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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Thales Q1 2026 Order Intake and Sales Conference Call. The presentation will be held by Pascal Bouchiat, Thales CFO. It will be followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded. I would now like to turn the conference over to Mr. Louis Igonet, VP, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, all. Welcome, and thank you for joining us for the presentation of Thales Q1 2026 Order Intake and Sales. I am Louis Igonet, Head of Investor Relations at Thales. With me today is Pascal Bouchiat, Chief Financial Officer of Thales. As usual, this presentation is audio broadcasted live on our website, thalesgroup.com, where the slides and press release are also available for download. A replay will be available soon after the end of the event.

With that, I'd like to turn over the call to Pascal Bouchiat.

Good morning, everyone. Let me start with Q1 2026 highlights. I'm now on Slide 2. We released today a robust first quarter 2026 that reflects the continued positive momentum across our businesses. Order intake was up sharply year-on-year, driven by the high level of demand for Thales products and solutions in a global supportive market environment. Even though I would like to reiterate that looking at order intake on a quarterly basis can be misleading, this performance illustrates the relevance of our premium portfolio, moreover in light of the current events.

Sales posted almost 10% organic growth in the quarter with a particularly strong performance in defense. The strong start to the year reflects both the quality of our backlog and continued solid execution across programs. Q1 also saw the continuous enrichment of our offer, notably in defense. You are already well aware of Thales technological leadership and the increasing efforts we put on innovation. And this is a new testimony with solutions increasingly powered by AI.

We indeed introduced SkyDefender, a multilayer and multi-domain air defense dome designed to provide full protection against the growing complexity and diversity of aerial threats. SkyDefender naturally includes the SAMP/T NG for midrange air defense alongside other multiple Thales solutions to also address short and long-range threats. We also unveiled Expeditionary PathMaster, a turnkey system that enables the conduct of full naval mine countermeasure missions. These leading offers, both boosted by our AI algorithms, illustrate how Thales is combining advanced technologies with operational expertise to deliver differentiated solutions that are more than ever at the heart of our clients' key priorities.

Finally, in space, Thales once again demonstrated its role as a trusted partner for its clients' sovereign capabilities. Thales Alenia Space was selected to supply a defense geostationary communication satellite to Luxembourg. This contract highlights our ability to support governments with strategic space capabilities and confirms the strength of our positioning in a domain that is becoming ever more critical for national autonomy and security. Overall, Q1 was a very solid quarter in the context of our 2026 objectives.

Moving on to order intake on Slide 3. Q1 2026 order intake was strong and amounted to EUR 4.7 billion as of end of March, which is a 27% organic growth versus Q1 2025. The commercial momentum remains strong across our businesses and in particular, defense. Large orders were a significant contributor to this performance. Seven of them were booked at group level in the first quarter this year for a total amount of EUR 1.6 billion against five large orders last year. Two large orders were booked in space, of which the defense geostationary communications satellite for Luxembourg, I already mentioned. Five large orders were booked in defense this quarter.

Among them, the SAMP/T NG order from Denmark as well as an air surveillance contract for Qatar, comprising various Ground Master radars. Besides large orders, the high granularity of order intake is also a source of satisfaction and resilience. In terms of volume, the orders with a unit value below EUR 10 million were again up year-over-year, and they accounted for half of the orders recorded in Q1 2026. It reflects the strength and diversity of demand across our businesses. A word finally on the performance by region. Order intake was particularly strong across Europe and Middle East this quarter, 2 regions that are seeing strong demand.

Moving on to sales on Slide 4. Sales amounted to EUR 5.3 billion in Q1 2026 and grew by 9.7% organically versus Q1 last year. This performance was primarily driven by Defense, where sales increased by 14.3% organically. Aerospace also delivered a good quarter with organic growth of 5.9%, driven by both Avionics and Space. Cyber & Digital recorded a 2% organic growth. From a geographic standpoint, growth was well distributed. Both mature and emerging markets showed solid sales growth and contributed to the overall performance.

In mature markets, Europe posted organic growth of 11.8%, while Australia and New Zealand grew by 14.3%. In emerging markets, which grew by 9.8% organically in the quarter, Middle East was particularly strong with a 29.8% organic growth. This broad-based dynamism underlines the strength and the relevance of our positioning with customers worldwide and our capacity to deliver. A word lastly on technical impact. Scope was not material this quarter. By contrast, currency effect was significant, mainly due to the year-on-year evolution of the euro against the U.S. dollar. Overall, currency led to a 2.5 points headwind on reported growth.

Let me now turn to performance by segment, starting with Aerospace on Slide 5. Order intake in Aerospace remained at a solid level in the first quarter and amounted to EUR 1.5 billion, up 1% in organic terms. The two large orders booked in Space offset the absence of large orders in Avionics this quarter, while Q1 last year benefited from a specific large order booked in Avionics. This reflects the natural lumpiness of order intake from one quarter to another, while underlying demand trends remain solid. To that extent, our original equipment in our Avionics business notably saw good order momentum in the first quarter. Sales reached EUR 1.4 billion in Q1 and posted robust organic growth of 5.9% over the period.

Avionics saw continued growth on a demanding comparison base as Q1 2025 sales were already up by strong double digits. This highlights the continued good level of activity across our end markets. While the current conflict in Iran had a negligible impact on Q1 performance, it could weigh on the aftermarket business from Q2 and onwards, depending on the evolution of air traffic in the short to midterm. In Space, sales growth was also solid, notably supported by the progressive contributions of orders booked in '24 and '25, which are now moving into execution. On a reported basis, total sales growth was impacted by foreign exchange.

Moving on now to Defense on Slide 6. Defense delivered a solid start to the year with order intake in the segment that amounted to EUR 2.2 billion in the first quarter, a 75% organic growth. Five large orders were booked in Q1 2026 compared to one in the same period last year. This strong order intake reflects ongoing commercial momentum across our entire portfolio and in all domains. The recent events and the global geopolitical climate highlight more than ever the relevance of Thales capabilities, supported by the depth of our portfolio. Two critical domains where Thales technologies and positioning is considered as best-in-class are particularly in the spotlight, namely air surveillance and defense and mine hunting capabilities.

Prospective in those two areas are strong. Sales amounted to EUR 3 billion, a robust 14.3% organic growth. This performance was a result of some program execution and was supported by further deliveries in the context of production ramp-up. We saw sustained momentum across the board, notably in the airborne, naval domains as well as sensors and effectors.

Moving now to Slide 9 -- excuse me, moving now to Slide 7. Cyber and Digital sales amounted to EUR 0.9 billion and delivered low single-digit sales organic growth in the first quarter, in line with the phasing anticipated for the year. In Cyber, the year started slowly as expected, with slightly negative organic growth. We anticipate a gradual and progressive growth recovery over the coming quarters. In Digital Identity, sales posted good organic growth as they were up 4%. This performance reflected continued sustained momentum in Digital Solutions, both in Payment Solutions and in Secure Connectivity. By contrast, payment cards still saw low volumes as expected. ForEx impact was overall material to reported sales growth over the quarter.

Concluding now with our financial objective for 2026 on Slide 8. The fundamental underpinning the group's activities are robust, supported by structurally favorable trends and offering strong visibility on the group's growth trajectory. We also remain attentive to the evolutions of the global geopolitical situation and its potential short and midterm effects. In that context, the robust first quarter and the visibility we have are giving us confidence to confirm all our objective for 2026. Book-to-bill ratio will be above 1. Sales are expected to grow organically between 6% and 7%, corresponding to a range of EUR 23.3 billion to EUR 23.6 billion. And the adjusted EBIT margin is expected between 12.6% and 12.8%.

Many thanks for your attention, and I will now be pleased to answer your questions.

[Operator Instructions] And the question comes from the line of Alessandro Pozzi from Mediobanca.

I have two. You're showing a strong top line growth in Defense on the back of capacity expansion. I was wondering if you can give us a bit more color there? And what should we expect for the rest of the year in terms of growth in Defense? And my second question on order intake. You had a stronger Q1 as well with seven large orders, of course, order intake can be lumpy. But I was wondering whether we are starting to see any impact, let's say, or positive benefit from the increased geopolitical tension that we've seen in the Middle East. You talked about Air Defense products with the SkyDefender and SAMP/T. And if you can give us maybe an update on your commercial momentum in defense, also for the SAMP/T, we heard about Turkey potentially being interested in the system. And any thoughts there would be appreciated.

Thank you very much, and good morning, Alessandro. So first on Defense. It's true that the 14% organic growth that we reported for Q1 is above our overall guidance and expectation for the full year. Let's be clear about that. We guided the market as we released our 2026 objective for Defense at high single digits. And I do confirm this overall guidance for Defense organic growth in 2026. Of course, always good to start on a positive footing.

Maybe I could also update you on our challenges in terms of growth for Defense. And the reason why we are still a bit cautious as we look forward in particular for the rest of the year. Today, it's true that, as I said, we managed to ramp up a number of production capacities in many sites across the board at Thales.

Second point, we see still today some constraints not issues, but some constraints when it comes to supply chain, even though, overall, we have been able to manage supply chain challenges, in particular in Defense pretty successfully over the last few years. It's true that at this point, it's not over. And I mentioned many times, in particular constraints with regards mechanical parts, but also PCB and PCBA. So those electronic boards that are absolutely critical for us.

And to that, I would also add today some constraint when it comes to supplies on energetics and propellants, which are also pretty important when it comes to producing effectors. So this is why we are, at this point, a bit cautious when it comes to 2026 organic growth for Defense.

Now in terms of momentum, and I guess your second question was about order intake, pretty strong Q1 and what we see today. So when it comes to defense order intake and as we look forward in 2026, we're pretty positive. Overall, we see a pretty strong level of momentum, level of demands. And you mentioned, in particular, the potential positive impact from the Middle East situations. It's also true that we got requests for what is called UOR, Urgent Operational Requirements from some clients in the Middle East. So which is in terms of business development, pretty positive.

Will this positively impact our 2026 order intake? The answer is yes. This is my view on this matter. Will we start seeing our concrete additional revenue in 2026? At this point, it's probably a bit too early. Even though, we got this type of demands, we know that, in particular, in these regions, it can take a bit of time to move from request for proposal to signing a contract and to effectively being able to start recognizing revenue. But overall, it is positive. And it's true that, in particular, in these regions, but even though more globally, it's true that air surveillance, air defense, in particular, domains where we see today a number of requests.

You asked me about the overall commercial campaigns with regards to SAMP/T NG. On that, I cannot give you more insight on this matter because as you can imagine, it is pretty sensitive. But globally, when we go through our spectrum of businesses of activities, it's true that air surveillance, which is much broader than SAMP/T NG. And in particular, we get today a number of requests when it comes to air surveillance, so radar-driven type of demand across the board.

Second point is also with regard ammunitions, rockets, in particular. Also, a domain where we see a strong level of demand. So overall, making a long story short, we need to be a bit cautious when it comes to revenue growth, but I do confirm the high single-digit growth for 2026. When it comes to order intake, my tone is probably even a bit more positive than it was a few months ago, considering the prospects that we see today coming from the overall geopolitical context.

Just a follow-up on the SkyDefender. How are you planning to market that product? Is it mainly for European countries, for the Middle East?

I suppose the answer is yes, of course. SkyDefender is multi-range overall protection dome, moving from what we call VSHORAD, very short-range air defense to long-range air defense capabilities through mid-range defense capabilities through our SAMP/T NG offering. So it's really a comprehensive sets of capabilities. Very short range is about what we call our ForceSHIELD type of capabilities, based on both rader capability, but also effectors, in particular, what we call the LMM and also RapidRanger type of offering. Mid-range is, as you know, SAMP/T NG and long range is early warning capabilities that allows to get early detections.

And all of that powered by AI-driven command and control, which is in the name of slides. So all of that is available today. And of course, we market this offering across the board in various countries, you mentioned Middle East and Europe are two examples of countries where we market this overall offering.

We are now going to proceed with our next question. And the questions come from the line of Olivier Brochet from Rothschild & Co.

I had three quick ones, please. The first one is on Defense orders. Can you just give us a bit of a flavor of what happened in France? Did we get any delays or anything related to the delay in budget in that country? Second, on Mine Hunting, you flagged that as an area where you have a lot of skills. Can you just remind us how significant it is in terms of revenues for you? And third one on Cyber. You also mentioned a gradual improvement in revenue throughout the year. Can you elaborate on the factors that will contribute to that improvement, please?

Okay. So first good morning, Olivier Brochet. On your first question about Defense order and the French component of Defense orders, nothing very specific to report to you on this matter. In 2026, probably, as you know, the French budget was voted beginning of the year, pretty much like what happened in 2025. Now it's true that in Q1 2025, we have seen some kind of freeze in terms of order intake, at least for Thales, with regards the French MOD. This is not what happened in Q1 2026.

And today no specific point to report with regard the French budget for 2026, except that it has been confirmed, as you know, with overall what is expected in 2026 in the overall French Defense spending is a growth of 13% in 2026 against 2025. So overall, it is positive.

Mine hunting capabilities in terms of revenue. Today, this is a small business. And the reason is, at this point, only a few navies have decided to get equipped on this type of pretty sophisticated system. And it's true that if I look back over the last 20 years, it's true that a number of navies have, I would say, given up this type of capabilities and what happened in the Hormuz Strait was a bit of a wake-up call for a number of navies and they are challenging themselves about the need to come back on this type of capabilities.

It's good because you've got a few countries, and in particular, U.K. and France grow as opposed to other navies have decided a bit more than 10 years ago to launch developments of new mine hunting capabilities. And this is what they have done with Thales. And we started developments of this new type of capability, what we call today the Expeditionary Pathfinders (sic) [ Expeditionary PathMaster ] 10 years ago.

And we are today in the process of delivering our assistance to the U.K. and to the British and the French navies. It's a pretty sophisticated type of system that embark various drones and robots, starting with what we call USV, Unmanned Surface Vessel, that carries payloads, in particular, a towed array plus robots that are able to put a military charge just close to the mine. All of that driven by AI. So I can tell you a pretty sophisticated type of system.

And yes, this really reflect Thales' capability to come up with pretty complex autonomous AI-driven system for our clients. And in this case, for navies. So we'll see, but at this point, a pretty low level of revenue. But probably a type of capabilities where we'll see demand growing in the next few years.

So Cyber, what is positive is that we have seen in Q1 order intake in two segments getting back to growth. And those are the two most important segments overall for Thales, which are DataSec and AppSec, which is positive. So the factors behind that, as you ask, Olivier, is I would say it's getting back to normal, which is today our commercial forces are fully trained with the right level of incentives.

As we mentioned, as we released our 2025 figures today, level of turnover when it comes to this commercial force, getting back to what is normal, i.e., 15% overall annual loan turnover for sales reps, whereas in 2025, it went up to 25%. So overall, we should see now and as from Q2, a positive growth on Cyber. And all of that consistent with what we said for the full year in terms of expected growth for Cyber, that should be mid-single digit, mid-single digit plus.

And the questions come from the line of Christophe Menard from Deutsche Bank.

I had two actually on Cyber and Digital. First, continuing on Cyber. Just reflecting on recent developments we've heard about AI. Has it changed your approach to product development? Any updated you have on this? Given also your good knowledge of AI, it may be applicable to your Cyber product line. Another question is on biometry. I may have missed it, but I don't think you've talked about it in the release. Is it stable or what is the outlook for biometry for the rest of the year?

So on your first questions about AI for Cyber, in particular in terms of product development, the answer is yes. We now use AI for Cyber product development. Commercial cybersecurity is mainly software development, so it is about coding. And it's true that AI-driven coding allows to go much quicker in terms of product development and using our engineers no longer to code, but to test, to validate what AI produced in terms of coding. So I'm not telling you that there is no more manual coding, but the proportion between manual coding from engineers to AI coding has shifted pretty significantly. So the answer is yes.

AI, this type and your question was about product development. Yes, AI driven by automatic coding.

Biometric overall, Q1, I would say, is stable. Now, maybe a point of vigilance on this matter. And I guess there will be also a question about our Avionics business, we are a bit vigilant when it comes to biometrics is the side effect of the Middle East crisis because biometrics goes together with mobility with people traveling, with air traffic because a number of our solutions are both secure documents.

And basically the renewal of secured documents is very much linked with people deciding to travel plus biometric, used in particular on airports. So all of that being driven by air traffic. So this is why we are a bit cautious today and looking at what is going to happen in terms of evolution of air traffic, considering what is happening in the Middle East.

May I ask just a follow-up on the AI? I was also thinking that given that AI may show some increased vulnerabilities on infrastructure, are you planning to spend more on R&D in Cyber or same type of amount?

No. Overall, the level of R&D spending on Cyber is pretty high. You probably have in mind that this is a business where gross margin is around 75%. But where -- behind that, you've got a level of sales and marketing around also 25%, 20% plus and R&D also in excess of 20%. So this is the standard level of R&D. And our intent is to keep having it at this level.

However, it's true that AI is a bit of multiplying factors in terms of overall effectiveness of our R&D. If we can use AI for coding, it means that our engineers can spend more time on other type of things. So this is why for the same level of spending, you could have a global positive effect, in particular, in terms of speed of development. This is our view.

And the questions come from Sebastian Growe from BNP Paribas.

The first one would also be on Avionics and in the wake of Middle East conflicts, there are currently concerns that jet fuel availability is only being guaranteed until mid of May, especially for the European Airlines. With that, it might lead to forced capacity cuts. So the question that I'm having is, how do you prepare for any such scenario? And how should we think of the visibility in terms of weeks or months that you have at this stage? And then I would have two more in Defense and a quick one on Digital. So maybe you can take the Avionics question first.

So Avionics, jet fuel and so on. So there are two side effects of the Middle East crisis. One is, of course, jet fuel prices going through the roof. And second, a potential jet fuel availability. So what we start seeing today is some airlines even though they have still access to jet fuel, considering that some of their flights are no longer profitable because of the steep increase in the jet fuel price. And in particular, those airlines that are not hedged on their jet fuel exposure.

This is today what we start seeing at this point more than the jet fuel availability. It seems like, and here, I'm referring to statements from various authorities, that at this point, in Europe, there is no shortage of jet fuel, even though we have seen some alerts, in particular in Italy, but it's very specific.

The situation could be a bit more difficult in Asia in terms of jet fuel availability. Not today, but for the next few months, yes, it could be jet availability in some countries, in particular, in Asia could be a second issue. Now what we see today is more about the impact of higher price for jet fuel and some airlines deciding to reduce overall capacity, deciding to start reducing what they call ASK, Available Seat Kilometers. This is what we see. And this is why, at this point, we are a bit vigilant in terms of aftermarket. Q1 for Avionics aftermarket was pretty solid.

Now, I guess it's recognized the fact that air traffic as compared to the initial 2026 projections, air traffic will be lower overall. Of course, all of that will depend upon the length of the crisis. But overall, we need to consider a drop in air traffic against the initial 2026 expectations. And this will have probably some kind of side effect on aftermarket. What will be the size of the reduction in demand at this point, it's really too early.

Again, Q1 was not affected because the crisis started end of February. So because of the lagging effect, we have not seen any impact in the aftermarket. We could start seeing some impact as early as Q2. But, at this point, probably too early to give you more insight on this matter, which is moving pretty quickly.

Thank you very much for the comprehensive answer. Then quickly on Defense and the orders pattern here, particularly on the SAMP/T NG order for Denmark. Can you provide some more color with regard to the number of systems that were sold? And how should we think of the potential follow-up order eventually from Denmark? And I think there was a lot of talk and also around the configuration previously, which was not defined yet. So if you could also comment on how we should think of the number of launches, the missiles, please that would be helpful.

So what can we say on this matter, which is as you can consider this is pretty sensitive information. So we have not communicated and our belief is that our clients has not communicated, in particular, on the number of systems, and they have not communicated on the number of missiles. So I cannot go very deep and sorry for that.

Maybe what we can -- what I can -- we explain is what does this represent overall? The sales of one battery. We said a few months ago is that one battery with 48 missiles, this represents approximately EUR 500 million. And we explained that when we look at the system parts, putting aside missiles, Thales' share represent more than 50%. Because what we do is we provide both radars plus most of the command and control for any battery.

And second, what we said is that on the missile part, we represent approximately 10% of the price of any missile for SAMP/T NG as we produce a seeker. So this is what I can share. Now, I cannot go further because once again, it's not public, it's not public information.

That's understandable. That helped me at least quite a bit. So thank you for that. And then lastly, on the digital part with Cyber & Digital, you pointed to low volume and payment cards in the first quarter. So the question here is, can you comment on the business outlook from here, i.e., for the rest of the year? And I'm asking the question in the wake of, I think, a pretty sizable difference in the margin quality within the various activities inside the Digital business. Yes, if you could comment on this, that would be much appreciated.

