Leonardo SpA – The Pivot Point for European Defence

Leonardo SpA has positioned itself at the fulcrum of a strategic shift in Europe’s defence landscape. The company’s latest moves—an advanced AI‑driven air‑defence platform and a looming investment from Saudi Arabia’s Public Investment Fund (PIF)—signal a decisive turnaround that could rewrite the company’s valuation narrative.

1. The “Michelangelo Dome” – A Game‑Changing AI Shield

Roberto Cingolani, Leonardo’s CEO, announced on 27 Nov 2025 that the firm will unveil the Michelangelo Dome, a next‑generation air‑defence system that integrates artificial‑intelligence‑controlled missile networks. Drawing a direct comparison to Israel’s Iron Dome, the system promises to link disparate platforms—radars, aircraft, surface‑to‑air batteries—into a cohesive shield that can autonomously track, classify, and neutralise hostile air threats.

  • Technological Leap: The system’s AI core will process sensor feeds in real time, enabling rapid decision‑making that outpaces manual controls.
  • Strategic Value: By offering a modular, scalable solution, Leonardo can target a range of clients—from small European states to NATO allies—thereby expanding its footprint beyond traditional aircraft and helicopter sales.
  • Market Impact: The unveiling has already nudged the share price up 1.56 % on the Borsa Italiana, reflecting investor confidence that Leonardo is moving from a legacy defence producer to a technology‑led future‑defence architect.

2. Saudi PIF Eyes the Aerostructure Division

While the Michelangelo Dome captures headlines, another headline‑grabbing story is unfolding: the PIF is in advanced talks to invest in Leonardo’s aerostructure division. This part of the business has long been a “worry area” for the company, burdened by high capital costs and limited cash flow.

  • Financial Injection: A multi‑billion‑euro capital infusion would not only stabilize the division’s balance sheet but also free up resources for R&D in AI‑driven systems.
  • Strategic Market Access: Saudi Arabia’s growing defence procurement programmes and its push towards domestic manufacturing present a strategic gateway for Leonardo into the Gulf’s lucrative market.
  • Risk Mitigation: The deal would effectively eliminate a structural risk that has historically dragged on Leonardo’s earnings, giving the market a cleaner, more predictable earnings profile.

3. Sectoral Context – A Turning Tide

Bank of America’s latest analysis underscores a broader sectoral rebound after a recent downturn. With European defence budgets projected to hit 3.5 % of GDP by 2035, analysts expect a moderate growth multiplier of 0.9–1.1. Leonardo’s dual strategy—AI innovation coupled with a stabilising Saudi investment—places it ahead of peers such as BAE Systems, Saab, and German Renk, many of whom still depend heavily on US revenue streams or face higher upside volatility.

4. Investor Implications

  • Valuation Upside: The 52‑week low of €24.76 and a current close of €46.91 illustrate a significant upside potential. A successful AI product launch combined with the PIF’s capital could justify a new valuation multiple, potentially moving the P/E ratio beyond the current 25.8.
  • Risk Profile: The only tangible risk is the successful execution of the Michelangelo Dome and the closing of the PIF investment. Both are in advanced stages, with the former already priced into the market.
  • Strategic Positioning: Investors should view Leonardo not merely as a traditional aerospace supplier but as a burgeoning technology leader poised to command premium pricing for integrated defence solutions.

In sum, Leonardo SpA is at a pivotal junction: it is redefining its core offering through AI‑powered air‑defence and securing a strategic partnership that could unlock a new growth engine. The market’s reaction—already reflected in a modest share‑price rally—suggests that the consensus view is shifting from a cautious outlook to one that embraces Leonardo as a forward‑looking defender of Europe’s security future.