Guide · Markets
Book-to-Bill Ratio Explained: Orders, Backlog and Revenue
The book-to-bill ratio divides new orders by revenue billed in the same period; above 1 means the backlog is growing. Siemens Energy's was 1.54 in fiscal 2026.
On November 11, 2026, Siemens Energy reported its results for the fiscal year to September. Revenue was €44.2 billion and new orders were €68.1 billion, so the company booked about €1.54 of new business for every euro it billed: a book-to-bill ratio of 1.54. Its order backlog, the orders taken but not yet delivered, rose to a record €164 billion. The shares rose about 9.7% that day, and the order figures were a large part of the reason.
The ratio is simple. Divide the value of orders received in a period (the bookings) by the revenue recognised in the same period (the billings). A ratio of 1 means the company is replacing exactly what it ships. Above 1, the backlog grows and future revenue is building up; below 1, the company is working through its backlog faster than it refills it, which can be fine for a quarter but becomes a warning if it lasts. Siemens Energy's backlog grew from €138 billion to €164 billion over the year because its ratio stayed well above 1.
Book-to-bill matters most in businesses where products take months or years to deliver: power equipment, aircraft, defence, semiconductor equipment, shipbuilding and large engineering projects. A gas turbine or a transformer ordered today may be shipped in 2028, so this year's revenue says little about demand; the order intake says much more. For a software company or a retailer, whose revenue arrives almost as soon as the sale is made, the ratio has little meaning, and investors look at measures such as remaining performance obligations or same-store sales instead.
Read the ratio with care. Orders are lumpy: one large contract can push a quarter's ratio far above 1, which is why analysts prefer twelve-month figures. Orders can also be cancelled, and companies define them differently, so the backlog is a promise of revenue, not a guarantee. Price matters too: a backlog filled at old prices can hurt margins if costs rise before delivery. Siemens Gamesa, the wind unit, showed the opposite side in 2026: its orders fell 31%, so its own book-to-bill was much weaker than the group's.
The backlog also tells you how long the visible revenue lasts. Divide it by annual revenue: Siemens Energy's €164 billion is close to four years of 2026 sales. That cover is why the market was willing to pay for the stock, but it also shifts the risk. When orders are already secured, the question for investors becomes whether the company can build and deliver on time, at the margins it promised.
When a company reports orders, check four things: the book-to-bill ratio over twelve months, not one quarter; how the backlog compares with annual revenue; which divisions are driving the orders; and whether management gives any sign of the margins on new business compared with the old. A rising backlog at rising margins is the strongest combination; a rising backlog with falling margins can mean the company is buying growth with price.