On payment card, as opposed to Digital Solutions, it's true that we keep seeing a level of volume that is slightly positive. However, with a pressure on prices that is still there. So this is why we are a bit cautious in terms of margin for payment counts. All of that is reflected in the overall 2026 guidance for CDI that we mentioned when we released our 2025 financials.

We said that 2026 EBIT margin for CDI should be around 13%. So this is what I can confirm. Now, it's true that most likely H2 in terms of EBIT margin would be higher than H1. And the reason, in particular is also because Q4 on CDI is traditionally a pretty strong quarter in terms of volumes and in terms of margin. But overall, what we see today in terms of level of demands on payment cards is really in line with the guidance that we shared with you a few weeks ago.

Now overall, you have seen our Digital business in Q1, reporting a 4% organic growth, which was a bit above expectations, which means that, overall, payment counts was absolutely decent in terms of level of revenue. And also, the mobile communication system in terms of demand was also pretty satisfactory in Q1.

And the question comes from the line of Ian Douglas-Pennant from UBS.

Just going back to the full year guidance. At what point would it be reasonable for you to revisit your full year guidance, especially I'm looking at the 6% to 7% organic growth for this year. It looks, I guess, one quarter that Cyber is tracking finally in line with your expectations. Defense is clearly tracking ahead, although I recognize what you're saying on supply chain. At what point would it be credible to revisit that? Or is it literally just the aftermath the civil aviation uncertainty that's holding you back?

And then secondly, could you talk about the -- I hear what you're saying about the incremental demand coming through from the Middle East, and it's great to hear how you're helping your customers in region. How durable do you think that demand is? Is this something we're still going to be talking about in a year's time? What's your sense here?

So in terms of full year guidance I guess based on H1, so mid-July, as we will report our H1 figures, of course, we'll share with you our update how we see the situation. And of course, I mentioned various uncertainties. I mentioned, in particular, the impact of the Middle East crisis. And hopefully mid-July, we'll know much more about whether it will have been fixed or whether we need to get ready for a prolonged period of crisis.

And as I mentioned the potential impact on our Avionics business, and on our Biometric business, of course, mid-year we know more about that, and we will be more comfortable to guide you on this matter. And by the way, also pretty much the same thing when it comes to potential opportunities, in particular in Defense.

As I mentioned today a number of urgent operational requirements that have detailed and mid-year, we'll get a better view on how many of them will be converted into order intake. And how much of that we could deliver in H2. So potentially providing a tailwind on our overall defense revenue. So my view is that mid-year is probably the right timing for us to provide updates on how we see growth for the full year 2026.

Middle East, our view is that you need to understand that what is happening today in the Middle East is really a trauma for all countries in the regions. The intensity of the strike from Iran to a number of countries in the region is such that -- our view is that it's not just for the short term that those countries are willing to get better equipped, we believe that it's here again a long-term view. How to build up better protection capabilities and in particular, when it comes to air defense, whether it's against a long strike missiles, but also drones, which means that everything which is connected with air surveillance, with air defense is a matter where those countries will probably consider for the long term, having a level of capabilities, which is much higher than it was.

Also considering that, as you know, you have heard about the number of U.S.-made missiles that have been launched in the regions. And it seems like, U.S. providers could be also struggling to replenish inventories. So all of that will be also probably a driver for effectors, which is also overall positive. And last point, as I mentioned, the threat from maritime mines is a new topic, which has been forgotten in the past and which can be also a driver for growth in these regions.

Maybe last point and also linked to the number of Patriot missiles that have been launched that have been launched, it's true that, here again Thales and through Eurosam and MBDA being able to come up with ability to deliver more quickly this type of equipment. The air defense, in particular, SAMP/T can be also a positive factors to develop revenues in these regions. So our view is not just for the very short term, it's more a mid- long-term a positive trend in terms of need for better air surveillance, air defense capabilities in these regions. And I think, yes, this is okay. Okay. Ian?

Next question, please?

And the question comes from the line of Herve Drouet, from CIC CIB.

Two on my side. First one, could you give us an update on Bromo, with consolidation of the satellite business from your side on Airbus? Did you get some indication on the regulatory side already on how that can go further? And I was also wondering with the recent projects in Poland Military satellite project, was it signed with Bromo or with Airbus and Thales separately? So that was my first question.

The second question is regarding the French Military Law, which is likely to be passed to the assis French Assembly. That's been in the press despite the increased budgeted, some analysis saying that there will be some project which will be canceled while order will be more prioritized. And I was wondering if you can share with us if there is any of those projects, which could be impacted, is Thales significantly involved? And reversely, if there are some which are going to be accelerated, how that also can potentially impact Thales?

So first, on Bromo and Poland. And first on Bromo, we initiated -- we started the overall consultation processes with works council. And this has started -- each of the three players have started this type of consultations. And it is progressing. So no specific matter on this -- concern on this matter.

And second, which is on the critical part of the closing of these transactions is the feedback from the antitrust authorities, in particular, the European antitrust authority. So on this point, we started engaging with them in a positive way, in positive mood. Now we are at the beginning of the process, and I cannot be more explicit because it's going to be interactions in the next few quarters with, in particular the European antitrust authorities. And this is why we said that the closing of the Bromo project shouldn't happen before 2027. It will be in the course of 2027. So nothing more to report on this matter except to say that things on those two matters are progressing as expected.

So Poland, on military satellite together with Airbus, it shows that when it comes to export, in particular, on defense satellites, we work together with Airbus. It's not new. It's not linked at all -- to Bromo at all in the past. In a number of cases, when it comes to export and, in particular, when it comes to export to MODs, we may, I mean, two companies may decide to partner together, and this is the case in Poland. So, it's good to see a new European country deciding to buy from Thales Alenia Space and Airbus this type of sovereign capabilities.

I mentioned in my introduction that in Q1 2026, we managed to book a Defense geostationary satellite for Luxembourg. So two examples of European countries deciding to increase their overall defense capabilities. And we keep working on all the type of opportunities of this kind. Your second question was more about the French Loi De Programmation Militaire, and what we can say on this matter.

So first and it is positive to see that the update of this 2024-2030 program law has confirmed a significant ramp-up in terms of French defense spending. So overall, looking at the 2026 to 2030 period of time, so the additional level of budget that is today embedded in this update, this additional level amount to EUR 36 billion, which comes on top of the previous LPM, which you probably remember was voted in July 2023.

I need to say that this update will have to be voted also at the French parliament, which is still not the case, but we see here, again, a broad consensus across political parties on increasing our French defense spending. So good to see that, all in all, this represents an additional EUR 36 billion of Defense spending over 2026-2030. This also confirms what we're expecting from -- for 2026 and 2027. So overall, the growth in the French Defense budget in 2026 will be 13% versus 2025.

And if you look at 2027, it should be 11%. So good to see that the need for higher spending is now translated in this update of this LPM. Now in terms of priorities, capabilities and so on. First one, it is true that there have been comments about the number of platforms. And it's true that the priorities have been more on specific items that I'm going to explain in a few minutes as opposed to getting more platforms. And this is maybe what you got in terms of comments, cancellation of programs. No, it's not cancellation of program, but at this point, there is no more frigates, for instance, in the -- there is not a second aircraft carrier, no.

However, we've seen a number of domains where there will be a significant growth in terms of spending. So first is ammunition and effectors. With overall as compared to the previous LPM, a 50% increase in defense spending for ammunition effectors. Second is space, where there will be a 65% increase in Defense spending as compared to the initial LPM.

Third is drones, where there will be almost 40% increase in spending. Fourth is Air Defense, overall, with 32% higher spendings. And fifth is operational innovations with a 14% increase in Defense spending. To that -- on top of that, also three additional elements where the progression is more limited, but with still quite significant progressions. One is in-depth strike capacities. Second is naval combats and third is electronic warfare.

So all in all, it represents nine specific items that will cover those priorities. I've forgotten -- I'm sorry for that. I've forgotten also as a key domain of priorities, which is military aircraft with, in particular, the Rafale F5 standards being a key priority. And what is also positive is as you go through this list of nine priorities, Thales, we click all the boxes, which is positive. Whether it's effectors, military aircrafts, space, drone, air defense, in-depth strike capacities, innovations, novel combat, electronic warfare. I mean, we click all the boxes. So overall, we are pretty happy with this outcome and this list of priorities.

And the questions come from the line of Benjamin Heelan from Bank of America.

I had three. Just wanted to follow up on some of your comments on Cyber and the margin. You mentioned the 13% margin. But at the full year, I believe the kind of messaging was a slight improvement from 2025 underlying, which was around 13%. So just wanted to see if there was any change there.

Secondly, on the Defense capacity increases, right? Obviously, the capacity increase is what's been capping growth. And obviously, as you're investing, you're growing, right? So it's the capacity that's been the constraint. Where are you on this journey? Can you talk a little bit about capacity? What are the big areas of the Defense business that you're expanding capacity and how much more is there to go? Is there a framework that you can provide for that?

And I know you've had a couple of questions on Avionics already and the impact of the Middle East. Just wanted to add one, so over the last 6 weeks, you haven't really seen any impact to the aftermarket component of the Avionics portfolio. Is that a fair summary of what you've seen so far?

Okay. So, starting with Cyber. So this guidance to 13% is right in line with what we said at the -- as we released our 2025 financials. We mentioned, you probably remember that when we commented 2025 for CDI, we mentioned that we benefit from a few positive one-offs that in 2025 amounted to 0.7 percentage in terms of EBIT margin. And we said that those one-off, of course, will not happen again in 2026. And hence, the fact that we guided that at 13%. So no change on this matter.

Second, increase in Defense capability. It's really across the board on many sites. It is airborne type of capabilities on Rafale, in particular, whether it is your radar, what we call the SPECTRA, which is a device -- the system that protect the aircraft, whether it is the pods that allows to designate the target. It's about Ground Master radar ramp-up in capabilities, both in France and also, in particular, in 2026 in the Netherlands, where we are growing our overall production output.

It is our effectors in particular, with significant investments in Belfast, but also a new production investments in France about, in particular, the ammunitions. So here, I'm talking about many, many sites, could be also optronics in countries. It is in Germany as well in terms of radar capability. So it's really across the board.

Just because -- just to give you an idea, a good way also is to track the overall level of capital expenditure. When I look back a few years ago, what we used to spend on an annual basis was around EUR 500 million per year. In 2026, I said that we should be around EUR 840 million. So you see the progression of our overall capital expenditure that support these progressions in terms of production output.

Middle East aftermarket. So as I mentioned, no impact in March because there is a bit of lag effect. We think that there will be a first impact on our aftermarket in Q2. The first impact, the magnitude of it at this point, it's probably too early, to be more precise on this matter. But it's part of the overall uncertainties. It's also true that we see airlines behaviors being quite different from one airline to the other. Of course, the most affected are the one in the Middle East. But we also see some airlines, in particular, in Asia, considering the issue about jet fuels that I mentioned, starting to cancel flights and we need to see the impact of that.

Now as we discussed with airlines, it's also true that -- they also tell us that management of their fleet until now was pretty tight. And it might not be -- I mean, their first decisions will not be to cut or to stop maintenance. And in particular, as we are approaching this summer season, so this is what we get from some of our customers, where there will be probably more uncertainties is, in particular, if the Middle East crisis continues throughout the summer, it's probably decisions that airlines will make probably early September following the summer season to decide to reduce capacity.

So this is -- this will be, of course, a bit more challenging in terms of situations. This is not the case. We see a number of airlines willing to have the right level of capacity in order to address the summer season. It's more afterwards in case we see the Middle East crisis continuing that some of them could make more structural decisions, including, by the way, to exit some old aircrafts.

And the questions come from the line of Chloe Lemarie, from Jefferies.

Most of mine have been answered already, but I did have one on MBDA. They recently commented on a step-up in production in '26 by 40% in doubling CapEx plans to 2030. So I just wanted to check, first of all, have you seen orders for your components from MBDA that would kind of support that 40% growth? And was that included in your initial defense guide? And do you feel confident in this type of ramp, given your comments on PCB supply constraints?

So of course, I will not comment about how I see the likelihood of MBDA to deliver on their commitments. This question should be directed to MBDA. Now it's true that the level of demand for midsized producers have never been so high. And it's a matter of fact that MBDA is doing whatever it can to increase its overall production capacity. So no more comments, but of course, we will be glad to see MBDA accelerating. So all of that is overall positive and nothing more to add on this matter.

We are now going to take one final question. And the final question comes from the line of Ross Law from Morgan Stanley.

Just a couple of follow-ups really. The first is on the LPM and I guess, bigger picture, how this impacts your medium-term outlook, both in terms of guidance for growth, which you've already raised to the top end of the 5% to 7% range at the full year. But also in terms of capacity and sort of expansion plans and capital performance that you see going forward?

And then the second question, just on the SAMP/T, can you just remind us of the current production rate of that program and the ramp-up you're planning for the coming years?

So on the LPM , of course, this update of the French LPM provide us even more comfort about our overall defense trajectory. So this is positive. Does it mean that today, I'm going to change the midterm view on defense? The answer is no. But you have seen that my tone is pretty positive when it comes to 2026 overall in terms of order intake. And my view is that it will continue going forward.

And I would say, months after months, we see signals, all of them in the same directions about clear tailwinds with regard to our defense business. Today, we discussed two key elements. One is about this update of the French LPM. And the second is those opportunities from a business standpoint coming from the Middle East crisis, which means that in just a few months, the last 3 months, we add two, I would say, a positive -- two significant positive inputs. When it comes to our overall defense business, we see, again, not just a level of demand, but a nature in terms -- type of capabilities that our clients are looking for, that will match our overall positioning, which is positive.

SAMP/T, as you know, we are today finalizing the development phase of the new generation of SAMP/T. And we also said that the first battery for Denmark should be delivered, I think that we said end of 2027, beginning of 2028. We've got also the delivery to the -- to our French customers as well that should start shortly.

Now with regard to the overall production output, here again, as we did in our overall Defense businesses, we will be able to adjust to ramp up our production capability at Thales to follow the level of demands. It is essentially for us radars, in particular, which we -- what we call the Ground Fire 300, this new flat panel type of capabilities.

And the second point is command and control. Here again, we'll be able to adjust the level of production to match the level of demand. It could take a few years, yes, but eventually, we will be able to follow the level of demand. As by the way, we did over the last 3 years on most of our overall production, and in particular, the growth on the radars, but also in airborne equipments has been -- the growth has been done as we manage to ramp up our production output in line with the level of demand.

And this is what I said earlier, we might see and where we are a bit vigilant is about the supply chain in some cases, where we need to probably to keep working on the overall ramp-up and resilience of our supply chain for our Defense business, but this is what we have been doing and pretty successfully. If I look at the '24, '25 and Q1 2026 growth for our Defense business. So this is what I can say to you.

So thank you very much. Thank you all for your questions. Of course, the Investor Relations team is at your disposal. If you have any follow-up questions, so don't hesitate to reach out. Thank you very much. I wish you all a very good day and see you in the next few days, few weeks. Bye-bye.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales 2025 Full Year Results Conference Call. The presentation will be held by Patrice Caine, Thales' Chairman and CEO; and Pascal Bouchiat, Thales' CFO.

[Operator Instructions] I must advise you that this conference is being recorded. I would now like to turn the conference over to Mr. Louis Igonet, VP, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Welcome, and thank you for joining us for the presentation of Thales' 2025 Full Year Results. I'm Louis Igonet, I recently joined Thales as Head of IR. I'm excited to be with you today. With me today are Patrice Caine, Chairman and CEO; and Pascal Bouchiat, CFO.

The presentation will be followed by a Q&A session. As usual, this presentation is audio webcasted live on our website at thalesgroup.com, where the slides and press release are also available for download. A replay will be available soon after the end of the event.

Please also note that this presentation contains forward-looking statements based upon what management of the company believes are reasonable assumptions. These statements are not guarantees of future performance.

With that, I'd like to turn over the call to Patrice Caine.

Good morning, everyone. So I'm now on Slide #2. So let's start by sharing some highlights for 2025 which was another very strong year for Thales. First, on commercial performance. We delivered another year of strong order intake, equaling the record level reached in 2024, thanks to our strategic positioning in high-growth markets.

Our sales growth accelerated, surpassing our guidance. We achieved a robust improvement in profitability compared to 2024. And most notably, our free operating cash flow reached a record high level, reinforcing our financial strength and ability to fund future growth. Hence, we achieved or exceeded all our 2025 financial targets.

On the strategic front, we also made major progress in positioning Thales for the future, thus delivering on our strategic road map. Typically, we further increased our production capacity to capture rising defense spending and support our customers' rapid ramp-up, ensuring we meet demand without compromising quality or on-time delivery, which are our clients' key priorities.

We also continued to strengthen our R&D leadership with new breakthroughs in 2025 that keep us at the cutting edge of technology from AI with cortAIx to quantum and even nuclear fusion with our GenF project. And we took a major step in space by signing an MoU with Airbus and Leonardo to create a leading European space player, a move that will reshape the industry and secure Europe's strategic autonomy in this critical domain.

So moving to Slide #3. To illustrate our ramp-up and successful positioning in the European rearmament dynamic, I'd like to mention our groundbreaking success with SAMP/T NG, a strategic milestone that reshapes the air defense landscape.

The SAMP/T NG produced in partnership with MBDA through Eurosam is the world's most advanced air defense system, which offers long-range air defense with a unique detection and tracking capability against all current and future threats, aircraft, helicopters, UAVs, cruise and ballistic or hypervelocity missiles.

It definitely sets a new standard in air defense with 360-degree and 90-degree coverage, meaning it can intercept threats anywhere in the sky, extensive interoperability with NATO systems, ensuring a seamless integration with allied forces, high firepower with low manpower requirements, optimizing operational efficiency, encamping and decamping, and 24/7 operations.

So with SAMP/T NG, we have disrupted a long-standing de facto monopoly. Denmark's decision to select SAMP/T NG over their legacy system is a clear validation of our technology, performance and value proposal, proving that European sovereignty in air defense is now a tangible reality. And this is only the beginning with SAMP/T NG being a high-value, a large-scale system we expect many more export successes.

Moving to Slide 4. Now to discuss what truly differentiates Thales, our innovation and technological leadership, I would like to focus on AI, where we are leading the transformation. Our AI leadership is built on scale and expertise with 800 AI experts and 100 PhD students.

We are also expanding cortAIx globally with 5 country hubs across the globe, 200 patents covering the full spectrum of AI technologies, securing our intellectual property and competitive edge. Our cortAIx accelerator is now fully deployed across all Thales divisions, embedding AI into 100-plus products with 250-plus use cases deployed or in development.

Another of our strengths lies in our strategic partnership. We are joining forces with industry leaders to codevelop solutions or use cases. With Dassault Aviation, for instance, we are integrating cortAIx into next-gen aviation systems, enhancing functions for manned or unmanned aircraft for observation, situation analysis, decision-making, planning and control during military operations.

With Naval Group, we aim to accelerate the development of trusted AI solutions applied to critical systems in several key areas, collaborative combat, decision support systems, electronic warfare, training and simulation, logistics and support, just to mention a few. Then to give you concrete examples of how we are turning AI and innovation into customer value.

Number one, our TALIOS reconnaissance and targeting pods capabilities are now unmatched. Boosted by cortAIx AI, it provides AI-assisted targeting, passive detection and enhanced vision to overcome stealth threats, electronic warfare and poor visibility. It maximizes mission efficiency, ensuring safety and maintaining superiority across all domains for the end users.

The second example is in the maritime domain, our autonomous mine countermeasures with first delivered in 2025 to the French Navy as AI augmented detection, classification and identification capabilities.

I am now on Slide 5. Moving on to our strategic ambitions in space, an area where Thales is positioning itself at the heart of Europe's sovereign capabilities. We have taken a major step forward by signing a Memorandum of Understanding with Airbus and Leonardo to create a leading European space player.

This partnership will combine our complementary strengths to build a global scale champion for Europe. Our target is to launch operations in 2027, subject, of course, to regulatory approvals and closing conditions.

And this initiative holds significant value creation potential for all stakeholders, for customers, for Europe, for investors. For customers, it means end-to-end space solution from secure connectivity to earth observation and exploration. For Europe, it ensures strategic autonomy in a critical domain. And for investors, it opens new avenues for growth in one of the fastest evolving high-tech sectors.

Let's now move to Slide 6 to look at our financial performance with a few charts. As previously said, we have enjoyed strong commercial momentum in 2025, reaching EUR 25.3 billion for the second year in a row.

The book-to-bill ratio is maintained significantly above 1, reaching 1.14. Sales recorded a sharp 8.8% organic growth, reaching a record high EUR 22.1 billion. Adjusted EBIT rose by more than 13% on a reported basis, while EBIT margin improved to 12.4%.

