Volkswagen's biggest investor increases defence focus after earnings slump

By Rachel More and Ilona Wissenbach

BERLIN, ‌March 26 (Reuters) - Porsche SE ​announced ​increased investments in defence on Thursday after bearing the brunt of a drop in 2025 earnings at its core investments Volkswagen and Porsche AG.

Conflicts in Ukraine and the Middle East ‌have driven investor interest in the defence and technology stocks, while it has declined ⁠in Germany's weakened automotive sector.

Porsche SE shares fell 2.7% in early trade on Thursday, underperforming the wider index.

REDUCED SHARE OF PROFITS

The holding ‌company of Germany's Porsche-Piech auto dynasty ‌is Volkswagen's largest investor with 31.9% of shares and 53.3% of voting rights. It also owns 12.5% of sports-car maker Porsche AG.

Porsche SE reported adjusted earnings after tax of 2.9 billion euros ($3.35 billion) for 2025, ​down by around 9% year on year, after Volkswagen and Porsche AG were hit by billions of euros in costs from tariffs and the decision to halt Porsche's electric vehicle rollout in September.

While core ⁠automotive holdings fell, Porsche SE's smaller investments generated 193 million euros in profit last year, it said, driven largely by its stakes in ​drone maker Quantum Systems and semiconductor startup Celestial AI.

"Overall, Porsche SE sees significant growth potential in the defence and security sector," CEO Hans Dieter Poetsch said, adding that ​further investments would follow.

The group announced on Thursday a 100 ‌million euro investment in a newly launched defence fund of the investment company DTCP, focusing on European technology start-ups in areas including cyber defence and AI.

COMMITTED TO ⁠VOLKSWAGEN BUT COMPLEXITY IS AN ISSUE

Poetsch said the company remained committed to Volkswagen as an anchor investor after 1 billion euros in cost cuts across the group last year.

"We expect the management of both Volkswagen AG and Porsche AG to ⁠view the challenging situation as an opportunity to implement the strategic adjustments," Poetsch said.

Both Volkswagen CEO Oliver Blume and Porsche AG ​CEO Michael Leiters, who took over from Blume to restructure the subsidiary in January, have Porsche SE's backing, Poetsch said.

But as companies strive to strengthen margins and to revive sales in China, the world's biggest car market, the pressure to ‌cut costs has grown.

Volkswagen Group is considering divestments, having collected a number of subsidiaries over the years that are not central to its auto business, Poetsch said.

"There ‌are ongoing discussions in various places to finalise potential divestitures. In that regard, I think this issue will certainly continue ⁠to develop over the course of the ‌year," he added.

A Volkswagen spokesperson said ​active portfolio management was an important element of the group's strategy, without going into detail.

($1 = 0.8647 euros)

(Additional reporting by Christina Amann and Amir Orusov, Editing by Kirsti Knolle and ‌Barbara Lewis)

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