European weapons makers are racing to keep up with surging demand for military equipment as Russia's war in Ukraine and higher NATO spending targets strain defense budgets.
Italian defense firm Leonardo, which is partly owned by the state, sits in the middle of that push.
At the end of June, Leonardo's contracted work had risen to a record €59 billion, up 30% from a year earlier.
After Russia's invasion of Ukraine, European governments increased defense spending, and the industry has been straining to turn those commitments into equipment quickly enough.
Leonardo raised its full-year guidance.
It expects earnings before interest, tax, and amortization (EBITA) of 2.21 billion euros, compared with 2.03 billion euros previously.
The company also lifted its new-orders target to 28.2 billion euros from 25 billion euros.
CEO Lorenzo Mariani told CNBC's Carolin Roth in Rome that the challenge now is delivery, not demand.
"The ramping gap in how we fulfil the demand is really the key element to deliver to our customers what they need… both for our European arm and for the U.S. arm," he said, adding that recent M&A, some of it struck in the past few days, shows where he sees opportunity.
To close that gap, Leonardo is making acquisitions.
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In March, Leonardo closed its 1.6-billion-euro ($1.8 billion) purchase of Iveco Defence Vehicles, a military vehicle maker.
Leonardo DRS, the company's U.S. subsidiary, this week struck a deal to acquire software firm Raft for $450 million, adding AI and mission software.
Earlier in the year, it struck a deal for Becrypt, a U.K. cybersecurity firm.
Further deals and alliances are part of Leonardo's playbook for sustained expansion, Mariani indicated.
The scramble is not unique to Leonardo.
Beyond new factories and hiring, European defense firms are relying on takeovers to bring in technology, protect supply chains, and expand industrial capacity at speed.
Fincantieri CEO Pierroberto Folgiero called his company's recent purchases of stakes in four underwater technology businesses a "second M&A wave."
Germany's Hensoldt, a maker of defense electronics, bought Nedinsco, a Dutch optronics specialist, this year to strengthen supply security and raise output capacity.
"What really matters today is accelerating all our processes," Mariani said.
Leonardo is converting increased European defense spending into a larger order book and higher profit forecasts.
After a multiyear boom triggered by Russia's invasion of Ukraine, defense-related stocks have lost some momentum this year.
Some investors worry that share-price levels have moved ahead of how quickly arms makers can increase production.
Leonardo's shares have gained about 11% this year, broadly in line with Europe's Stoxx 600 blue-chip index.
Leonardo is betting heavily on defense technology, pointing to the wars in Ukraine and Iran as evidence that modern combat increasingly depends on drones, autonomous vehicles, and AI-guided weapons.
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