Adjusted net income, group share, grew by 5.5%, crossing the EUR 2 billion mark. And a very strong generation of free operating cash flow from continued activities, which increased by 27%, reaching EUR 2.6 billion, notably supported by the solid momentum in our order intake.

And the last chart, the dividend. This new year of strong financial performance is leading our Board of Directors to propose at the next AGM in May, a 5.5% increase to EUR 3.90 per share. It demonstrates Thales' confidence and commitment to regular shareholder returns.

Turning now to Slide 7, looking at our extra financial performance in 2025. I indeed wanted to come back on the continuous progress we've made in terms of corporate social responsibility.

First pillar, society. The Thales Climate Passport training deployed in 2024 raises employees awareness to climate change and its impact on society. The 2025 campaign was a success with over 94.6% of managers who completed the training, way above the 85% target. We are clearly ahead of plan on this pillar.

Second pillar regarding our strategy for climate change. Our CO2 emissions from Scope 1 and 2 decreased by 75.2% in 2024 and Scope 3 emissions decreased by 15.4% compared to 2018. The group has thus achieved its 2030 targets ahead of schedule for the third consecutive year. The absolute carbon footprint reduction targets remain relevant for 2023 in light of the group's growth prospects.

Finally, our third pillar named people aims at strengthening gender diversity where at the end of 2025, we are in line with our 2030 trajectory. First, the percentage of women in senior management position reached 21.8%. And this performance is in line with the group's trajectory to reach the set goal of 25% by 2030.

Second, the percentage of management committees with at least 4 women reached 69.2% in 2025 compared to 64.1% at the end of 2024. For 2030, we have set an ambitious target to have 85% of management committees with at least 4 women.

After this introduction, I now hand over to Pascal, who will comment our financial results in greater detail.

Thank you, Patrice, and good morning to everyone. I'm now on Slide 9. So starting with order intake. As Patrice mentioned, 2025 was again a strong year in terms of commercial momentum as order intake was maintained at a record level, namely EUR 25.3 billion. This reflects the quality of Thales' diversified product and solutions portfolio fit for our clients' purposes.

The book-to-bill ratio stood at 1.14, meeting our expectations for the year and even 1.24 for Defence segment. This bodes well for future revenue generation. This robust performance was driven by all type of orders with a notable strong momentum for orders below EUR 100 million.

Looking at large orders. 28 orders with a unit value over EUR 100 million were booked in 2025, of which half in the sole fourth quarter. 20 large orders were booked in Defence with several flagship contracts notably in Air Defence. I can, in particular, mention the LMM, Lightweight Multirole Missile contract with the U.K. MOD or a major land surveillance contract with the German MOD.

2025 saw also a good momentum in Space with large -- with 5 large contracts booked, of which 1 in OEN and 4 in telco, including the IRIS2 initial phase contract. Avionics booked 3 large contracts, of which a flagship contract for IFE with a major U.S. airline in Q4 2025. Overall, a strong performance in 2025 for order intake, driven by continued high demand from our clients in all our businesses.

Now moving on to sales on Slide 10. Sales in 2025 reached EUR 22.1 billion, translating into an organic growth of 8.8%, significantly above the top of our guidance range, which was upgraded in July. This robust performance was notably driven by Defence activities, which recorded double-digit organic growth again this year.

Aerospace also contributed significantly with stronger organic growth fueled by both Avionics and Space activities. Cyber & Digital sales were slightly down organically, in line with latest expectations. I will comment further the performance in the following slides.

From a geographical perspective, sales organic growth was again well balanced between emerging and mature markets. It's worth noting that all our emerging markets, Asia, Middle East and Rest of World, recorded double-digit growth.

Reported growth was negatively impacted by material currency impacts this year as the euro strengthened against most currencies in 2025, against the U.S. dollar, as we are all aware of, but also against other currencies like the Australian and Canadian dollars.

Overall, currency led to a 1.5 percentage points headwinds on 2025 sales reported growth. Scope impact was positive and resulted mainly from Cobham Aerospace Communications acquisition in April 2024. Taking into account these elements, 2025 sales recorded a solid 7.6% reported growth year-on-year.

Let's now have a look at adjusted EBIT. I am on Slide 11. So as you can see, adjusted EBIT increased sharply in 2025 and reached EUR 2.7 billion. This increase mainly was driven by the significant progression of our gross margin, up by EUR 391 million (sic) [ EUR 383 million ]. This was mostly the result of the sales volume progression in Defence and Aerospace.

Looking at indirect costs. R&D expenses continue to increase in volume and represented 6% of sales in 2025, in line with our expectations. Marketing and sales expenses were broadly stable organically, reflecting Thales' ability to optimize its indirect cost in line with the evolution of the business. This was notably the case in Cyber & Digital in 2025.

G&A grew organically at half the pace of revenue, which is also satisfactory. Equity affiliates contributed positively for EUR 61 million to adjusted EBIT growth in 2025. This includes, in particular, a stable contribution from Naval Group, which includes the fiscal surcharge in France.

It also includes positive contributions from various JVs, notably from our Defence JVs. It also reflects a one-off positive effect linked to the Thales JV, which is accounted for in our Digital Identity business.

A word on mechanical effects. As for sales, negative currency impact at minus EUR 37 million outweighed scope positive impact at EUR 24 million.

Moving on now to performance for you by segments, starting with Aerospace on Slide 12. Orders in the Aerospace segment amounted to EUR 6.1 billion, slightly down versus last year on the back of high comparison basis.

Underlying momentum in both Avionics and Space remain solid. In Avionics, this solid momentum extended into most activities. In Space, 5 orders with unit value above EUR 100 million were booked, including several geostationary communications satellites and the initial phase contract for IRIS2. Those wins enhance visibility for the coming years.

Sales reached EUR 5.9 billion in 2025, recording a solid 8.7% organic sales growth. Both Avionics and Space contributed to this performance. Avionics indeed saw double-digit growth year-on-year, driven by OEN activities.

Both flight avionics OE and aftermarket enjoyed strong dynamic, supported by continued ramp-up in aircraft production and also a solid air traffic momentum. Both civil and military domains were supportive. In Space, sales were up as well in 2025, mostly driven by the OEM business.

Looking at profitability. Adjusted EBIT stood at EUR 560 million in 2025, an outstanding 39% organic increase, which led margin to reach 9.5%. Avionics posted a solid increase in its profitability driven by stronger aftermarket and further contribution from Cobham AeroComms. Space recovered even better than announced a year ago, posting a positive EBIT in 2025.

Now commenting Defence on Slide 13. Order intake in Defence amounted to EUR 15.1 billion in 2025, setting this year, again, a new record high. The book-to-bill ratio stood significantly above 1. It's now the seventh year in a row that Defence sees its book-to-bill ratio stands above 1.2. With a backlog of EUR 42 billion, the level of visibility in this activity keeps being higher at 3.4 years of sales.

Thales booked 20 orders with a unit value above [Audio Gap] air defense, effectors, airborne solutions or in the naval domain. We also believe that stronger European collaboration, for example, through EU MFF mechanism such as Space [Audio Gap] EUR 12.2 billion, up 12 [Audio Gap] firmly supported by further production and deliveries ramp up across the portfolio. Surface radars and effectors are, for instance, areas where efforts have been paying off in 2025.

Overall, organic growth has outpaced our expectations in 2025. And I want to highlight the tight execution throughout the year that led to this excellent performance. A word finally on adjusted EBIT [Audio Gap] EBIT in 2025 versus 2024.

Now moving on to Cyber & Digital on Slide 14. Sales in the Cyber & Digital segment were broadly flat organically in 2025, reflecting a mixed performance. In reported figures, it's worth noting that the FX impact was significantly negative and led to a 3.4 points headwind on sales growth.

Starting with Cyber as a whole, which was down 3.8% organically over the whole year. Cyber Products, which represented a bit more than 80% of the Cyber business in 2025, recorded a low single-digit organic decrease last year. As you know, until Q3, we have been impacted by the merger of Thales and Imperva sales forces, which notably led to a higher staff turnover and weighed on the performance.

Employee turnover is now back at a benchmark level. In Q4, Cyber Products was back to growth, which is positive, and paves the way for further growth in 2026. Market momentum keeps being supportive and Imperva sales force integration being now over, we should progressively recover sales growth profile.

Cyber Services sales were down double digit organically year-on-year as it kept being impacted by soft market in Australia. The premiumization strategy Thales has adopted for this business showed encouraging signs in related geographies as we are focusing on selective, profitable segments.

Digital Identity sales were up slightly, 1% in organic terms. Digital Solutions kept driving growth, notably in secure connectivity solutions and payment services. However, volumes on payment cards remained low in 2025. And at this stage, we don't expect the market to improve materially in 2026.

Having a look at profitability. Adjusted EBIT margin resisted in the context of lower revenues in 2025 and stood at 13.7%. This is mainly the result of tight cost management in the Cyber business, which saw an increase in margin in 2025 as well as a positive impact from one-off elements in the digital business we already mentioned in July 2025.

Turning now to Slide 15 and looking at below adjusted EBIT items. So the line cost of net financial debts and other financial results was moderately up in 2025 as expected. Net financial interest was significantly down in 2025 and stood at minus EUR 116 million in 2025 versus EUR 166 million in 2024, driven by the ongoing deleveraging following the acquisition of Cobham AeroComms.

Other financial results amounted at minus EUR 28 million versus plus EUR 35 million in 2024. This evolution is due to the non-recurrence in 2025 of positive one-offs recorded in 2024. The finance cost on pensions and other employee benefits were slightly up in 2025 to minus EUR 56 million.

Moving on to income tax. At minus EUR 561 million, the amount of income tax integrates EUR 75 million of tax surcharge in France in 2025. This led the effective tax rate to reach 24.1% in 2025. But it's worth measuring it is broadly stable excluding the surcharge.

The 2026 French budget includes a recurrence of this tax surcharge in 2026. The expected impact for Thales in 2026 P&L should amount to around EUR 90 million, a EUR 50 million increase versus 2025.

In addition, the impact on our share in Naval Group's net income should be broadly stable at minus EUR 8 million. Minorities have significantly decreased year-on-year to EUR 26 million. This is mainly driven by the reduced net losses incurred by tax.

All in all, this led to an adjusted net income, group share, at EUR 2 billion, an increase of almost 6%. The adjusted EPS stood at EUR 9.76 in 2025. Excluding the tax surcharge in France, adjusted net income group share would have been up by more than 9%.

Having a look at the bridge from adjusted EBIT to free operating cash flow, I'm now on Slide 16. So in 2025, on Slide 16, we see D&A, depreciation and amortizations broadly stable, while net operating investments were significantly up at minus EUR 746 million, in line with our guidance of 3% to 3.5% of sales. This reflects the group's strategy to keep investing for future growth, for example, with additional industry capacities as already commented.

Overall, the balance of D&A and net operating investments amounted to negative minus EUR 260 million. Change in working capital requirements was a strong tailwind in 2025. I will comment further in the next slide. All in all, 2025 is again an impressive year in terms of cash generation.

Free operating cash flow amounted to almost EUR 2.6 billion in 2025. This means a conversion from adjusted net income to free operating cash flow of 128%, a very strong performance.

Let's now have a look on what drove this impressive performance. I'm now on Slide 17. Firstly, and we've discussed it already, 2025 was once again a year of strong momentum for order intake. Major orders were booked while orders with a unit value below EUR 100 million were solid as well.

Secondly, the payment profile from our customers is very satisfactory. This includes down payment, but also highlights Thales' tight management of contract structure. Lastly, the emphasis that we keep putting internally on stocks optimizations over the last few quarters and year showed a positive outcome in 2025.

All in all, conversion ratio has outpaced expectations for the year at 128%. For 2026, we anticipate a cash conversion ratio between 95% and 100%. This give us confidence to reach the high end of the guidance we gave at our 2024 Capital Market Day, which is an average conversion ratio of between 95% to 105% over 2024-2028.

Now a word on net debt evolutions, moving on to Slide 18. Net debt saw significant reduction in 2025, and Thales' financial position is particularly strong as of end 2025. This was primarily driven by the strong free operating cash flow generation I just detailed. The impact from acquisition and disposal amounted to a negative EUR 69 million, which corresponds mainly to final price adjustments related to the sales of Thales transport business to Hitachi Rail finalized in May 2024.

The dividend cash out amounted to EUR 781 million in 2025, corresponding to a payout ratio of 40% and reflecting the increase in adjusted net income. All in all, net debt stood at EUR 1.6 billion as of the end of December 2025.

Finally, on Slide 19, a word on dividend. As I just described, 2025 was again a year of robust financial performance and value creation. This leads our Board to propose to the next AGM a dividend of EUR 3.90, up 5.5% versus 2024. This is in line with the payout ratio at 40% and reflects the increase in adjusted EPS.

A quick look at the chart on the right-hand side shows the steady growth of adjusted EPS over the last few years, reflecting Thales' ability to consistently deliver sustainable and profitable growth over the years.

This marks the end of this financial review. I'm now turning over the call to Patrice, who will address our strategic priorities and guidance.

Thank you, Pascal. So now turning to our strategy and outlook for 2026. So let's move to Slide 21. And before talking about our 2026 strategic priorities, I'd like to briefly give you the big picture on the tailwinds supporting our different businesses and the key differentiators that Thales can leverage to keep delivering strong and profitable growth.

Thales is a unique business in the sense that we are only positioned on markets which benefit from positive long-term momentum supported by proven resilience and sustainable macro trends.

First, if we start with Defence, our activities are supported by a strong need for more security, more protection in the context of geopolitical instability.

This is shown by the global increase in defense spending with a notable concentration in Europe, where it is projected to grow high single digits annually until 2035 in Europe. And also by the need for our clients for speed as they seek both high-performance products and solutions as well as good enough products that are quickly available.

The competition is fiercer than ever, but we have significant competitive advantages. Number one, our deep and diverse portfolio with a unique and historic ability to fill products with the latest technologies, our AI augmented radars, for instance.

Number two, our strong customer intimacy and historic knowledge of our clients' concept of operations or CONOPS. And number three, Thales is the strategic partner of choice at the heart of European rearmament. Our position is unmatched because we are deeply embedded in Europe's defense ecosystem.

Moving to Avionics. Well, in Avionics, we have a great visibility, thanks to sustained and powerful demand for travel and mobility. That shows no sign of slowing, resulting in continued growth in global air traffic, as IATA, the International Air Transport Association predicts passenger numbers to double in 20-year forecasts. And at the same time, a global renewal of commercial fleets, which increases demand for our equipment from OEMs.

And of course, we have strong differentiators, thanks to our commitment to developing a more sustainable and connected avionics, bringing skills and technologies to build the future of avionics, for instance, through predictive maintenance and new generation of flight management systems.

Space now, while demand in the institutional market is improving with a growing number of opportunities, thanks to the rise in government investments, typically growing ESA budget and EU MFF and the need for large-scale projects like IRIS2 or the space early warning initiative.

We have won very important contracts and delivered truly emblematic projects, which are a testament to the relevance of our positioning and the quality of our products in exploration in science with the Lunar Descent Element for the Argonaut mission in the 2030.

Regarding observation, the long-awaited entry into force of the all-in-one contract with Indonesia and the first slice of the Leonardo constellation. On the telecom side as well, where we recorded a good level of orders and the launch of the initial phase of IRIS2 will allow us to start the technological development of the payload.

And lastly, in Cyber & Digital. Well, the omnipresence of connected devices and the digitalization of our daily lives with the consequential need to protect our data, our applications, our identities from cyber attacks continues to fuel our activities.

We are a world-class player in Cyber with best-in-class products across application security, data security, identity and access management and also premium cyber services. And the services we provide to accompany all industries in their move to cloud are ideally positioned in the competitive landscape.

So moving now to Slide 22. To seize all the opportunities created by this environment and to address the many challenges facing Thales, I have identified 4 key priorities for 2026. The first one being our ability to capture profitable growth.

To seize this growth, we will continue to ramp up our capacity which means continuing to scale up production across both existing and new facilities with a clear focus, focusing on high-end demand products such as radars, munitions and optronic cameras, systems like our SAMP/T NG, Rafale equipment, counter-UAS, just to mention a few. And at the same time, ensuring we have the right talent. Hence, we plan to recruit more than 9,000 employees worldwide in 2026.

Secondly, we'll put a heavy focus on competitiveness through operational excellence, i.e., continuously improving internal processes to continue to deliver on time at cost and quality, but also AI-driven productivity, leveraging artificial intelligence to transform how we operate from AI optimized logistics to so-called software companion, accelerating development cycles and reducing time to market.

Lastly, to fully capture the current momentum, we will continue addressing our customers' core expectation, proximity, intelligence. Proximity, our customers expect alignment with their local realities and sovereign requirements, typically leveraging our ability.

We will further strengthen customer intimacy by localizing critical parts of the value chain where it creates value, as we demonstrated, for instance, with the recent radar factory opened in the UAE.

Intelligence as well, we will continue to enhance the value we deliver by embedding AI across our entire product portfolio, building on our track record of combat-proven AI-enabled systems already deployed operationally. We are scaling AI capabilities across all our offerings.

Another key area of focus in 2026 will be to restore growth in our cyber business. The integration of Imperva is fully done, as said by Pascal. So we are now ready to go back on the offensive.

First, by reaping the benefits on the sales team reorganization which is now fully up and running to gain traction and go after significant opportunities across all our segments, IAM, software monetization, that affect application security and the likes.

And second, by continuing to deliver on commercial synergies by offering to our clients solutions combining the best of Imperva and the best of Thales across all our activities, for instance, via cross-selling.

Lastly, our teams are working on the next generation of cyber products. These developments will be essential to ensure that we outperform the competition. So in a nutshell, we have everything in place to position ourselves for growth on these markets.

Regarding the Bromo Project, well, if everything goes as planned, this joint venture will be operational within 2 years. So during this time, we are focused on securing support from all stakeholders. This includes the European Commission, but also many key states and their regulatory bodies.

And above all, in the meantime, we remain focused on delivering our road map and maintain a solid pace of recovery. This is essential, as by definition, there is still a lot of work to do before the merger is authorized, if it is authorized.

So it is critical that we continue doing business to the best of our ability on a stand-alone basis. And as such, the recovery plan we have been implementing is now bearing fruit as you have seen in 2025.

But beyond that, we agree that this project has a strong rationale, securing Europe's future in space and allowing to accelerate innovation through joint R&D and cutting-edge space missions. And hence, competitiveness against global players, lead sovereign and military space programs for European nations and strengthen the European space ecosystem, creating opportunities for suppliers and employees alike.

Last but not least, regarding Avionics. Our focus for 2026 will be to expand that business above and beyond. Today, we benefit from a world-class portfolio, supporting our customers in making aviation greener, more digital and more connected. Our ambition is to extend our leadership across all aircraft manufacturers.

As you know, the most powerful structural trend in the market in both civil and defense markets is the renewal of most aircraft platforms around the 2030s and we are already actively preparing for this significant opportunity. To that end, in 2026, we are continuing to invest heavily in technologies, in industrial capacities -- capabilities.

In technology, our 9 product lines, including flight controls, high-performance IMA, Integrated Modular Avionics, help displays, navigation heads are already competitive and are being further enhanced to address the next generation of platform requirements.

In industrial capabilities as well, while we continue upgrading our industrial sites to ensure best-in-class performance and competitiveness. So thanks to the actions already taken and the investments underway, we are extremely well positioned for the upcoming competitions. We are excited to deliver the most advanced, reliable and industrially competitive avionics solutions.

So now I'm on Slide 23. Well, all these priorities will bring Thales to pursue ambitious financial targets in 2026. First, a book-to-bill ratio above 1. Second, a dynamic organic sales growth between 6% to 7%, which should correspond to sales ranging from EUR 23.3 billion to EUR 23.6 billion, including FX impact.

Number three, 12.6% to 12.8% adjusted EBIT margin, which puts us well on track to deliver our 2028 target. And number four, free operating cash flow conversion ratio still high, expected between 95% and 100%. This is clearly a key strength of our model.

So overall, we are well on track to deliver the various commitments we made back at our 2024 CMD where we provided some outlook by 2028. We are not even halfway through the 2024-2028 period. But I can already tell you that we feel very confident in our ability to reach the high end of our organic sales guidance given what I've just described in terms of business opportunities.

In terms of operating margin, we are clearly on track to deliver 13% to 14% by 2028. And as far as free operating cash flow generation is concerned, there again, we are confident we will be in a position to reach the high end of our guided range.

Many thanks again for your attention, and we will now be pleased with Pascal to take all your questions.

[Operator Instructions] And the questions come from the line of Chloe Lemarie from Jefferies.

Could I start with the guidance and digging into the divisional growth expectation, please? So for 2026, what do you factor in, in terms of organic growth for Defence, Aerospace and Cyber & Digital? And in Cyber, what do you call a vigorous market? And how do you think Thales will perform compared to that market growth, please?

