading on a PE ratio of 21.3x, assuming you use a discount rate of 6.7%.
• Given the current share price of €262.0, the bullish analyst price target of €383.81 is 31.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.