Thales flags improving profitability after defence and avionics boost earnings

PARIS, March 3 (Reuters) - French aerospace and technology company Thales TCFP.PA reported slightly higher than expected annual core profit on Tuesday and predicted higher profit margins for this year.

Europe's largest defence technology group said last year's performance was led by its main defence business and demand for avionics and space activities.

Adjusted operating earnings rose 14% on a like-for-like basis to 2.74 billion euros ($3.20 billion) on sales up 8.8% at 22.14 billion euros. Its order intake edged up 1% from a record 2024 to 25.26 billion euros.

Analysts had expected adjusted operating income of 2.7 billion euros on revenue of 21.88 billion euros and an order intake of 25.21 billion euros, estimates compiled by the company showed.

Thales shares outperformed a wider market that was pressured by the conflict in the Middle East. The shares were down 1.8% in midday trading, against a 2.6% decline for the blue-chip CAC40 .FCHI index.

The company said its defence business had been buoyed by demand for air defence systems, especially in Europe.

CEO Patrice Caine said it was too early to judge the impact on defence spending or supply chains from the latest Gulf conflict.

"Nobody knows today how it will evolve. But it is a reminder that the disturbed state of geopolitics in general is leading countries to invest more in security and therefore defence," he told a press conference.

A return to growth for the company's cybersecurity business remains a priority, he said, along with a proposed merger of satellite activities with Airbus AIR.PA and Leonardo LDOF.MI, which is under review by European competition authorities.

For 2026, the maker of radar, satellite and digital systems predicted an operating profit margin of 12.6% to 12.8%, up from 12.4% last year. It also projected underlying revenue growth of 6-7% and said that new orders would continue to grow faster than revenue.

($1 = 0.8562 euros)