Okay. So first, I mean, giving you a bit of insight on our segment expected growth for 2026. So in total, as you -- as we mentioned, the guidance of organic growth between 6% and 7% at group level for 2026 over 2025.

So going through our divisions, starting with Defence. So Defence at this point, high single digit. Overall, that was by the way what was our guidance for 2025. You have seen that we went above this level ultimately. Now as we move into 2026, we believe that high single digit is a reasonable guidance for Defence overall and consistent with the 6% to 7% overall for Thales Group.

Overall, that was, by the way, what was our guidance for 2025. You have seen that they weren't above this level ultimately. Now as we move into 2026, we believe that high single digit is a reasonable guidance for Defense overall and consistent with the 6% to 7% overall for Thales Group. Second, on Aerospace. So aerospace, I mean, growing, by the way, both from avionics and also from our space business.

So aerospace overall, what we see probably mid-single digit to mid-single digit plus with avionics mid-single digit. We mentioned as we presented 2025 growth that avionics in 2025 was more low double digit. So we are at this point, probably a bit more conservative on avionics for 2026. And today, as we see mid-single digit, this being based on also, I mean, the announcement from Airbus in terms of OEM, but also, I mean, as we see, I mean, the air traffic developing in 2026.

Space, we are positive on the back of, I mean, the 2025 order intake and as we see 2026 overall. So -- and lastly, I mean, CDI overall mid-single digit with, of course, I mean, cyber above this level and digital lower than this level. So as you know, I mean, one of our key priorities that Patrice mentioned is to get cyber back on growth in a market which is today pretty positive, as we said.

So at this point, of course, and we mentioned that Q4 for cyber product was getting back to growth, which is not the case for the cyber services that was down in Q4. At this point, of course, I mean, we need to be a bit cautious, but the market is there in terms of demand. Now it's up to us I mean, to get back to growth, in particular, in the cyber product, which is absolutely essential for us in terms of value creation. More to come as we move forward in 2026. But overall, yes, I mean, one key priority for us is to recover and regrowth.

[Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Benjamin Heelan from Bank of America.

I hope you both well. I had a question around AI and the implications around cyber. Obviously, there's been a lot of pressure on software companies over the past couple of months around the threats of Agentic AI. I was wondering if you could talk a little bit about what you're seeing in the cyber market. Do you see it as a threat? Do you see it as an opportunity? How can we, on the outside, think about the impact of Agentic AI on cyber?

And then the second question was, I guess, a bit of a follow-on from that. Can you talk a little bit about given what is going on from a technology perspective with AI, how is your M&A strategy evolving to encompass that? Is it a time to accelerate doing deals in cyber or moving into different areas? Is it a time to slow down and see how things progress? Is there any update that you can provide us from that?

So I will take this one, Ben, and thanks for your question. Yes, indeed, there has been recently a lot of debates about AI and in particular, Agentic AI and how will it or not, by the way, disturb the software market. Well, as far as the cyber market is concerned, our market, first, it's a mix of, I would say, hardware product and software solution. And typically for hardware, there is no real, I would say, worries to have in mind.

For our software solution, I do think this is a clear opportunity to have even more, I would say, efficient solutions to fight against AI --to fight against cyber attacks, sorry. So this is for me a great opportunity. And in particular, we are, I would say, on the verge of, I would say, launching new solutions, leveraging Agentic AI to serve some of our products -- cyber products. That's a key plus for us. Now M&A, if I move to M&A -- well no change, if I may, in our global, I would say, approach or mindset in terms of capital allocation in general and M&A in particular.

We will be always, I would say, very pragmatic and financially disciplined. We are looking at every, I would say, verticals of Thales, defense, aeronautics or cyber and digital, probably putting a little bit space aside because we have already a big M&A, I would say, initiative to conclude with the BROMO project. But clearly, I do not exclude any segment or definition to benefit from an M&A, I would say, opportunity. So clearly, I would say we'll see if something will make sense in the next future. But I would say no change versus what we've already discussed for several years in a row.

The next questions come from the line of Olivier Brochet from Rothschild & Co. Redburn.

Two questions then. First of all, on cyber, you're positioning yourself for growth. Does it mean some pricing efforts that needs to be done there? And what impact do you see for the margin in cyber and digital in 2026. Consensus is at 15.1%. Is that something you think is reasonable? And second question is in your revenues in 2025, how much was done with Ukraine direct and indirect, please?

Maybe I will start and let Patrice to complete maybe. Margin. So I mean, first, let me start with this cyber product, which, as you understand, represent 80% of our cyber business. And this is where, I mean, clearly, our challenge to get back to growth and of course, not at the expense of prices. So basically, I mean, this is -- I mean [Audio Gap]

And for us, this represents when I talk about the Rule of 30, it should represent a level of EBIT margin of around 20% and overall a level of growth of 10%. This is basically what we have in mind in terms of midterm objective for this business. And of course, as we enter 2026, our view is not to give up on prices just to get back to growth. This is absolutely not what we are willing to do first point.

Second point on Ukraine and our level of revenue directed to Ukraine. Giving you just 3 figures. I mean 2024, overall, our revenue directed to Ukraine was around EUR 200 million. It went up pretty strongly in 2025 with overall in 2025, a level of revenue of around EUR 450 million. All of that to be compared to a defense level of revenue for Thales at EUR 12 billion.

So if you look at 2025, EUR 450 million out of EUR 12 billion, it's something like 3.5%, 3.6% of our revenue directed to Ukraine. Now we believe that revenue to Ukraine will keep growing in 2026. And today, our view in 2026 is a level of revenue to Ukraine that would be close to EUR 600 million. So it's a growth driver. Now when you look at overall what it represents against our global defense exposure, something like 3.5% of the Defense segment's revenue, which is still pretty limited.

That's very helpful. Sorry, I didn't catch if you commented on the consensus in cyber for '26.

The consensus -- no, I'm not...

It's 15.1%...

2026. Overall, I mean, what I mentioned is overall for cyber and digital level of growth mid-single digit. So if you start from our level of revenue in 2025 and if you add up 5% [Technical Difficulty], for the 2026 level of revenue. So overall, starting from 2025 level [Technical Difficulty] CDI -- so if you add the price on top of that, this is how you should get to 2026 expected revenue for CDI.

Sure. No, I was thinking of the margin consensus at 15%.

No. So overall, I mean, it's above what we have in mind. It's above what we have in mind. If I start with 2025, we mentioned a level of margin for CDI at 13.7%. But we said that we had in this level of margin, I mean, a few positive one-offs.

We believe that the 2025 recurring level of margin is more in line with 13% for 2025, putting aside those one-offs -- by the way, I mean, you need to understand that in 2025, CDI had also to face with 2 headwinds, one being, I mean, the drop in the U.S. dollars plus implementation of the U.S. tariff.

So all of that representing probably something like 1 percentage points of headwinds. And this leads to a recurring level of margin in 2025 at 13%. And I mean, from that, this is what we could expect for 2026. So maybe slightly above this level, but this is, I mean, the overall ballpark that we could expect for CDI EBIT margin in 2026.

But I think, Olivier, your question was related to cyber, not CDI as a whole. You mentioned the 15.1% consensus for 2026 for cyber, which corresponds to what we see globally for the cyber segment of CDI for 2026. So...

Yes, 2026, I mean, I'm sorry for that, but I mean the connection is not great. So if your question was about cyber EBIT margin for 2026. So overall, a 15.5% EBIT margin for 2026 is what we have in mind.

We are now going to proceed with our next question -- and the questions come from the line of Alessandro Pozzi from Mediobanca Capital.

The first one is on free cash flow conversion. I was wondering if you can perhaps share your assumptions around working capital and CapEx. I think working capital was a key contributing factor in 2025. And given the order intake, perhaps maybe we should assume something similar for '26. And CapEx I think you mentioned that -- of course, you have the ramp-up going on, you increased the production of radars and you mentioned that potential CapEx is going to go up again in 2026.

And if you can quantify that as well? And second question on capital allocation, which is a nice segue from the first question is, your net debt is substantially down, and we know that your priority is to delever the company. But I think by 2026, probably that target will be accomplished and or you're going to be very close. And I was wondering whether we should think about a different capital allocation, maybe more buybacks as well. So any thoughts on that will be appreciated.

Okay. Thank you very much -- thank you very much, Alessandro. So we can -- by the way, we can hear you loud and clear, which was not the case before, much better. So let's start with, I mean, cash flow generation for 2026. I mentioned that, I mean, conversion ratio should be 95%. And this takes into account a few assumptions that you want me to give you more insight.

So first, in terms of CapEx, it's true that we'll keep seeing our CapEx moving up in 2026. Overall, I mean, if you look at 2025, CapEx were at around EUR 750 million. 2026, it should be higher and probably, in my view, EUR 820 million to EUR 850 million CapEx for 2026, pretty much in line with the overall CapEx to revenue ratio around 3.5%, which was the high end of our guidance that we shared with you at our Capital Market Day in November 2024.

So first point. And second point, in terms of working capital, it's true that 2025, I mean, change in working capital was a clear tailwind and reflecting, I mean, in particular, down payments and large down payments in particular, defense export contracts. 2026 at this point, we believe that the guidance that I mentioned about conversion ratio is more based on a flattish level of working capital. So this is, I mean, what we have in mind.

Of course, it will depend at the end of the day of the -- of our order intake and the profile of order intake, in particular, coming from export contract. But at this point, what we shared with you is the level of cash flow generation. So I mean, makes -- to ensure 100% being based on something like a stable level of working capital. So again, with a stable level of working capital, a pretty strong level of cash flow generation again.

With Thales investing also more in terms of CapEx. As I mentioned, I mean, a level of CapEx EUR 820 million, EUR 815 million, it has to be compared to a level of depreciation slightly above EUR 500 million. So basically, we keep investing on all our industrial sites. We keep investing on ISIT. We keep investing in engineering tooling for us, I mean, to benefit from the growth that we see down the road. Maybe capital allocation for Patrice.

Yes, I can -- Alessandro, I can come back on this point in a more global setup. As you know, we've said that for a while now we have all the different levers available in what we call that ToolBox in Thales. Clearly, you've mentioned, number one, deleveraging the company, which is an important stake for us as we do want to keep Thales being an investment-grade company with a strong balance sheet.

Clearly, funding our organic growth through CapEx and R&D, and R&D is super important for us. M&A, we discuss M&A with the same, I would say, philosophy as already discussed, dividends as well. And we said that the 40% payout ratio will be proposed to the AGM giving clear visibility on this front. And last but not least, buyback. So buyback is part of the ToolBox clearly.

Now don't -- always keep in mind that among the different criteria that we look at if and when we have to decide for a buyback is clearly the price of the company, the share price. Is there a gap or not? Do we think there is clearly potential in terms of valuation of the company that is not well understood by the market. And it's true that currently, if we look at the share price of Thales, I cannot say that there is a misunderstanding or a mismatch between the full potential of the company and how the company is currently valued by the market.

So all in all, the ToolBoxes there, we have all the levers in hand, and we do not exclude one among any others per definition.

We are now going to proceed with our next question. And the questions come from the line of Christophe Menard from Deutsche Bank.

I had two. The first one on BROMO. Thanks for the update. Is there any extra update on the authorization? Any progress being made on this, quite obviously? You mentioned it needs to be authorized. That's the key element. And the other question on SAMP/T NG , thanks for the update as well.

The contract in Denmark, has it been confirmed -- I mean, there has been announced back in September, but is it confirmed yet? And can you comment -- I mean, you mentioned a few other potential markets. Do you see more interest since the September [ CH ] or the September announcement? And what is the updated potential?

I can start and Pascal will complement, of course, if needed. Well, on BROMO, I would say so far so good. I mean, everything is on track. Number one, the social processes are ongoing. And I would say with constructive discussions with the unions, constructive discussions. They do understand the rationale of this initiative. And I would say the benefits for everybody, the customers, the employees and as well the shareholders of the groups.

Of course, the second work stream, which is important is antitrust authorization. On this front, discussions are ongoing in a positive -- I would say, with a positive, I would say, mindset of everybody. So this is -- I'm not saying that we expect such outcome. But globally speaking, I would say the discussions are constructive on this front as well. That's the two main work streams. There are many others, but probably with less, I would say, importance than those two ones.

So stay tuned. We'll keep you informed, of course. But for the moment, work in progress in a positive sense. On SAMP/T, there is, for me, absolutely no risk not to do this contract in 2026. The Danish customer even passed us some LLI contracts, long lead item contract to, I would say, anticipate the formal and definitive full scope contract that was clearly expected in 2026.

So no surprise on the fact that it was not booked in 2025. Denmark has chosen to go through [indiscernible]. That's why it takes a bit of time. And again, it's just an iterative process. No surprise on this front. So you should or you could consider that it is 99% secure, I would say. Now of course, there are many other prospects in -- typically in Europe, Eastern Europe, in the Middle East as well. By the way, the recent events of this last weekend shows how air defense is important again and again after Ukraine, it's another, I would say, very visible and striking example of how air defense is important.

And of course, it reinforced our conviction that some SAMP/T NG has a lot of potential in the years ahead of us. I don't want to mention any country in particular because they don't like us to disclose discussions. But believe me, the pipe is important in this domain. And in particular, both in terms of, I would say, performance offered by the SAMP/T NG versus its main competitor, which is the Patriot system.

And secondly, an important criteria of decision is lead time. And again, SAMP/T NG is, I would say, available in the short run, clearly, before 2030, 2028, 2029, where the Patriot system, if you want to buy one tomorrow, you will have to wait much longer than the date I said for the SAMP/T NG. So all these criteria or all these elements are positive elements, and that makes SAMP/T NG a good candidate for future big orders in the years to come.

We are now going to proceed with our next question. And the questions come from the line of Aymeric Poulain from Kepler Cheuvreux.

The first question is on cyber again. And just to understand the phasing of the reacceleration, the gradual comments you make in the guidance? And why does it take so long to regain the lost market share of last year? That would be the first question. And secondly, to follow up on Ben's question on AI implication for cyber, but perhaps broadening the question on the whole portfolio. I mean, what do you see in terms of the overall competitive impact of AI on your various businesses?

What are the most important challenges or opportunity? And maybe is there already some figures you can provide in terms of the contribution to sales or the benefit in terms of cost or the size of the investments that you're putting into your AI transformation?

Maybe -- first good morning Aymeric ,thank you very much for your two questions. Maybe I will start on cyber. So in a nutshell, why is it so low? Why it so slow? I mean -- so of course, I mean, I guess it was quite clear that 2025 was below expectations. And we made it clear that, I mean, those difficulties that we faced in 2025 was above what we anticipated beginning of 2025. And it's true that it took us a bit of time, I mean, to put that under control in terms of, I mean, the organization of the sales force, the implementation of the new variable compensation program, getting the right level of training across the workforce.

I mean, developing the new element, the new level of intimacy with customers and our sales force, our sales reps having to get trained to a new portfolio of products. So it seems to be easy from the outside. Now when you drive and you manage a sales force of more than 1,000 sales reps, I can tell you that it's not that easy. So we are, of course, a bit cautious. This is also our trademark globally. And we believe that we should see growth accelerating throughout 2026. Now let's take quarter-by-quarter, I mean, to give you more input on that. But please be assured that we are doing whatever we can, I mean, to accelerate on this cyber product business.

I've tried to explain, but perhaps I was not clear enough during the presentation, how we do leverage AI for a while now in all our different lines of products, be there I would say, sensors. I took the example of the TALIOS pod, but I could have mentioned how do we embed AI in our radars, in our electronic warfare equipment, in our even radio communication equipment, number one.

And number two, how do we leverage AI in the so-called decision and making system, the C2 system, if I take the military acronym. And we have already powered by AI, several, if not many, C2, C3, C4I systems for several customers in the world. So it's not possible to give you a measure of how AI make us even more, I would say, attractive. But that's what I observed with the conversations I have with our customers, starting from world-class products and making them even more, I would say, attractive by enhancing their capability through AI.

This is a clear and straightcut strategy for us. Last but not least, we do as well care about AI on our internal processes. That's another, I would say, aspect of how do we use AI. It's clear that it is a key element of our global and overall competitiveness plan. Now it's one element among many others. So it's, again, not possible to, I would say, decouple this one from all the others and to say, okay, the contribution of this element help us in this amount of -- in this percentage to improve the competitiveness of the group. But definitely, it is a key element that we use or a key enabler that we use to improve the overall competitiveness of Thales.

We are now going to proceed with our next question -- and the questions come from the line of David Perry from JPMorgan.

So two questions. One simple one, one a bit longer. The simple one is the associate line was very strong. If you could just comment on that, that would be helpful. The second one, if I can be a bit provocative. If I -- you delivered a good EBIT number overall for the group, it was better than consensus. But if I compare it to expectations 12 months ago, you're kind of double-digit better on EBIT in Defense and Aerospace and you're about 20% worse in Cyber and Digital.

What is the chance in 12 months' time that you meet your group guidance, which you often do, that it's going to be a lot better in defense or aerospace and worse in cyber, so -- or cyber and digital. If you can just give your level of confidence overall on the individual parts?

David, thank you very much again for your insightful questions. So I mean, the first one, I mean, about equity affiliates. Yes, it's true that, I mean, 2025 was pretty good. Having said that, 2024 -- the 2024 reference base for equity earnings was pretty low. And it's true that we had in 2024, some negative one-off. I think probably a better reference base for equity earnings would be more 2023 than 2024.

And if you compare 2025 against 2023, you will realize that overall, our equity earnings in 2025 are 20% above what we reported 2 years ago. And this is basically, I mean, a normal type of expected contributions and in particular, because it so that our defense JVs are doing pretty well, but also, I mean, fueled by, I mean, also the level of demand across the board. Maybe a last point, it's also true that and I mentioned it, we had on one of our CDI JV, a positive one-off in 2025.

Now the underlying, I mean, message is that overall, across the board, we see, I mean, contributions from JVs keeping moving up. By the way, it could have been even better absent the tax surcharge in France that it never got contributions by EUR 8 million in 2025. So all in all, I mean, a pretty good level of contribution, but reflecting, in particular, defense JVs that are performing pretty well. And I could also mention JVs in the avionics business that are doing also pretty well.

Now your second question about what is going to happen in a year's time when we meet again, how will -- no, I mean maybe I can start, Patrice, unless you want to. No, of course, I mean, we give you at this point, I mean, the best view that we have within Thales with, of course, I mean, defense with, I mean, quite a good traction on this matter. Avionics also pretty good traction. Space as well. And that's -- I mean, when you look at our level of growth for Space in 2025 has been above the expectations. It's a matter of fact.

I mean, I remember a year ago telling you space revenue should be low single digit in 2025. Eventually, we have done the mid-single-digit plus for space, so doing better. I mean the -- then it's about cyber, and we share, I mean, how we see the situation getting back to growth progressively on cyber product. And I mean, this is what we expect to announce you in a year's time as we release our 2026 financials.

But overall, what I see is that as compared to what we said a year ago, we are overall, whether it's order intake, whether it's revenue, organic growth, whether it's EBIT, whether it is net income, whether it's free operating cash flow, at the end of the day, when you look at our 2025 figures compared to what we said a year ago, all those metrics in terms of 2025 results are above what we said a year ago.

I mean this is just a fact-based comments. So at this point, and we are just entering 2026 with, of course, a number of open points, and we see in a year's time whether or not, I mean, we'll be at this level or whether we'll be above what we guided this morning.

But we have shared what we do strongly believe in as we speak, of course. But David, every year, we face along the year, unexpected events. And typically, last year, it was a tariff who could have expected the decision taken by the U.S. President at the very beginning of 2025, no one, by the way, no one. Then it's our duty. And I think it's part of the merit of the business model of Thales to deliver whatever it happens.

And the fact that, yes, we are, I would say, involved in several domains or several verticals, maybe a source of complexity for you guys trying to understand Thales, but it's also a source of resilience along the year when it happens something here or there. And it always happens something here or there, always, always always.

So at the end, what really counts, it's Thales' results, even more importantly, that's the results of division A, B or C. And again, if we do our results by the end of this year a bit differently, what would be even more important is doing our results globally speaking. So we will see, David. We'll do our best to deliver, I would say, as expected per division, but what matters most is what we do at group level.

Okay. And something we can chat about over the next dinner, which we look forward to.

With pleasure, David, with pleasure.

Yes, we are now going to proceed with one final question. And the questions come from the line of Ross Law from Morgan Stanley.

So just one on kind of high level on the medium-term growth outlook, which you've upped -- the upper end of the range of 5% to 7%. Can you just provide some color on the growth rates at the divisional level? That's the first one. And then just secondly, on Space, what is the absolute EBIT contribution in '25? And what do you expect for '26?

Okay. So at this point, I mean, a bit cautious and we are guiding you division by division for the 2024, 2028 period of time. I mean what we said today is overall Thales in terms of organic growth being at the high end range of the 5% to 7%. But at this point, we need to be more patient. I don't want to go deeper on this matter.

Second point on Space. So you probably remember a year ago, we said that we're expecting, I mean, 2025, pre-restructuring EBIT being positive. What I can share with you is that overall, the post restructuring, so full adjusted EBIT for Space was slightly positive in 2025 despite the level of restructuring that in my memory is something around EUR 20 million.

So overall being slightly positive despite the EUR 20 million headwind on restructuring. It shows that we have done a bit more than expected on this matter. And what we're expecting in 2026 is the further progression of our EBIT. All of that being consistent with the 7% plus 2028 EBIT margin that we shared at the Capital Market Day with some kind of linear progression in terms of EBIT margin.

This is what we said a year ago, and this is what we can confirm today. So linear progression from this breakeven plus full EBIT margin in 2025 to 7% plus in 2028.

So thank you all for your questions. We'll be happy to meet you on the road in the next couple of days together with Pascal. If you have any follow-up questions, do not hesitate to reach out to Louis and the IR team. I wish you all a very good day. Thank you very much. Bye-bye.

Thank you very much. See you. Bye-bye.

Thank you, ladies and gentlemen. If you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group Investor Relations at [email protected], and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect your lines. Thank you.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales Q3 2025 Results Call. The presentation will be held by Pascal Bouchiat, Thales' CFO. It will be followed by a question-and-answer session. [Operator Instructions]. I must advise you that today's conference is being recorded.

I would now like to hand the conference over to Ms. Alexandra Boucheron, VP, Head of Investor Relations. Please go ahead, Madam.

Good morning. Welcome and thank you for joining us for the presentation of Thales' 9 months 2025 order intake and sales. I am Alexandra Boucheron, Head of Investor Relations at Thales. And with me today is Pascal Bouchiat, Thales' Chief Financial Officer. As usual, this presentation is audio webcast-ed live on our website, thalesgroup.com, where the slides and the press release are also available for download. A replay will be available soon after the end of the event.

With that, I would like to turn over the call to Pascal Bouchiat.

Thank you, Alexandra. Good morning, everyone. So let me start with Q3 2025 highlights. I'm now on Slide 2. Thales continued to record over the third quarter a strong commercial momentum in most of its businesses. The level of demand for our solutions continues to be high, notably in Defense, where our backlog benefits from stronger European collaboration, in particular in the framework of the Readiness 2030 strategic defense initiative.

Thales indeed booked in the third quarter, several large contracts with European countries, notably in air defense. I will come back to those later in the presentation. Air defense, as you know, is a critical need today in a number of countries. In that context, Thales is proud to have recorded a first export success for the SAMP/T NG that was selected by Denmark in September. This comes as a major turning point for the SAMP/T NG and paves the way for further successes.

Space also saw some good news this quarter. Thales indeed signed a first contract with SpaceRISE, the consortium of satellite operators. This contract relates to a first sizable engineering development phase for the IRIS Square constellations. Although discussions are still ongoing with the open commissions and SpaceRISE, this is an encouraging sign that the project is progressively taking shape.

Finally, Thales keeps being at the forefront of innovation in its businesses. This is particularly true on the quantum revolution in which Thales researchers are playing a central role. To that end, we launched in September, the very first quantum-resistant smart card in Europe to receive high-level security certification from French Cybersecurity Agency, ANSSI, on industrial standards. This underscores Thales' commitments to staying ahead of emerging cyber risks in the quantum era.

Moving on to 9 months and Q3 2025 key figures on Slide 3. Order intake amounted to EUR 16.8 billion at end September '25, up 9% organically year-on-year. This performance was driven by continued strong commercial momentum in the third quarter, which saw a 30% -- 37% organic growth, and the booking of several large contracts that I will comment on the next slide. Sales came to EUR 15.3 billion over 9 months, up 9.1% in organic terms. Q3 alone recorded a sharp 11.2% organic growth. This puts us right on track to deliver our 2025 annual targets.

Moving on to Slide 4, commenting order intake. As mentioned earlier, commercial momentum keeps being strong for Thales, driven by the continued success of our product and solutions with our clients. As you can see on the graph on the right-hand side, all types of orders contributed to this robust performance. A few comments on large orders first, which continue to fuel the backlog. 14 large orders have been booked so far this year, of which 4 new orders came in Q3.

Nine large orders were booked in Defense over 9 months, including two with a unit value in excess of EUR 1 billion, namely the order of 26 Rafale by Indian Navy and the contract with the U.K. MOD for the delivery of 5,000 LMM missiles. Also five large orders were booked in Aerospace, of which four in Space and one in Avionics. It's worth mentioning that orders between EUR 10 million and EUR 100 million recorded a remarkable 18% growth, while orders below EUR 10 million were continuously solid as well.

Moving on to sales on Slide 5. A few words first on scope and currency impacts. Over 9 months, the scope impact amounted to EUR 90 million, mainly coming from Cobham AeroComms acquisitions closed in April 2024. Currency impact was negative at minus EUR 164 million over the period, including minus EUR 91 million in Q3 alone. All in all, this negative impact led to a 1 point headwind on sales reported growth.

Sales organic growth reached a solid 9.1% over 9 months. This performance is a result of strong sales momentum in Aerospace, mostly driven by Avionics and continued double-digit growth in Defense. In Cyber & Digital, sales were slightly down organically over the period, reflecting different trends I will comment later. Both mature and emerging markets contributed to this robust sales growth with a noticeable 14.5% organic growth in emerging markets.

Now moving on to performance by segment, starting with Aerospace on Slide 6. Orders in the Aerospace segment amounted to EUR 3.9 billion, up 7% in organic terms. This performance reflects solid underlying demand in Avionics, fueled by the continued success of Thales solutions. In Space, order intake was up with four large orders booked since the beginning of the year, of which three in telco, including the contract related to IRIS Square and also one in exploration.

Sales reached EUR 4.1 billion over the first 9 months of 2025, representing an increase of 6.9% organically year-on-year. This sustained growth momentum was notably driven by Avionics, which recorded continuous robust organic growth over the period in both civil and military domains. All sub activities were supportive of this performance. In Space, sales were up year-on-year, in line with our annual expectation for this business.

Now commenting Defense performance, I'm on Slide 7. Order intake in the segment amounted to EUR 9.9 billion over 9 months, a 12% increase in organic terms. Q3 was especially strong. However, we know that quarterly order intake can be bumpy. In the current supportive context, nine large orders have been booked since the beginning of the year. Three were booked in Q3, including two air defense contracts with the U.K. and Germany for a combined amount of EUR 1.9 billion. These significant commercial successes illustrate that Thales, leveraging its comprehensive portfolio of innovative products and solutions, is ideally positioned to benefit from the ongoing stronger European collaborations in defense.

The perspectives remain solid in the coming quarters and years as countries are progressively increasing their defense spending and benefiting from further support from Europe as part of the Readiness 2030 initiative. Sales were up sharply year-on-year, up 14% organically to EUR 8.2 billion. All our defense activities contributed to this robust performance with continued strong growth. This puts us right on track to deliver high single-digit organic growth for the full year 2025 in Defense. As a reminder, we expect a lower Q4 on the back of the high comparison basis from last year, which saw Q4 '24 record 24% organic growth.

Now looking at the Cyber & Digital, I'm now on Slide 8. Sales in the Cyber & Digital segment amounted to EUR 2.8 billion over 9 months, slightly down organically at minus 1.3%. In Cyber, sales were down year-on-year over 9 months. In Cyber Products, the business was not yet back to normal in the third quarter. The first half of this year saw the final step of Imperva's integrations with the merger of Thales and Imperva sales force. This, as you know, created some disturbances on the business. Those disturbances continue to weigh on the performance in the third quarter. We are continuously focusing all our efforts to get back to growth in an overall supportive cyber market.

Cyber Premium Services sales were down year-on-year. The business kept being soft in Australia, where it has a significant footprint. The ongoing execution of our premiumization strategy aimed notably at focusing our sales strategy on selective profitable growth segments. And this is, however, showing encouraging signs.

Moving to Digital Identity, where was sales were up slightly over 9 months. In Payment Services, digital banking solution showed outstanding growth over 9 months, which was, however, muted by still low volumes on physical cards. We indeed see some areas of the business still impacted by customers' destocking. Secure Connectivity solutions sales recorded sustained growth over the period, mostly driven by the strong momentum of digital solutions, included eSIM and on-demand connectivity platforms.

So concluding with our financial objective for 2025, I'm now on Slide 9. The continued strong momentum for both order intake and sales in Q3 2025 and the strong perspective ahead of us make us fully confident to achieve the target set for the year. Accordingly, we fully confirm our 2025 objectives. Book-to-bill ratio will be above 1. Sales are expected to grow organically between 6% and 7%, corresponding to a range of EUR 21.8 billion to EUR 22 billion. And the adjusted EBIT margin is expected between 12.2% and 12.4%. Many thanks for your attention, and I will now be pleased to answer your questions.

[Operator Instructions] And the first question come from the line of Olivier Brochet from Rothschild & Co.

Pascal, I would have three quick ones, if I may, please. The first one is on Defense and a small part of the business for you, I suppose, which are drones. Could you give us a sense of how large a business it is for you today? The second question is related to that one. You announced the joint venture with Destinus a few weeks ago. Can you share a bit more on what you will be doing in this area? And the third one is on the F126 in Germany. If they change the prime contractor for that contract, what are the consequences for Thales, please?

Okay. Olivier, so starting with your first question about drones. I mean it's at this point, quite a small business overall for Thales, but clearly, an opportunity for us to get growth. Maybe it's worth that I remind how we are positioned and what we want to do on this market. By the way, I guess that when you discuss about drones, I understand that it might be more unmanned air vehicles, what we call UAV. Knowing that we also see the emergence of drones, for example, undersea -- underwater system, where we also work on drones, by the way, with Naval Group. But at this point, the market is probably more driven by unmanned air vehicles.

When we discuss about drones or UAV, we can discuss about platforms that are used for different purposes, but we can also discuss about what we call loitering munition, which, as you know, is this type of ammunitions can fly over potential targets and then detect and be directed to the target. So I mean, the concept of drones covers a spectrum of different type of solutions.

Now how are we positioned on this matter? As you know, our play is not to develop platforms. What we do is more to provide the equipment, the solutions, but also the system integration. So what does it mean? It means that in terms of specific solutions, we provide, of course, a set of different sensors. That's the first, the type of business we develop in this drone business. Second is what we call C2, command and control. So providing the intelligence to the systems. And third is military capabilities and in particular, through the development and the sales of what we call warhead in particular, to equipped at drones or loitering ammunitions.

So this is where we are positioned. So as you understand, it's more either positioning Thales as a supplier of different equipment. By the way, I also forget another type of equipment, which is secured communications line of sight, for instance. So what we do is to provide this type of equipment together with, in some cases, also providing system integration capabilities. So this is basically what we do.

Now overall, at this point, it's a business which is probably yes a triple-digit million euros of revenue. But at this point, relative to the size of our Defense, it's not that a large segment, but clearly a growing one. Your second question was about the JV that we announced this morning. But your question was a bit broad, Olivier, when you say what we will be doing with this JV. So can you elaborate a bit more because otherwise, my answer will be quite generic?

I don't know if I'm still on the line.

Yes, yes.

I am, perfect. No, the question was on the JV with Destinus in drones.

No, I thought that you were asking a question about the JV that we announced this morning. So no, Destinus is probably a good example where, I mean -- and probably you have seen the number of potential drones that this could reflect. And basically, it's probably a good demonstration of what we want to do. And very clearly, we don't make platforms, but we can platform -- we can partner with platform makers. And in particular, when it comes to high volumes type of platform production, this is not the type of business we want to be in at Thales. Once again, with the intent at Thales to focus on providing sophisticated equipment. I mentioned sensors, C2, line of sight, warheads. So this is basically how we want to position ourselves, and Destinus is probably a good example of what we want to do.

Your last question was about F126. And it's true that the German MOD is considering changing the responsibility from Damen to another prime contractor. This is what we have understood. Now of course, we are in close relationship with the German MOD. And I mean, all news that we got from them are pretty reassuring about our positioning in this program, where you understand that we provide in particular, two large type of equipment. First is SAMP/T, in particular, water capability for this class of frigates, plus the Combat Management System, which is also, of course, a critical equipment for this class of frigates.

Our next questions come from the line of Alessandro Pozzi from Mediobanca.

Congratulations for the new JV in Space, and I do have some questions about that. I'm not sure how much you can say at this point, but I will try anyway. The first will be in terms of strategy, how the new company or the new JV is positioning versus what the three different companies are doing at the moment in terms of positioning in different subsegments of Space? And you talked about synergies. I'm not sure how you can tell us how you arrived to the triple-digit numbers. And also, we've been reading about on the press that there potentially could be a compensation to Airbus for having a lower share of 35%. Any color on that would be appreciated.

Alessandro, so on your first question, it's really about putting together the strength of the three companies and working more and more on more integrated offers, but it will be also bring together all the R&D capabilities, which are pretty significant in each of the three companies. I mean, to build up here again as much as we can and avoiding duplications of efforts when it comes to development. But because of that, freeing resources to invest in order to pursue new opportunities.

You discussed and I could elaborate just a bit on the synergies. We mentioned mid-triple-digit level of bottom line synergies 5 years after the closing. And as you can imagine, in this type of situation, it's going to be a combination of top line revenues. And of course, more synergies reflecting better competitiveness and better operational performance. When it comes to, in particular, better operational performance, as I mentioned, avoiding duplications of investments. But it means also combining as much as possible engineering capabilities.

Of course, working on program management where we believe that we can make a substantial savings. Of course, SG&A is also a matter we can expect also synergies. Not to mention, of course, procurement will be also an area where we can envisage synergies. So quite a wide spectrum of synergies. All of that in a context where we believe that the level of growth in this market should start picking up or should grow. And it's also true that the recent news in terms of announcements in [indiscernible] Europe in terms of the need to invest more in space capabilities is making the overall framework probably a positive in order to develop this type of synergies. It's always, of course, much easier to get synergies in a growing market than in a shrinking market.

Your last question was about compensations. And yes, to reflect -- I mean, to make sure that overall, there will be a balance between the economic contribution of each partner and its level of shareholding. And yes, there will be a mechanism with regard to balancing payments. Now at this point, it's really too early to make any more comments. And this type of balancing payments will be made public probably at closing and not before.

Okay. If I can, just maybe last one on Cyber. I think the overall division, Cyber & Digital, I think we've seen an improvement versus H1, but Cyber is still a little bit weak. Should we expect maybe an improvement in Q4? Or you see an improvement in Cyber sales something for 2026?

No. Of course, we are expecting 2026 to be stronger than 2025. Now Q4, we should see a sequential improvement as compared to Q3. Now it's true that, as I mentioned, in my press is true that we still see those disturbances still weighing in terms of overall efficiency and in terms of level of revenue. So we expect Q4 to be better than Q3, but it's true that where we're expecting more growth is probably from 2026.

And the next question come from the line of Benjamin Heelan from Bank of America.

I had a few. So firstly, just wanted to ask a little bit more on the Space JV. Are there going to be any onetime charges, cap gains, et cetera, that we need to think about? And should we assume going forward, it will be consolidated from January '27 as a rough time line? Secondly, I wanted to ask on Aerospace. It seems as though the supply chain is in a much better position than it was. Can you talk through a little bit how are you seeing the aftermarket performance there? What are you seeing in terms of your OE and your IFE business and the trends you're seeing there?

A quick question on Cyber, just to follow on from that last question. I mean the 3Q performance to me feels disappointing relative to the comments you guys had made on the Q2 call. And it doesn't seem from your comments that it will return to growth in Q4. It sounds as though Cyber will improve sequentially, but it's still not going to grow. And I feel as though at half year, the commentary was we're largely through a lot of these integration challenges, so we should start to see an improvement. So what has lagged in Q3, that's meant it's continued to be quite weak? Just to understand a little bit what's going on there.

And then final one, France in your geographic tables. It does look quite weak in terms of both orders, but also revenues. I was just wondering if there's anything to read into that with the government changes that we've had.

Ben, so a number of questions, so I'll try to be quick. So on the Space JV, you asked about onetime charge. Before closing, overall at Thales, we don't expect any significant onetime charge as the carve-out of our own business is mostly done because, as you know, we already today operate through a JV. Thales Alenia Space is already some kind of stand-alone company. So we don't expect on our side significant carve-out cost, first point.

Now once the JV is launched, you mentioned about 2027 January 1. I mean, we believe that the closing should be done in 2027. At this point, we cannot be more precise, but I wouldn't bet on January 1 in terms of date of closing. I think it will be probably later than that. And the reason, as you understood, of course -- by the way, there's, of course, a bit of uncertainty on this matter. And in particular, as you have understood, we have ahead of us, some significant discussions with regulatory bodies in various jurisdictions, in particular in Europe, but not only in Europe. And we know that by experience that all of that can take time.

Now once the JV is up and running, we mentioned the level of synergies that we plan to get. Of course, there will be cost to implement those synergies. Probably at this point, it's probably a bit too early to be more precise on this matter. But of course, to get synergies, we need to consider cost to implement those synergies. That's, of course, something which is quite obvious.

Aerospace, overall in Q3, above our expectations in terms of level of growth in this business. By the way, not that much driven by aftermarket, where there was growth. But where we had most of the growth in our Avionics business is more on IFE. But also the line fit was also pretty strong in Q3. And overall, Avionics in terms of top line growth in Q3 above our expectations. Which was not the case for Cyber and it's true that in Q3 overall -- and you're absolutely right. I mean, then the level of revenue in Cyber in Q3 was a bit below our expectations.

At this point, we say that Q4 should be better than Q3, yes. It has stabilized in Q3, but we are expecting more in terms of level of revenue. So we believe that we'll see Q4 being better than Q3. But of course, I'm a bit cautious considering the fact that Q3 was a bit below our expectations. And France. So France overall, no specific concern. It's true that Q3 last year, we had pretty large orders in France, by the way, in particular, on the SAMP/T for France. So as I mentioned, it can be a bit bumpy, but no specific concern on this matter.

And the questions come from the line of Ian Douglas-Pennant from UBS.

Sorry, can you still hear me? I was going to blame the UBS IT for not let me find the mute button. Could we talk about the Defense business just to start with. So what are your expectations for growth for the full year for that business? And if it's still high single-digit, could you talk about what the offsets are in Q4 in excess of, of course, the high comp that you've got? Secondly, on the Space JV, a couple of questions. Could you just educate us quickly the Thales SESO business? Could you just help us understand roughly how big that business is? And apologies if that's been said before? And if the JV comes into force in 2027, what are the major risks to timing around that? Should we be thinking about antitrust? Should we be thinking about negotiations with the partners? Should we be thinking about something else?

Okay. Ian, so on your first question about growth in Defense for the full year. So I stick to the high single-digit organic growth for revenue for the full year 2025. It's true that end of September, it's above this level because it's 14%. Now as I said, Q4 last year was very strong with a 24% growth as compared to Q4 2023. So hence, the fact that we said because the reference base is so high in Q4, we are, of course, a bit cautious. And this is why we stick to the level of growth that I mentioned earlier, so high single-digit.

Now probably from my tone, you can get that overall Q3 was, in Defense, a bit above expectations. And by the way, a level of growth, which is not coming from a single segment or a few segments, it's really across the board in Defense that we see pretty strong level of growth. Your question about our Space business, your question was about the size of this business today at Thales, was it?

Exactly, sir. Yes.

So overall, as you know, we operate our Space business through two JVs. One is Thales Alenia Space, where we own 67%, which is consolidated -- fully consolidated at Thales. And the 2024 level of revenue for this business was EUR 2.2 billion. And second, we've got in this, what we call, the space alliance with Leonardo. We also have a minority stake in Telespazio, 33%. But Telespazio is consolidated just through the equity method, which means that we don't consolidate the Telespazio revenue in our own P&L. We just reflect our share in the net income of Telespazio.

Your last question was about what would be the risk to close the -- this new JV. As you have understood, we've got -- if I summarize, we've got ahead of us three challenges, three steps or three key type of actions. One is, of course, to engage the social processes with works councils, employee's representatives and that in the various countries we operate in which, by the way, the three partners, the three companies operate. And the announcements of today allow us to initiate this overall social process.

Second is, of course, getting ready and working on the various steps to make a stand-alone company, which means that there will be some, in particular, a carve-out at each of the three companies. As I mentioned, at Thales, we already operate through two JVs. Which means that in our view, for our own contributions, the preparations will be -- will not be that a great challenge.

And the last point, which is probably, of course, the one where the timing can take a bit of time. It is, of course, going through all the regulatory approval and going through all the regulatory bodies, in particular, the antitrust regulators. And we know that all of that can take a bit of time. Now it's also true that we have already started to engage some of them, and other regulators will be engaged in the very short term. So those are, in my view, the three elements.

In particular, the last one, this is probably where, of course, we need to be vigilant, even though we believe that our case is pretty strong. Of course, I could comment more on this matter. But when it comes to this type of process interactions with antitrust regulatory bodies, we know that it can take time. So this is why we mentioned that the closing of the new JV will be in 2027 without, at this time, to be able to say when will this be enforced.

[Operator Instructions] Our next question come from the line of Herve Drouet from CIC Market Solutions.

Pascal, so two questions. First one, I just wanted to check the order from Denmark on SAMP/T NG, sorry. Was it -- do you know when it will be booked in your order book? And was the part booked in Q3 or not? And if it's not the case, at what time do you think it could be booked? And the second question is back to the Space JV. I understand you are saying you are currently operating through existing JV. So therefore, the job on your side and the cost you will have to put aside to include the business will be relatively limited. But I was wondering, did you get any data you can share with us in terms of the overall integration cost we should expect for this new entity to be put together? You were talking about synergies as three-digit -- in the three-digit million euro range in 5 years' time. I was wondering if you can give us a bit of a range potentially on the integration cost side, if you are aware of any.

Okay. Herve, so let's start with your first question about SAMP/T NG relative to Denmark. So it has not been booked in Q3. What we have announced in Q3 is the fact that we have been selected by Denmark. But of course then afterwards, you need to proceed with the final negotiations and signing a contract. Of course, this is a sizable contract. At this point, I'm not able to tell you whether this contract will be booked in Q4 2025 or in 2026. At this point, it's an open topic, but no specific stress on this matter. But it's probably quite a good example when I explained to the investors that it's always difficult to tell you that in this quarter why is it that the order intake in this quarter was above or below the expectation. It is also because we need to deal with this type of uncertainty, and it can move from December to Q1 2026. And at this point, I have no clue. But once again, it's not a concern to me.

Now on the JV, I will try to be clear, but taking into account, of course, the level of details that at this point we can communicate to you. So first, in terms of the level of synergies, we mentioned in the press release a level of synergies on the bottom line. So on the operating income, a level of synergies that would be mid-triple-digit million euro. Overall if I want to explain more in terms of what should be the range, it's between EUR 400 million and EUR 600 million of synergies on the operating income. And this 5 years after the closing of the transaction.

Now as I explained, to get these type of synergies, you need to -- of course, you need to spend money, you need to spend cash. And what is drafted in the press release, and I won't be able at this point to be more precise is that associated cost to generate those synergies are expected to be in line with industry benchmark. As you are expert of the industrial matters, no doubt that you will be able to have your own view about this statement. But at this point, and you need to consider that we are at the beginning of a new adventure with Airbus and Leonardo, pretty excited about putting together our assets. But of course, at this point, and considering this is the first step, we cannot be more precise on this matter.

The next question come from the line of David Perry from JPMorgan.

So it's a busy results day, and I missed a little bit of what you said. So I really apologize if I'm repeating anything. But two questions. One, could you just give a bit more precise detail on the sales growth that we saw in Q3 between Space and pure Avionics, and maybe even the Avionics civil versus military? And then just one last question. I know you've had loads of questions about Space and the JV. But that synergy number is very high as a percentage of sales for the combined entity. Are you expecting all of that to flow to EBITA? Or is that a gross number, but quite a lot of that is going to get recycled into R&D, for example, to be more competitive? So how much actually will flow to the EBIT number of the new entity?

Okay, David. So on your first question, overall looking at our Aerospace segment end of September, we said 6.9%. And I explained that Avionics growth was significantly above this level and Space -- below Space in line with our expectations, meaning that Space end of September is around 2%. And you've got Avionics, which is more probably something like high single digits of organic growth overall for the first 9 months in 2025. So we see, yes, this bit of disconnect between those two businesses.

On Space, it's -- yes, what we expect is really a bottom line impact of the synergies. Of course, you need to understand that in the first few years after the closing, there will be charges to implement synergies. And it's true that 5 years after the closing, of course, there won't be any more cost to implement synergies. But synergies will still not be at full speed, but will be already pretty significant, as you mentioned. And yes, this level of synergies is expected to impact positively the operating income of the joint ventures.

Okay. Very interesting. It's a huge percent of sales. Well, good luck with it.

No good luck. Of course, you also need to consider that from the current level of revenue of the JV. We mentioned EUR 6.5 billion of revenue. This is a pro forma 2024 figure. It shows that we expect the JV, as it close in 2027 or 2028 as the first year of -- full year operations in this new JV, we expect quite a significant growth. By the way, it's also good to have in mind that relative to Thales, this JV allow us to be more exposed to more growing businesses, in particular services because, as you know Thales Alenia Space doesn't provide service because service is part of Telespazio when it comes to Thales.

And it's also true that in the mid- to long-term, we expect services in the Space to grow more quickly than the infrastructure. So overall, please don't look at the level of synergies that we mentioned relative to the EUR 6.5 billion. It has to be compared to a level of revenue, which 5 years after the closing, which will be probably more something like 2032, which will be, of course, significantly above the EUR 6.5 billion revenue pro forma that we disclosed.

No, that's super helpful. Can I be cheeky and just sneak one more in? And again, I really apologize if it was already asked. In forming this JV, are there any equalization payments from any of the parties?

Yes. Of course as I mentioned, there will be, of course some kind of balancing payments. We cannot be more vocal at this point, as I explained earlier. But of course those balancing payments, it will ensure that the economic contributions of each of the three partners reflect its level of shareholding. This is quite obvious. But at this point, we cannot disclose. And by the way, those balancing payments might also take into account some valuation adjustments. So we need to wait until the closing to get final figures in terms of those balancing payments.

The next question come from the line of Chloe Lemarie from Jefferies.

Pascal, I would actually want to follow up on the topic of the F126 enrollment because the potential new prime contractor is in the process of being acquired by Rheinmetall, and they have actually called Thales among the companies they would want to partner with to expand their exposure to naval systems. So could you share maybe from your perspective, what could be the appeal of such a partnership? And what would be the key criteria for you to agree as opposed to just supplying systems as you currently do on naval platform? And the second one is on the Rafale in India. There's been quite a lot of news flow recently. So anything you can share to help us understand where in the process we are, especially around discussions on offsets and content, which seems to be a sticking point.

Chloe, I'm sorry, but I'm going to disappoint you probably on both topics. No, on Rheinmetall, of course, we are discussing. And that's already a comment that I made earlier. Of course the current situation, which is, by the way, very good with all those opportunities in terms of business development opens the door for more partnership with other companies. And I remember mentioning in particular, the JVs that we have decided with Kongsberg in Norway, but also JVs that were put in place in Ukraine to support our development in this country.

Of course, we are discussing with other partners and Rheinmetall is quite a good example. No, at this point, it's really too early to be more precise on anything because it's really too early. Maybe last point, I could comment specifically on F126. We welcome any decision from the end customers, the German MOD, to secure the overall execution of such an important project. And of course, we'll do whatever we can to cooperate with the new prime contractors if this is a decision of the German MOD. All of that with the spirit of collaborations, which is for us absolutely essential.

Last point on India. There is nothing more I can say on this matter. Probably a question that you could direct to Dassault Aviation as the prime contractors on this type of business. So no. And always difficult to make any comment. Now, good to see that Rafale has a number of opportunities which shows the quality of the aircraft. And in particular, when it comes to existing customers willing to order more, which, by the way, happened in various countries so far. It shows how they see the quality of the aircraft and also the support from the various partners in the overall operation. So all of that is pretty positive. But you need to be a bit patient on this matter as it is the case in all, I would say, Rafale opportunities.

On the Rafale, can I just ask you to confirm whether you're involved in the discussions on the offsets and the technological transfer? Or is it all through Dassault?

No. I mean, of course, we are involved with Dassault in the discussion. Now it's true that Dassault is leading the negotiation. But of course, we are involved as a partner, as a key partner with Dassault. And you discussed about offset. We are quite used to managing offsets in various countries and not just only for Rafale. It's really part of our business to be able to manage offsets in various countries. So don't consider that this is something which is new to us. This is something which we are quite accustomed to manage on various type of defense business in many countries. India is an example, among other examples of countries where you need to manage offset to develop your business. When I say offset, it's also -- and more and more importantly, the need for localization, which is, of course, something that we see developing for the future.

The next question come from the line of Ross Law from Morgan Stanley.

I've got two. The first is just on Cyber and coming back to Ben's question earlier. I'm just looking to understand if the integration of the sales team was completed in the first half, what exactly drove that 7% organic negative growth in the third quarter? And what changes in the fourth quarter to drive the expected sequential improvement? That's the first question. And then the second on rare earths. If you could provide some more color on which elements Thales is reliant on, where you source these, and what buffer stock you currently hold?

Ross, so on your first topic about Cyber. No, the integration of such a large commercial force, you cannot say that once it is merged, it is fully operational with a full effectiveness. And it's a progressive improvement that we expect from our commercial force through 2025. When it comes to your level of intimacy with your new customer, your level of technical understanding of the new portfolio of products that you need to sell, all of that cannot happen overnight, it takes time. And second, of course, all of that has also driven a level of turnover in our sales force, which was above what we anticipated. So which means that more turnover at our sales reps means the need to recruit more people, which means that we need to work more on training those new sales reps that joined Thales recently.

So all of that has created, yes, some disturbances and disturbances have not stopped end of June 2025. So it's a progressive improvement. But it's true that it is taking time. And it's true that today in terms of overall effectiveness -- looking at Q3 figures, it's true to say that overall, Q3 figures in terms of level of sales was below our expectations. Now we see with some metrics, that situation is improving, but it's probably a bit slower than expected. By the way, on the other side, if you look at Digital, our level of revenue was also above our expectation, in particular in the mobile connectivity business. So it means that it can be a bit different from one segment to the other.

Now, overall -- second question about rare earths. First, we don't buy rare earth minerals directly. Of course, we use small -- very small quantities of rare earths. At this point, we don't identify any specific risk in connection with the export restrictions, which has been imposed by China. Now of course, that's a point that we look closely. There was, in particular, the question about germanium, which is a strategic metal for Thales and in particular, in our infrared technologies. And it's true that on germanium, we have seen increasing global supply tension for this specific metal. Which means that as we have done in many other situations, we are working on different ways to manage these situations. So exploring new sources of germanium outside the traditional producing countries.

We are working on some recycling initiatives with some partners. And we are also working this time more on R&D to find alternative materials or to optimize the use of germanium in particular through optimized processes in order to use less germanium for the same outcome. So you see that overall our exposure is quite limited. But as always, as we face tension in the supply chain, we put in place the traditional actions, exploring new sourcing, working on getting additional stock from other partners, recycling. So those are the type of things that we have done in the past on other materials and overall pretty successful. So I would say this is one matter in the supply chain among many other supply chain challenges that we have been facing over the last few years. And that will continue, of course, as we will keep growing our top line.

And I made a few comments on supply chain in our last calls, saying that overall situation overall under control, which is the case. But please don't consider that supply chain tensions are no longer there. They are still there, which means that it is a continuous effort at Thales to manage supplies on various elements. I mentioned in the past, if you probably remember, hardware. I mentioned in particular PCB shortage. And we are still struggling to get the right level of materials for this type of patents, in particular, on specific hardwares and PCB is a good example. But so far, we have been able to manage all of that pretty successfully. And no doubt that it will continue this way going forward.

The next questions come from the line of Christophe Menard from Deutsche Bank.

So I had two. The first one is Defense Q3, very strong performance, as you said, organically. In the press release, you're saying that it's due to production capacity expansion being deployed. That means operational leverage, in my view. Does it mean that it could have a positive impact on your Defense margin in 2025? And the second question is on the Space Alliance. Sorry for this, you had a lot, but -- and still on the compensation, the formula that you will be using. My -- the question is, is the compensation -- I mean, you can't disclose it quite obviously, but is the compensation already agreed upon or will it be agreed upon in 2027? And will it be based on the formula mixing sales, EBIT performance, will it be based on historicals or forward-looking elements?

Thank you very much, Christophe, with your pretty specific questions. So on Defense, yes, but as I said in the past, new production capability being put on stream, yes, in Q3, but it's a continuous move. And quarter after quarters, we keep improving our overall production output following the investments that we have announced. And we gave you a few examples in the past about Thales increasing its production of effectors of airborne radars, ground-based radars. So we gave you a number of elements. I could mention also now more underwater system ramp-up capability. So nothing very specific on this matter. But all of that -- that was anticipated and all of that very much consistent with our guidance on Defense margin with this concept of 13% EBIT margin, which is the level of margin that we keep having in mind to guide you for the short and the mid-term.

Space Alliance, you want to know everything about that, but I will stick to what I said. Which means that, of course the mechanism has been agreed on, but the outcome will be finalized at closing. And that's the reason why we cannot be more precise on this matter as we speak today.

The next questions come from the line of Aymeric Poulain from Kepler Cheuvreux.

The last one on Cyber again. Would you be able to separate the performance in terms of organic growth in Q3 between product and services? And since someone asked about the margin outlook, would you be also able to confirm that the margin for DIS or Cyber & Digital now would stay around 14.5%? Or is there some impact of this weaker-than-expected organic growth on the margin outlook?

Aymeric, so your question in particular valid within Cyber because there are two elements between product and services. And this shows that where we are looking for growth. And what I said about effectiveness of the commercial force, all of that relates to the product business line within Cyber. This is where we've got a very pretty strong margin. This is why we are looking for growth on this segment, which is by far, the largest segment within Cyber.

The other one being services, where at this point, the profitability is not in line with our expectations. And where we said we made it clear, this business is needed, in particular, as we want to develop growth in products. This is a way to go-to-market for our product. But it's really a business where at this point, we are willing to focus on the profitable segments as opposed to market segments where we believe that differentiation is not recognized by customers. And this is why we have decided to exit some subsegments. And it's true that overall, if I take this service business, overall the drop in revenue. But part of it is really what we want to do is double digits year-on-year end of September. But once again, that's something we want to do in order to refocus this business more on the profitable market segments. And I need to say that I don't remember your second question.

The implication for the margin outlook.

Okay. So overall just to give you a rule of thumb, but probably a level of EBIT margin for the full year 2025, around 14% is probably what I have in mind. All of that being very much consistent with 12.2%, 12.4% overall at a group level.

The next question comes from the line of Sebastian Growe from BNP Paribas Exane.

Thanks for taking my question and squeezing me in. It's on SAMP/T. You recently said to expect more order wins for the SAMP/T and that beyond Denmark. So now you sounded on the call a bit reserved with regard to the timing of signing that contract. So my questions are, to what extent is the contract signing impacted by the question, how many systems Denmark might ultimately be willing to purchase? And secondly, how might the signing in, say, late '26 impact the signing of other contracts that you might have in the pipeline? So the question is if the Danish order is key to unlock potential elsewhere?

Sebastian, so it's true that as we discuss about Denmark, we are still discussing about the number of batteries. And it's -- this is why between being selected and sign a contract, there might be a bit of time gap. And that to a commercial discussion, which, in my understanding, also takes into account the final number of batteries that Denmark will order. First point.

Now second point, here we are discussing about a pretty sophisticated sensitive air defense capabilities. It's mid -- long-range type of capabilities. Those equipments, those systems are extremely sensitive for any countries. All of that, a bit like a combat aircraft, if I want to make some kind of analogy. All of that meaning that any contract of this kind, you've got a pretty lengthy upstream phase in terms of discussion with potential clients in order to end up with a final decision. It's not the type of contract that you sign in 2 or 3 months, it takes time because once again, it is extremely sensitive type of capabilities. But this is very sensitive, so I will not share this information with you. But of course, we are discussing with other potential customer.

When all of that will materialize, it will be probably progressive, but it will be in the next few years. So don't expect January 2026, Thales announcing one, two or three additional contract on SAMP/T NG that will be triggered by the signature of the Danish contract, no. This is quite important. And this is, of course a first step, which is so important for us as we discuss with other clients. Now the sequence of decisions in other countries at this point, of course, will take a bit of time. But as I mentioned a number of times, we are not looking for Q1 2026 order intake, but we are looking to keep growing our order intake in the next few years. And it's true that air defense capabilities is one key drivers -- key opportunities for Thales to keep growing our defense capability in the long term.

So air defense capability, in particular, SAMP/T NG is really the next 10 years in terms of capabilities because, of course, this system will continue to evolve, of course, but will be hopefully a success that will look like the Rafale success.

Last questions come from the line of Sam Burgess from Goldman Sachs.

Just following on the theme of air defense there. Some of your big wins recently have been focused on air defense, U.K., MOD, LLM, Denmark, SAMP/T. Just given the strength of demand that's likely to continue in that area over the midterm, do you see it as an area where you could do M&A or future JVs? Or are you pretty happy with your portfolio at the moment? And the second question, if I may, just the destocking that's ongoing in the banking payments business, any visibility on when that effect is likely to end would be really helpful.

Sam, so two different type of questions. So first on Defense and air defense. Yes, a quite important JV. As you know, we already operate under a JV with MBDA when it comes to mid, long-range air defense capability, and SAMP/T is a common venture between MBDA and Thales through a consortium, which is called EUROSAM. Now M&A on Defense because M&A cannot just be considered on air defense, because air defense is growing, so considering M&A on air defense questions, I would take it a bit more broadly about M&A in Defense.

Yes, no mysteries that we would be interested in any meaningful M&A on Defense. But this, of course, in line with our key M&A criteria when it comes to considering acquisitions. So of course the value of the technology, does it allow us to keep expanding our spectrum of technologies, what is the potential for growth, does it allow us to get a growing position in new markets, when I say new markets, in new geographies in particular. So those are the key criteria, of course, valuations as always. So yes, now we also acknowledge that M&A when it comes to transborder on Defense is always a challenge. So no rush. But of course we keep working and mapping the market to see whether there would be meaningful opportunities for us on Defense. But as you understand, not an easy ride considering the specificities of the defense industry.

Your second question about smart card destocking in particular on payments. It's true that it is taking more time than expected and in particular, in North America. So I would still be a bit cautious on this matter. Now that's something that we have anticipated. It's taking a bit longer, but I don't see anything concerning on this matter. So no, that's -- it's not for me something I'm quite concerned. Even though, yes, we would like the market to pick up a bit more quickly. But overall, for us, it's a balance also between level of revenue, level of margin. And at this point, the balance between the two on smart cards is pretty positive.

Okay. So I understand that was the last question. So thank you very much for all your questions. So as always, Alexandra and her team are at your disposal if you have any follow-up questions. It's true that there have been a number of questions, and it's true that it's not that common to issue both quarterly figures together with the announcement of a very important step relative to putting together a quite important business for Thales together with Leonardo and Airbus. That's a very positive news in our views. So don't hesitate to reach out. And with all of that, I wish you all a very good day. Thank you very much.

Thank you, ladies and gentlemen. If you didn't have a chance to ask your question on today's call, please do not hesitate to send your questions to Thales Group Investor Relations at [email protected], and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect, and have a good day.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales H1 2025 Results Conference Call. The presentation will be held by Patrice Caine, Thales' Chairman and CEO; and Pascal Bouchiat, Thales' CFO. [Operator Instructions] I must advise you that this conference is being recorded.

I would now like to hand the conference over to Ms. Alexandra Boucheron, VP, Head of Investor Relations. Please go ahead, madam.

Good morning. Welcome, and thank you for joining us for the presentation of Thales H1 2025 Results. I am Alexandra Boucheron, Thales' Head of Investor Relations. With me today are Patrice Caine, Chairman and CEO; and Pascal Bouchiat, CFO. The presentation will be followed by a Q&A session. As usual, this presentation is audio-webcasted live on our website at thalesgroup.com, where the slides and press releases are also available for download. Finally, a replay will be available soon after the end of the event.

With that, I would like to turn over the call to Patrice Caine.

Good morning, everyone, and welcome to Thales' 2025 half year results. So starting with a few highlights of the group's performance so far this year. To start, Thales has achieved a high single-digit sales growth in the first half of the year, mainly driven by Avionics and Defense. Indeed, focusing on Defense, the supportive context has offered Thales increasing opportunities globally with a new order of 26 Rafale fighter jets for Indian Navy, which was booked in Q2 2025, or with a GBP 1.16 billion contract with the U.K. Ministry of Defense for the supply of 5,000 LMM missiles booked in July 2025.

Growing opportunities that we start to see with the ReArm Europe plan to enhance Defense capabilities in Europe, and France planning to exceed the Military Programming Law by progressively increasing total defense spending from EUR 50 billion in 2025 to EUR 64 billion in 2027. This amount of EUR 64 billion was initially supposed to be reached in 2029, meaning that we expect a real acceleration in France as well. So this context, along with a constant focus on operational efficiency, has led to a strong increase in our adjusted EBIT margin, which I will detail in the next slide.

So now moving to our H1 2025 financial performance on Slide #3. Commercial momentum was solid for order intake over the semester with EUR 10.4 billion worth of orders. This reflects the high level of demand for Thales products and solutions in most of our businesses. The book-to-bill ratio stands once again above 1 in H1 2025. Sales progression was robust in this first half of the year, up 8.1% in total and organic changes to EUR 10.3 billion. Adjusted EBIT reached EUR 1.2 billion, recording a solid 12.7% organic growth. Margin was up sharply and stood at 12.2%.

Adjusted net income reached EUR 877 million in H1 2025 or EUR 937 million if we exclude the temporary additional corporate tax paid this semester in France. This compares to EUR 866 million last year. In terms of cash generation, H1 2025 was particularly strong with a free operating cash flow of EUR 499 million. Lastly, net debt position at end of June 2025 increased by EUR 383 million compared to December 2024 to EUR 3.4 billion as a result of the usual seasonal effects, including dividend payments. And if we compare to end of June 2024, the net debt has been reduced by more than EUR 1 billion. I now hand over to Pascal, who will review our financial performance in greater detail.

Thank you, Patrice, and good morning, everyone. I'm on Slide 4, starting with order intake. As Patrice mentioned, momentum was solid in H1 2025 for order intake, which stood at EUR 10.4 billion. One large contract was signed this semester with a unit value above EUR 1 billion, namely the order of 26 Rafale by the Indian Navy. This compares to 3 contracts in H1 2024 with unit value above EUR 500 million, leading to a very high comparison basis.

Now taking a step back and comparing this first half to H1 2023 order intake, we observed a robust increase of 21% in H1 2025 order intake, underscoring the group's solid growth trajectory. 10 large orders were booked in H1 2025, 6 in Defense in all domains, illustrating the continued strong momentum and the relevance of our portfolio of projects; 4 in Aerospace, of which 3 in Space and 1 in Avionics, all booked in Q1 2025. Importantly, orders below EUR 10 million showed robust progress of 40%.

Now moving on to sales on Slide 5. First, a word on scope and currency impact. H1 2025 saw a positive scope impact of EUR 87 million, mostly concentrated in Q1 and mainly resulting from the Cobham Aerospace Communications acquisition. Cobham is integrated in the organic figures since April 2025. Yes, April 2025. Currency impact was negative at minus EUR 73 million due to the strengthening of euro against U.S. dollar and Australian dollars. Excluding those impacts, sales were up 8.1% on an organic basis in H1 2025. This solid performance clearly demonstrates Thales' continued strong growth momentum. This growth notably reflects the good momentum in Aerospace, mostly driven by Avionics.

In addition, Defense delivered again double-digit growth in the supporting context Patrice already mentioned. Cyber & Digital was slightly down in H1. A progressive ramp-up is expected in H2, and I will come back to this in a minute. Finally, sales organic growth was well balanced between mature and emerging markets. Europe posted a solid 8.9% growth in H1 2025, while emerging markets delivered double-digit growth.

Turning now to Slide 6 and having a look at the drivers of adjusted EBIT year-on-year bridge. Looking first at the mechanical impact. Scope effect was positive and amounted to EUR 23 million, primarily linked to Cobham AeroComms acquisition. Currency impact was negative at minus EUR 9 million, while pension costs impact was marginal. As you can see, the strong progression of our gross margin was the most significant driver of adjusted EBIT growth. It was up EUR 160 million, driven notably by the sales volume increase on Defense.

While costs linked to marketing and sales are stable year-on-year, R&D expenses were up in H1 2025 and stood slightly above 6% of sales, reflecting sustained R&D investment. G&A expenses were contained as well, growing organically at less than half the pace of revenue. Restructuring costs were higher in H1 2025 versus H1 2024, mostly driven by the costs linked to the adaptation plan in Space. Finally, contribution from equity affiliates increased by EUR 28 million. Most of our JVs progressing well with also a few positive one-offs. On the other side, contribution from Naval Group was hampered by the temporary additional corporate tax in France.

Moving now to performance by segment and starting with Aerospace. I'm now on Slide 7. Orders in the segment came at EUR 2.7 billion, broadly stable year-on-year. Avionics enjoyed a solid underlying demand across most segments and notably in the military domain. Order intake in Space was slightly down, although 3 large orders were signed in H1 2025, of which 2 in Telco for Norway and Japan and 1 in Exploration. Sales amounted to EUR 2.8 billion, leading to an organic growth of 5.8% year-on-year. This reflects, on the one hand, sustained growth in Avionics with a strong performance notably in aftermarket, supported by robust air traffic momentum and in military activities. On the other hand, Space sales are still impacted by the low demand experienced over the last 2 years in the Telco business.

Now commenting adjusted EBIT with a sharp increase of 2.7 points in margin, which stood at 9.1% in H1 2025. This strong progression was driven by the solid double-digit margin in Avionics and also an improvement in Space margin on track to deliver a positive adjusted EBIT before restructuring costs in full year 2025.

Moving on now to Defense on Slide 8. So in Defense, order intake amounted to EUR 5.8 billion in H1 2025, reflecting strong and continued commercial momentum, although year-on-year comparison is impacted by a quite tough comparison basis. Six large contracts were booked in H1 versus 9 in H1 2024, which also saw the booking of 3 contracts with unit value above EUR 500 million. It's worth noting that small orders were particularly supportive this semester. The good news is that additional large contracts are expected to be booked in H2, notably in Air Defense with contracts with the U.K. and German governments. As a reminder, book-to-bill ratio is expected above 1 this year in Defense.

Sales amounted to EUR 5.6 billion, recording a sharp organic growth of 12.7%, ahead of full-year expectations. This was driven by continued double-digit growth in Q2 after a very strong Q1 with solid momentum in most of the activities. The performance also benefited from continuous production ramp-up. Margin was broadly stable, around 13% as expected and in line with annual expectation.

Moving now to Cyber & Digital on Slide 9. At EUR 1.9 billion, sales of the overall Cyber & Digital segments were down minus 1.9% organically. Commenting Cyber first, where sales were down organically in H1 2025. Cyber Products growth, which represents more than 80% of total Cyber business was hampered by the short-term disturbances linked to the merger of Thales and Imperva sales forces. This merger has been completed at the end of Q2 as expected. During this process, marking the final step of the integration of Imperva, 70% of sales reps were allocated either a new customer portfolio or a new product portfolio to sell. We now expect a progressive ramp-up in H2 for this activity.

In Cyber Services, low market dynamics held back growth in H1. As you know, our priority for this activity is on executing our strategy of premiumization to refocus on segments offering more profitable growth. While this process implies rationalizing and standard designing some operations, it can temporarily act as a drag on growth.

Moving to Digital Identity with sales that recorded growth in Q2 after a slow Q1. Over the whole semester, organic growth is slightly down. H1 2025 was slow in Identity & Biometrics as the activity is normalizing to a more usual run rate after the COVID catch-up effect that occurred until 2024 in the travel document activity. In Secure Connectivity Solutions and Payment Services, the performance of digital solutions was very solid. While Digital Banking solutions were indeed vigorous in H1 2025, Digital Solutions and Secure Connectivity also drove solid profitable growth.

The overall adjusted EBIT margin of the segment has been holding well this semester, protected by continued disciplined pricing policy. While overall margin was stable in Cyber, it's worth noting that the premiumization strategy is starting to bear fruits in Cyber Services with an increase in margin year-on-year. Margin was slightly down, however, in Cyber products due to temporary low top line evolutions. Margin was also slightly up in Digital Identity, but also benefiting from a few positive one-offs.

Now looking at the H1 2025 adjusted P&L, I'm now on Slide 10. The cost of financial debt and other financial results was up compared to last year. The comparison is impacted by the nonrecurrence of positive one-off recorded last year, namely dividend payments from nonconsolidated affiliates and also a foreign exchange gain. The finance cost on pensions and other employee benefits were broadly stable.

Looking at taxes, you can see the effective tax rate was significantly higher this semester and stood at 26.7%. This is due to this temporary additional corporate tax in France front-loaded in H1 2025 at EUR 60 million out of the total EUR 80 million impact expected this year have been recorded in H1. Excluding this impact, the effective tax rate was broadly stable at 21%. Minorities are down year-on-year, mainly linked to the reduced net loss incurred by Thales Alenia Space. Overall, adjusted net income group share stood at EUR 877 million in H1 2025 or EUR 937 million excluding the tax one-off. This compares to EUR 866 million last year, so leading to 8% growth.

Moving now on Slide 11 to free operating cash flow. So the free operating cash flow was particularly strong in H1 2025 and stood at EUR 499 million versus minus EUR 85 million last year. This excellent performance was driven mainly by the significant improvement in change in working capital. This reflects the continued satisfactory payment profile from customers including down payments as a result from ongoing action plans to optimize stocks after the increases of the past years. This H1 2025 performance makes us quite confident to achieve our guidance of 95% to 100% adjusted net income to free operating cash flow conversion ratio for 2025.

Concluding the financial performance, moving on Slide 12 with a review of the net debt evolution. So we see net debt amounted to EUR 3.4 billion at June 2025 versus EUR 3 billion end of December 2024. The main drivers of seasonal increase are the payment of our dividends resulting in a cash out of EUR 586 million and new leases for an amount of EUR 118 million. The disposal impact stood at minus EUR 64 million. This is due to the final price adjustment related to the sale to Hitachi Rail of the Transport activity. These impacts were, however, partly compensated by the strong free operating cash flow I've just discussed.

So thank you for your attention. I now turn over the call to Patrice to review our strategic priorities and guidance.

Thank you, Pascal. So now turning to our strategy and outlook. So I'm on Slide 14. Here are the 4 strategic priorities for 2025 we shared with you during our 2024 full year results. As you will see, we've made a significant progress following these priorities in the first half of the year. So first, ramping up our capacity, which includes production capacity, but also ensuring we have the right talent to seize market opportunities; second, restoring Space profitability, a key priority for the group this year; third, maintaining our innovation and R&D leadership to increase differentiation; and last, fourth, delivering strong value creation from our recent acquisitions, namely Imperva and Cobham, which have both undergone successful integrations.

So moving to Slide 15 and first, the capacity ramp-up. So due to the current supportive context and Thales' strong position and value offering, many of our products are in high demand. And to respond to this trend and serve our customers, we have continued our internal and external efforts to accelerate production internally by investing in some of our production sites and recruiting the right talent, externally by supporting our supply chain, and mitigating potential bottlenecks.

Just to give you a few examples of these capacity extensions, Thales launched an unprecedented investment plan of around EUR 350 million for its Cholet site in France, which employs 2,600 people, hosts R&D, production and service activities in radio communications, cybersecurity, electronic warfare and satellite communications. This project includes, among other developments, new industrial lines for equipment and systems to provide significant increases in production rates expected in the current context.

And other capacity expansions have been implemented all around Europe, namely in Hengelo in The Netherlands and Gdansk in Poland. But as I just mentioned, ramping up our capacity also means ensuring we have the right talent in place to seize market opportunities. So we have continued making Thales a very attractive employer brand. And our strong brand awareness has once again been recognized. The Universal Research Institute ranked Thales as the #1 most attractive employer among engineering students in France in 2025.

If I move to Space now. Well, as you all know, we have been implementing, since March 2024, the transformation plan of Thales Alenia Space, Telecoms business line, in order to, number one, optimize its structure; number two, maintain its leadership position; number three, restore its profitability. This plan mainly consists the redeployment of 1,300 positions across the group with no forced departure. As of H1 2025, we have 75% of positions already redeployed.

Moreover, Thales has had a certain number of recent commercial wins. And just to name a few, contracts to build telecom satellites in Norway and in Japan; a contract with Hispasat to start the development of the world's first quantum key distribution system capacity from geostationary orbit; and a contract with the European Space Agency to develop the space segment of the navigation system orbiting around the moon. And this promising business and business growth opportunities show our transformation plan is going in the right direction. Hence, we are confident in TAS', Thales Alenia Space, perspectives for profitability recovery.

Third priority regarding our innovation leadership. Maintaining strong R&D capabilities is indeed key to bringing pioneering and differentiating products to our customers. In the end, this is why our customers prefer us versus the competition. A few illustrations of what we have done so far this year in this area. Expanding our cortAIx AI accelerator worldwide with new AI industrialization capabilities in the U.K. and Singapore, targeting 800 AI experts and around 100 PhD students globally at the end of 2025.

For those of you who visited Thales' stand at Paris Air Show, I imagine you have seen the number of products, over 100, with Thales AI inside. Another example is our future potential partnership with Radiall and FoxConn to create an industrial capacity to develop what we call System in Package, SIP technologies in France. For the more curious among you, this technology enables the integration of multiple electronic components into a single compact module, thanks to an increase in the density of electronic components while reducing their size. In one word, we are developing the electronic technology and components of tomorrow. It's a definite step towards more strategic autonomy. This partnership with FoxConn and Radiall will indeed meet the growing needs of the aerospace, automotive, telco and defense sectors.

Fourth priority, Thales is, of course, strongly committed to delivering strong value creation from recent acquisitions. Imperva and Cobham AeroComms are already providing strong operational performance and synergies across the group. For example, Thales has launched a new solution combining Thales and Imperva's best technologies named File Activity Monitoring or FAM.

You all have in your companies unstructured data across servers, cloud services and file shares that is to say everywhere. It would take an endless time to look at each file, define the level of classification and secure it. Thanks to AI capability, FAM, File Activity Monitoring, is doing everything for you automatically. This is just one example of the new state-of-the-art solutions that we are launching. Moreover, the activities stemming from the acquisition of Cobham AeroComms are showing very strong performance, thanks to the development of synergetic products such as the safety satellite communications system Thales will provide to equip the A400M military transport aircraft.

Moving to the last slide. So all these priorities will bring Thales to continue pursuing ambitious financial targets for 2025, a book-to-bill ratio above 1, organic growth of 6% to 7% or EUR 21.8 billion to EUR 22 billion in sales, and a 12.2% to 12.4% adjusted EBIT margin.

Many thanks again for your attention, and we will now be pleased to take your questions.

[Operator Instructions] Our first question today is from the line of Benjamin Heelan, Bank of America.

First question, Patrice or Pascal, was on Cyber. Obviously, a very strong decline in Q2, which on the face of it, I think, is kind of marginally worse than certainly what I was expecting. And you've highlighted again sales integration. Can you just talk a little bit about what is actually going on? Like why is the integration of Imperva's sales team being so disruptive to the business? And you have some comments in the presentation about expecting a progressive ramp-up in the second half of the year. Can you just talk a little bit about what we should read into that? Is that sequential improvement versus Q2? Should we see a return to year-on-year organic growth in that business? So any color around that would be super helpful.

Second question on Space. And can we get an update on the discussions between yourselves, Airbus and Leonardo. Any time lines that you can provide there would be helpful. And then finally, on Avionics, can you break down a little bit what you're seeing in terms of aftermarket growth versus original equipment? And any color on the IFE business that you have as well would be super helpful.

Okay. I'll start on Cyber perhaps and Space as well. But of course, Pascal will complement. Well, Cyber, we said since the very beginning that this first semester will be not a normal semester, if I may say. Clearly, it's an important and mandatory, by the way, operation to merge the 2 sales teams. We did so, if you remember well, Ben, between Vormetric and SafeNet a while ago, SafeNet belonging to Gemalto, Vormetric belonging to Thales. So when we acquired Gemalto, we had this merger within the merger between Vormetric and SafeNet.

So honestly, I would like to reassure you, we know how to do it. We knew it would cause some inefficiency. It concerns 1,000 people. So it's a vast sales team and approximately 70% of these people have changed either the customers they were supposed to address before or the products they were supposed to push before, plus the fact that we have prolonged incentive scheme, which is also something which is both important and sensitive in this type of business model. So it's absolutely, I would say, expected and normal that some efficiencies occurred in H1. Now of course, the fact that it was a bit higher than your own expectation, it's pretty difficult to model it very precisely.

Now we need to take a step back, be a little bit patient. We are, I would say, very confident that it will progressively come back to a fully operational and efficient situation soon. And normally, H2 -- I'm sure we'll have questions in Q3, but H2, end of H2, end of this year, we will be able to measure, to monitor this return to full efficiency in this domain. But the quality of the asset and the quality of Imperva is a high-quality company and the products are of high quality. That should, I would say, help us to keep a cool head looking at just Q1 or Q2 figures in this domain, though they may seem a bit disappointing.

Now Space, not much to say, if I may say. Discussions are ongoing. And as I've said already in the past, we will, I would say, say something if and when we have something to say. So work in progress. I'm not sure it will get to something which would be positive or something which will be announced to the 3 of us. So too soon to say, but working on it. More color on Avionics, Pascal?

Good morning, Ben. So Avionics, so overall, I mean, very happy with the level of performance in particular in terms of growth in H1. In terms of, I mean, the key subsegments where we enjoy most of the growth in H1, one is the aftermarket, which has been pretty strong in H1. Good development continuing throughout H1, first point. Second, also, I mean, Cobham AeroComms, in terms of level of growth. You mentioned about OEM. It's in particular at Cobham AeroComms where we enjoyed the largest level of growth. For the rest of OEM, it follows, I mean, in particular the [indiscernible].

You mentioned in particular IFE. So IFE overall, no concern at all in terms of underlying growth at this point. I mean the concern is more about our clients being able to get their aircraft or their fleet, so that we can deliver our own products. That's the point that we mentioned in Q4 last year. And it's true that things seems to be a bit better, but we are still not there. And this is today, I mean, some kind of limiting factor overall in terms of growth for IFE. Now in terms of underlying level of demand, I mean, IFE is back to what it should be in terms of level of demand.

Next question is from the line of Olivier Brochet from Rothschild.

Yes. I have a few questions, if I may. Starting first with Cyber & Digital. Could you just give us a sense of how significant in terms of revenue is the banking solution business that you mentioned in the presentation? And you also mentioned there positive one-offs. What were they and of what scale were they, please?

Secondly, on Imperva, to continue on Ben's question, have you seen some leakage on R&D and key people leaving, or on the contrary, has it been quite satisfactory on that front? And third, on ExoMars, if the U.S. gets out of ExoMars, what are the consequences for Thales, please?

Okay. So Olivier, I will start maybe on Cyber. So in terms of Digital, I mean, there is, at this point, in terms of size of business, quite a difference between the level of transitioning on the mobile communication system from the classic rSIM to the embedded SIM. I mean, we already commented this transition, which is growing pretty nicely. And very soon, we'll have most of mobile communications system business driven by the Digital, i.e., the embedded SIM business.

On Banking, and that was your question. Of course, I mean, the move will take much longer, which means that even though the growth of our Digital Banking solutions is pretty strong, it's really a double-digit type of growth. The underlying level at this point is still a small size business. We are talking about a business which overall represents something like EUR 50 million of annual revenue, but growing fastly and paving the way for this progressive transition for the Banking business. But once again, that will take time.

And yes, I mentioned several one-offs, mainly one-off on Cyber & Digital in H1. One was a pretty strong level of demand, in particular in the specific telco operators in Asia. So that's the first point. And the second is more on JV with [indiscernible], which in 2024 was pretty low in terms of contributions, having a specific one-off positive that came in H1 2025. Overall, I mean, the impact in terms of margin for the Cyber & Digital business is not that large, but I mentioned this point. Imperva, Patrice?

Imperva, of course, we monitor, I would say, attrition at Imperva, or globally speaking, at our CSP business. Honestly, we have not observed anything that would be, I would say, worrying or above benchmark. In fact, it's below benchmark even in the U.S. now. And you know that in the U.S. also some big digital or big tech companies have, I would say, either stopped hiring or laid off people. So the tension on the market is, I would say, probably less stringent than it was before. So nothing to be worried about on this. Of course, it's a good and important question, Olivier, about key people, not only in R&D, but also in the sales team. We have also some key people in the sales area that are important for the business.

Moving to Space. In fact, more than ExoMars, we were, I would say, looking very precisely at the discussions and developments around Artemis, because you know we have a big stake in this Back to the Moon initiative. We have been reassured by the recent, I would say, vote of the Big Beautiful Bill in the U.S, which has, in particular, confirmed the right level of credit of funding allocated to NASA on this particular project. So I would say, so far, I would say, we are sure there is no particular concern. Now let's also acknowledge that the situation in the U.S. is always difficult to predict. So as we speak, no concern, but let's be cautious, exactly, yes.

Next question is from the line of Ross Law, Morgan Stanley.

So the first is just again on Cyber. Can you maybe be a bit more specific on your second half expectations? Should we be expecting year-over-year growth? Secondly, on Space, you've called out the margin as being significantly improved. Can you maybe quantify that margin for the first half and also what you're expecting for the full year? And then thirdly and lastly, you call out investing in expanding industrial capacities. Are you doing this on the assumption that defense spending in France goes above the current LPM trajectory? Or are you continuing to assume for the time being that the LPM is maintained in its current form?

Okay. Good morning, Ross. Maybe I will start with the first 2 ones, then Patrice on Cyber and Space. So yes, Ross, we expect Cyber to get back to positive growth in H2. H1 is probably a bit too early to quantify. But yes, we expect progressively to get back year-on-year in Q3 and Q4 to be positive. This is how we see and it's the most likely scenario for this Cyber business. And in particular, on the Cyber Products subsegment, which is the one where we want to evolve.

Maybe this is a bit of additional comment. As you know, in our Cyber business, we've got -- which represents the bulk of our business, which is the Cyber Products business, overall level of revenue was between EUR 1.3 billion, EUR 1.4 billion. And this is clearly where we want to resume growth as quickly as possible, and it should be the case as early as Q3. The second subsegment, which is by far the lowest, which is Cyber Services. You know this business, its key purpose is really, I mean, to drive then sales in our Cyber Products business. This is the famous doctor as opposed to the producer of medicines.

So Cyber Services is really designed -- is meant to foster the sales of products. So this business is a much smaller one. It's a EUR 250 million annual sales, which was significantly down, resulting from 2 factors. One was the softness in terms of demand, particularly in Australia. And the second was really our decision to refocus this business on the most attractive market segments. And this is what we keep doing. So on this Cyber Service subsegment, I mean, the strategy is not that much growth in the short term. It's more, I mean, increasing profitability. On the Cyber Products business, this is where we should see growth resuming in Q3.

Space, you asked me to quantify a bit more the progression of EBIT. So what I can confirm is what we expect for the full year 2025. You probably have in mind that back in 2024, this Space business overall in terms of level of EBIT, we mentioned it was close to minus EUR 70 million of EBIT. And we said that in 2025, it should be breakeven before restructuring charges. And this is what we expect overall, and restructuring charge in 2025, it should be EUR 20 million, EUR 25 million, which means that excluding those restructuring charges, this business should be breakeven in 2025. And the run rate in H1 2025 overall in terms of level of EBIT really underpins support in this overall level of profitability for the full year.

Okay. Good morning, Ross. If I take the first one, indeed, it's a good question. This, I would say, additional funding that has been announced by the French President is good news, of course, in terms of business momentum, which will come on top of the already growing multiyear programming law. Now in terms of CapEx, in terms of investments, and in the case of France, because your question is on France, but the reasoning would apply to any other countries of Thales. Of course, we take a global appraisal. We look at all the markets we serve from France, French market, but also the export markets, number one. And it's mainly based on our, I would say, backlog and some immediate expected contracts, but clearly something which is de facto firm.

Hence the fact that when we have increased the production rate of our radars x4 in a few years, same for our ammunition business in France, x4 as well, was really based on, I would say, backlog plus immediate contracts. So coming back to your question related to the recent announcement of the French President, honestly, it's a bit too soon to say that it will trigger additional CapEx. Now again, if it materializes next year, of course, we will always assess continuously our situation and see if we deserve, I would say, additional industry capacity, or what we have already in hand is sufficient to serve this additional requirement or this additional need. So to make it short, a bit too soon to say if this will trigger new CapEx. But if yes, we will adjust, as we did in the past.

Next question is from Chloe Lemarie from Jefferies.

I'll start one with the guidance update. If you could share with us the moving parts from the initial 5% to 6% organic growth. I assume it's fair to expect maybe slower Cyber versus the mid-single digit, but maybe higher Defense. So if you could just talk around that. The second is actually on restructuring. Could you just remind us what you expect in total restructuring costs for this year? And last point, just on the Cyber performance. Just wanted to see if you had seen any softness in the markets that kind of, let's say, amplified the impact of the sales integration, or if it's simply the effect of the sales integration that's affecting the group at this point?

Okay. Good morning, Chloe. So I mean you answered your first question on the moving parts. So yes, I mean the upgrade of our guidance for organic growth of revenue moving from 5% to 6% to 6% to 7%. Yes, on the positive is, of course, I mean, Defense. And overall, it's true that today, we see organic growth in Defense in terms of revenue for 2025 that should be probably high single digits. This is how we see today, I mean the most likely scenario.

Now it's also true that on the side, if I take Cyber & Digital, probably flat to low single digits is probably more what we have in mind considering, I mean, H1. But overall, and it's true that on this call, we have not discussed a lot about Defense growth, but it's true to say that we are quite positive on this business. And considering the size of our Defense business, overall, this allowed us to upgrade our revenue guidance.

So second question was about our expectations in terms of level of restructuring expenses for 2025. Overall, my view is that it should be probably around EUR 120 million. Our H1 restructuring expenses was EUR 55 million. So let's consider that it would be twice, a bit more, twice this amount for the full year, which if I remember well, it's probably what we expensed in 2024. Still in 2025, still a level of restructuring charges for Space that will be still material. I mentioned EUR 20 million, EUR 25 million. So this is what I can share with you in terms of restructuring charges for 2025. Patrice, can you...

Yes. Good morning, Chloe, and thank you for your questions. Indeed, it's a question we have asked to ourselves, of course. Now what I can say? Well, number one, we have, I would say, market figures only for Q1, and these figures are announced, and we need to go into, I would say, quite a detailed analysis, because this Cyber market is highly fragmented in terms of size and therefore, in terms of products. So it needs a deep dive on what is really, I would say, pertinent for us, namely data security segment, application security segment or the IAM segment, IT Access Management segment. In these different segments where we operate, in fact, Q1 figures, they do not show any kind of softness. So it's reassuring considering your good question.

Now for Q2, we are consolidating the figures, it's a bit to say. Therefore, more qualitatively, if I may, so it's not based on figures, but more qualitatively, all the feedback that we have from our team says that the market is there. I mean there is no -- nothing has changed in the market. And if we take a further step back, if we look at the number of cyber-attacks worldwide, and we do, I would say, publish yearly reports on, I would say, the level of cyber threats worldwide in our domains, it shows that this, I would say, the situation is worse, if I may say. So needing more and more cyber protection in particular in our domain. So nothing to be, I would say, worried about. And again, the third driver is really this reorganization that reduces these inefficiencies I've already mentioned.

Next question is from Alessandro Pozzi from Mediobanca.

I have 2. The first one is on the French defense budget. As you pointed out in your opening remarks, there is an acceleration in defense spending in France. I was wondering if you have a sense of what could be your capture rate there and how well placed are you with your products to capture basically the increased spending? And the second question is on the free cash flow. I think the improvement was in part driven by working capital. Can you tell us maybe what we should assume for the second half of the year for the working capital?

I can start on the first one. Good morning, Alessandro, and thanks for your question. So yes, this announcement is clearly a positive for us and for the defense industry as a whole. The figures are not negligible, EUR 3.5 billion in addition in 2026, and EUR 3 billion in addition to what was already expected in 2027. Now it's a bit too soon to say how much will it represent for Thales. The good rule of thumb is the fact that we will have our fair share, if I may say.

So if we take in average what we as Thales capture globally speaking of the defense budget, there is no reason why it should not be at least the same. So it's a bit of a qualitative answer, but for the moment, it's the best I can say on top of the fact that it is a positive, of course. Now always keep in mind that we should see it as of next year in terms of order intake. But in terms of sales, it will take a bit more time, of course, as usual. So does it change our sales perspective for 2026, 2027? Probably not, certainly not. But it's a nice additional opportunity in terms of order intake, of course, for 2026 and onwards. Free cash flow, Pascal?

Yes. Good morning, Alessandro, and thanks a lot for your questions on cash flow, because it seems to be that our strong performance on free cash flow in H1 was not noticed. Thank you very much for that. So overall, yes, as you know, I mean, our working capital is seasonal at Thales and in my view also in the sector with growth in working capital in H1 and then drop in H2. This is the reason why our cash flow generation is much higher in H2 than it is in H1.

Now it's true that the way we started 2025 was very strong and clearly above our own expectations. And as I mentioned in the press, resulting from 2 factors. One, overall, I mean, a pretty strong payment profile from our customers, both on current project execution, but also on down payments. And second was our ongoing actions to optimize our level of stocks. So when you put all of that and if you project yourself to H2, I'm quite positive. And I think that in my press, I mentioned that we are quite confident to achieve our guidance in terms of free operating cash flow for the full year.

Of course, it will depend upon maybe some last minute payments or cutoff in terms of payments from Q4 to Q1 2026. But overall, as you understand from my tone, we are quite positive in terms of cash flow generation. Again, in 2025, confirming, I mean, this pretty strong cash flow generation at Thales. So our ability to convert, I mean, all our net income into free operating cash flow.

Understood. Just a follow-up on the cash flow. In terms of CapEx, what should we assume in terms of year-on-year movement in '25 versus '24?

So we should see our CapEx moving up in 2025. In 2024, overall level of CapEx, I think it was something like EUR 620 million. We should be probably around EUR 700 million in 2025, showing that we are accelerating. And in particular, as we see opportunities in terms of business, which needs the continuous ramp-up that we have already commented. So clearly, we'll keep probably increasing overall our capital expenditure. Now it doesn't change our view in terms of overall our ability to convert net income to free operating cash flow, which means that it's my view that we can do both. On one side, I mean, keeping growing our capital expenditure and paving the way for future organic growth expansions together with maintaining a pretty strong level of conversions ratio. And by the way, we committed at our Capital Markets Day in November last year.

Next question is from the line of Herve Drouet from CIC Market Solutions.

The first one, I'm sorry, is back to Cyber. And if we look at the margins and the way the EBIT margin has evolved compared with first half, it's been, in fact, quite stable despite the pressure on sales. I was wondering, I mean, how do you explain that? Is it because you have taken less integration cost in H1 this year versus last year? Or is it the product mix, which has slightly changed, as you explained, potentially in the Cyber Services. And I was wondering if you can give us as well maybe a split between what is recurring maybe coming from a SaaS type of product versus which is more one-off sales you do on the go. So that's on the Cyber.

And the second question is more on the Defense side and especially on the order intake, which has a pickup in Q2 versus Q1, slightly above 1. But if we look at some countries, especially U.K. and France, I mean, U.K., I think it's minus 25% versus '24 and France, 10%. I understand, I mean, the budget is gradually increasing. I was wondering what explains maybe the softness for those 2 countries? I understand you are expecting some pickup in second half. But do you believe we are going to have to still be negative at the end of the year on those 2 countries on order intake, or we can go to par versus last year?

Okay. Good morning, Herve. Maybe I will start commenting a bit more on Cyber in terms of margin. And this is probably where I need also to come back on the 2 subsegments that I already commented, Cyber Products on one side, Cyber Services on the other side, because in terms of margin, it is quite different. So Cyber Products is where, I mean, we get most of the margin and pretty strong level of margin for this segment. And here, I mean, our strategy is quite simple, it is resuming growth as quickly as possible, while I mean, preserving the level of margins that are more in the high teens or low 20s at this point, more high teens level of EBIT margin for this Cyber Products business.

On the other side, I mean, the small-sized Cyber Services is today a level in the business where at this point, the level of profitability is not what we expect. At this point, slightly negative. It was negative in 2024, particularly in H1 2024. We managed to improve I mean the situation in H1 2025. That's also a reason why, I mean, despite this lower level of revenue, we managed to maintain quite a good level of margin. It is in particular because on Cyber Services, we tend to focus on margin improvement as opposed to growth, and this is what happened.

So we are pretty happy with the directions in terms of improvement of margin for this Cyber Products business. Even though we are still not yet where we want to be, but it is pretty positive. Nothing more to report on Cyber and no specific one-off sales from different type of mix. It's more I mean those 2 different businesses, Products on one side, Services on the other side, and Services where today we streamline, we rationalize. We focus on more attractive market to improve the level of profitability.

On Defense, if I follow up on Defense. Good morning, Herve. On one hand, you're right, the figures are the figures. Now in this long-term business like Defense, we are obliged to report on a quarterly basis, but it doesn't make sense. So year after year, we explain why Q1 is up or Q2 is down. But honestly, the right, I would say, measurement is at least a yearly measurement. And typically, you said U.K. is down by 25%. Would we have taken or booked the big, big LMM contract in Q2 instead of a few days after, you would have said exactly the contrary. So you see how, I would say, meaningless, if you authorize me to say so, it is to look quarter after quarter at order intake. But okay, this is the rule of the game. So we do so, but I do insist that we need always to take a bigger perspective when we look at OI for Defense, should I say the same also for Space or even Avionics.

Now of course, we do confirm the global, I would say, guidance for order intake in 2025. Book-to-bill ratio will be greater than 1. And of course, Defense will be a key contributor of this strong commercial performance. It's more qualitative answer I share with you, but clearly, Defense will be a key contributor of this commercial performance. And we do expect a strong commercial performance again in 2025 after several years or many years in a row with such strong momentum. And this is due, again, in Defense to the geopolitical situation. So it's another way to take another step back and to look at the commercial momentum in Defense and the one we observe at Thales. So I hope it has reassured you and given you enough, I would say, color to be confident that Defense is enjoying a strong Defense momentum and in particular for Thales.

Next question is from the line of David Perry, JPMorgan.

I just want to dig into this plan to increase the defense spending from EUR 50 billion to EUR 64 billion in 2 years that Macron spoke about. I think it was on July 14, in his speech. It's a huge number. It has very little media coverage here in the U.K. or impact on the shares, which suggests to me people don't really believe it. So could you just explain to me here in the U.K., what is now the legislative process to make this happen? What are the next steps? What are the obstacles or the things that will make it happen or won't make it happen? And if it is passed into law, when is the money actually spent? Is there a time lag?

David, thank you for your question. It's a good question as well, of course. I think the answer is quite simple. It just requires a budget law. So it will be embedded, will be part of the budget law that France needs to operate, globally speaking. So there will be no dedicated law for defense. There is no intention and no need to change the LPM. I would say, it will be just translated in the budget law for 2026. Now everyone can speculate about will there be a law or not -- budget or not in 2026. But clearly, the most likely scenario is that we will have one next year, and it will encompass this increase in terms of defense spending. I do observe as well that it's largely consensual in France, largely. I'm not saying that it's unanimity, but it's largely consensual. And I'm not sure that, I would say, the debate in the House of Parliament will focus on this particular point. There are many other controversial topics to focus on than this one at the House of Parliament in France.

So is there a date, a specific date we should look out for where, say, at least 2026? Because you're talking about kind of 14% a year growth. And I think most of us have been assuming 6% to 7% growth. So I'm just looking at when is this locked down and happens? And does the money get -- if it's approved for '26, is the money spent in '26?

The orders are passed in '26. Now the cash flow, sorry, plan, I would say, specific contracts, about contracts. But this is concerning, I would say, bookings, order intake contracts. So what you will see normally in 2026 is EUR 3.5 billion additional contract passed to the defense industry.

Maybe I mean, if that is low, I mean the caveat is that EUR 3.5 billion is the overall increase in defense spending covering both OpEx and acquisitions. And at this point, there's a split between the 2. As you know, overall in most countries, and it is also the case in France, acquisitions tend to represent something like 1/3 of the global defense spending. So you could assume that overall, out of the EUR 3.5 billion, let's consider that in terms of acquisitions, I mean the additional growth on top of the existing LPM should be probably EUR 1 billion at least if we follow this 1/3 type of ratio. But at this point, it has not been disclosed. So we need to be a bit more patient.

But there is no intention or no one has said any time that typically the number of military people will be higher next year. There is no reason why the salary would go through the roof next year. So in terms of OpEx, there will be a portion for OpEx, but there will be no -- CapEx would be the first, I would say, beneficiary of this increase.

Due to timing constraints, we'll take our final question. This is from Christophe Menard from Deutsche Bank.

I had 3. The first one is on strategy and outlook. You mentioned some of the joint ventures with FoxConn. You had one with Kongsberg. Can you give more details as well? And there is a broader question around joint ventures. I mean we've seen some of your peers rushing, so to say, to do joint ventures to gain access to technology. Do you have the same approach? Or do you have all the technologies in your portfolio to address future demand? That was question number one.

Question number two is to get back on free cash flow in H1. I think, Pascal, you mentioned it's linked to inventory optimization. So am I right to think that it is structural. It's not just the prepayment of the Indian Rafale that is making that good performance? And the last question is on the 2028 guidance for Defense. I mean, you said on the call, we should be organic sales growth around, I mean, I understood 8%, 9% this year. We were at 13.3% last year. So the 6% to 7% that you described between '24 and '28, is it something that probably needs, I mean, may be updated or may be revised as time goes by?

Okay. I'll start with the joint venture strategy. So what we contemplate -- [indiscernible], should I say so first, the joint venture that we contemplate to create with FoxConn, Radiall and maybe other partners, by the way. First, it's not done. It was given as an illustration of how we do prepare the future. So take it as an example of, I would say, how do we care not only about short term, but also about mid- to long-term, I would say, future of the group. This is, I would say, super exciting, a bit technical. So I've tried to simplify it during my speech, but this is very promising. However, it has no impact on the short run in terms of financial economics.

Moving to Kongsberg. What we decided to do with Kongsberg is, in fact, to merge our own forces in Norway, and we have had for decades nice defense budget, which is very strong typically on crypto in Norway with Kongsberg business in terms of software-defined radio. By the way, in many cases, crypto and radio, it's, I would say, intertwined quite, I would say, significantly. So in terms of economics, it's a couple of hundreds of people and in the range of EUR 100 million to EUR 150 million, to give you an order of magnitude of what it represents. So it's a nice joint venture. It's a big one, but it's a nice one. And it is a nice way to, I would say, grab a bit more of the Norwegian market share, leveraging Kongsberg's, I would say, presence, which is honestly stronger than ours. Ours is significant. But clearly, Kongsberg is one, if not the Norwegian defense champion over there. So it's a smart move.

And the last aspect of your question was about technology. The fact that you have observed several joint ventures created by other companies aiming at sharing or addressing technologies. It's true that it's less in our case because as you said, by the way, I do think that although we are not perfect, but we have already a very, very wide and strong technology or technical portfolio. Where we do need some joint venture, it's more to address the market, more a go-to-market, I would say, approach than sharing genuine technologies or co-developing things unless the customer asks us to do so, which is another aspect. But yes, we do not feel, I would say, a strong need to partner to get access to technologies in different countries. Free cash flow, Pascal?

Yes. Christophe, [Foreign Language]. Peak performance in H1, as I commented, which was pretty strong and, as you have seen, significantly above H1 2024. I mentioned that the profile of our stocks was part of the explanation. And we need to understand that we are working pretty hard, I mean, to optimize overall the level of stocks at Thales. So we believe that there is opportunity on this matter. And what you have seen in H1 is a first step of overall better management of stocks. Behind that, hard work on things like a more effective sales and operation planning, but also, I mean, the outcome of a progressive improvement overall on supply chain.

By the way, it was quite interesting in this call that we didn't get any questions on supply chain. I mean just a year ago, there were many questions on this matter. And it shows that we see the situation overall in supply chain improving, even though we are still not there yet and there is still some roadblocks, but overall situation is progressively improving on this matter, which also allows us opportunity probably to optimize our overall level of stocks. And all of that in an overall trajectory where we discuss about the need for us to invest more in terms of capital expenditure, while preserving a pretty strong level of conversions ratio.

So taking into account this global picture, opportunity to optimize stocks, a better supply chain situation, the need to keep ramping up overall our production capability, all of that is basically what we do to keep reassuring you on our ability to keep delivering a strong level of cash flow.

Your second question was more about organic sales, in particular on Defense, and adjusting, I guess it was probably upwards our visions on the 6% to 7% that we mentioned at the Capital Markets Day in November. So to that, I would say, Christophe, you need to be a bit patient. By the way, it is very consistent to what we have said in the last 6 months. We said that all of that will take time. By the way, we explained that the first step was for the countries in which we sell, those countries to explain how quickly they will be able to raise their defense spending. Hence, the comments on the French defense spending.

And yes, the need, I mean, to have the statement from Mr. Macron to be translated into the 2026 finance law. All of that resulting in additional order intake that will drive more revenue and more EBIT. So let's take it step by step. You have seen that H1 was pretty strong. This led us to upgrade the overall guidance for the full year, in particular, driven by Defense. So all of that supporting a pretty positive view on the development of our Defense business in the next few years.

I will now pass back to the speakers for any closing remarks.

No closing remarks. Thank you very much for being with us this morning, and we will be pleased with Pascal to continue these discussions during our roadshow coming soon this week and early September. Thank you very much, and have a nice summer break for those who take vacations. Bye-bye.

Thank you very much. See you. Bye-bye.

Ladies and gentlemen, if you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group Investor Relations at [email protected], and we will get back to you as soon as possible. Thank you all for your participation. You may now disconnect.